We previously reported on the Federal Circuit’s decision in Ethicon Endo-Surgery, Inc. v. Coviden, No. 2014-1771 (Fed. Cir. 2016) that the AIA does not preclude the same PTAB panel from rendering both institution and final decisions in an IPR, and we previously reported on the Federal Circuit’s denial, over Judge Newman’s strong dissent, of the Patent Owner’s petition for an en banc hearing of this decision.  On September 20, 2016, the Patent Owner, Ethicon, filed a petition for a writ of certiorari with the Supreme Court, requesting Supreme Court review, and reversal of, the Federal Circuit’s decision.

In its Supreme Court petition, Ethicon argues that delegation of the Director’s institution authority to the PTAB is improper. Thus, Ethicon argues, the Federal Circuit’s decision is incorrect because: (1) it runs contrary to the text of the AIA, (2) the Director lacks the “inherent authority” or “general rulemaking authority” to delegate her institution authority to the PTAB in a manner contrary to the clear text of the AIA, and (3) Congress did not bless the departure from established principles of administrative law that would otherwise be required to sanction the Director’s delegation to the PTAB.

“the Federal Circuit’s endorsement of the Director’s delegation of institution authority to the PTAB ‘subverts congressional intent, flouts statutory limits on the exercise of delegation authority, and contravenes established administrative law principles.’”

First, responding to the Federal Circuit’s conclusion that “nothing in the statute indicates a concern with separating the functions of institution and final decision”, the petition asserts that the AIA clearly and explicitly tasks one decision maker, the Director, with handling the institution decision, and another, separate, decision maker, the PTAB, with handling the adjudication of any proceedings instituted by the Director.  In support, Ethicon directs the Court’s attention to the text of the AIA, which states that “[t]he Director [of the USPTO] shall determine whether to institute an inter partes review”, but states that “the [PTAB] shall … conduct each inter partes review instituted [by the Director].”  35 U.S.C. §314(b) (emphasis added); and 35 U.S.C. §316(c) (emphasis added).  Ethicon notes that this division of labor is maintained throughout the remainder of the AIA, which is replete with references, e.g., in 35 U.S.C. §§314(a) and 314(c), to the process that the Director, and not the PTAB, must follow when determining whether to institute an IPR, and only discusses the PTAB in connection with the act of “conducting” IPRs.  According to Ethicon, then, the PTAB’s authority is limited by the terms and structure of the AIA to only post-institution adjudication.  Ethicon therefore asks the Court to “give effect to the unambiguously expressed intent of Congress” that the Director, and not the PTAB, be “responsible for instituting [IPRs].”  Petition, p. 15.

 Second, the petition dismisses the Federal Circuit’s conclusion that the Director’s delegation of institution decisions constitutes a proper exercise of the Director’s “inherent authority” as head of the USPTO, or, in the alternative, of the Director’s “general rulemaking authority” provided by Congress.  Conceding that agency heads “generally have authority to delegate their tasks”, the petition nonetheless cites to well-established case law for the proposition that “Congress may explicitly or implicitly circumscribe such delegation by either restricting that authority or the delegee’s ability to undertake delegated tasks.”  Petition, p. 16.  And, according to the petition, Congress explicitly circumscribed the Director’s ability to delegate institution authority by expressly dividing labor between the Director, explicitly tasked with determining whether to institute an IPR, and the PTAB, explicitly tasked with conducting an instituted IPR.  Moreover, even if Congress did not circumscribe the Director’s ability to delegate her authority to institute IPRs, the petition argues that Congress has, by way of 35 U.S.C. §3(b)(3), only provided the Director with the ability to delegate her authority to “officers and employees whom she appoints or hires.”  And because the members of the PTAB are appointed by the Secretary of Commerce, and not the Director, the petition asserts that “general rulemaking authority” provided to the Director by Congress does not provide the Director with the authority to delegate her institution authority to the PTAB.

Third, the petition cites to longstanding principles of administrative law as confirmation that Congress chose to empower the Director, and not the PTAB, with the authority to institute IPRs.  According to the petition, the Administrative Procedure Act (APA) generally precludes an officer or employee below the agency head from performing both executive and adjudicative tasks.  See petition, p. 21 (citing 5 U.S.C. §554(d) (“prohibiting an ‘employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case’ from ‘participating or advising in the decision”) and Martin v. Occupational Safety & Health Review Comm’n, 499 U.S. 144, 151 (1991) (“[u]nder the [APA] an agency generally must divide enforcement and adjudication between separate personnel.”)  Congress, the petition argues, chose to follow the APA’s desire for separation by tasking the Director with total discretion to institute or not institute IPRs, an executive function akin to a prosecutorial function, and separately tasking the PTAB with conducting instituted IPRs, an adjudicative proceeding.  To hold otherwise, and bless the PTAB with the authority to institute IPRs, would, the petition argues, turn an executive function, institution, into an adjudicative one.

Continuing, the petition asserts that the Federal Circuit’s endorsement of the Director’s delegation of institution authority to the PTAB “subverts congressional intent, flouts statutory limits on the exercise of delegation authority, and contravenes established administrative law principles”.  Petition, p. 25.  Moreover, and perhaps more importantly, the petition argues that the Federal Circuit’s decision undermines “a decades-long effort, culminating in the enactment of the AIA, to ‘correct flaws in the U.S. patent system that had become unbearable, and to accommodate changes in the economy and the litigation practices in the patent realm.”  Petition, p. 25.  Noting that the creation of IPR proceedings was a key element of this effort, and highlighting the Supreme Court’s interest in ensuring that IPR proceedings function as Congress intended, as expressed through the Supreme Court’s granting of certiorari in Cuozzo, the petition concludes by emphasizing that the “Court’s review is thus of undeniable importance.”