As a standard of appellate review, “substantial evidence” is not peculiar to the Federal Circuit’s review of patent decisions from district courts and the Patent Office. All circuit courts are familiar with that review standard. They apply it routinely in deciding appeals. The standard originated with appeals of jury verdicts, in recognition of the role of credibility at trial. Under this standard, a judge determines not whether a jury’s decision was correctly made, but whether its decision could reasonably have been made based on the evidence it received. Recent opinions make apparent, however, that the Federal Circuit judges are divided and disagree on how to apply that standard. That disagreement should be especially disconcerting to parties engaged in AIA post-grant trials before the PTAB because the court is supposed to review the PTAB’s fact findings under a consistent application of the substantial evidence review standard. The disagreement, if persistent, could render the outcome of that review panel-dependent.
In Apple Inc. v. Samsung Electronics Co., a jury returned a black box verdict that Apple’s patent claim directed to its slide-to-unlock feature of portable electronic devices was not obvious. Samsung filed a motion for judgment as a matter of law (JMOL) that the claim was obvious, complaining that the evidence the jury considered permits only one reasonable conclusion and that is contrary to the jury’s verdict. The parties specifically disputed whether the trial record included evidence of a motivation to combine the prior art, a factual inquiry the jury implicitly made and resolved in issuing its verdict. The district judge concluded that substantial evidence—viz., testimony from Apple’s witnesses and statements in the prior art—supports the jury’s implicit fact findings of no motivation to combine, and thus denied Samsung’s motion.
On appeal, a three-judge panel of the Federal Circuit determined that the jury’s verdict was not supported by substantial evidence and thus reversed the district judge’s denial of Samsung’s JMOL motion. Apple Inc. v. Samsung Elecs., Co., 816 F.3d 788 (Fed. Cir. 2016). That panel was supposed to review the evidence in the trial record in a light most favorable to the verdict winner (Apple) and draw all reasonable inferences in favor of that winner. It did not do so. On October 7, 2016, an en banc panel of the Federal Circuit vacated the original panel’s decision for this reason, over separate dissents of each of the original panel’s members.
The en banc panel’s majority presumed the jury resolved the parties’ conflicting witness testimony in Apple’s favor and, thus, found the skilled person would not have been motivated to combine features in the prior art as Samsung argued. Apple Inc. v. Samsung Elecs. Co., — F.3d —-, 2016 WL 5864573, *12 (Fed. Cir. 2016) (en banc). Continuing, the majority explained that the court’s “job is not to review whether Samsung’s losing position was also supported by substantial evidence or to weigh the relative strength of Samsung’s evidence against Apple’s evidence.” Id. To the contrary, appellate review is “limited to determining whether there was substantial evidence for the jury’s [factual] findings on the entirety of the record.” Id. So limited, the majority could not “conclude that the evidence affords only one reasonable conclusion and that it is contrary to that of the jury.” Id. The majority agreed with the jury that without hindsight “it would not have been obvious to a skilled person to combine the prior art to arrive at the claimed invention.” Id. at *17. As a result, the en banc court affirmed the district judge’s denial of Samsung’s JMOL motion, effectively reinstating the jury’s verdict favorable to Apple.
Dissenting, Chief Judge Prost accused the majority of having “abdicated its role in substantial evidence review.” Id. at *21 (Prost dissent). Further, she countered that the court’s job is to “review the record as a whole, crediting not only evidence favoring the nonmovant but also evidence supporting the moving party that is uncontradicted and unimpeached, at least to the extent that that evidence comes from disinterested witnesses.” Id. at *24 (internal quotations and citation omitted).
The Chief Judge characterized Samsung’s evidence as “compelling.” See id. at *23. Judge Dyk, separately dissenting, took aim at Apple’s evidence, characterizing it as being of a “flimsy nature,” and asserted that Apple’s inventions were of a “trivial nature.” Id. at *31–*32 (Dyk dissent). Judge Dyk warned of the “dangers of inviting factfinding to dominate the obviousness determination.” Incredibly, he asserted that findings of fact regarding a motivation to combine prior art are “largely irrelevant to the legal question of obviousness.” Id. at *31. In a third, separate dissent, Judge Reyna complained that the court should not have granted en banc review as the “en banc decision neither resolves a disagreement among the court’s decisions nor answers any exceptionally important question.” Id. at *39 (Reyna dissent). None of these judges joined each other’s dissenting opinions.
There is disagreement within the court over its role in reviewing evidence—a disagreement of exceptional importance. Inconsistent applications of the “substantial evidence” standard of review upset litigants’ risk assessments and, importantly, can render the victory of a costly trial worthless. The original panel’s decision reversed the outcome of a thirteen-day trial and three-and-a-half days of jury deliberation—apparently because that panel simply disagreed. Other recent opinions highlight the Federal Circuit’s disagreement on how the substantial evidence standard of review should apply. See, for example, our earlier discussion (here) of Merck & Cie v. Gnosis S.p.A., 808 F.3d 829 (Fed. Cir. 2015), reh’g and reh’g en banc denied, 820 F.3d 432 (Fed. Cir. 2016), cert. denied, 2016 WL 4014485 (2016) (Dkt. 16-125). Now, in Apple, eight circuit judges comprising the majority expressly disagree with their three dissenting colleagues on how the standard should apply. Without consistent application of the standard or review, predicting the outcome on appeal may be no more accurate than flipping a coin.
Questions surrounding the proper application of the substantial evidence standard, however, may potentially become moot. Merck & Cie recently sought certiorari to review whether fact findings in inter partes reviews should instead be reviewed on appeal for clear error, rather than substantial evidence. While the Supreme Court denied this particular petition, we may expect similar petitions in the future.
The proper legal standard of review and its proper application is of exceptional importance because (i) appeals of PTAB decisions today dominate the Federal Circuit’s docket and (ii) the court must review fact findings in every single one of those decisions under this standard. To litigants, there is simply no merit to the view that a panel is entitled to err in misapplying an otherwise correct legal standard without the full court descending upon it. Cf. Id. at *40 (Reyna dissent). Courts are always supposed to decide cases correctly. For now, the en banc majority’s opinion reinforces the court’s limited ability to reverse a PTAB decision (or jury verdict) that turns on the weight of competing factual evidence—weight that the Federal Circuit may not reassess on appeal.