Federal Circuit Holds that the PTAB and District Courts May Reach Different Conclusions

Recently, the Federal Circuit confirmed that it is permissible for the district courts and the Patent Trial and Appeal Board (PTAB) to reach different conclusions on the validity of challenged patents, even when presented with substantially the same evidence. Inconsistent post-grant validity determinations may arise due to the different legal standards applied by the district courts and the PTAB, or when the evidence presented to the adjudicative bodies is not the same.

Different Legal Standards

In validity disputes before district courts, patent challengers must prove invalidity by clear and convincing evidence due to the presumption of validity and the challenger’s “burden of establishing invalidity,” as required by 35 U.S.C. § 282(a). See Microsoft Corp. v. i4i Ltd. P’ship, 564 U.S. 91, 95, 102 (2011) (affirming that a patent challenger must prove invalidity by clear and convincing evidence in a district court invalidity dispute due to the presumption of validity and the challenger’s burden of providing invalidity under § 282(a)). On the other hand, in post-grant trials such as inter partes review (IPRs) before the PTAB, a patent challenger need only prove invalidity by a preponderance of evidence, 35 U.S.C. § 316(e), and there is no presumption of validity of the challenged patent.

The PTAB is Not Bound by a District Court’s Validity Determination

In Novartis AG v. Noven Pharm. Inc., the Federal Circuit held that the PTAB was not bound by a district court’s prior determination that Novartis’s patents were not invalid. 2017 WL 1229742 at *2 (Fed. Cir. April 4, 2017). Novartis sought review of the PTAB’s final written decisions in two IPR proceedings involving U.S. Patent Nos. 6,316,023 and 6,335,031 (the Novartis patents). In the IPRs, the PTAB determined that the challenged claims of the Novartis patents are unpatentable as being obvious over the asserted prior art. Id. Previously, the Federal Circuit had affirmed the determination by the U.S. District Court for the District of Delaware that the challenged claims of the Novartis patents were not invalid. Id. at *2-3.

In the appeal of the IPR decisions, the parties did not dispute that the evidence before the PTAB and the district court was “substantively the same.” Novartis argued that the PTAB committed legal error by finding the claims to be unpatentable when the district court and the Federal Circuit found the claims to not be invalid. Id. at *2-3. To support this argument, Novartis argued that an earlier Federal Circuit decision precluded the U.S. Patent and Trademark Office (PTO) from arriving at a different conclusion if faced with the same evidence and arguments as a district court. Id. at *3 (citing In re Baxter Intl., Inc., 678 F.3d 1357, 1365 (Fed. Cir. 2012) (stating that the PTO “ideally should not arrive at a different conclusion” if faced with the same evidence and arguments considered by a district court).

The Federal Circuit first noted that the evidence presented in the IPRs differed from the evidence presented in the district court proceedings. Id. at *2. But even if the evidence had been the same, the Federal Circuit explained that the different burdens of proof in the PTAB and the district courts allowed for different results. The court noted that, before the PTAB, unpatentability determinations are made based on a preponderance of evidence standard, whereas district courts assess validity based on a clear and convincing standard:

[N]evertheless, even if the record were the same, Novartis’s argument would fail as a matter of law. The PTAB determined that a “petitioner in an inter partes review proves unpatentability by a preponderance of the evidence (see 35 U.S.C. § 316(e)) rather than by clear and convincing evidence[] as required in district court litigation,” meaning that the PTAB properly may reach a different conclusion based on the same evidence. [Emphasis added.]

Id at *3. The Federal Circuit noted that its decision is consistent with recent Supreme Court precedent. Specifically, in Cuozzo, the Supreme Court observed that the different standards at the PTAB and courts was by design, and is based on the presumption of validity afforded to issued patents in district court litigation. See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2146 (2016) (“And though the application of one standard in inter partes review and another in district court proceedings may produce inconsistent outcomes, that structure is inherent to Congress’ regulatory design, and it is also consistent with past practice, as the patent system has long provided different tracks for the review and adjudication of patent claims.”); see also 35 U.S.C. § 282(a).

The Federal Circuit also explained that Baxter’s aspirational statement—that the PTO “ideally should not arrive at a different conclusion” if presented with the same evidence that was considered by the district court—does not mandate that the PTAB must reach the same conclusion as a district court. On the contrary, the Federal Circuit explained that this aspirational statement, when read in context, “recognized that Congress has provided a separate review mechanism before the USPTO with its own standards.” Id. at *3. Given these considerations, the Federal Circuit held that the PTAB did not commit legal error. Id.

Novartis therefore provides an example of where the PTAB and the courts may arrive at different results. In this instance, the PTAB was not bound by the district court’s determination that the claims were not invalid. The reverse has also been demonstrated to be true.

District Courts are Not Bound by the PTAB’s Validity Determination

Recently, in a combined final written decision, the PTAB held that Kyle Bass’s Coalition for Affordable Drugs did not demonstrate by a preponderance of evidence that the challenged claims of four of Acorda Therapeutics’ patents are unpatentable. IPR2015-01850, Paper 72 at 4, 54-55 (PTAB Mar. 9, 2017). The challenged patents are directed to Acorda’s drug for treating multiple sclerosis (MS). Acorda produces the drug under the label Amprya®.

However, Acorda’s victory before the PTAB was short-lived. In Acorda Therapeutics, Inc. v. Roxane Labs., Inc., the U.S. District Court for the District of Delaware held that the defendants proved by clear and convincing evidence that the claims of Acorda’s patents were invalid as being obvious over the asserted prior art. 2017 WL 1199767 at *40 (D. Del. Mar. 31, 2017) (“While Defendants face a high burden in proving that the Acorda Patents are invalid as obvious, the Court finds … they have met this burden.”). Thus, even though the defendants in the Delaware litigation were faced with a higher burden of proof, the defendants were able to persuade the court to find that the claims which the PTAB previously held to be not invalid are invalid. In a footnote, the district court recognized the PTAB’s opposite conclusion, but indicated that “two of the three references the PTAB was considered are not part of the trial record here.” Id. at *41, n. 1. Thus, unlike Novartis, the court pointed out that the evidence it considered was different from the evidence considered by the PTAB.

In view of the Novartis and Acorda decisions, litigants should not expect the PTAB and the district courts to be bound by each other’s validity determinations.