“Substantial Evidence” Hurdle is Substantially Difficult to Overcome

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One of the less appreciated hurdles to a successful appeal of a Final Written Decision in an IPR proceeding is the “substantial evidence” standard of review the Federal Circuit applies to the Graham factors that underlie a determination of obviousness.  Although the ultimate determination of obviousness is a legal issue subject to de novo review, the underlying Graham factors are questions of fact, which receive the more deferential, substantial evidence standard of review.  In practice, the ultimate legal conclusion rises and falls with the Graham factors—particularly, whether the prior art teaches the claimed limitations (i.e., “the differences between the prior art and the claim at issue”).

The Federal Circuit’s August 9, 2016 opinion in In re: Warsaw Orthopedics illustrates the deferential nature of the substantial evidence standard.  According to the Federal Circuit, “substantial evidence” is “something less than the weight of the evidence more than a mere scintilla.”  In Warsaw, the claim limitation of interest was: “[i]nserting…a non-bone interbody intraspinal implant…, the length of said implant being sized to occupy substantially the full transverse width of the vertebral bodies of the two adjacent vertebrae, the length of said implant being greater than the depth of the disc space,…[and] the length of said implant being greater than the maximum height of said implant.”

The factual question was whether the prior art disclosed these limitations.  The prior art disclosed implants that were recessed within the vertebrae and which were substantially shorter than the full width of the vertebrae.  The PTAB nevertheless found it would have been obvious to one of ordinary skill that the prior art implant would be sized to conform to the disk space.  The Federal Circuit determined this was supported by substantial evidence, despite the fact that no expert testimony was referenced in the Federal Circuit opinion.  In doing so, the Federal Circuit indicates that an obviousness determination does not actually require each claimed limitation be met by the prior art, stating “To the extent that Warsaw argues the PTAB erred because it did not decide whether [the prior art] discloses dimensions that exactly meet the limitation ‘substantially the full transverse width’ in claims 1 and 17 of the ‘’97 patent, Warsaw misunderstands the governing law, see, e.g., Beckson Marine, Inc. v. NFM, Inc., 292 F.3d 718, 727 (Fed. Cir. 2002) (“[O]bviousness does not require the prior art to reach expressly each limitation exactly.”).

The Federal Circuit did, however, throw a bone to the patentee with respect to the PTAB’s cancellation of claim 17.  There, the Court agreed that the PTAB’s following explanation on one limitation did not sufficiently show its reasoning in reaching its decision:  “Jacobsen appears to disclose anchor wires (i.e., ‘elongated portions’) that are positions over adjacent vertebrae.’) (citing Figure 5).”  The reversal as to claim 17 may be a fleeting victory for the patentee, though, because the Federal Circuit remanded for further findings on the issue.

Federal Circuit Maintains “Substantial Evidence” Standard of Review in AIA Post Grant Proceedings

cafc1The Federal Circuit, today, denied a petition seeking rehearing en banc of its application of the “substantial evidence” standard of review in post grant administrative proceedings, in the case of Merck & Cie v. Gnosis S.P.A., Appeal No. 2014-1779 (from IPR2013-00117). Writing a concurring opinion (in which Judges Wallach and Stoll joined), Judge O’Malley recognized the appeal of a change in the standard, such that the Federal Circuit would apply a less deferential “clear error” standard of review in AIA proceedings. But, Judge O’Malley felt compelled by Supreme Court precedent to maintain the “substantial evidence” standard. In short, Judge O’Malley signaled that the issue should be left to Congress to change, finding that, because Congress failed to expressly change the standard when it created IPR proceedings, the Court is not free to make that change now.

In dissent, Judge Newman wrote that it was inappropriate for the Federal Circuit to continue to apply the highly deferential standard of review and, instead, a full and fair review is more appropriate to the America Invents Act. More specifically, because PTAB proceedings are intended to be an alternative to district court proceedings on the issue of validity/patentability, the “substantial evidence” standard “does not assure the intended identity of result for these PTAB and district court determinations.”

Consider the baton officially passed to Congress to decide whether PTAB proceedings should be reviewed using a less deferential standard. For the foreseeable future, the Board will continue to receive high deference in its factual determinations.