Appeal of Decision to Take Inventor’s Challenge Rejected

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By Peter Leung

Sept. 23— The decision to hear an inventor’s challenge against a patent assigned to his former company in an administrative proceeding at the Patent and Trademark Office cannot be appealed, the U.S. Court of Appeals for the Federal Circuit ruled ( Husky Injection Molding Sys. Ltd. v. Athena Automation Ltd. , Fed. Cir., No. 2015-1726, 9/23/16 ).

The Sept. 23 decision highlights continuing uncertainty about the scope of the prohibition against judicial review of Patent Trial and Appeal Board decisions to institute patent challenges. The Federal Circuit continues to interpret this bar on review broadly.

The case involves the first time that the PTAB rejected a patent owner's attempt to bar a challenge from an ex-employee's new company. It has come to the same conclusion several times since (59 PTD, 3/28/16).

Initial Decision

Athena Automation Ltd. filed an inter partes review (IPR) challenging the novelty of several claims in Husky Injection Molding Systems Ltd.'s U.S. Patent No. 7,670,536, which covers a type of molding machine. The board instituted trial, finding that as an initial matter Athena had a reasonable likelihood of prevailing on at least one of the claims. In doing so, the board rejected Husky's argument that Athena's challenge should be barred by the doctrine of “assignor's estoppel.”

Assignor estoppel is the concept that a party that assigns a patent to another is barred from challenging the validity of that patent later. This is based on the idea that a party should not be allowed to claim that rights it had earlier assigned are actually invalid and have no value. In the case at issue, a co-inventor on the patent was Husky’s former owner who later left to found Athena.

In its final written decision, the board invalidated several but not all the challenged claims. Husky appealed, arguing that assignor estoppel barred Athena from bringing the IPR challenge. Athena also appealed, challenging the board's finding that several of the claims were not anticipated by the prior art.

Closely Related to AIA

The majority rejected Husky's appeal, finding that the court has no jurisdiction over the matter. The opinion, written by Judge Alan D. Lourie and joined by Judge Kara F. Stoll, pointed out that 35 U.S.C. § 314(d) of the America Invents Act (AIA) prohibits judicial review of board decisions on whether to institute trial in IPR proceedings. The court said that the U.S. Supreme Court's decision in Cuozzo Speed Techs., LLC v. Lee affirmed that Section 314(d) broadly excludes almost all review of decisions whether to institute trial (119 PTD, 6/21/16).

The majority also ruled that Husky's case did not fall under any of the exceptions to this bar on judicial review. Under Cuozzo only exceptions are when the issue implicates constitutional questions, depend on the interpretation of less closely related statutes, or concerns issues that reach well beyond this section of law.

Not About Ultimate Authority

Husky's appeal does not fall within previous Federal Circuit rulings which held that it may review PTAB decisions that go toward the board's “ultimate invalidation authority,” the majority said. It explained that this case is most analogous to the situation in Achates Reference Publ'g, Inc. v. Apple Inc. (190 PTD, 10/1/15).

In that case, the Federal Circuit ruled that Section 314(d) prevented it from considering arguments that the board should declined institution on the grounds that Apple Inc. was time-barred, because the issue did not concern the board's ultimate invalidation authority.

By contrast, the Federal Circuit ruled in Versata Dev. Grp., Inc. v. SAP Am., Inc., that it had authority to review the board's decision to institute trial in a covered business method (CBM) proceeding, because the issue of whether the challenged patent was in fact a CBM went to the board's “ultimate invalidation authority” (132 PTD, 7/10/15).

The majority also found that the board made a mistake in finding that several of the claims were not anticipated, and vacated and remanded as to those issues.

Not Closely Related

Judge S. Jay Plager wrote a partial dissent. He sided with the majority as to the issues being remanded back to the board, but would have ruled that the Federal Circuit had authority to consider the assignor estoppel issue, though he offered no opinion as to whether the board's ruling was correct or not.

Plager said that there are several unanswered questions about how to properly interpret the bar against judicial review of decisions whether to institute, even after the Cuozzo decision. For example, he said that one interpretation is that Section 314(d) only barred appeals before the matter was finalized, and that the whole case would be open to appeal after the board reached its final written decision. He said that was the position Justices Samuel Alito Jr. and Sonia Sotomayor took in their concurrence in Cuozzo.

Plager also pointed out that assignor estoppel is a common law doctrine and not one based on statute. Because of this, he said he would have found that the appeal concerns issues far removed from the AIA and not barred from review.

Harness, Dickey & Pierce PLC represented Husky. Michael Best & Friedrich LLP represented Athena. The Office of the Solicitor for the PTO represented PTO Director Michelle K. Lee as intervenor.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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