Arthrex Strategy With One Medical Device Patent Could Hurt Others

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By Tony Dutra

Arthrex Inc.'s attempt to sacrifice the claims of one patent, on a medical device that attaches soft tissue to bone, to shield two related patents failed on appeal Jan. 24.

The decision by a split U.S. Court of Appeals for the Federal Circuit serves as a caution to patent owners facing a challenge at the Patent and Trademark Office while related patent applications are still in progress at the agency.

Arthrex abandoned its defense of nine claims of U.S. Patent No. 8,821,541 challenged at the PTO by Smith & Nephew Inc. and ArthroCare Corp. under the America Invents Act of 2011. Arthrex intended to avoid PTO regulation 37 C.F.R. §42.73, which ties an AIA proceeding loss on one patent to other related applications.

The Patent Trial and Appeal Board, which handles patent challenges at the PTO, treated Arthrex’s abandonment of claims as an adverse judgment against the ‘541 patent and canceled the nine claims.

Under Rule 42.73(d)(3), adverse judgment bars Arthrex’s attempts to get other patents on claims not “patentably distinct” from the canceled claims. The PTAB made its adverse judgment while Arthrex’s other applications were in progress.

The board did not specifically rule that the newer claims—which were subsequently issued as patents—were patentably indistinct. But Arthrex will have to face that argument if it asserts infringement of the new patents.

Point in Proceeding

The three judges of the Federal Circuit panel each issued an opinion. Their dispute extends a debate within the court about Congress’s intent in the AIA when it split PTAB challenges into two stages: pretrial and trial.

The court has disagreed in the past about whether pretrial decisions have estoppel effect in federal court—that is, barring challengers from again raising arguments that failed to proceed to trial. The issue in this case was whether pretrial decisions can block patent owners, per Rule 42.73(d)(3), from getting other patents in the same patent family. The three patents shared the same description.

Rule 42.73(b) allows the patent owner to request adverse judgment “at any time during a proceeding.” It also allows the PTAB to interpret certain patent owner actions as equivalent to a request for adverse judgment, including: “Cancellation or disclaimer of a claim such that the party has no remaining claim in the trial.”

Judge Timothy B. Dyk, writing for the majority, held that “a proceeding” includes both pretrial and trial stages. In dissent, Judge Pauline Newman argued that “in the trial” barred the PTAB from turning Arthrex’s abandonment into adverse judgment pretrial.

Judge Kathleen M. O’Malley concurred in the result, but wrote separately to express doubts about whether the PTO had the authority to create Rule 42.73 under the AIA. However, since Arthrex’s appeal didn’t include a challenge to the rule, the Federal Circuit couldn’t address the issue, O’Malley said.

What can be Appealed

As a preliminary matter, the three judges agreed on another point that has also divided the court—the extent to which a party losing at the trial-institution stage can appeal to the Federal Circuit at all. They agreed that the AIA didn’t bar appellate review in this case.

Smith & Nephew argued that 35 U.S.C. § 319 only allows appeal of post-trial final written decisions. But the court held that Section 319 “does not on its face provide the exclusive means for appeal” of PTAB judgments. The court relied on the broader authority of 28 U.S.C. § 1295, which gives it jurisdiction “with respect to” final judgments of the board. The adverse judgment ruling here was final, the court said.

Carlson, Gaskey & Olds P.C., Birmingham, Mich., represented Arthrex. Wolf, Greenfield & Sacks P.C., Boston, represented Smith & Nephew.

The case is Arthrex, Inc. v. Smith & Nephew, Inc. , 2018 BL 22928, Fed. Cir., 2017-1239, 1/24/18 .

To contact the reporter on this story: Tony Dutra in Washington at adutra@bloomberglaw.com

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

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