ARTHREX, INC. v. SMITH & NEPHEW, INC.

Federal Circuit Summary

Before Newman, Dyk, and O’Malley.  Appeal from the Patent Trial and Appeal Board.

Summary: The PTAB may enter an adverse judgment against a patent owner where, before issuing an institution decision on an IPR petition, the patent owner disclaims all challenged claims but does not request adverse judgment.

Smith & Nephew and Arthrocare filed an IPR petition on certain claims of an Arthrex patent.  Before the Board issued an institution decision, Arthrex disclaimed the challenged claims.  A PTO regulation, 37 C.F.R. § 42.73(b), states that a disclaimer of all challenged claims will be construed as a request for an adverse judgment.  In order to avoid the effect of this regulation, Arthrex filed a Preliminary Response stating that it was not requesting an adverse judgment under 37 C.F.R. § 42.73(b).  Nevertheless, the Board entered an adverse judgment against Arthrex.  As a result of the adverse judgment, estoppel attached that in part prevents Arthrex from obtaining a claim in any other patent that is not patentably distinct from the disclaimed claims.

The Federal Circuit affirmed.  First, the Court held that an adverse judgment by the Board is appealable.  The Court reasoned that the statutory appeal-bar of 35 U.S.C. § 314(d) relating to institution decisions is not applicable.  Also, the right to appeal final written decisions under 35 U.S.C. § 319 does not cabin the right to appeal an adverse final judgment under 28 U.S.C. § 1295.  Second, the Federal Circuit held that the Board properly entered an adverse judgment pursuant to the plain language of its regulation under § 42.73(b).  The Federal Circuit explained that the regulation would be meaningless if it could be evaded by the simple expediency of filing a paper indicating that the patentee did not want the regulation to apply.

The Federal Circuit noted that Arthrex expressly waived any challenge to the PTO’s authority to issue 37 C.F.R. § 42.73(b).  But in a concurrence, Judge O’Malley expressed doubts about the PTO’s authority to issue that regulation.  Judge Newman dissented, noting her belief that the plain language of § 42.73(b) prevents an adverse judgment before an institution decision.

This case is: ARTHREX, INC. v. SMITH & NEPHEW, INC.

Written By: Mark Kachner and Daniel Kamkar

Edited By: Paul Stewart