On April 26, 2016, the Federal Circuit denied a petition for rehearing en banc, filed by Merck and Cie. The Federal Circuit maintained that the “substantial evidence” review standard applies for an appeal from an IPR proceeding.1 Judge O’Malley, with whom Judges Wallach and Stoll concurred in the denial of the petition, stated that in light of §§ 7 and 144 of Title 35, “we review Board decisions ‘on the record of an agency hearing provided by statute,’ and that we should therefore review Board fact-finding for ‘substantial evidence.’”2 The court explained its decision to deny the petition, “[i]n light of In re Gartside, [it] has reviewed all of the Board’s factual findings including those in IPRs, for substantial evidence.”3
Judge O’Malley, stated that the substantial evidence standard of review is seemingly inconsistent with the purpose and content of the America Invents Act (“AIA”). Indeed, according to Judge O’Malley, “[t]o the extent IPR proceedings were intended to replace district court litigation, it would make sense for this court to review factual findings by the Board in these new IPR proceedings under the same standard we employ when reviewing factual findings of district judges – for clear error.”4 However, Judge O’Malley recognized that the court is bound by the Supreme Court precedent in Dickinson v. Zurko5, and its own precedent in In re Gartside.6 Before Dickinson, the Federal Circuit had a “settled practice of reviewing factual findings of the board’s patentability determinations for clear error.”7 In Dickinson, the Supreme Court disagreed, “conclud[ing] that [5U.S.C. § 706 of the APA] does apply [to Board findings], and the Federal Circuit must use the framework set forth in that section.”8
The opinion further stated that the failure to change the standard of review at Federal Circuit is inconsistent with what Congress sought to accomplish by creating IPR proceedings;9 and, unless and until the Congress or the Supreme Court sees fit to expressly change the standard of review, the Federal Court will continue to review factual findings of the Board for substantial evidence.10 Judge O’Malley explained “when authorizing IPR proceedings under the AIA . . . Congress viewed IPR proceedings as cost-efficient substitutes for litigation in federal district courts” and, therefore, it makes sense for the Federal Circuit to review factual findings by PTAB under the AIA with the same standard employed when reviewing factual findings of district judges.11 However, the Court acknowledged, “[b]ecause Congress failed to expressly change the standard of review employed by this court in reviewing Board decisions when it created IPR proceedings via the AIA, we are not free to do so now.”12
The opinion also distinguished inter partes reexamination (which were reviewed under the standard of substantial evidence) from IPR proceedings, and explained that “Congress … enacted substantive and procedural changes that brought IPR proceedings in line with district court in meaningful ways.”13
Judge Newman, consistent with her dissent in the December 2015 decision,14 reiterated that (i) the precedence does not prohibit objective review of PTAB decisions15, (ii) the substantial evidence standard does not conform to the statutory plan,16 and (iii) the PTAB proceeding is a trial between private parties, and requires commensurate review.17 The dissent further stated that the purpose of AIA to provide a substitute for district court proceedings is “thwarted” if on appeal the Federal Circuit simply looks for substitutional evidence on the side of the PTAB decision.18
Given that (i) at least four Federal Circuit judges do not seem to think that the Court’s application of, and failure to change, the substantial evidence standard of review is consistent with the AIA, and (ii) three of the four Judges clearly call on Congress and/or the Supreme Court to address the issue of standard of review to be applied by the Federal Circuit judges, it will be interesting to see whether Merck pursues its petition to alter the standard of review to the Supreme Court.
2 Id. at 3.
4 Id. at 4.
5 Dickinson v. Zurko, 527 U.S. 150 (1999).
6 In re Gartside, 203 F.3d 1305, 1313 (Fed. Cir. 2000).
7 In re Zurko, 142 F.3d 1447, 1458 (Fed. Cir. 1998) (en banc).
8 Dickenson, 527 U.S. at 152.
9 Merck & Cie at 6.
10 Id. at 7.
11 Merck & Cie at 3.
12 Id. at 2.
13 Id. at 5.
14 Merck & Cie v. Gnosis S.p.A., 808 F.3d 829 (Fed. Cir. 2015).
15 Merck & Cie (Fed. Cir., Apr. 26, 2016) at 11-12.
16 Id. at 12-14.
17 Id. at 14-15.
18 Id. at 15.