The Lawless Body – “Prior Judicial Opinions Did Not Bind the PTAB”

No just and coherent legal system would permit an administrative body to invalidate a property right that a court had previously upheld. Unfortunately, exactly that result was just endorsed by the Court of Appeals for the Federal Circuit in Novartis AG v Noven Pharm., Inc.  In its April 4 Novartis decision, the Federal Circuit affirmed a finding by the Patent Trial and Appeal Board (PTAB) that two of Novartis’ patents were obvious and therefore invalid. The patents cover a transdermal patch for treating Alzheimer’s Disease, an important medical advance in treating a scourge of the elderly.

The Federal Circuit handles all patent appeals, and this was not the first time they addressed the patents at issue in the case. Previously, the Federal Circuit had found the patents were not obvious on appeal from a district court.  However, when the PTAB—a unit of the Patent & Trademark Office—reached the opposite result and invalidated the patents, the Federal Circuit accepted the inconsistent results as part of Congress’ design.  The court explicitly stated that consistent results in different proceedings are merely “aspiration[al].”

None of the Federal Circuit’s purported justifications can justify such a discrepancy from the foundational requirement of the rule of law and the Constitution that people and their property are treated equally. First, the court did not contend that the record in the two cases differed in any substantive way.  To underscore this point, the court specifically held that it would have followed the PTAB’s decision even if the records were the same.

Second, the court justified the inconsistency by citing the different standards of review applied by district courts and the PTAB. This reasoning is exactly backwards. The court was wrong to rely on different standards to justify inconsistent results.  Instead, we should rely on the inconsistent results as evidence that having two separate adjudicatory systems with widely differing procedures and standards is a problem.

It is difficult to imagine a worse-functioning system of property rights. After lengthy litigation in courts ordained by the Constitution, the second highest court upholds a patent. This validation is still not sufficient for patent owners to be secure in their property rights once administrative review at the PTAB begins.  Procedures at the PTAB are stacked against patent owners, as Greg Dolin has shown in a CPIP policy brief.  Unfortunately, the harms of this bias against innovators have just been ratified again by the Federal Circuit.

This is exactly the type of legal uncertainty that kills economic development, not to mention the incentives to create and commercialize the innovation the patent system is supposed to spur. Given the high stakes for the innovation economy, it is becoming increasingly clear that the courts will not do their constitutional job reining in an overreaching administrative tribunal. If the Patent Office itself won’t constrain itself to respect basic due process protections for property rights, then Congress should fix this constitutional and innovation-threatening disaster. The Novartis decision is just one more addition to a fast-growing, long list that proves this point.

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