United States: "Substantial Evidence" Review Dooms PTAB Appeal

Merck & Cie v. Gnosis S.P.A.

Addressing the issue of obviousness in the context of an inter partes review (IPR), the U.S. Court of Appeals for the Federal Circuit affirmed a decision by the Patent Trial and Appeal Board (PTAB or Board) under a substantial evidence standard, finding that the contested claims of the patent-at-issue were invalid as obvious. Merck & Cie v. Gnosis S.P.A., Case No. 14-1779 (Fed. Cir., Dec. 17, 2015) (Hughes, J.) (Newman, J. dissenting) (Gnosis I).

The patent at issue, owned by Merck, related to methods of using folates to lower levels of homocysteine in the human body. Gnosis instituted inter partes review of certain claims, and the PTAB found that all of the claims-at-issue were obvious under § 103 in light of three prior art references. The PTAB also considered objective indicia of non-obviousness and concluded that Merck failed to demonstrate an adequate nexus between the novel features of the patent-at-issue and the evidence of commercial success, licensing, copying and industry praise. It also found that evidence of long-felt but unmet need, unexpected results and industry skepticism was unpersuasive. Merck appealed.

The Federal Circuit agreed with the PTAB that the asserted claims were obvious, concluding that the PTAB's factual findings with respect to both motivation to combine and lack of adequate nexus for the secondary considerations were supported by substantial evidence. In addressing the motivation to combine, the Federal Circuit emphasized that the prior art must be considered as a whole. As to the secondary considerations of non-obviousness, the Federal Circuit noted that Merck's evidence of commercial success, copying and industry praise were based on products that had material features beyond those disclosed and claimed in the patent-at-issue. The Court also noted that Merck failed to show an adequate nexus between the objective indicia factors and the novel features of the asserted claims. Similarly, the Federal Circuit found Merck's evidence of licensing to be weak because the licensing agreement covered several other patents, and it was difficult to determine the extent to which the licensing agreement was the result of the novel features of the patent-at-issue as opposed to those other patents.

Judge Newman dissented on several grounds, voicing her concern that the PTAB and the majority departed from the "explicit and implicit provisions of the [America Invents Act] statute." First, she noted that the lower burden of proof in the PTAB—preponderance of the evidence to prove invalidity—established a powerful incentive to challenge patent validity in the PTAB instead of the district court. Second, Judge Newman noted the AIA's provision for finality after the PTAB decision and any appeal to the Federal Circuit, arguing that that the majority's deferential "substantial evidence" standard of review was at odds with the benefits that Congress intended. Finally, Judge Newman disagreed with the majority's holding, stating that the record did not support a motivation to combine the prior art references or a reasonable expectation of success. Rather, according to Newman, such a conclusion only comes from hindsight reconstruction using the teachings of the inventors. She also stated that the majority discounted Merck's evidence of objective indicia of non-obviousness for the same reasons.

The same day, the Federal Circuit issued another opinion affirming a decision by the PTAB in a companion case, finding that the contested claims of the patent-at-issue were invalid for obviousness. South Alabama Med. Sci. Found. v. Gnosis S.P.A., Case Nos. 14-1778, -1780, -1781 (Fed. Cir., Dec. 17, 2015) (Hughes, J.) (Newman, J. dissenting) (Gnosis II). At issue in this case were three patents owned by South Alabama Medical Science Foundation (SAMSF) that related to administering the natural stereoisomer of 5-methyl-tetrahydrofolic acid and other vitamins to treat symptoms associated with folate deficiency.

For the same reasons discussed in Gnosis I, the Federal Circuit concluded that the PTAB's factual findings of a motivation to combine the prior art references and lack of adequate nexus with the merits of the claimed invention with respect to the objective indicia of non-obviousness were supported by substantial evidence. The Court noted that the PTAB did err in discounting SAMSF's licensing evidence, stating that the relevant inquiry is "whether there is a nexus between the patent and the licensing activity itself, such that the factfinder can infer that the licensing 'arose out of recognition and acceptance of the subject matter claimed' in the patent." However, the Federal Circuit held the PTAB's error was harmless because the licensing evidence was not enough to overcome the strong evidence of obviousness found in the prior art and expert testimony. Judge Newman dissented for the same reasons as in Gnosis I.

"Substantial Evidence" Review Dooms PTAB Appeal

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