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Fed. Cir. Declines to Rehear Cisco-VirnetX Row After PTO Ask (1)

May 13, 2020, 5:41 PMUpdated: May 13, 2020, 11:00 PM

The Federal Circuit declined to rehear its decision to vacate and remand a patent office tribunal’s ruling on Cisco Systems Inc.'s challenge of VirnetX’s patent.

The dispute is similar to other patent cases that the court recently sent back due to new considerations surrounding the constitutionality of patent judges’ appointments, the U.S. Court of Appeals for the Federal Circuit said in its decision.

The U.S. Patent and Trademark Office and Cisco had asked the court to reconsider its January order to send the case back to the Patent Trial and Appeal Board because the patent review process in the case was different than other recent cases involving the tribunal’s inter partes reviews.

The Federal Circuit’s remand followed its controversial Arthrex Inc. v. Smith & Nephew Inc. decision, in which the court found that PTAB judges were unconstitutionally appointed. The court has since used the decision to kick a slew of IPR appeals back to the PTAB for redos.

The order holds Arthrex’s influence widens to other PTAB proceedings beyond IPRs. It shows “Arthrex applies to all actions by the administrative patent judges at the PTAB,” Doug Robinson, patent attorney at Harness, Dickey & Pierce, P.L.C, said.

Reexam vs. Review

In Arthrex, the Federal Circuit found that patent judges had so much power they should have been appointed by the President and confirmed by the Senate. The court changed their job status by severing job protections.

Cisco and the patent office, in their requests, argued the Cisco-VirtnetX row was unique because it involved a different kind of patent review. VirnetX’s case involved an inter partes reexamination, a review process that was replaced in 2012 by inter partes review.

In inter partes reexams, a third party can ask an agency examiner to review the validity of patent claims, and the decision can be appealed to the patent office’s administrative patent judges (APJs). In inter partes reviews, a third party’s challenge of patent validity goes directly to the PTAB’s judges.

The Federal Circuit, in explaining its refusal, said the two types of reviews are “similar” enough for Arthrex to apply even to VirnetX’s case.

“Both involve third-party challenges to the claims of an issued patent and, importantly, in both, APJs exercise significant authority on behalf of the government by issuing final decisions that decide the patentability of the challenged claims,” the court said.

Cisco asked for a reexam, in which a patent examiner rejected certain claims in a VirnetX patent. VirnetX appealed to the PTAB, which affirmed the rejections.

The patent office noted in its rehearing request that the VirnetX dispute presented different “remedial considerations” than those touched on in Arthrex.

In Arthrex, the Federal Circuit found that PTAB judges had too much power in inter partes review , the PTO argued.

“In contrast, this case involves an inter partes reexamination, a process in which the USPTO Director has always had the ability to make unilateral decisions regarding examination of the claims,” the PTO argued.

The court didn’t agree. “They primarily argue that the Director has significant control over inter partes reexamination proceedings before a case reaches the Board,” the court wrote.

Arthrex Expanding

The VirnetX order may also offer a glimpse into the Federal Circuit’s view as to whether Arthrex can be applied to a patent applicant’s ex parte appeal of a rejected application to the PTAB, according to Tyson Benson, patent attorney at Bejin Bieneman PLC.

The Federal Circuit is currently grappling with that question in another case, In Re: Boloro Global Limited. It has yet to issue a decision on the case.

“I think VirnetX gives us insight into how the Federal Circuit views ex parte appeals,” Benson said.

The court “painted with a very broad brush” as to how Arthrex applies, he said. “This certainly expanded the number of patent decisions that could be subject to Arthrex.

But the patent office has a stronger argument against applying Arthrex to appeals of examiner rejections, Matt Rizzolo, a patent attorney at Ropes & Gray LLP said.

The “Director has the last word even if the PTAB were to reverse an examiner’s rejection, the director could always refuse to issue the patent,” Rizzolo said in an email.

Judge Kathleen M. O’Malley authored the precedential order. Judges Kimberly Ann Moore, author of the Arthrex opinion, and Raymond T. Chen, who was on the Arthrex panel, joined.

The case is VirnetX Inc. v. Cisco Systems, Inc., Fed. Cir., No. 19-01671, Order 5/13/20.’

(Updated with additional reporting)

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Roger Yu at ryu@bloomberglaw.com, Keith Perine at kperine@bloomberglaw.com

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