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Arthrex, Inc. v. Smith & Nephew, Inc.

Pre-IPR Institution Disclaimer Can Lead to Estoppel in Prosecution of Related Applications

Arthrex, Inc. v. Smith & Nephew, Inc.,  2018 WL 522366 (Fed. Cir. Jan. 24, 2018) (Newman (dissenting), DYK, O’Malley (concurring)) (PTAB) (3 of 5 stars)

Fed Cir affirms entry of adverse judgment per Rule 42.73(b). After Smith & Nephew filed a petition for IPR, but before institution, Arthrex had disclaimed all claims cited in the petition, after which the PTAB entered adverse judgment. Rule 42.73(d)(3) thus required Arthrex to defend, during prosecution of related applications, that the related claims were patentably distinct from the disclaimed claims. As an initial matter, 28 U.S.C. § 1295(a)(4)(A) establishes Arthrex’s right to appeal. The opinion rejects Smith & Nephew’s argument that 35 U.S.C. § 319 and St. Jude Medical, 749 F.3d 1373 (Fed. Cir. 2014), limit appeal rights from such an action. § 319’s appeal bar does not bar appeal of the entry of adverse judgment.

The opinion notes, but declines to reach, the issue of whether the Board had statutory authority to adopt Rule 42.73(b), as it was disclaimed by Arthrex at oral argument. The regulation permits the Board to enter adverse judgment when a patent owner cancels all claims at issue after the filing of a petition, but before institution. The opinion rejects Arthrex’s argument that the regulation was inapplicable because Arthrex never requested adverse judgment; such an approach would “render the rule a nullity.” Op. at 7. It also rejects Arthrex’s argument that the rule’s reference to claim cancellation leaving “no remaining claim in the trial” means that subsection 2 of Rule 42.73(b) applies only post-institution.

Concurrence: Judge O’Malley agrees that the Board’s action is consistent with the text of the regulation, but has doubts as to whether Rule 42.73(b) meets statutory requirements.

Dissent: Judge Newman takes the view that the estoppel provisions of Rule 42.73(d)(3) should not apply in the absence of an IPR trial on the merits, and views the majority’s statutory and regulatory interpretation as flawed.

KEYWORDS: INTER PARTES REVIEW; ESTOPPEL; DISCLAIMER OF CLAIMS