# United States **Court of Appeals**  **for the Federal Circuit**

______________________
ETHICON ENDO

- SURGERY, INC., Appellant

v.

COVIDIEN LP, Appellee

______________________

2014

- 1771

______________________ Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR 2013

- 00209.

______________________

Decided: January 13 , 2016

______________________

P HILIP S TATON J OHNSON , Johnson & Johnson, New Brunswick, NJ, argued for appellant. Also represented by S TEVEN D. M ASLOWSKI , R UBEN H. M UNOZ , J ASON W EIL , Akin, Gump, Strauss, Hauer & Feld, LLP , Philadelphia, PA ; P RATIK A. S HAH , H YLAND H UNT , Washington , DC.

K ATHLEEN D ALEY , Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, Washington, DC, argued for appellee. Also represented by J. M ICHAEL J AKES ; J. D EREK M C C ORQUINDALE , Reston, VA.ETHICON ENDO

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K ATHERINE T WOMEY A LLEN , Appellate Staff, Civil Division, United States Department of Justice, Washin gton, DC, argued for intervenor Michelle K. Lee. Also represented by B ENJAMIN C. M IZER , M ARK R. F REEMAN ; N ATHAN K. K ELLEY , S COTT W EIDENFELLER , S TACY B ETH M ARGOLIES , Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA.

______________________
Before N EWMAN , D YK , and T ARANTO , Circuit Judges.
Opinion for the court filed by Circuit Judge D YK

. Dissenting opinion filed by Circuit Judge N EWMAN

. D YK , Circuit Judge

. Ethicon Endo

- Surgery, Inc. (“Ethicon”) owns U.S. P atent No. 8,317,070 (“the ’ 070 patent”). Covidien LP (“Covidien”) petitioned the United States Patent and Trademark Office (“PTO”) for inter partes review of claims 1

– 14 of the ’ 070 patent. The PTO, through a panel of the Patent Trial and Appeals Board ( “PTAB” or “Board”), granted the petition. On the merits, the same Board panel found all challenged claims invalid as obv ious over the prior art. Ethicon appeal s, asserting that the Board’s final decision is invalid because the same Board panel made both the decision to institute and the final decision. Ethicon also asserts that the Board erred in finding the claims obvious

. We first hold that 35 U.S.C. § 314(d) does not preclude

us from hearing Ethicon’s challenge to the authority of the Board to render a final decision

. O n the merits we hold that neither the statute nor the C onstitution pr ecludes the same panel of the Board that made the decision to institute inter partes review from making the final determination. We also find no error in the Board’sETHICON ENDO

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determination that the ’ 070 patent claims would have been obvious over the prior art. Accordingly, we affirm

. B ACKGROUND
The claims of the ’ 070 patent are directed to a surgical device used to staple, secure, and seal tissue that has been incised

. As the specification describes, a typical embodiment can both make the incision and simultan eously apply lines of staples on opposing sides of the inc ision. ’ 070 Patent col. 7 ll. 5

– 31. As is commonly done during endoscopic procedures

, a surgeon will insert the device into the patient and will pull a trigger to latch onto a desired tissue. Once attached, the surgeon will then pull an other trigger, which causes a blade to move, cu tting the desired tissue. Simultaneously, rows of staples on either side of the cutting blade are actuated against a staple forming surface , both securing and sealing the newly

- cut tissue.
Claim 1 is representative of the claimed invention:
A surgical stapling device comprising an end e ffector that comp rises :

a circular anvil having a staple forming surface;

a plurality of staples facing the staple forming surface of the anvil, each staple comprising a main portion and two
prongs, wherein the two prongs each co mprise a first and a second end, wherein the first ends are connected to opposite ends of the main portion, and wherein the two prongs extend non

- parallelly from the main portion ; and

a staple driver assembly comprising a pl urality of staple drivers, wherei n each st a-ETHICON ENDO

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ple driver supports one of the plurality of staples and is configured such that, when the staple driver assembly is actuated, each staple driver drives the staple into the staple forming surface of the anvil, wherein a first quantity of the staples have a first pre

- deformation height , measured from a lower surface of the main portion to the second end of the first prong, and a second quantity of the staples having a second pre

- deformation height , measured from a lower surface of the main portion t o the second end of the first prong, wherein the first height is less than the second height , such that when the staple driver assembly is actuated, the first quantity of staples have a different formed staple length than the second quantity of staples.
( emphase s added)

. S urgical staplers were not new at the time of the ’ 070 patent

. A s the patent specification itself describes, these types of devices were well known and had been commonly used. ’ 070 Patent col. 1 ll. 45

- 47. The ’ 070 patent claims
two primary aspects of stapler design : the use of staples of different pre -formed and formed heights (i.e.

, heights before and after stapling) and the use of staples with non

parallel legs . It is undisputed that both of these i mprovements, separately, were a lso well

- known in the prior art. Thus, the purported inventive aspect of the ’ 070 patent is the combination of these two features in a surgical stapler

. The patent discloses no particular synergy resulting from the combination.
According to the prior art disclosures and the specification , the use of staples of different pre

- formed and formed height s is beneficial in a number of ways . ForETHICON ENDO

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example, “rows of inside staples [can] serve to provide a hemostatic barrier, while the outside rows of staples with l arger formed heights [can] provide a cinching effect where the tissue transitions from the tightly compressed hemostatic section to the non

- compressed adjacent se ction.” ’ 070 Patent col. 2 ll. 8– 12

. This is beneficial b ecause these staples of different s izes “decrease [] leakage
rates

. . . and provide [] short and long

- term tis sue strength” after incision. J.A. 290. The use of these diffe rent sized staples thus allows this type of device to be used on a broader range of tissue thicknesses. As is unconte s ted, these staples of varying pre

- formed and formed heights were first disclosed 25 years ago by prior art references Tyco Healthcare International Publication No. WO 2003/094747 and U.S. Patent No. 4,941,623.

The primary benefit of using non

- parallel l egs on st aples is that the staple legs press against the side of the staple cartridge and stay in the cartridge without falling
out. J. A

. 454. As is also uncontested, the use and benefit of these staples was previously disclosed in a 1970 U.S. Patent

, No . 3,494,533
, and were well known by those in the field, even according to Ethicon’s own expert
, who testified that he used nonparallel staples “maybe 50 or 75 percent of the time” in his practice

. In 2010 , Covidien began selling surgical staplers that, Ethicon contends, embody the claimed invention of the

’ 070 patent. The brochures for these staplers, featuring what Covidien called “Tri

- Staple technology,” tout “ pr ogressive staple heights” that allow “consistent perfo rmance over a broader range of tissue thickness.” J. A

. 1101 , J.A. 1126. Notably absent from these brochures, though, was any mention of non

- parallel legs on the staples. The staplers using this technology were very successful, achieving over $1 billion in product sales within the fi rst three years of their introduction to theETHICON ENDO

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market. According to Covidien, the Tri

- Staple devices are likely to be one of their most success ful product lines ever.
Covidien filed a p etition with the PTO on March 25, 2013, requesting inter partes review of claims 1

– 14 of the

’ 070 patent on the ground that the claims would have been obvious over the prior art . The Board granted the petition on August 26, 2013.

In its June 9, 2014

, final decision, the same panel of the Board that instituted the inter pa rtes review rejected all of Ethicon’s arguments and found all challenged claims of the ’ 070 patent obvious under 35 U.S.C. § 103. It noted that Ethicon admitted that all of the recited elements of the patent claims were found in the prior art. Rel ying on Covidien’s expert testimony , the B oard co ncluded that one of skill in the art would have been mot ivated to combine the prior art staplers disclosing staples of varying heights with staples of non

- parallel legs to securely hold the staples in the cartridge because the benefits of both were well known at the time of the inve ntion

. Further, the Board found no suggestion in the prior
art teaching away from combining these elements

. T he B oard alternatively found that it would have been obvious to try to com bi ne non

- parallel staples with the prior art devices disclosing staples of varying heights because of the “limited choice” of staple designs

. J. A

. 15. Finally, it found that Ethicon’s evidence of secondary considerations did “ not overcome the strong case o f obviousness. ” J. A

. 19. Ethicon appeals . We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A). We review the Board’ s factual findings for substantial evidence and its legal conclusions de novo. In re Baxter Int'l, Inc. , 678 F.3d 1357, 1361 (Fed. Cir. 2012).ETHICON ENDO

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D ISCUSSION

I

Ethicon challenges the final decision of the Board, a rguing that the final decision should be set aside because it was made by the same panel that made the decision to institute inter partes review

. T he America Invents Act 1 (“AIA”) gives the Director the authority to determine whether an inter partes review should be initiated

, and the Director has delegated this authority to the Board. 2 T he statute specifically gives the Board the power to decide the ultimate question of patent

va lidity

. See 35 U.S.C. § 318 ( requiring that “the Patent Trial and Appeal Board shall issue a final written dec ision with respect to the patentability of any patent claim challenged by the petitioner” ). T he PTO has determined that

, in the interest of effi ciency, the decision to institute and the final decision should be made by the same Board panel, in line with the purposes of the AIA , which r equires the Director consider the “efficient administration of the [PTO], and the ability of the [PTO] to timely c o mplete proceedings” in promulgating regulation s. 35 U.S.C. § 316 (b ). Ethicon contends that this combination of

1 The relevant portions of the Leahy

- Smith America Invents Act, Pub. L. No. 112

- 29, 125 Stat. 284 (2011) have been codified in T itle 35 of the U.S. Code.

2 See 35 U.S.C. § 314(a) (“ The Director may not a uthorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response

. . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition. ”); 37 C.F.R. § 42.4(a) (stating that the “Boa rd institutes the trial on behalf of the Director”).ETHICON ENDO

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functions is improper because the statutory text and structure, guided by constitutional principles, require that the decision to institute not be made by the same panel of the Board that makes the ultimate deci sion and , in fact, that the statute does not authorize the Director to del egate the institution decision to the Board at all.

A

Before we can turn to the substantive questions raised by Ethicon’s challenge , we must first decide whet her we have jurisdiction to address the combination of functions issue

. The PTO, as interveno r , argues that 35 U.S.C. § 314 (d) bars us from considering this issue on appeal because it is an issue concerning the institution of

an inter partes review proceeding

. Section 314 (d) provides that “ [t] he determination by the Director whether to institute an inter partes review shall be final and nonappealable.” 35 U.S.C. § 314(d) (emphasis added)

. Section 314(d) here plainly “prohibits review of the decision to institute [ inter partes review] even after a final decision .” In re Cuozzo Speed Techs.

, LLC , 793 F.3d 1268, 1273 (Fed. Cir. 2015). It does not, however, preclude review of the final decisi on. Indeed, § 319 specifically provides for appeal of a final decision: “[a] party dissatisfied with the final written decision of the Patent Trial and Appeal board . . . may appeal the decision

. ” 35 U.S.C. § 319 ; s ee also Versata Dev. Grp., Inc. v. SAP Am., Inc. , 793 F.3d 1306, 1322 (Fed. Cir. 2015)

. Here, Ethicon does not challenge the institution dec ision, but rather alleges a defect in the final decision. It
argue s that the final decision is invalid because it was made by the same panel that institut ed inter partes review . Section 314(d) does not prevent us from hearing a challenge to the authority of the Board to issue a final decision

.ETHICON ENDO

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B
On the merits, Ethicon argues that having the same panel make the decision to institute and then later decide the merits of the inter partes review raises “serious due process concerns.” Appellant’s Br. 35. According to Ethicon, because the panel of the Board is first exposed to

a limited record consisting of the petition and patent holder’s preliminary response, there is a risk that the panel may prejudge the case before seeing a full record

, thereby depriving a patent holder of a due process right to an impartial deci sion maker. Ethicon argues that to avoid these constitutional concerns, we must construe the statute to preclude the Director from delegating the decision to institute to the same panel of the Board that makes the final decision. We disagree with Ethicon and conclude that, where, as here, there are no other separate procedural

- fairness infirmities alleged, the PTO’s assig nment of the institution and final decisions to one panel of the Board does not violate due process under governing Supreme Court preced ent. The leading case involving due process and the co mbination of functions is the Supreme Court’s decision in Withrow v. Larkin , 421 U .S. 35 (1975). In Withrow , the question was whether a physician’s due process rights had been violated by a state med ical board ’s suspen sion of his license when the same board both investigated, and then later adjudicated, the issue

. Id. at 46. The Court held that there was no due process violation, finding that combining the investigative and adjudicat ory functions in a single body does not raise constitutional concerns. Id. at 58. Similarly, the Court found no due process violation where Administrative Law Judges determine Social Security disability benefits and, at the preliminary stage,

“ investigat e facts and develop the arguments both for and against granting benefits,” Sims v. Apfel , 530 U.S. 103, 111 (2000)

, and “act[] as an examiner ch arged with deve l-ETHICON ENDO

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oping the facts. ” Richardson v. Perales , 402 U.S. 389, 410 (1971) . In fact, “[t] he Supreme Cou rt has never held a system of combined functions to be a violation of due process, and it has upheld several such systems.” 2 Richard J. Pierce, Jr.

, Administrat ive Law Treatise § 9.9,

p. 892 (5th ed. 2010).
Lower courts have also rejected due process c hallen ges to systems of adjudication combining functions in an
agency. S ee, e.g. , Riggins v. Goodman , 572 F.3d 1101, 1112 (10th Cir. 2009) (no due process concerns in a sy stem for deciding whether to terminate tenured public employees which combined inves tigative and adjudicatory functions); In re Seidman , 37 F.3d 911, 9 24

– 26 (3d Cir. 1994) (no due process violation in combining “functions of investigation, prosecution and adjudication” in the Di rector of the Office of Thrift S upervision when banker was sanctioned ); NLRB v. Aaron Bros. Corp. , 563 F.2d 409, 413 (9th Cir. 1977) (no due process v iolation when Regional D irector of the NLRB “exercised both investigative and adjudicative responsibilities in connection with the issuance and resolution of [an] un fair labor practice complaint”); Jonal Corp. v. Dist. Of Columbia , 533 F.2d 1192, 1197 (D.C. Cir. 1976) (no due process violation simply because of combined functions when contract dispute was decided by officials appointed by officer representing the gove rnment ). And we have held that there is no due process issue when, in the anti

- dumping context, a Department of Commerce official makes both the decision to institute and then the final determination. NEC Corp. v. U.S. , 151 F.3d 1361, 1374 (Fed. Cir. 199 8)

. Ethicon cites no case to the contrary.

H ere , combining the decision to institute with the final decision in a single panel is less problematic than theETHICON ENDO

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situation in Withrow

. 3 The Board first decides whether a petition demonstrates a likelihood of success on the merits, and, if it does, makes a decision to institute inter partes review. During the merits, the Board decides whether the petition actually succeeds. B oth the decision to institute and the final decision are adjudicatory dec isions and do not involve combining investigative and/or prosecutorial functions with an adjudicatory function. The inter partes review procedure is directly analogous to a district court determining whether there is “a likelihood of success on the merits” and then later deciding the merits of a case. See , e.g. , Fed. R. Civ. P. 65; Winter v. Natural Res. Def. Council, Inc. , 555 U.S. 7, 20 (2008) . As Withrow also made clear, “p retrial involvements,” such as “issuing or denying a temporary restraining order or a preliminary injunction” do not “raise any constitutional barrier against the judge’s presiding” over the later trial

. See Withrow

, 421 U.S. at 56

. Lastly, Ethicon argues that the Board panel ’s exp osure to a limited record in the decision to institute i mproperly biases it so as to disqualify it from making the final decision on the merits. But, as Withrow held, adj udicators are afforded a “presumption of honesty an d integrity” and even “ exposure to evidence presented in nonadversary investiga tive procedures is insufficient in itself to impugn the fairness of [adjudicators] at a later adversary hearing.” Withrow , 421 U.S. at 47, 55

. As the

3 Note that the Administrative Procedure Act pr ohibits “[a]n employee or agent engaged in the performance of investigative or prosecuting functions for an agency” from participating “in the decision .

. . except as witness or counsel.” 5 U.S.C. § 554(d). However, the APA impo ses no separation obligation as to those involved in preli minary and final decisions.ETHICON ENDO

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Court has also made clear, “opinions held by judges as a result of what they learned in earlier proceedi ngs” are “not subject to deprecatory characterization as ‘bias’ or ‘prejudice.’” Liteky v. U.S. , 510 U.S. 540, 551 (1994)

. 4 To rise to the level of presenting actual bias, the cha llenger must show that an adjudicator is exposed to unofficial, “extrajudicial” sources of information. See Liteky

, 510 U.S. at 554 . For example, the Supreme Court in Withrow pointed to a case in which a judge in a criminal
context improperly served as a “one

- man grand jury,” charged two witnesses who appeared before him in th e grand jury proceeding with criminal contempt, and then tried and convicted them. 421 U.S. at 53. In line with traditional ethical rules that generally prohibit judges from being witnesses in cases in which they preside

, see, e.g. , Fed. R. Evid. 605 , the problem in that case was that the judge “called on his own personal knowledge and impression of what had occurred in the grand jury room and his judgment was based in part on this impression,

4 See also Hortonville Joint Sch. Dist. No. 1 v. Ho rtonville Educ. Ass’ n , 426 U.S. 482 , 493 (1976) (“Mere familiarity with the facts of a case gained by an agency in the performance of its statutory role does
not

. . . disqualify a decisionmaker. ”); Goldberg v. Kelly

, 397 U.S. 254, 271 (1970) (“[P] rior involvement in some aspects of a case will not necessarily bar a welfare official from acting as a decision maker

. ”); Mangels v. Pena , 789 F.2d 836, 838 (10th Cir. 1986) ( finding that adjudicator’s

pre

- hearing exposure to an investigative report did not violate due process); Vanelli v. Reynolds Sch . Dist. No. 7

, 667 F.2d 773, 776 (9th Cir. 1982) (finding that a school board’s participation in an initial termination decision did not render the board impermissibly biased when it co nducted a subsequent termination hearing).ETHICON ENDO

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the accuracy of which could not be tested by adequate

cros s- examination.” In re Murchison , 349 U .S. 133, 138 (1955) . There is no allegation of exposure to extra

- judicial information here. We see no due process concerns in combining the functions of initial decision and final disposition in the same Board panel

. C
We now turn to Ethicon’s statutory arguments. Eth icon argues that the history, structure, and content of the AIA reflect a c ongressional intent to withhold the power of the Director to delegate to the Board the power to institute inter partes review. This was allegedly designed to insulate the B oard as final decision maker from the supposed taint of the decision to institute the proceeding

. Ethicon argue s that because Congress (1) specifically gave the Director the power to institute, see, e .g. , 35 U.S.C. § 314(a)

, (2) did not explicitly give the Director authority to delegate the institution decision to the Board, and (3) gave the Board the power to make the final determin ation, Congress intended to keep the functions of instit ution and final decision separate

. There is nothing in the statute or legislative history of the statute indicating a concern with separating the functions of initiation and final decision. Ethicon ignores the longstanding rule that agency heads have imp lie d authority to delegate to o fficials within the agency, even without explicit statutory authority and even when age ncy officials have other statutory duties

. Congress regularly gives heads of agencies more tasks than a single person could ever accompli sh, necessarily assum ing that the head of the agency will delegate the task to a subordinate officer. For example, more than 100 years ago

, the S upreme Court in Parish v. United States found that the Surgeon General had properly delegated authority to an assistant Surgeon General to place orders with vendorsETHICON ENDO

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because “it is impossible for a single individual to perform in person all the duties imposed on him by office.” 100 U.S. 500, 504 (1879)

. The implicit power to delegate to subordinates by the head of an agency was firmly entrenched in Fleming v. Mohawk Wrecking & Lumber Co.

, where the Supreme Court held the a dministrator of an agency could delegate the power to sign and issue subpoenas to regional admi nistrators despite absence of an explicit authorization in the statute. 331 U.S. 111, 122 (1947)

. “W hen a statute delegates authority to a federal officer or agency, subdel egation to a subordinate federal officer or agency is pr esumptively permissible absent affirmative evidence of a

co ntrary congressional intent.” U. S. Telecom Ass’n v. FCC , 359 F.3d 554, 565 (D.C. Cir. 2004); see also Kobach v. U.S. Election Assistance Comm’n , 772 F.3d 1183, 1190 (10th Cir. 2014) (finding that the courts of appeals that have spoken on the issue are “un animous in permitting subdelegations to subordinates .

. . so long as the enabling statute and its legislative history do not indicate a proh ibition on subdelega tion ”)

. The general principle is so well accepted that the Supreme Court has called it “unexc e ptional.” See United States v. Giordano

, 416 U.S. 505 , 514 (1974)

. Ethicon argues that Cudahy Packing Co. of Louisiana v. Holland , 315 U.S. 357 (1942)

, holds that affirmative authority to delegate is required. The Supreme Court has not cited Cudahy since 1958 “and the lower courts no longer follow it.” 1 Richard J. Pierce, Jr., supra § 2.7, p. 125. Despite some language in Cudahy suggesting that express authority to delegate is required, the Supreme Court later clarified in Fleming that the Cudahy decision was based on explicit legislative history that “showed that a provision grant ing authority to delegate

. . . had been eliminated when the bill was in Conference.” Fleming

, 331 U.S. at 120 . Thus

, Cudahy simply stands for theETHICON ENDO

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unremarkable proposi tion that c ongressional intent to preclude delegation can sometimes be found in the legi slative history. 5 Ethicon can point to no legislative history or any other aspects of the AIA here suggesting that delegation by the Director to the Board is impermiss ible

. Quite th e contrary, C ongress obviously assumed that the D irector would delegate. Before the AIA, t he Director, as head of the PTO, regularly assigned tasks to subord inate officers. See, e.g.

, 35 U.S.C. § 131 (“the Director shall issue a patent”); § 132(a) (“the Director shall notify the applicant” of a rejection of a patent application); § 251(a) (“the Director shall” reissue amended patents). This carried over to the AIA, where Congress assi gned the Director the decision to institute

, necessarily assuming that the popularity of inter partes review and the short time frame to decide whether to institute inter partes

5 Ethicon’s reliance on our previous decision in Splane v. West , 216 F.3d 1058 (Fed. Cir. 2000) is also misplaced. Splane cannot be read to require express authorization in light of the Supreme Court’s Fleming case (not cited in Splane ), which makes clear that express authorization is not required. Ethicon, in addition, relies on two inapposite D.C. Circuit cases finding no delegation to outside agencies

— Shook v. D.C. Fin. Respons ibility & Mgmt. Assist ance Auth

. , 132 F.3d 775, 782 (D.C. Cir. 1998) and Halverson v. Slat er , 129 F.3d 180, 185

– 86 (D.C. Cir. 1997)

. These cases are not applicable to the current situation because “[t]he presumption that subdelegations are valid absent a showing of contrary congressional intent applies only to” subdelegations, not delegations to outside agencies. U.S. Telecom Ass’ n , 359 F.3d at 565. “T here is no such presumption covering subdelegations to outside parties. ” Id.ETHICON ENDO

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review would mean that the Director could not her self review every petition. 6

Ethicon finally argues that the existence of 35 U.S.C. § 3(b)(3)(B), which allows the D irector to delegate duties to officers and employees s he appoints

, evidences a c o ngressional purpose to cabin the Director’s authority with respect to delegation

. See 35 U.S.C. § 3(b)(3) (providing that “[t]he Director shall .

. . appoint such officers .

. . as the Director considers necessary, .

. . and delegate to them such of the powers vested in the Office as the Director may determine ”)

. Ethicon argues that this means that the Director cannot delegate to other officers of the PTO, like members of the Board , whom s he does not appoint. Ethicon primarily relies on one sentence from the S upreme Court’s decision in Fleming stating that a provision “specifically autho riz [ing] delegation as to a particular function ” may “lend[] support to the view that when Congress desired to give authority to delegate, it said so explicitly .” 331 U.S. at 121 (emphasis added)

. Section 3(b)(3) is not such a provision. Not only does it not delegate a “particular function,” but it is not pr imarily a delegation provision at all. It is, instead, a source of authority for the Director to appoint subord i6 See 35 U.S.C. § 314 (authorizing the D irector to institute inter partes review, but requiring that the decision t o institute be made within 3 months of either when a response was filed or could have been filed); H.R. Rep. No. 110

- 314, Patent Reform Act of 2007

, at 3 (2007) (“With fewer limitations on future challenges and a larger universe of patents open to challenge, CBO expects that the number of inter partes proceedings would increase under the bill. Based on information from PTO, CBO expects at least 100 additional employees would be nece ssary to handle that increase in patent challenges.”)

.ETHICON ENDO

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nates and assign them tasks. This is a situation where Congress has “mention[ed] a specific official only to make it clear that this official has a particular power rather than to exclude delegation to other officials .” United States v. Mango , 199 F.3d 85, 90 (2d Cir. 1999)

. It is not a provision delegating a specific named function to a speci fic named official. See Giordano , 416 U.S. at 513 ; Mango

, 199 F.3d at 90

. It would indeed be strange to read § 3(b)(3) as limiting delegation to the Deputy Director, who is appointed by the Secretary of Commerce and not the Director

, see 35 U. S.C. § 3(b)(1) , who would then be left with no other tasks other than to step in the shoes of the Director “in the event of [ her ] absence or incapacity.” See 35 U.S.C. § 3(b)(1). Thus , § 3(b)(3) cannot be read to limit the ability of the Director to dele gate tasks to agency officials not mentioned in § 3(b)(3)

. We conclude that the D irector here has the inherent authority to delegate institution decisions to the Board

. Moreover, Congress ’s vesting of broad rulemaking powers in the head of the agency is an alternate source of authority to delegate. As the Supreme Court noted in Fleming

, “rule

- making power may itself be an adequate source of authority to delegate a particular function, unless by express provision of the Act or by implication it has be en withheld.” 331 U.S. at 121. Here, Congress gave the Director broad rulemaking power to “govern the conduct of the proceedings in the Office ,” 35 U.S.C. § 2(b)(2), and to “ establish [] and govern[] inter p artes review under this chapter, ” 35 U.S.C. § 31 6 (a)(4) . Co ngress undoubtedly intended the Director to have power by rulemaking to define the structure of inter partes review, including the power to subdelegate tasks assigned to her in the interest of efficiency. The Director promulgated a regulation allowing the Board to institute inter partes review “on behalf of the Director.” 37 C.F.R. § 42.4(a). This rule itself is entitled to Chevron deference

. Chevron,ETHICON ENDO

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U.S.A., Inc. v. Nat. Res. Def. Council, Inc. , 467 U.S. 837, 84 2–4 3 (1984)

. The reference to “the Director” in the statute is ambiguous as to whether it requires her pe rsonal participation and the regulation is a permissible interpretation of the statute. See Chevron

, 467 U.S. at 842

– 43; Cuozzo , 793 F.3d at 1279; Cooper Techs. Co. v. Dudas , 536 F.3d 1330, 1335 (Fed. Cir. 2008)

. In short, both as a matter of inherent authority and general rulemaking authority, the Director had authority to delegate the institution decision to the Board. T here is nothing in the Constitution or the statute t hat precludes the same Board panel from making the decision to inst itute and then rendering the final decision.

II

We now turn to the merits of the Board’s decision finding the claims of the ’ 070 patent obvious in view of the prior art. Obviousness is a q uestion of law based on underlying factual findings, including: (1) the level of ordinary skill in the art; (2) the scope and content of the prior art; (3) the differences between the claims and the prior art; and (4) secondary considerations of nonobviou sness, such as commercial success, long

- felt but unmet needs, failure of others, and unexpected results. See KSR Int’ l Co. v. Teleflex, Inc. , 550 U.S. 398, 406 (2007); Gr aham v. John Deere Co. of Kan. City , 383 U.S. 1, 17

– 18 (1966).

Ethicon does not challenge the Board’s finding that all of the claim elements are found in the p rior art, nor does it challenge the Board’s determination that a person of ordinary skill would have been motivated to combine those prior art elements to come up with the inven tion in the ’ 070 patent. Ethicon instead argues that the Board did not properly take into account the secondary consi derations of non

- obviousness.ETHICON ENDO

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First, Ethicon argues that the Board failed to consider the commercial success of a n allegedly infringing Covidien device

. Our case law establishes that for evidence of commercial success to be relevant, “ the patentee must establish a nexus between the evidence of commercial success and the patented invention. ” Wyers v. Master Lock Co. , 616 F.3d 1231, 1246 ( Fed. Cir. 2010)

. Ethicon argues that the Board failed to afford Ethicon a presumption of nexus between the commercial success of an allegedly infringing product made by Covidien and the patented features. It contends that because it showed that the Covidien devices were infringing, the commercial success of those devices is a strong secondary indication of

non

- obviousness which the Board ignored. However, regardless of any presumption of nexus, Ethicon’s own evidence demonstrates that other non

- patented features and features known in the prior art underlay the comme rcial success of Covidien’s allegedly infringing product. “[I]f the commercial success is due to an unclaimed fe ature of the device” or “if the feature that creates the

c ommercial success was known in the prior art, the su ccess is not pertinent.” Ormco Corp. v. Align Tech., Inc.

, 463 F.3d 1299, 1312 (Fed. Cir. 2006).
As the Board recognized, the Covidien products co ntained numerous unclaimed features, “such as ergonomic design, precise articulation, and reloads that provide simpler selection and reduced inventory, ” which may instead have been responsible for the commercial success of the products. J.A 19

. Other unclaimed features, such as “ [u] ncompromised staple line st rength” and “[s] uperior [l] eak [r] esistance ,” are touted in b rochures advertising the Covidien products. J. A

. 1101. The Board concluded that, in light of these unclaimed features, Ethicon had “not shown sufficient credible evidence that the sales of the [Covidien devices] are the result of the claimed inve ntion.” J.A. 19. We agree.ETHICON ENDO

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In addition, the Board had substantial evidence before it that the commercial success of the Covidien products was primarily attributable to a single feature present in the prior art , varying staple heights, rather than the combination of prior art features that is the alleged invention of the ’ 070 patent. The evidence demonstrates that the Covidien products were successful because of their “graduated compression design and progressive staple heights, which provide less stress on tissue during compression and clamping.” J. A

. 1126. In addition, the varied staple heights allowed for “[b]roader indicated tissue thickness ranges” and “[c]onsistent performance over a broader range of tissue thicknesses.” J. A

. 1101. As the Board found and Ethicon concedes, the use of staples of different heights was well known in the prior art at the time of the ’ 070 patent

. J.A. 9. Nowhere does Ethicon demonstrate , or even argue, that the commercial success of the Covidien products is attributable to the combination of the two prior art features

— varied staple heights and non

- parallel staple legs

— that is the purportedly inventive aspect of the ’ 070 patent. Lastly, Ethicon argues that the Board failed to weigh its evidence demonstrating a long

- felt but unresolved need. Here , Ethicon only pointed to a single passage in a marketi ng brochure (and expert testimony based on that marketing brochure) touting the advantages of the Covidien products to demonstrate long

- felt need. But a t most, these demonstrate a long

- felt need for staples of different height s (a feature in the prior art ) , not the combination of features that is the invention here. As the Board found, this single brochure “does not support the assertion that there was a long

- felt but unresolved need in the industry” for the claimed invention. J.A. 21

. The Board d id not err in concluding the asserted claims would have been obvious.

AFFIRMEDETHICON ENDO

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C OSTS Costs to appellee.

# United States **Court of Appeals**  **for the Federal Circuit**

______________________
ETHICON ENDO

- SURGERY, INC. , Appellant

v.

COVIDIEN LP, Appellee

______________________

2014

- 1771

______________________ Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR 2013

- 00209.

______________________

N EWMAN , Circuit Judge , dissenting

. I respectfully dissent, for the majority’ s holdings are contrary to the Leahy

- Smith America Invents Act, Pub. L. No. 112

- 29, 25 Stat. 284 (2011) ( codified at Title 35 of the United States Code ). The post

- grant proceedings esta blished by the Act were intended as “quick and cost effe ctive alternatives to litigation.” H.R. Rep. No. 112

– 98, pt. 1, at 48 (2011). That legislative plan has been repeatedly thwarted by the implementing bodies, administrative and judicial.
These post

- grant proceedings were designed to pr ovide rigorous inquiry and confident adjud ication as a surrogate for district court litigation, with the addedETHICON ENDO

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benefits of administrative expertise and efficiency. As part of this new agency procedure, the Act established a threshold step called “institution” by the Director of the PTO followed b y tria l and adjudication, by a new adjud icatory body established in the PTO . The “institution” step is a carefully designed threshold, whereby only meritor ious challenges will be considered. And as a safeguard of administrative objectivity, the legislati on divided the functions of institution and trial into sep arate bodies within the PTO.

T he panel majority states that “there is nothing in the Constitution or the statute that precludes the same Board panel from making the decision to institute and then rendering the final opinion.” Maj. O p. at 1 8 . That is incorrect. The statute requires that these proceedings be separated

, the first decision required to be made by the D irector , and the second decision made by the Board

. This court has now endorsed proceedings in which the Board makes both decisions. This procedure cannot be reconciled with the statute. At the first stage

, the Director determines whether the review is to be instituted. 35 U.S.C. § 314(a) (“The Director may not authorize an inter partes review to be instituted unless the Director determines that the info rmation presented in the petition . . . and any respo nse . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the pe tition.”). (Of course, the Dire ctor may designate an examiner or solicitor to conduct this initial revie w.)

If institut ed by the Director, the Board then conducts a trial on the merits. 35 U.S.C. § 316(c) (“The Patent Trial and Appeal Board shall, in accordance with section 6, conduct each inter partes review instituted under this chapter.”). “The statute thus separates the Director’s decision to ‘institute’ the review, § 314, on one hand fromETHICON ENDO

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the Board’s ‘conduct’ of the review ‘instituted’ by the Director, § 316(c), and the Board’s subsequent ‘written decision,’ § 318, on the other.” St. Jude Med., Cardi ology Div., Inc. v. Volcano Corp. , 749 F.3d 1373, 1375 (Fed. Cir. 2014).
The threshold determination to institute post

- grant review requires the Director to find that th e re is more

likely

- than

- not an error in the grant of at least one claim of the patent. When such finding is made by the Director, the newly created independent tribunal in the PTO co nducts a full trial, with discovery, testimony, experts, and other trappings of district court litigation. This trial, and the ensuing Board decision, are inde pendent of and give no deference to the Director’s decision “ to institute ” the proceeding. In turn, the Board’s decision is not subject to review by the Director or in the district courts, and can b e appealed only to this court. Our decision, in turn, cannot be challenged in infringement litigation between these parties.

Th e bifurcated design of post

- grant review is clear not only from the language of §§ 314(a) and 316(c)

, but pervades the structure of the se p ost

- grant proceedin g s. Congress unambiguously placed these separate determ inations in different decision

- makers

, applying different criteria

. The majority’s endorsement of the PTO’s stat utory violation depart s not only from the statute , but also from the due process guarantee of a “fair and impartial decision

- maker.”

I

Post

- Grant Proceedings are a Surrogate for District Court Litigation

The America Invents Act is the result of more than six years of discussion, debate, negotiation, and collaboration among innovative industries, independent inventors, legislators, academics

, research institutions, entrepr e-ETHICON ENDO

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neurs, the concerned public, the intellectual property bar, and the PTO

— all seeking to resolve problems that had arisen in the patent system. The key advance of the America Invents Act is its creati on of a new procedure for reviewing previously granted patents, to shift determin ation of patent validity from the courts to the expert age ncy , to provide “quick and cost effective alternatives to litigation” and thereb y to restore the innovation incentive of an effective system of patents. H.R. Rep. N o. 112

- 98, pt. 1, at 48 (2011).
The design and intent of the America Invents Act i s that the se new PTO proceedings w ill provide early, reli able, and less costly adjudicati on of the major issues of patent validity

. See 157 Cong. Rec. S 5327 ( Sept. 6 , 2011) (statement of Sen. Leahy ) (“ This bill will establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterprodu ctive litigation costs, while making sure no party’s access to court is denied. ”).

The se new proceedings were developed in the context of the shortcomings of the then

- existing inter partes reexamination system

. That system authorized third parties or the patentee to request reexamination on showing a “substantial new question of patentability.” 35 U.S.C. § 312(a). Reexamination then proceeded similarly to initial examination, including the right of amendment ; appeal could be taken to the Patent Office Board of A ppeals and Interferences and then to the courts. Criticism focused on the prevalence of cumulative and harassing attacks

, whereby the vitality of the patent could be co nsumed by multiple and time

- consuming proceedings. The America Invents Act s ought to address these c oncerns, as well as the expense and duration of litigation of validity in the district courts.

T he America Invents Act requires an initial decision by the Director as to whether post

- grant review is wa r-ETHICON ENDO

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ranted at all; this is require d to be made within three months of the filing of a petition for review. 35 U.S.C. § 314(b) ; s ee 157 Cong. Rec. S1376 (Mar

. 28, 2011) (stat ement of Sen. Kyl) (“Among the reforms that are expected to expedite these proceedings are . . . the elevated thres hold for instituting proceedings. The elevated threshold will require challengers to front load their case.”). The statute requires petitioners to demonstrate a “reasonable likelihood” of invalidity as to at least one claim , in order for institution to be granted. 35 U.S.C. § 314(a).

I nterlocutory appeal of a decision on the question of institution is barred by statute

. The legislative record explains that the America Invents Act “eliminates inte rmediate administrative appeals of inter partes procee dings to the BPAI . . .

. By reducing two levels of appeals to just one, this change will substantially accelerate the resolution of inter partes cases.” 157 Cong. Rec. S1376 (Mar. 28, 2011) (statement of Sen. Kyl). H owever, this salutary purpose did not dis card the protections of due

process

. The threshold institution proceeding is designed to avoid the disadvantages of the prior inter partes practice

, for: “ The Patent Office has indicated that it currently is forced to accept many requests for ex parte and inter partes reexamination that raise challenges that are cumulative to or substantially overlap with issues prev iously considered by the Office with respect to the patent .” Id. The institution step also protects the patent owner from “attacks on patents that raise issues that are su bstantially the same as issues that were already before the Office with respect to the patent.” Id.

This institution procedure, which “requir[es] the pet itioner to present a prima facie case justifying a rejection of the clai ms in the patent

, ” i d. at S1375 , tracks the obligation of a complainant to provide a legally sufficient pleading. Thereafter the adjudicatory body conduct s aETHICON ENDO

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trial and complete s its proceedings within one year ( with extension for good cause shown )

. 35 U. S.C. § 316(a)(11);

s ee 157 Cong. Rec. S1366 (Mar

. 8, 2011) (Republican Pol. Comm. Leg. Notice S.23 (Feb. 28, 2011) entered by Sen. Kyl) (“These reforms add additional procedural prote ctions to the process by converting the reexamination into an adjudicative proceeding to be known as ‘inter partes review.’ Inter partes review must be completed with on e year of being instituted.”).

Th e America Invents Act require s that the trial be condu cted, and the matter finally decided, by a different part of the PTO than makes the decision to institute

. The se post

- grant proceedings have become the new fro ntier of patent litigation. 1 Threatening the viability of this new system, however, is the disregard of the procedures established by the America Invents Act.

II The Statutory Separation of the Decision to Institute and the Decision on Validity

T he panel majority holds that t he decision to institute may be made by the PTAB, not by the Director, and that it may be made by the same PTAB panel that would then conduct the trial and make the validity decision . This violation of the statute has been criticized by practitio ners , citing the “actual or percei ved bias against the patent owner” because the administrative patent judges are “put

1 As of October 31, 2015, the PTO had received more than 4000 petitions under this statute, see Patent Trial and Appeal Board Statistics, at 2 (Oct. 31, 201 5 ) available at http://www.uspto.gov/sites/default/ files/ documents/2015

- 10

- 31%20PTAB.pdf

. Of the 2,450 co mpleted proceedings, the Office instituted more than 1200 trials. Id. at 9.ETHICON ENDO

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in the position of defending their prior decisions to inst itute the trial.” AIPLA , Comments on PTAB Trial Pr oceedings, at 20 (Oct. 16, 2014), available at http://www.uspt o.gov/ip/boards/bpai/aipla_20141016.pdf

. It cannot be ignored that this transfer to the Board of the Direc tor’s statutory assignment violates the text, structure, and purpose of the America Invents Act. Th e statutory separation of roles cannot be abrogated by either the PTO or this court. In defense of abrogation, the panel majority cites a treatise that reports that administrative agencies have been authorized to perform both investigative and adjud icatory functions

. Maj. Op. at 10 ( citing 2 Richard J. Pierce, Jr., Administrative Law Treatise § 9.9, p. 892 (5th ed. 2010). ). However, such authorization cannot violate the implementing legislation

. Due process guarantees “ a fair trial in a fair tribunal. ” In re Murchison , 349 U.S. 133, 136 (1955). Permitting the same decision

- maker to review its own prior decision may
not always provide the constitutionally requ ired impartial decision maker. “The right to an impartial decision marker is unquestionably an aspect of procedural due

process. . . . Th is applies to administrative proceedings as well as judicial trials.” NEC Corp. v. United States , 151 F.3d 1361, 1371 (Fed. Cir. 1998) (internal citations omi tted).

As stated in Matthews v. Eldridge , “identification of the specific dictates of due process generally requires consideration of three distinct factors,” 424 U.S. 319, 335 (1976). The three factors are “the private interest that will be affected by the official action,” the “risk of an erroneous deprivation,” and the “fiscal and administrative b urdens that the additional or substitute procedural requirement would entail.” Id. Here, the first two factors weigh heavily in favor of the divided decision

- making of the America Invents Act, with scant additional burden.ETHICON ENDO

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In evaluating administrative pr ocesses for prejud gment this court has considered the “bifurcation” of other decision

- making processes and the “statutory and regul atory protections” for the party subject to a deprivation. NEC Corp oration , 151 F.3d at 1371. In NEC Corp oration this court upheld the bifurcated administrative process involved in antidumping duty proceedings: First of all, an antidumping investigation is bifu rcated: Commerce makes less

- than

- fair value d eterminations for a class or kind of foreign merchandise, and the ITC makes injury determ inations. Only if Commerce determines that the merchandise is being sold at less

- than

- fair value

, see 19 U.S.C. § 1673(1) (1994), and the ITC d etermines that a domestic industry is materially in jured or is threatened with materia l injury, see 19 U.S.C. § 1673(2), does Commerce issue an a ntidumping order. See 19 U.S.C. § 1673. This b ifurcation reduces the risk that an improper bias will deprive importers of their due process rights.

151 F.3d at 1373 . In contrast, the unitary procedure now implemented by the PTO and ratified by this court e nlarges, rather than reduces, the “risk [of] improper bias.” Id

. If bifurcated decision

- making is required to reduce the risk of erroneous deprivation in antidumping proceedings

, similar protec tion is at least as appropriate for post

- grant proceedings. And contrary to the panel majority’s hol ding, Congress explicitly provided for exactly that kind of decisional separation in the America Invents Act.
My colleagues also suggest analogy to a d istrict
court ’s preliminary d etermin ation of whether there is “a likelihood of success on the merits” for purposes ofresponding to a request for preliminary in junction

. Maj. Op. at 1 1 (citing Fed. R. Civ. P. 65). However , such decisions are immediately subject to appeal.ETHICON ENDO

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In Withrow v. Larkin , 421 U.S. 35, 58 n.25 (1975), t he Court expressly reserved the question of “[a]llowing a decisionmaker to review and evaluate his own prior decision .” We need not decide this question here, for the possible potential conflict was foreseen by the legislators, and by statute was forestalled. All that is needed is to apply the statute as it was written. T he statute divides post

- grant a uthority between the Director, who is respo nsible for deciding whether to institute review, and the Board of administrative patent judges, charged with conducting the trial and rendering a decision on pat ent validity . The statute bars the Board from rendering both the institution and final decisions. As this court has recognized, “i nstitution and invalidation are two distinct actions. ” Versata Dev. Grp., Inc. v. SAP Am., Inc. , 793 F.3d 1306, 1319 (Fed. Cir. 2015) (“ In addition to being deeply embedded in federal administrative law, the distinction is built into the structure of this particular AIA statute

. ”).
The statute repeats several times the requirement that the Director make the institution decision. See, e.g.

, 35 U.S.C. § 314(c) (notification must be made of “the Director’s determination under subsection (a)”); § 314(d) (the Director may join parties “[i]f the Director institutes an inter partes review”). The Director’s institution dec ision carries a different burden of persuasion, is decided on limited submissions before trial, and is barred from appeal. In its implementing regulations, the Office e xcludes all substantive evidence from the patent owner’s preliminary response, including expert declarations or other rebuttal evidence. 37 C.F.R. § 42.107(c). Thus the statutory structure favors institution, for the overarching purpose is to provide a forum for early, expeditious review of granted patents. By placing the institution decision in different hands than the trial, Congress acted to preserve the process from human frailty.ETHICON ENDO

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The statute is equally clear that it is the Board that conducts the trial and issues a final decision. See 35 U.S.C. §§ 316(c), 318(a). This legislative assignment of functions can not be ignored. See Corley v. United States

, 556 U.S. 303, 314 (2009) (“[O]ne of the most basic inte rpretative canons [is] that [a] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant.” (internal citations omitted

, alterat ions in original)); c f. United States v. Giordano , 416 U.S. 505, 514 (1974) (holding that where a statute authorized wiretaps only by the Attorney General or any Assistant Attorney General specially designated, the statute “fairly read, was inten ded to limit the power to authorize wiretap applications” to the expressly named positions).

S tatute s must be interpreted to conform to “the design of the statute as a whole and to its object and policy.” Crandon v. United States , 494 U.S. 152, 158 (1990). The legislative division of these decisional roles i s not subject to agency or judicial modification, whether by adjudic ation or by rulemaking. The PTO’s rulemaking authority does not extend to changing statutorily defined proc edures. In promulgating 37 C.F.R. § 42. 4 to transfer the Director’s institution respo nsibility to the Board , the PTO departed from the statute. See Ernst & Ernst v. Hoc hfelder

, 425 U.S. 185, 213

– 14 (1976) (“The rulemaking power granted to an administrative agency charged with the administration of a federal statute is not the power to mak e law. Rather, it is the power to adopt regulations to carry into effect the will of Congress as expressed by the statute.”).

“A lthough an agency’s interpretation of the statute under which it operates is entitled to some deference, ‘this deference is con strained by our obligation to honor the clear meaning of a statute, as revealed by its language, purpose, and history.’” S e. Cmty. Coll. v. Davis , 442 U.S. 397 , 411 (1979) (quoting Teamsters v. Daniel , 439 U.S.ETHICON ENDO

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551, 566 n. 20 (1979)); see Muwwakkil v. Office of Pers. Mgmt. , 18 F.3d 921, 925 (Fed. Cir. 1994) (“When an agency’s interpretation of a statute it is entrusted to administer is contrary to the intent of Congress, as d ivined from the statute and its legislative history, we owe it no deference.”)

. S UMMARY The post

- grant proceedings of the America Invents Act are a pioneering measure to shift several aspects of patent validity from the district courts to the PTO. The legislative purpose is to provide optimum decisional objectivity, in order to restore public confidence in the reliability of patents as investment incentives; this r equires that the PTO p roceedings conform to the statute

. I respectfully dissent.