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

______________________
BIODELIVERY SCIENCES INTERNATIONAL, INC. , Appellant

v.

AQUESTIVE THERAPEUTI CS, INC., FKA MONOSOL RX , LLC, Appellee

______________________

2019

- 1643
, 2019

- 1644, 2019

- 1645

______________________ Appeal s from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No s . IPR2015

- 00165
, IPR2015

- 00168 , and IPR2015

- 00169

.

______________________
ON PETITION FOR REHEARI NG EN BANC

______________________
K IA L YNN F REEMAN , McCarter & English, LLP, Boston, MA, filed a petition for rehearing en banc for appellant. Also represented by T HOMAS F. F OLEY , W YLEY S AYRE P ROCTOR

.

J OHN L LOYD A BRAMIC , Steptoe & Johnson, LLP, Chicago, IL, filed a response to the petition for appellee. Also represented by J AMIE L UCIA , San Francisco, CA; K

ATHERINE D OROTHY C APPAERT , Washington, DC.

______________________BIODELIVERY SCIS

. INT ’ L v. AQUESTIVE THERAPEUT ICS , INC

. 2

Before P ROST , Chief Judge

, N EWMAN , L OURIE , D YK , M OORE , O’M ALLEY , R EYNA , W ALLACH , T ARANTO , C HEN , and H UGHES , Circuit Judges

. ∗

N EWMAN , Circuit Judge

, dissents from the denial of the petition for rehearing en banc

. P ER C URIAM

. O R D E R

A ppellant BioDelivery Sciences International, Inc. filed a petition for rehearing en banc. A response to the petition was invited by the court and filed by appellee Aquestive Therapeutics, Inc. The petition for rehearing and response w ere first referred to the panel, and the reafter, to the circuit judges who are in regular active service. A poll was requested, taken, and failed.
Upon consideration thereof,

I T I S O RDERED T HAT : The petition for panel rehearing is denied.
The petition for rehearing en banc is denied.

The mandate of the court will be issued on January 21, 2020

.

F OR THE C OURT

January 13, 2020 /s/ Peter R. Marksteiner Date Peter R. Marksteiner Clerk of Court

∗ Circuit Judge Stoll d id not participate.

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

______________________
BIODELIVERY SCIENCES INTERNATIONAL, INC. , Appellant

v.

AQUESTIVE THERAPEUTI CS, INC., FKA MONOSOL RX, LLC, Appellee

______________________

2019

- 1643, 2019

- 1644, 2019

- 1645

______________________ Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No s . IPR2015

- 00165, IPR2015

- 00168, IPR2015

- 00169.

______________________ N EWMAN , Circuit Judge , dissenting from denial of the petition for rehearing en banc

. The court has declined to re hear this appeal en banc

. I write because of the significance of th e balance of agency and judicia l authority

, and the rules of procedural law in th e administrative state.

The issue arises from the response of the Patent Trial and Appeal Board to the Federal Circuit’s mandate and order to apply the Supreme Court’s decision in SAS In stitute Inc. v. Iancu

, 138 S. Ct. 1348 (2018)

. In SAS Institute t he Supreme Court hel d that 35 U. S.C. § 318(a) requires that i n an inter partes review the PTAB must decide all of the claims and grounds challenged in the petition. Id. at 1354

–BIODELIVERY SCI S

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58. Since the PTAB ha d not m e t th is requirement for these

cases, our R emand O rder instructed :
The Court held that if the Director institutes review proceedings, the PTAB review must proceed

“ in accordance with or in conformance to the petition, ” including “ ‘ each claim challenged ’ and ‘ the grounds on which the challenge to each claim is based. ’ ”
BioDelivery S ciences Int ’ l , Inc. v. Aquestive Therapeutics, Inc.

, 898 F.3d 1205 , 1207 (Fed. Cir. 2018) (“ Remand Order”) (quoting SAS Institute , 138 S. Ct. at 1355

– 56)

. The PTAB d id not comply with the Remand Order

, stating that it would be inefficient and expensive to include the additional claims and grounds :Because the overwhelming majority of unpatentability grounds presented by Petitioner fail to meet the standard for institution of inter partes review, we find that instituting trial as to those grounds at this time is neither in the interest of the efficient administration of the Office, nor in the interest ofsecuring an inexpensive resolution of this proceeding.
BioDelivery Sciences Int ’ l , Inc. v. Aquestive Therapeutics, Inc.

, No. IPR 2015

- 00165, 2019 WL 494351

, at *3 (P.T.A.B. Feb. 7, 2019) (“Decision on Remand”). 1

I nstead of complying with the Remand Order, the PTAB withdr e w all of its past actions as to th ese proceedings , although past actions we re not the subject of the r emand. Neither this court ’ s o rder nor the Supreme Court ’ s

1 This is a consolidated appeal of the PTAB’s three separate decisions in IPR2015

- 00165, IPR2015

- 00168, and IPR2015

- 00169; citations to IPR 2015

- 00165 apply to all three PTAB decisions.BIODELIVERY SCI S

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ruling in SAS Institute related to aspects that had already been decided

. Nonetheless, my colleagues h o ld that the PTAB is not required to comply with th e court ’ s Remand Order, and further hold that this non

- compliance is not reviewable. T his action raises critical issues of agency authority

, judicial res ponsibility

, and the constitutional plan.

D ISCUSSION For U.S. Patent No. 8,765,167

, BioDelivery Sciences International, Inc. (“BioDelivery”) ’ s p etition request ed inter partes review of claims 1, 4, 6

– 9, 11, 12, 26, 27, 32, 38, 44, 51, 58, 65, 72, 82, 109
, and 125

– 127
, citing seven prior
art grounds o f anticipation or obviousness

. BioDelivery Scienc es Int’l, Inc. v. Monosol RX, LLC , No. IPR2015

- 00165, 2015 WL 2452905, at *1

– 2 (P.T.A.B. May 20, 2015). On May 20, 2015 the PTAB ins titut ed the IPR on most
, but not all of the challenged claims , and on one of the prior art
gr o unds

. Id. at *18. T he PTAB received briefing and argument and held trial, and ruled by Final Written Decision that claims 1, 4, 11, 12, 26, 27, 44, 51, 58, 65, 72, 82, and 125

– 127 are patentable. BioDelivery Sciences Int’l, Inc. v. Monosol RX, LLC , No. IPR2015

- 00165

, 2016 W L 11447939 , at *14 (P.T.A.B. Mar. 24, 2016).
BioDelivery ap peal ed, and we received briefing and argument. The Supreme Court then decided SAS Institute

, stating that “Congress’s prescribed policy here is clear: the petitioner in an inter partes review is e ntitled to a decision on all the claims it has challenged.” 138 S. Ct. at 1358. On BioDelivery ’ s motion, we direct ed the PTAB “ to implement the Court ’ s decision in SAS

. ” Remand Order at 1210.

T he PTAB did not comply with the Remand Order. Instead, the PTAB asked the parties for advice

, and received directly opposing positions. The PTAB decided to “modify [its] Decision to Institute and instead deny the Petition in its entirety, thereby terminating [the] proceeding.” Decision on R emand at *1. T he PTAB “ ORDERED that Petitioner ’ s request for inter partes review of claims 1, 4, 6

– 9,BIODELIVERY SCI S

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11, 12, 26, 27, 32, 38, 44, 51, 58, 65, 72, 82, 125

– 127 of the

’ 167 patent is denied and no inter partes review is instituted. ” Id. at * 12

. The court now ratifies that action . However

, the America Invents Act does not include agency authority to disregard the mandate , instead th e Federal Circuit’s “ mandate and opin ion

. . . shall govern the further proceedings in the

case :”
35 U.S.C. § 144. The United States Court of Appeals for the Federal Circuit shall review the decision from which an appeal is taken on the record before the Patent and Trademark Office. Upon its d etermination the court shall issue to the Director its mandate and opinion, which shall be entered of record in the Patent and Trademark Office and shall govern the further proceedings in the case.

A ppellate courts may remand for further proceedings, “ as

m ay be just under the circumstances: ”
28 U.S.C. § 2106. The Supreme Court or any other court of appellate jurisdiction may . . . remand thecause and direct the entry of such appropriate judgment, decree, or order, or require such further proceedings to be had as may be just under the circumstances.

Th e further proceedings here relate to implement ing SAS Institute as to the additional claims an d grounds. The remand did not include review of the decision to institute these IPRs.
My concern is with the PTAB ’ s position that it need not follow the court ’ s Remand Order, for reasons of efficiency and expense. Such agency authority cannot be discerned in the America Invents Act, and contravenes decades of constitutional jurisprudence. E.g.

, Chi

. & S

. Air Lines, Inc. v. Waterman S.S. Corp. , 333 U.S. 103 , 113 (1948):BIODELIVERY SCI S

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Judgments, within the powers vested in courts by the Judiciary Article of the Constitution, may not lawfully be revised, overturned or refused faith and credit by another De partment of Government.

See also Plaut v. Spendthrift Farm, Inc. , 514 U.S. 211, 218(1995) (“Congress cannot vest review of the decisions of Article III courts in officials of the Executive Branch.”).

In SAS Institute the Court reiterated that “the duty ofan administrative agency is to follow its commands as written, not to supplant those commands with others it may prefer. ” 138 S. Ct. at 1355. See City of Cleveland v. Fed. Power Comm’n , 561 F.2d 344, 346 (D.C. Cir. 1977) (footnotes omitted) : The decision of a federal appellate court establishes the law binding further action in the litigation by another body subject to its authority. . . . Theseprinciples, so familiar in operation within the hierarchy of judicial benches, indulge no exception for reviews of administrative agencies.
Judicial authority may be manifested in orders on remand. See Mefford v. Gardner , 383 F.2d 748, 758 (6th Cir. 1967):
[O]n the remand of a case after appeal, it is the duty of t he lower court, or the agency from which appeal is taken, to comply with the mandate of the
court and to obey the directions therein without variation

. . . . The Administrative Procedure Act “ directs courts to set aside agency action ‘ not in accordance w ith law ’ or ‘ in excess of statutory jurisdiction, authority, or limitations. ’ ” SAS Institute

, 138 S. Ct. at 1359 ( quoting 5 U.S.C. §§ 706(2)(A),(C)). Agency action is bound by the mandate rule :
The mandate rule . . . dictates that ‘ an inferior court has no power or authority to deviate from theBIODELIVERY SCI S

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mandate issued by an appellate court. ’ Once aquestion has been considered and decided by an appellate court, the issue may not be reconsidered atany subsequent stage of the litigation, save on appeal.

Banks v. U nited States , 741 F.3d 1268, 1276 (Fed. Cir. 2014) (citation omitted) (quoting Briggs v. Pa. R. Co. , 334 U.S. 304, 306 (1948))

. These premises are beyond debate.
The PTAB has elsewhere recognized its obligation to comply with a judicial mandate

, stating: “As an initial matter, we recognize that we are bound by the mandate on matters that the mandate addressed.” Zodiac Pool Sys., Inc. v. Aqua Prods., Inc. , No. IPR2013

- 00159, 2019 WL 548667, at *9 (P.T.A.B. Feb. 11, 2019)

. The PTAB acknowledged an Office SAS Guidance on how t o proceed following the decision in SAS Institute . The Office SAS Guidance states : “for pending trials in which a panel has instituted trial only on some of the challenges raised in the petition

. . . the panel may issue an order supplementing the institution decision to institute on all challenge s raised in the petition.” 2 “[ T ] he Office SAS Guidanceis to be interpreted with the weight of Office policy as precluding termination of a partially instituted proceeding in

respo nse to SAS Institute .” ESET, LLC v. Finjan, Inc., No. IPR2017

- 01738, 2018 WL 3854167, at *4 (P.T.A.B. Aug

. 10, 2018). Here, the PTAB mentioned the Office SAS Guidance but did not follow it, stating that it applies only to “pending trials” and does not ap ply to judicial remands. Decision on Remand at *4

.

2 Guidance on the Impact of SAS on AIA Trial Proceedings , U.S. Patent & Trademark Office (Apr. 26, 2018), https://www.uspto.gov/patents

- application

- process/patent

trial

- and

- appe al

- board/trials/guidance

- impact

- sas

- aia

trial (“Office SAS Guidance”).BIODELIVERY SCI S

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Thus the PTAB departed from not only the letter but also the spirit of the R emand Order

. However, t he “letter and spirit” of a mandate control actions on remand. See SUFI Network Servs., Inc. v. United States , 817 F.3d 773, 779 (Fed. Cir. 2016) (“[B]oth the letter and the spirit of the mandate must be considered.”); Laitram Corp. v. NEC Corp. , 115 F.3d 947, 951 (Fed. Cir. 1997) ( “[A] ctions on remand should not be inconsistent with either the letter or th e spirit of the mandate .” ).
The panel herein held that this PTAB action is not reviewable. I repeat, the court ’ s Remand Order was not for review of the PTAB ’ s “ institution ” decisions; the Remand Order was to review additional claims and grounds

. See St. Jude Med., Cardiology Div., Inc. v. Volcano Corp. , 749 F.3d 1373, 1375 (Fed. Cir. 2014) ( “ T he statute separates the Director’s decision to ‘ institute ’ the review, § 314, on one hand, from the Boar d’s ‘ conduct ’ of the review ‘ instituted ’ by the Director, § 316(c), and the Board’s subsequent ‘written decision,’ § 318, on the other. ” ) The legislative record contains no contemplation of a PTAB procedure whereby, after full PTAB trial and decision and appeal to the Federal Circuit, the PTAB could annul the appeal and remove the entire action and decisions and procedure from history, insulated from review.

T he Supreme Court has observed that “the agency bears a ‘heavy burden’ in attempting to show that C ongress

‘ prohibit [ ed ] all judicial review ’ of the agency’s compliance with a legislative mandate

. ” Mach Mining, LLC v. EEOC

, 575 U.S. 480, 486 (2015 ) (alteration in original) (quoting Dunlop v. Bachowski , 421 U.S. 560, 567 (1975))

. In SAS Institute the Court reiterated that “nothing in § 314(d)

. . . withdraws our power to ensure that an inter partes review proceeds in accordance with the law’s demands” and “everything in the statute before us confirms that SAS is entitled to a final writte n decision addressing all of the claims it has challenged.” 138 S. Ct. at 1359. The PT AB ’ s refusal to comply with our Remand Order toBIODELIVERY SCI S

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implement the Supreme Court ’ s r uling warrants en banc attention.

Of further concern is the PTAB ’ s contravention of the

purpose of the America Invents Act

, to provide a gency expertise to resolution of patentability issues. S ee H.R. Rep. No. 112

– 98, pt. 1
, at 48 (2011) ( “[T]he purpose of the [ post

grant review proceedings is to] provid[e] quick and cost effective alternatives to litigation. ”) ; 157 Cong. Rec. S1352 (daily ed. Mar. 8, 2011) (statement of Sen. Udall) (“These proceedings are intended to serve as a less

- expensive alternative to courtroom li ti gation and provide additional access to the experti se of the Patent Office on questions of patentability. ”)

. On this background, the PTAB ’ s explanation of agency efficiency and cost is curious, as litigation cost was a primary concern of the America Invents Act

. In the interest of achieving a viable and e ffective administrative process, and the nation ’ s critical need for an effective system of innovation law and practice, the PTAB ’ s action is seriously flawed

. From my colleagues ’ inaction

, I respectfully dissent

.