Clayton patent attorney Matt Cutler spoke with Law360 this week on the topic of Arthrex v. Smith & Nephew, in which the Federal Circuit upheld a Patent Trial and Appeal Board ruling of adverse judgment against Arthrex.  The case is garnering considerable attention because it offers a rare example of Patent Owner estoppel.

Smith & Nephew had originally filed an Inter Partes Review Petition against a patent held by Arthrex.  Before the PTAB court had the opportunity to decide to institute the review, Arthrex disclaimed nine of its patent claims, seemingly in the hope of avoiding the IPR proceeding.  Arthrex also specifically requested that it did not want an adverse judgment.

The Board, however, decided to move forward, ultimately entering adverse judgment against Patent Owner and thereby attaching the rarely seen Patent Owner estoppel.

This rule was put in place to prevent Patent Owners from forfeiting claims in one PTAB proceeding and then turning around and obtaining similar claims in a new patent.  As the rule states, patent owners cannot obtain “in any patent … [a] claim that is not patentably distinct from a finally refused or canceled claim.”

Once lost, always lost, in other words.  This unintended consequence proved to be a significant problem for Arthrex because it was awaiting issuance on two patents with similar claims.

To avoid similar situations, Cutler suggests that patent owners keep their eyes wide open before disclaiming any patent claims at the PTAB.  “Patent Owner estoppel could get you whether your patents are canceled in a final written decision or are disclaimed voluntarily earlier in the proceeding,” Cutler said.

The Board cited a regulation that views the disclaiming of all claims in question as a request for adverse judgment.  Typically, disclaiming claims can be a strategic decision to avoid the expenses of litigation.  There are other instances where adverse judgment can also benefit Patent Owners.

While Arthrex is not currently seeing any benefits of their gamble, they may have grounds for further appeal.  U.S. Circuit Judge Kathleen O’Malley, despite concurring with the ruling, questioned if the USPTO had the authority to issue this regulation.  She also questioned if they had followed the correct procedures.  To top it off, the Federal Circuit was further asked is adverse judgments can be appeals, to which they replied they could.

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Read Matt Cutler’s blog post on Arthrex, Inc. v. Smith & Nephew, Inc.

Read the full article on Law360.