USPTO Implementation of Arthrex: Questions from Administrative Law, Part I—Dismissal and Subregulatory Rulemaking

By M. David Hoyle
July 22, 2021

“Implementing Arthrex within the law will require substantial resources and significant new machinery within the USPTO, and some of that new implementation may be impossible until a confirmed Director is in place…. Until then, a great many of the PTAB’s decisions will be challengeable.”

https://depositphotos.com/69425595/stock-photo-a-law-book-with-a.htmlIn United States v. Arthrex, No. 19-1434, 141 S.Ct. 1970 (Jun. 21, 2021), Chief Justice Roberts cured an Appointments Clause defect in the Patent Trial and Appeal Board’s (PTAB’s) organic statute by holding that 35 U.S.C. § 6(c) “cannot constitutionally be enforced to the extent that it[] prevent[s] the Director from reviewing final decisions rendered by APJs.” Arthrex, slip op. at 21. Henceforth, rehearings are no longer the exclusive domain of PTAB panels, and the U.S. Patent and Trademark Office (USPTO) must provide at least one path of review that flows through the agency head.

The idea of a new layer of review was proposed by the government itself, in a throwaway alternative position at pages 40-41 of the Government’s reply brief (the government’s lead position asked the Supreme Court to affirm the Federal Circuit’s severance of the protections that gave the PTAB adjudicatory independence similar to administrative law judges’ (ALJs)). Because this remedy was only proposed in the last brief of the case, the Court did not have the benefit of input from either the parties or amici as to the implications of such an approach.

On Tuesday, June 29, 2021, the USPTO published interim guidelines for Director review via two web pages and a webinar. USPTO implementation of an interim Director review process following Arthrex, Arthrex Q&As, and Boardside Chat: Arthrex and  the interim  procedure for Director review. The USPTO changed the rules on the fly on July 20 by updating the Q&A.

This article discusses a number of issues of administrative law that must be addressed before the USPTO can proceed. The PTAB now resembles a poorly-maintained building—after decades of benign neglect, and more than a little old-fashioned cheating to evade work that’s required by the statute, a stress has induced a collapse. Essentially all judgments of the PTAB will be appealable and voidable for underlying procedural error under various administrative law statutes; very few have all the prerequisites to stick. Implementing Arthrex within the law will require substantial resources and significant new machinery within the USPTO, and some of that new implementation may be impossible until a confirmed Director is in place because of limits under the Vacancies Reform Act. It will take at least a year of regulatory reconstruction to implement Arthrex on a solid foundation that will allow the PTAB’s judgments to survive appellate review.  Until then, a great many of the PTAB’s decisions will be challengeable for various past and future failures of the USPTO to observe requirements of law.

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Question #1: Can the Director summarily dismiss requests for review, analogously to FRAP 36?

No.  In the first week after Arthrex issued, commentary in the press urged that implementation will be “no big deal,” in part because the USPTO will be able to summarily dismiss most requests for Director review. But that view directly conflicts with the Administrative Procedure Act (APA). The APA disallows anything analogous to Federal Rule of Appellate Procedure (FRAP) 36(a)(2) or Fed. Cir. Rule 36(a).

First, an America Invents Act (AIA) proceeding is a “formal adjudication” under the APA, 5 U.S.C. §§ 554, 556, and 557 (as opposed to informal adjudication under § 555). Dell Inc. v. Acceleron, LLC, 818 F.3d 1293, 1301 (Fed. Cir. 2016). The APA, 5 U.S.C. § 557(b) specifies that “[b]efore … a decision on agency review of the decision of subordinate employees, the parties are entitled to a reasonable opportunity to submit for the consideration of the employees participating in the decisions… exceptions to the decisions … and … supporting reasons for the exceptions.” Then, § 557(c) requires a “ruling on each … exception presented,” and requires that such “decisions … include a statement of… findings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion presented on the record.” Thus, § 557(c) doesn’t permit a Rule 36 shortcut.

Second, Union Pacific R.R. Co. v. Brotherhood of Locomotive Engineers and Trainmen General Committee of Adjustment, Central Region, 558 U.S. 67, 71 (2009) reiterates the 200-year-old general rule that agencies cannot decline to exercise jurisdiction where it exists, and an agency with a statutorily-defined scope of jurisdiction cannot adopt regulations to avoid deciding cases within that jurisdiction.

Third, the APA sets minimum standards for written decisions, and requires sufficient explanation to avoid being “arbitrary and capricious.” 5. U.S.C. §§ 555(e), 706(2)(A). The lead case is Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983):

[T]he agency must examine the relevant data and articulate a satisfactory explanation for its action including a “rational connection between the facts found and the choice made.” In reviewing that explanation, we must “consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.”  Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Another oft-cited opinion is Tourus Records v. DEA, 259 F. 3d 731 (D.C. Cir. 2001), by then-judge Merrick Garland. The Drug Enforcement Administration (DEA) had denied a petition in a single-sentence order, that the grounds were “not adequately supported.” Judge Garland wrote, “[a] ‘fundamental’ requirement of administrative law is that an agency ‘set forth its reasons’ for decision; an agency’s failure to do so constitutes arbitrary and capricious agency action.” Id. at 737. Judge Garland explained both the law and the policy behind the APA’s requirement (5 U.S.C. § 555(e)) that all agency decisions must set forth a reasoned explanation. Even in affirming the PTAB, the Director must give some explanation, with narrow exceptions explained in Roelofs v. Sec’y of the Air Force, 628 F.2d 594, 601 (D.C. Cir. 1980).

Even discretionary action must be explained sufficiently to avoid being “arbitrary and capricious.” AFL-CIO v. NLRB, 471 F.Supp.3d 228, 238 (D.D.C. 2020). Agency failure to explain, or evasion of a key issue, is probably the single most paradigmatic pattern adjudged “arbitrary and capricious.”  Silent failure to explain is evaluated and vacated on an essentially per se basis. State Farm, 463 U.S at 50.

Chief Justice Roberts writes in Arthrex, slip op. at 23, “To be clear, the Director need not review every decision of the PTAB. What matters is that the Director have the discretion to review decisions rendered by APJs.”  “Need not review every decision” contrasts to agencies like the ITC, where full Commission review is mandatory for every decision. The Director’s “discretion” can only be exercised within non-arbitrary, non-capricious procedures, uniformly applied, and within the obligation to provide “reasonable opportunity to submit… exceptions.” 5 U.S.C. § 557(c). Just as the Director’s “discretion” wouldn’t allow dismissal of an individual petition because the Director wants to make a Thursday golf game, “discretion” won’t permit a regulation that is designed to dismiss a whole class just to avoid hard work that is required by law—an agency can be arbitrary and capricious with respect to a class just as for an individual. Cf. Union Pacific R.R., 558 U.S. 67, 71 (2009).

Chief Justice Roberts concluded “the appropriate remedy is a remand to the Acting Director for him to decide whether to rehear the petition.” Arthrex, slip op. at 20. Of course, the Chief Justice meant an implicit proviso “subject to all other requirements of law,” not unfettered discretion to just say “no” without explanation.

Question #2: Can the USPTO use subregulatory rulemaking, such as web pages and POP precedential decision?

No. Arthrex, slip op. at 21, notes that authority to implement Director review lies in 35 U.S.C. § 316(a)(4), that is, by “regulation.”  See also 5 U.S.C. § 553; Aqua Prods., Inc. v. Matal, 872 F.3d 1290, 1329-31 (Fed. Cir. 2017) (Moore, J., concurring) (explaining the meaning of the word “regulation” in § 316(a)). Any new procedure implementing inter partes review (IPR)/post grant review (PGR) invokes the obligation to “prescribe regulations … governing inter partes review under this chapter,” § 316(a)(4).

The USPTO’s June 29 web pages are troubling, precisely because they’re web pages. Statute requires that such notices be run in the Federal Register, not evanescent web pages. 5 U.S.C. § 552(a)(1)(B) and (C). The Director review rule—a rule with billion-dollar consequence—was published on a web page that can be changed or disappear tomorrow. Then, only three weeks later, the USPTO actually did substantially change the rules on the fly by changing the Q&A page. The USPTO gave important elaboration in a Boardside Chat webinar—but it wasn’t recorded, and only the slides are available—there is no record whatsoever of important answers that were given in the Q&A.

One is left mouth agape at an agency that can’t follow one of the simplest requirements in the entire United States Code, and that so disrespects the importance of stable rules and consistent notice to regulated parties—Congress required agencies to publish rules they intend to enforce, and any interpretive commentary, in one authoritative, permanent, and tamper-proof source—the Federal Register. The USPTO’s cacophony of web pages, Trial Practice Guide updates, precedential decisions scattered around nearly a dozen lists on the USPTO website, “informative” opinions that have varying and non-ascertainable standing as precedent, Director’s memoranda on substantive law, and new rules announced by “press release,” are contrary to law. Congress intended that the Federal Register be the “one stop shop” for all binding rules.

Some commenters proposed that the USPTO implement Arthrex via the Precedential Opinion Panel (POP). The POP’s rulemaking authority is mentioned in the same number of statutes as three-dollar bills. Only a year ago, the Federal Circuit pointed out the obvious: the POP has neither grant of rulemaking authority nor procedural foundation in the Patent Act or the APA, and has no carve-out from the many statutes that govern rulemaking. Those were two of several reasons that PTAB decisions are ineligible for Chevron deference. Facebook, Inc. v Windy City Innovations, LLC, 973 F.3d 1321, 1350-51 (Fed. Cir. 2020), reaffirming 953 F.3d 1313, 1342-43; Aqua Prods. 872 F.3d at 1339 (Reyna, J. concurring) (“The Patent Office cannot effect an end-run around [the APA] by conducting rulemaking through adjudication …”).POP precedential decisions are just another form of routine guidance, with no more legal authority than the MPEP or a web page.

As a refresher of basic principles, and to slightly oversimplify, subregulatory guidance has legal effect only as follows:

(a)  Subregulatory guidance may interpret a “genuine ambiguity” in a statute, as the agency’s “first guess” at resolution of the ambiguity. If that interpretation either issues as regulation, or else issues from the component of an agency with rulemaking authority and with procedural formalities that approximate notice-and-comment, that interpretation can have force of law under Chevron deference. (A full catalog of conditions for Chevron or Auer deference, and the hurdles that the PTAB  cannot meet, is presented in The PTAB Is Not an Article III Court, Part 3: Precedential and Informative Opinions, AIPLA Q.J. vol. 47 No. 1 pp. 1-99 (June 2019).)  But guidance issued without the necessary preconditions has no binding force of law against the public. Perez v. Mortgage Bankers Assn., 575 U.S. 92, 97 (2015). If a party offers an alternative interpretation, the agency must entertain the issue, and cannot stand on its guidance as the last word. On judicial review, interpretative guidance of statutory ambiguity is accorded the weak form of deference, Skidmore deference, which means that a court will give the agency’s opinion the weight that its persuasive value warrants. In Windy City and Aqua Prods, a three-opinion majority and a unanimous “additional views” opinion held that because the PTAB lacks rulemaking authority, its opinions (POP or not) are not entitled to Chevron deference.

(b) Subregulatory guidance may interpret a “genuine ambiguity” in a regulation. If issued with high procedural formality (close to notice and comment), that guidance may be eligible for force of law under Auer deference. But no other agency has acted with comparable brazen defiance of administrative law to improvise anything analogous to a “precedential opinion panel,” so there’s no direct precedent to allow a 100% prediction. It seems more likely than not that PTAB POP decisions are not Auer-eligible, because the PTAB lacks rulemaking authority. See Windy City, citing Martin v. Occupational Safety and Health Review Commission, 499 U.S. 144, 154 (1991).

(c)  In ex parte proceedings, guidance that uses mandatory language to state obligations of agency employees with respect to “important procedural benefits” in favor of a party, or “interpretative” guidance interpreting the agency’s statute or regulation, is binding only against agency employees (including ALJs). Because AIA proceedings are inter partes, this form of binding effect never applies to POP decisions or any other guidance purporting to govern AIA trials.

(d) If subregulatory guidance does not interpret ambiguity in an underlying statute or regulation, and the guidance document imposes any new adverse effect or obligation on any party other than the agency, it’s simply a nullity.

No statute authorizes the POP or any similar shortcut as a substitute for § 553 “regulation.” The USPTO has lost two cases on this precise issue (in Aqua Products, by a plurality assembled from three opinions, and in Windy City, in a unanimous “additional views” opinion). Even though there is not yet a majority opinion on the precise issue, the words of the statute and the Court’s reading of that statute are pretty clear. Any other party would modify its conduct to avoid further losses; instead, the PTAB doubled down. Strikingly, in the week after Windy City told the PTAB that it lacked rulemaking authority and that POP decisions lacked force of law, the PTAB reacted with three new precedential decisions, and a dozen in the year since.

The path to regulation takes at least a year, as it winds through many statutes and executive orders. There’s a timeline here starting at page 6. The PTAB’s record of complying with simple law is not encouraging. When a rulemaking law requires hard work and cost-benefit analysis, the PTAB’s record is alarming—for example, in the 2018 “ordinary meaning” rule, the PTAB shortcut many statutory steps, often by the artifice of falsely claiming exemptions from oversight and regulatory review, as explained in An administrative law view of the PTAB’s ‘ordinary meaning’ rule, Westlaw J. Intellectual Property, vol. 25 no. 21, pp. 12-16, 2019 WL 303044 (Jan. 30, 2019).

The APA offers a perfectly good, well-paved road that works just fine for other agencies: the Director can issue an interim rule in the Federal Register, 5 U.S.C. § 553(d)(3), and then follow up with notice-and-comment rulemaking. The PTAB has not explained how continued reliance on rapidly-changing web pages and a “precedential opinion panel” comport with the rule of law, nor has the USPTO ever explained any basis for it to opt out of the APA rulemaking procedure that governs all other agencies.

Looking for the Logic

To be sure, it’s a good thing for an agency to float proposed trial balloons for public comment before formally proposing a rule. For most rules, agencies are required to do so (44 U.S.C. § 3506(c)(2)(A)—another law the USPTO seems to consistently disregard). But the USPTO announced the Director review as an immediately-effective rule. If this were an isolated departure from a technicality, perhaps it would be excusable as human error. But as part of an extended history of ignoring (or outright subverting) rulemaking law, with rules changing on the fly, it’s deeply concerning.

Why would the USPTO so steadfastly resist all requirements of rulemaking law, from the most complex to the simplest (simply publishing in the Federal Register)? Three potential reasons come to mind. First, it’s a lock-in—while parties before agencies crave predictability, agencies crave “flexibility.” Second, Federal Register publication is a signal to various regulatory oversight tribunals in the executive branch that an agency is undertaking rulemaking.  Rulemaking requires an agency to do a number of cost-benefit analyses, to make certain filings at the Office of Management and Budget, Small Business Administration, etc. Someone might think “No Federal Register notice, no hard work.” But these laws cover all “rules” in the broad sense of the APA, Batterton v. Marshall, 648 F.2d 694, 700?01 (D.C. Cir. 1980), so evasion of a statutory procedural requirement just sets up a basis for challenge on judicial review. Third, maybe the USPTO believes that by not publishing in the Federal Register, it insulates itself from judicial review of “arbitrary and capricious” and “without observance of procedure” rulemaking. Though that has naïve appeal with support here and there in dictum, it’s an erroneous view of the law. Bennett v. Spear, 520 U.S. 154, 177 (1997) (opinion letter was sufficiently “final” to permit judicial review). So, while nonstatututory rulemaking shortcuts may look easier in the short term, they shroud all PTAB judgments under a cloud of appealable issues.

Many other questions remain, such as whether the Director can delegate review and what time limits will apply, and we will explore those in Part II of this article.

 

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The Author

M. David Hoyle

M. David Hoyle is the inventor of B.E. Technology, LLC’s intellectual property covering Internet advertising technologies.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 36 Comments comments.

  1. Anon July 22, 2021 5:57 pm

    Scorching — and deservedly so.

  2. Pro Say July 22, 2021 8:43 pm

    . . . and — given that the AIA doesn’t have a severance clause to keep the remainder of the AIA intact should any part of it be found unconstitutional (which SCOTUS just did) — then the entire AIA is unconstitutional.

  3. Julie Burke July 22, 2021 8:51 pm

    Thank you, David, for the insightful analysis. I await Part 2 with morbid curiosity.

  4. ipguy July 23, 2021 6:20 am

    At this point, the most useful thing the USPTO can do is put post-grant proceedings on hold and assign all the judges to handle to deciding ex parte appeals, where they can be more useful.

  5. Paul F Morgan July 23, 2021 9:33 am

    “Essentially all judgments of the PTAB will be appealable and voidable for underlying procedural error under various administrative law statutes..”
    Precisely the disastrous draconian result some had hoped for, which both the Fed. Cir. and the Supreme Court clearly deliberately avoided in their Arthrex decisions [on two different grounds]. They are not going to let that happen by miss-applying Arthrex.

  6. TFCFM July 23, 2021 10:33 am

    If the assertions made here are accurate, then why don’t/wouldn’t the same assertions apply to every disputed ex parte reexam and every disputed appeal from an examiner’s rejection during prosecution, for example? If what is alleged here is true, how can any of THOSE decisions properly be heard by the Federal Circuit or US Supreme Court without a full written decision, tortuously discussing the merits by the Director?

    (Honest question. There may well be a reason that I’m not recognizing at first glance. If so, what is that reason?)

  7. David Boundy July 23, 2021 12:20 pm

    Dear TFCFM @6 —

    The difference is that IPRs/PGRs are “formal adjudication,” while ex parte appeals are “informal adjudication.”

    Dear Paul @5:

    As I read Mr Hoyle’s article, he doesn’t attribute the appealable problems to Arthrex itself, and thus they don’t fall within the protective zone you posit. They’re problems that the PTO can either create or avoid by its choices in implementing Arthrex, and legal errors that the PTO created for itself in the past and that Arthrex exposed.

  8. Paul F Morgan July 23, 2021 2:01 pm

    First, the part of the patent statute the Sup. Ct. overruled [no reconsideration other than by the PTAB itself] was in the patent statute long before the AIA and applied to many years of formal inter parties interference proceedings.
    Secondly, forcing the PTO Director to write detailed decisions for every reconsideration request it gets is unrealistic and unreasonable. If the APA required it would also have to be done in all other federal agencies having far more formal administrative judge’s contested hearing proceedings that those of PTO APJ PTAB IPRs.

  9. Anon July 23, 2021 2:26 pm

    Mr. Morgan @8,

    You raise a point that only exacerbates the legislative action of the judicial branch.

  10. Pro Say July 23, 2021 2:29 pm

    As Mr. Hoyle makes clear, the PTO has for untold years believed itself to be above the very same laws, rules, and regulations which every other federal government agency must follow and abide by.

    Long past time for this rogue agency to be brought to heal.

    Whether by the District Courts, the CAFC, SCOTUS, Congress, or two or more of these four.

    THIS is one of the most important matters which any nominee for Director must be forced to explicitly and on-the-record address before Congress:

    Three questions which must be answered:

    1. Do you agree that the Patent Office has been operating outside the bounds of all other federal agencies?

    2. If confirmed, will you correct this?

    3. If you will, how will you do it?

    And don’t let the nominee play dumb . . . or get away with song-and-dancing you.

  11. Julie Burke July 23, 2021 2:53 pm

    Dear Pro Say @10

    Agreed. You nailed it.

  12. ipguy July 23, 2021 2:56 pm

    “forcing the PTO Director to write detailed decisions for every reconsideration request it gets is unrealistic and unreasonable.”

    Cue the Solicitor’s Office.

  13. David Boundy July 23, 2021 8:33 pm

    Dear Paul @8

    “If the APA required it would also have to be done in all other federal agencies having far more formal administrative judge’s contested hearing proceedings that those of PTO APJ PTAB IPRs.”

    All other agencies accept that statutes mean what they say. The ITC, MSPB, ICC, IRS, ATF, EPA, DEA, INS, all write decisions (and get reversed when they don’t – Judge Posner’s opinions of Immigration Judges are particularly pointed). The FCC had your view in the 1980s, that the APA was “unrealistic and unreasonable,” which is why you see so many “v FCC” cases in the 1980s, which the FCC consistently lost.

    There are two different standards, “formal adjudication” under 5 U.S.C. §§ 554, 555, 556, and 557, and informal adjudication (§ 555 alone), Ex parte appeals are “informal adjudication.” AIA trials are “formal adjudication.” I just checked, and indeed, Mr Hoyle explains that distinction.

  14. BP July 23, 2021 10:16 pm

    David, first thank you. Second, a couple of questions, isn’t the law clear that unconstitutionally appointed for one task means unconstitutionally appointed period? And an ex parte decision is a FWD, correct (per fed cir)? The SCt seems like it deliberately avoided those points. What is the particular distinction, by law/fact, as to formal and informal?

  15. Paul F Morgan July 24, 2021 11:05 am

    Thanks David, but the argument here is not about the PTAB’s requirement to write adequate opinions. Rather whether or not the Director has to write a separate detailed response to every request for reconsideration rather than adopting the PTAB opinion, or, whether or not the Director is denied the normal discretion to deny requests for reconsideration.

  16. David Boundy July 24, 2021 1:13 pm

    Dear Paul @ 15–

    Lawyers generally follow a three-step process: (i) Read. (ii) Think. (iii) Write.

    Here’s the statute. https://www.law.cornell.edu/uscode/text/5/556 https://www.law.cornell.edu/uscode/text/5/557

    Start step (i) with § 557(c) and the other statutes cited in the article. Then do step (ii). Then get back to me with step (iii), and we can have an informed discussion.

    The ordinary interpretation of Supreme Court decisions is that the Court decides the issue presented, and didn’t carve out any other law. I’d be interested in your explanation if you see an exception.

  17. David Boundy July 24, 2021 1:25 pm

    Dear BP @ 14 —

    “isn’t the law clear that unconstitutionally appointed for one task means unconstitutionally appointed period?”

    I can think of many exceptions. Longer than I want to write.

    “And an ex parte decision is a FWD, correct (per fed cir)?”

    No. An ex parte decision under § 134 is a completely different thing than an FWD under § 318/§ 328. I don’t understand the basis for the question.

    “The SCt seems like it deliberately avoided those points.”

    That’s generally the way courts write opinions–answer the question presented, and avoid dictum answers to questions that weren’t asked.

    “What is the particular distinction, by law/fact, as to formal and informal?”

    See 5 U.S.C. §§ 554, 556, and 557. There are many good books to elaborate. The Hickman & Pierce Administrative Law treatise, or Litwak A Guide to Federal Agency Adjudication are good starting points. No doubt there are many law review articles, too.

    David

  18. David Boundy July 24, 2021 5:29 pm

    Dear Paul—

    You’re enough of a lawyer to understand that once in a while a single law covers two parties—simultaneously! Coverage of one doesn’t exclude the other. Take a look at § 557(c), https://www.law.cornell.edu/uscode/text/5/557 as the article suggests.

    Director review is surely “review of the decision of subordinate employees,” correct? The consequence, “The record shall show the ruling on each finding, conclusion, or exception presented” surely follows, correct?

    If you can identify an exception, I’m eager to learn of it. But it’s only helpful to continue this discussion if you look at the statute first.

    David

  19. BP July 24, 2021 5:30 pm

    Thanks David, I still think the semantics could be clearer on “finality” and “final written decision”.

    “Final written decision” is something entirely different than a decision of the agency with “finality”, sufficient for appellate review. I do understand that a “final written decision” in an IPR has a different effect as to claims/patentability than a “decision” with “finality” in an ex parte matter (though, again, both have “finality” for appellate review).

    As to an ex parte decision, if the rejections are reversed by the board, there’s a procedural window (generally open for a short period of time) where the only “valid” approach to reopening is via 37 CFR 1.198. And, note that 37 CFR 1.198 has an additional protection for appellants: “matters not already adjudicated”. I believe the Fed Cir stated that no prior adjudication (by Fed Cir or district court) has bearing on a decision to institute an IPR or the IPR itself?

    Thus, does 37 CFR 1.198 have some protection that IPRs don’t have? That seems odd.

    37 CFR 1.198 also demands “sufficient cause”, which can be akin to “probable cause” (consider a search warrant). However, unlike a search warrant, the agency’s office of petitions never reviews the substance, as would a court in a challenge to a search warrant (which happens all the time). The legal concept “for cause” is discussed throughout Arthrex as to employment. In the context of employment, an agency needs sufficient facts to raise to the level of “for cause”. Those facts need to be available for review (happens all the time).

    As to 37 CFR 1.198, the office of petitions says “sufficient cause” is a substantive matter for the board (and the board says it’s a petitionable matter for the office of petitions).

    The agency appears to be abusing 37 CFR 1.198 in that it is used for agency initiated petitions to reopen after an ex parte decision with “finality” without having to generate an adequate written record for review. The existence of an office action in itself cannot be “sufficient cause”. Imagine that happening in criminal law (law enforcement: here’s my application for a search warrant, that in itself suffices; judge: but it has only a sentence, I want a search warrant, how does that suffice?). In other words, “sufficient cause” cannot be turned into a pro forma requirement.

    And, 37 CFR 1.198 is neutral as to who can invoke, where an appellant invokes after a decision with “finality”, the agency raises the bar quite high, demanding an elaborate written record of “sufficient cause”, including why a requested action/amendment was not made earlier.

    It may be that ex parte decisions are somewhat misunderstood, particularly with respect to 37 CFR 1.198. As indicated above, the agency has to follow 37 CFR 1.198 to reopen. To argue a general ability to reopen would mean that 37 CFR 1.198 has no import, no effect, and is meaningless. And, it’s important to distinguish the cases as to pulling back before jurisdiction shifts to the board. If jurisdiction has not shifted to the board, the agency pulls back all of the time (Hyatt cases?).

    Certainly, a dumb outcome would be for the agency to not invoke 37 CFR 1.198, allow the application to issue as a patent and then drag the patent back into the agency.

    As an aside, on the first point, I have a case that stated “unconstitutionally appointed for one task means unconstitutionally appointed period” (I just need to dig it up). I can imagine there are many cases to the contrary (no need to argue/discuss that point).

    For what it’s worth some case law on “finality”, Barton v. Adang, 162 F.3d 1140, 1143, 49 USPQ2d 1128, 1131 (Fed. Cir. 1998):
    Although neither Monsanto nor Mycogen has challenged our jurisdiction to review the Board’s decision, this court “has the duty to determine its jurisdiction and to satisfy itself that an appeal is properly before it.” Woodard v. Sage Prods., Inc., 818 F.2d 841, 844, 2 USPQ2d 1649, 1651 (Fed. Cir. 1987) (in banc). Under 38 U.S.C. § 1295(a)(4)(A), this court has exclusive jurisdiction of an appeal from “a decision” of the Board. Although this provision does not expressly require “a final decision” for appellate jurisdiction, this court has held that § 1295(a)(4) should be read to incorporate a finality requirement. See Copelands’ Enter., Inc. v. CNV, Inc., 887 F.2d 1065, 1067-68, 12 USPQ2d 1562, 1564-65 (Fed. Cir. 1989) (in banc).

    1295(a)(4) of an appeal from a decision of—
    (A) the Patent Trial and Appeal Board of the United States Patent and Trademark Office with respect to a patent application, derivation proceeding, reexamination, post-grant review, or inter partes review under title 35 . . . .

    There’s no distinction between the PTAB “decisions” in 1295(a)(4)(A).

    Like a trip back in time on Copeland, with Doug Olson and Dale Nelson, from Copeland (though trademark):

    While section 1295(a)(4) does not expressly premise appellate review on the finality of the Board’s decision, cf. 28 U.S.C. § 1295(a)(1), (2), (3), (5), (6), (9), and (10) (1982), the CCPA, when faced with the issue, regularly held that finality was required to appeal. See, e.g., Champion Prods., Inc. v. Ohio State Univ., 614 F.2d 763, 765, 204 USPQ 833, 834 (CCPA 1980) (“As a general rule, `decision’ means a final dispositive ruling that ends litigation on the merits.”); R.G. Barry Corp. v. Mushroom Makers, Inc., 609 F.2d 1002, 1005, 204 USPQ 195, 197 (CCPA 1979) (“This court has repeatedly stated that the word `decision’ in the statute is to be read `final decision.'”); Aerco Int’l, Inc. v. Vapor Corp., 608 F.2d 518, 520, 203 USPQ 882, 884 (CCPA 1979); Stabilisierungsfonds Fur Wein v. Zimmermann-Graeff KG, 198 USPQ 154, 155 (CCPA 1978).

    And, from Champion Prods:
    As a general rule, “decision” means a final dispositive ruling that ends litigation on the merits. Stabilisierungsfonds Fur Wein v. Zimmerman-Graeff KG, 198 USPQ 154, 155 (CCPA 1978); Toro Co. v. Hardigg Industries, Inc., 193 USPQ 149, 153, 549 F.2d 785, 788 (CCPA 1977); SCOA Industries, Inc. v. Kennedy Cohen, Inc., 189 USPQ 15, 16, 530 F.2d 953, 955 (CCPA 1976).

    To sum up, 1295(a)(4) is the basis for appeal (finality). IPR is an FWD and ex parte is a “final decision” (“finality”) sufficient for appeal but not an FWD.

    Again, appreciate your time and what you have done!

  20. David Boundy July 24, 2021 9:59 pm

    Dear BP—

    The statutes are drafted as they are, and terms mean what they mean as terms of art. To those of us that spend time in the administrative law, the meanings are pretty clear. If you think “the semantics could be clearer,” then you’d have to get yourself elected to Congress, change the statutes, and get everyone else to agree with your redefinition of what words mean. In the mean time, you have to take words to mean what they mean today.

    Under current law, beyond five letters that happen to be in a random state of alignment, a “final written decision” of § 318/§ 328 is conceptually an entirely different thing than a jurisdictional “final agency action” of 5 U.S.C. § 702 or 28 U.S.C. § 1295 (though they overlap—“final written decision” is a subset of “final agency action.”)

    In Title 35, “final” almost always provides for further reconsideration. In contrast, “final” in Titles 5 or 28 generally means no more than “You now have a punched ticket that allows you to get out of the clutches of an executive branch agency. You can now seek review in an Article III court.” I can’t think of a context in which “final” means “The agency is done and will not entertain further reconsideration.”

    Your confusion is not alone. About a year ago, I had a phone call with the Director of the Office of Petitions, Charles Kim. Mr. Kim was utterly clueless on the most basic principles of administrative law—he made it abundantly clear that he doesn’t care that the Administrative Procedure Act is a different body of law to be read in pari materia with the Patent Act. He made clear that the only thing that he (and by extension, the Office of Petitions) cares about is the PTO’s fee collections. Mr. Kim made clear that in his Petitions Office, any time the law stands in the way of the PTO’s fee collections, the law can go fly a kite. He didn’t say so in exactly those words of course, but his attitude of contempt for the rule of law was firm as a brick wall.

    So if you’ve been learning your view of the law from the PTO, then you likely have a flawed view.

  21. David Boundy July 24, 2021 10:22 pm

    Dear BP @ 18—

    Reading your post further, I write to offer a few further pedagogical cautions.

    Ex parte prosecution and appeal (35 U.S.C. § 131-134, 37 C.F.R. § 1.191-198) are an entirely different thing than inter partes IPR/PGR (35 U.S.C. §§ 311-319, 321-329, 37 C.F.R. Part 42) which are in turn entirely different than appeal to an Article III court (§ 144, 145, Title 28). The procedural statutes are completely different, the standards of review are completely different, the grounds on which successful arguments are based are very different. It will lead you to more confusion than enlightenment to imagine any analogy between them. (A caution that applies to PTAB APJs—geeze louise, you guys are not an Article III court of appeals.)

    I’ve written several articles under the collective title The PTAB is Not an Article III Court, which you can find at http://ssrn.com/author=2936470

    As you can imagine, administrative law is a field unto itself, and I can’t give you a full semester course here in blog comments. You’re going to have to find another venue. All I can offer you here is caution to not analogize the non-analogizeable.

    David

  22. Anon July 25, 2021 1:00 pm

    I always enjoy the lessons provided on Administrative Law.

    I view such as essential in operating in one of the Administrative Agencies that – as Mr. Boundy reflects – seems intent on flouting the rules by which it operates.

  23. BP July 25, 2021 1:31 pm

    Thanks again David, appreciate: they overlap—“final written decision” is a subset of “final agency action.”

    Would be nice if “final written decision” were “Final Written Decision” or “final written IPR decision”. So, an ex parte written decision that’s a final agency action should never be called a “final written decision”.

    Anything as to the Fed Cir’s In re: Boloro Global Limited and VirnetX and how/when Freytag applies?

    From VirnetX:
    Thus, if these APJs are unconstitutionally appointed principal officers because of their inter partes review duties in light of Arthrex, it would appear that under Freytag vacatur would be appropriate for all agency actions rendered by those APJs regardless of the specific type of review proceeding on appeal. Freytag, 501 U.S. at 882

    Understood that the “Freytag vacatur” has no place in assessing “final agency action” as to the issues raised in Arthrex – because Arthrex never raised anything but IPR (didn’t raise ex parte review or other) and because VirnetX was not the case before the SCt.

    If VirnetX had made it to the SCt, how do you think it would have been decided?

  24. TFCFM July 26, 2021 11:16 am

    TFCFM@#6: “If the assertions made here are accurate, then why don’t/wouldn’t the same assertions apply to every disputed ex parte reexam and every disputed appeal from an examiner’s rejection during prosecution, for example?

    DB@#7: “The difference is that IPRs/PGRs are “formal adjudication,” while ex parte appeals are “informal adjudication.”

    I see also your comment at #20:

    DB@#20: “Ex parte prosecution and appeal (35 U.S.C. § 131-134, 37 C.F.R. § 1.191-198) are an entirely different thing than inter partes IPR/PGR (35 U.S.C. §§ 311-319, 321-329, 37 C.F.R. Part 42) which are in turn entirely different than appeal to an Article III court (§ 144, 145, Title 28).

    This seems to me like a “distinction,” rather than a “difference.”

    What is is about IPRs being a “formal adjudication” that requires the Director to issue a detailed written explanation for each IPR decision (s)he decides not to overturn?

  25. David Boundy July 26, 2021 3:12 pm

    Dear TFCFM @ 24 —

    Same response I gave Paul Morgan @ 18. Read the paragraph of the article that prompts your question. Then read the statutes and cases cited there. Then ask a question that shows you read them. From that point, we can have a productive discussion.

    David

  26. Anon July 26, 2021 6:42 pm

    What is it that you are trying to say with a comment that f, “This seems to me like a “distinction,” rather than a “difference.”…?

  27. BP July 26, 2021 7:35 pm

    When David appears on the boards, of course we’re going to try and get all the info/opinions we can, OK, maybe rushing too fast (or being a bit lazy). My apologies.

  28. TFCFM July 27, 2021 10:09 am

    DB@#25: “read the statutes and cases cited there. Then ask a question that shows you read them.

    That seems like dodging the question.

    S 131, of course, specifies that, “The Director shall cause an examination to be made of the application…

    S 134 specifies that “An applicant for a patent, any of whose claims has been twice rejected, may appeal from the decision of the primary examiner to the Patent Trial and Appeal Board…” and that “A patent owner in a reexamination may appeal from the final rejection of any claim by the primary examiner to the Patent Trial and Appeal Board…

    S 314 provides “The Director shall determine whether to institute an inter partes review… [and] The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”

    S 316: “The Patent Trial and Appeal Board shall… conduct each inter partes review instituted under this chapter…

    S 318: “the Patent Trial and Appeal Board shall issue a final written decision…

    S 319: “A party dissatisfied with the final written decision … may appeal the decision pursuant to sections 141 through 144.

    S 144: “A party to an inter partes review …who is dissatisfied with the final written decision … may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.

    [ignoring PGR for the sake of brevity, FWIW at this point]

    So… rather than obfuscating or waving hands, how about answering my extraordinarily simple question:

    TFCFM@#24: “What is is about IPRs being a “formal adjudication” that requires the Director to issue a detailed written explanation for each IPR decision (s)he decides not to overturn?

    Requesting an explanation (even a basic one) of so apparently bald-faced an assertion surely is not unreasonable. You may well be right, but whether or not you are, I’d like to understand WHY. (Please understand that “because I say so” seems a little thin on an open comment platform like this one.)

  29. Brian July 27, 2021 2:03 pm

    TFCFM@#28: As you have been a former PTAB judge and now an Apple employee, doesn’t Apple pay you enough to go and read the APA?

    David is talking about CAFC ruling that IPRs are “Formal adjudications” and that in turn implies that under the APA, 5 U.S.C. §§ 554, 556, and 557 apply. Read the Question #1 text again.

  30. David Boundy July 27, 2021 2:58 pm

    Dear TFCFM @ 6, 24, 28:

    From the article, sixth paragraph:

    First, an America Invents Act (AIA) proceeding is a “formal adjudication” under the APA, 5 U.S.C. §§ 554, 556, and 557 (as opposed to informal adjudication under § 555). Dell Inc. v. Acceleron, LLC, 818 F.3d 1293, 1301 (Fed. Cir. 2016). The APA, 5 U.S.C. § 557(b) specifies that “[b]efore … a decision on agency review of the decision of subordinate employees, the parties are entitled to a reasonable opportunity to submit for the consideration of the employees participating in the decisions… exceptions to the decisions … and … supporting reasons for the exceptions.” Then, § 557(c) requires a “ruling on each … exception presented,” and requires that such “decisions … include a statement of… findings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion presented on the record.” Thus, § 557(c) doesn’t permit a Rule 36 shortcut.

    This is the last time I will respond to you. Just copying and pasting Mr. Hoyle’s discussion of the issue takes only a moment. But you will understand my reluctance to spend time to write for someone that so clearly demonstrates an unwillingness to read.

  31. David Boundy July 27, 2021 8:40 pm

    Dear Bryan @ 29 —

    Could you email me offline? DavidBoundyEsq [at] gmail.com

    thank you

  32. TFCFM July 28, 2021 9:53 am

    DB@#30: “This is the last time I will respond to you.”

    Consider me unimpressed by, “my interpretation is right because I say so, and I won’t explain why, other than to wave my hands.”

  33. Anon July 28, 2021 12:13 pm

    TFCFM,

    You confuse “waving of hands” with the simple direction for you to inform yourself by reading the items pointed out to you.

    Then again, willful ignorance from you is not all that surprising.

    I do have to wonder how in the world you ever survived law school. Did they not employ the Socratic Method at the school that you attended?

  34. Ptarm July 28, 2021 8:44 pm

    TFCFM @32:

    I have to say, this is one of the most astounding conversation strings I’ve ever seen. I don’t see a question in your question that is not answered by the plain language of the statute. The statute that directly answers your question is literally quoted in the article, and then literally quoted again for you @30.

    If I give it to you once more, separated into distinct sentences, does that help you?

    “[b]efore … a decision on agency review of the decision of subordinate employees, the parties are entitled to a reasonable opportunity to submit for the consideration of the employees participating in the decisions… exceptions to the decisions … and … supporting reasons for the exceptions.” 5 U.S.C. § 557(b).

    § 557(c) requires a “ruling on each … exception presented,” and requires that such “decisions … include a statement of… findings and conclusions, and the reasons or basis therefor, on all the material issues of fact, law, or discretion presented on the record.” 5 U.S.C. § 557(c).

    With those two sentences, each straight out the United States Code, what question is left to your question? § 557 applies to the PTAB because of the case cited to you, Dell Inc. v. Acceleron, LLC, 818 F.3d 1293, 1301 (Fed. Cir. 2016). What hand do you claim to see being waved?

    And then comes the truly astonishing. The article cites Title 5. Why do you look in Title 35 and then claim that your inability to see the Title 5 answer is due to someone else “waving hands?” If listing irrelevant statutes was in any way helpful to supporting your point, why did you stop where you did? Surely if there were some point to be made by a list of irrelevancies, you could have made your point even stronger by including a few more from Titles 26 (tax), 11 (bankruptcy), and 15 (Commerce).

    I am astonished at your initial question, and at your reaction to being asked to do what lawyers do—read.

  35. Paul F Morgan August 4, 2021 11:02 am

    Last week what above commentators insist cannot be done was done just as I predicted: “..the Acting Director issued his first two decisions, adopting the panel decisions in each as the final decision of the agency. The first two Director Rehearing Requests (IPR2020-00081 and IPR2020-00320) were filed the week of July 6th. The decisions denying those requests were issued yesterday, unlike a typical request to a panel that can remain pending for months (and in some cases longer). The Director decision did not provide reasoning, akin to a Rule 36 CAFC affirmance, stating: It is ORDERED that the request for Director review is denied; and FURTHER ORDERED that the Patent Trial and Appeal Board’s Final Written Decision in this case is the final decision of the agency.”

  36. Anon August 4, 2021 8:01 pm

    Paul – you confuse “cannot” with “should not” (or perhaps, “cannot legitimately

    There is a world of difference.