Patent Watch: Pregis Corp. v. Kappos

by BakerHostetler
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[A] third party cannot sue the PTO under the APA to challenge a PTO decision to issue a patent.

On December 6, 2012, in Pregis Corp. v. Kappos, the U.S. Court of Appeals for the Federal Circuit (Prost, Clevenger, Reyna*) affirmed, inter alia, the district court's dismissal of Pregis' claim for judicial review under the Administrative Procedure Act (APA) of the USPTO's grant of U.S. Patents No. 7,325,377, No. 7,526,904 and No. 7,536,837, which related to apparatus for making air-filled packing cushions from a preconfigured plastic film material. The Federal Circuit stated:

The question here is whether a competitor, who has been sued as an infringer, is entitled under the APA to judicial review of the PTO's decision to grant the patents in suit. Pregis asserts a right to challenge two distinct aspects of a PTO "decision to issue" a patent: 1) the PTO's stated reasons for allowing the claims during examination under 35 U.S.C. § 131, and 2) the issuance of the patent itself. Pregis argues the need to permit competitors to challenge the PTO's stated reasons for allowance is illustrated by the prosecution history of the Perkins '397 patent. The PTO allowed the claims of Perkins '397 based on arguments made by Free-Flow's patent attorney to distinguish a prior art reference. During the litigation of this case, Free-Flow conceded that its attorney's arguments during prosecution were based on a misunderstanding of the prior art and were incorrect. Thus, at trial, Free-Flow argued Perkins '397 was patentable over the prior art on a different basis. Pregis argues it should be permitted to bring an APA claim challenging the PTO's reasons for allowance in addition to an invalidity defense -- which is subject to a corresponding presumption of validity -- in litigation against the patentee. Pointing to § 702 of the APA, Pregis asserts it was "adversely affected or aggrieved" by the PTO's action because the Free-Flow Patents "purported to impose a direct regulation and restriction on Pregis' business by excluding Pregis from making use of subject matter that was in the public domain . . . , and by exposing Pregis to claims for alleged infringement by its direct competitor, [Free-Flow]."

The district court dismissed Pregis' APA claims and held that the Patent Act's comprehensive scheme precludes putative third party infringers from seeking judicial review of PTO decisions to issue patents. . . . We affirm the district court's dismissal of Pregis' APA claims and hold that a third party cannot sue the PTO under the APA to challenge a PTO decision to issue a patent. The comprehensive legislative scheme of the Patent Act "preclude[s] judicial review" of the reasoning of PTO decisions to issue patents after examination under 35 U.S.C. § 131, and competitors have an "adequate remedy in a court" for the issuance of invalid patents.

To determine whether a particular statute precludes judicial review, we look to its express language, the structure of the statutory scheme, its legislative history and purpose, and the nature of the administrative action involved. There is a "strong presumption" that Congress did not intend to prohibit all judicial review of a type of agency action. A statute need not explicitly state that judicial review is unavailable for preclusion to be found. For example, "when a statute provides a detailed mechanism for judicial consideration of particular issues at the behest of particular persons, judicial review of those issues at the behest of other persons may be found to be impliedly precluded." As such, judicial review may be precluded when Congressional intent to do so is "fairly discernible in the statutory scheme."

The Patent Act expressly provides an intricate scheme for administrative and judicial review of PTO patentability determinations that evinces a clear Congressional intent to preclude actions under the APA seeking review of the PTO's reasons for deciding to issue a patent. First, the Patent Act establishes specific procedures allowing a patent applicant to appeal PTO rejections of patent claims. Second, the statute permits third parties to challenge issued patents through carefully-circumscribed reexamination proceedings. Third, putative infringers with a sufficiently immediate controversy may challenge the validity of issued patents through a declaratory judgment action, or can raise invalidity as a defense to an infringement suit.

The Patent Act thus presents several mechanisms by which third parties may challenge the PTO's decision to issue a patent, unlike cases in which preclusion of a suit under the APA would leave an agency action entirely free from judicial review. Having considered and addressed the need for review of PTO patentability determinations, Congress enacted specific procedures allowing third parties to attack the validity of issued claims. It is apparent that Congress decided not to provide for third parties to obtain review of the reasons for allowance of claims.

The carefully balanced framework of the Patent Act specifies a well-defined process for how, when, where, and by whom PTO patentability determinations may be challenged. . . . The Patent Act thus reflects Congressional intent as to which parties should be permitted to challenge the examiner's patentability determination made during original examination. That the Patent Act dictates the courts in which a disappointed applicant may appeal a patentability determination also shows Congress intended to preclude challenges to such PTO actions under the APA. Every district court of the United States has jurisdiction over an APA claim, while the patent applicant is restricted to review in a single district court or to a direct appeal to the Federal Circuit.

Moreover, Congress has protected the interests of competitors and the public through the mechanisms explicitly provided to them in the Patent Act to challenge the validity of issued patents. Preclusion of APA suits challenging the PTO's reasons for issuing a patent therefore does not "threaten realization of the fundamental objectives of the statute" to promote innovation by incentivizing inventors without unduly limiting competition.

If you have questions about the material presented above, please contact Dr. Lawrence M. Sung ( lsung@bakerlaw.com or 202.861.1537) or any member of our Intellectual Property Team.

See information regarding BakerHostetler's Patent Litigation and IP Prosecution and Portfolio Management practices.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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