PTAB Strategies and Insights - May 2020: Should USPTO Be Able to Make New Law Without Rulemaking

Sterne, Kessler, Goldstein & Fox P.L.L.C.

Since arriving at the USPTO, Director Iancu has tried to bring clear messages and consistency to the Office. For purposes of this article, we concentrate on the new POP procedures for Board case law and rules, and how the Federal Circuit has treated them.

Contrasting Proppant (POP) and Windy City (Fed Cir)

The contrasting positions of the Federal Circuit and Director Iancu are highlighted by comparing the POP’s decision in Proppant v. Oren Technologies, IPR2018-00914 with the Federal Circuit’s recent Facebook v Windy City panel decision, which is up for en banc review.

In Proppant, the POP determined that 35 U.S.C. § 315(c) provides the Board with discretion to allow a petitioner to be joined to a proceeding in which it is already a party, and it allows joinder of new issues into an existing proceeding.

One year later in Windy City, while not deciding an appeal of the Proppant decision, the Federal Circuit addressed Proppant and its issues – same party joinder under § 315(c) – but reached the opposite result.

In Windy City, petitioner Facebook filed an initial volley of IPR petitions—challenging some but not all of the claims of the asserted patents—exactly one year after being served with Windy City’s complaint. At the time, Windy City had not identified the claims it was asserting in the district court litigation. Later, after Windy City identified the asserted claims, Facebook filed two additional petitions for IPR challenging claims that were not included in the initial volley, along with motions for joinder to the already-instituted IPRs on those patents. The Board instituted Facebook’s new petitions and granted joinder. The Board ultimately found several claims unpatentable, including claims only challenged in the later-joined proceedings.

On appeal, the Federal Circuit vacated the Board’s decisions based on the later-joined petitions because “the Board erred in allowing Facebook to join itself to a proceeding in which it was already a party, and also erred in allowing Facebook to add new claims to the IPRs through that joinder.”

The Federal Circuit considered, and directly addressed, Proppant, stating “[w]e recognize that the Board’s Precedential Opinion Panel analyzed this issue in [Proppant], and came to the opposite conclusion…But that conclusion, which allowed same-party joinder, is incorrect under the unambiguous meaning of the statute.”

The Windy City court then turned to whether any Chevron deference is owed to the USPTO’s POP decisions or its interpretation of § 315(c) and ultimately determined that there was “no ambiguity that could warrant deference.” See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984) (“If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”). “Even under Chevron, we owe an agency’s interpretation of the law no deference unless, after ‘employing traditional tools of statutory construction,’ we find ourselves unable to discern Congress’s meaning.” SAS Institute Inc. v. Iancu, 138 S. Ct. 1348, 1358 (2018) (quoting Chevron, 467 U.S. at 843 n.9).

Now, with Windy City up for en banc review, the Federal Circuit wants the parties and amici – including the USPTO – “to file supplemental briefs explaining their views regarding the effect, if any, of the Supreme Court’s decision in Thryv on our decision in this case.” An overarching question is whether Proppant – although overturned –will still stand since the Federal Circuit may not have had the right to review it.
 
Is the USPTO allowed to use POP or only the APA Rulemaking

Perhaps a larger debate, however, is whether the USPTO may properly use its procedural  and POP processes to make law, or whether are they limited to comment and rule making under the APA. There are strong opinions on all sides.

It has been argued that Treatise authority shows overwhelmingly that academia and judges agree that only rulemaking should be used within an agency, and not case-by-case adjudication. But an argument against notice-and-comment rulemaking alleges that there is undue influence, almost lobbying, occurring from wealthy sources that infuse one-sided comments into the rule making process. There is also a concern that independent or so-called “garage” inventors do not have the resources to effectively counterbalance these influences. Although they have tried to swing the pendulum back to preserving patent rights, and will continue to.

The argument against the POP, and precedential and informative decisions in general, is whether the current practice is improper, ineffective, and whether the USPTO has any constitutional authority to establish precedential law. And whether some Executive Orders that have recently issued contradict the USPTO’s new practice.

Some believe that attempts at setting policy through informal guidance have failed because they lack bright line rules and still leave discretionary decision-making in the hands of the Board. Instead of presenting the public with a consolidated and organized set of regulations, which might otherwise be achieved through notice-and-comment rulemaking, POP adversaries argue that the current practice fragments the Board’s rules into disconnected pieces, leading to further confusion.

We will continue to monitor the Federal Circuit’s guidance on this issue, and will anxiously wait to see if the Supreme Court will decide to take up this issue. Stay tuned.

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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