HOW CONGRESS MADE THE USPTO INFALLIBLE AND HOW THAT AGENCY SEIZED EVEN MORE POWER BY ITS “RULE MAKING AUTHORITY”

The Supreme Court of the United States is set to hear oral argument in Cuozzo Speed Technologies, LLC v. Lee on April 25, 2016. The landmark case is the first opportunity The Supreme Court will have to weigh in on the constitutionality of the non-appealable provisions of the America Invents Act and the USPTO’s use of the “Broadest Reasonable Interpretation” in administrative post-grant trial proceedings used for the sole purpose of invalidating patents. The case will likely have precedential implications for two major issues. The first, whether an Article I administrative decision to institute an administrative trial can be “non-reviewable” without violating the Due-Process clause of the Constitution. The second, whether an Article I administrative court and an Article III judicial court may permissibly use different methods of patent claim construction.

When Cuozzo Speed Technologies, LLC v. Lee was decided by The Court of Appeals for the Federal Circuit Judge Dyk held that the court lacked jurisdiction to review the USPTO’s decision to institute. Judge Dyk cited 35 U.S.C. § 314(d), explaining that the Court was prohibited from reviewing the decision to institute an IPR. Judge Dyk found additional support for the USPTO’s claim construction standard, citing 35 U.S.C. § 316(a)(2) which he believes gives authority to the USPTO to adopt standards and regulations.

The position of Judge Dyk was clear and the rule would have been easy to follow. So why did The Supreme Court grant review? It is a widely known fact that The Federal Circuit, the circuit from whom Cuozzo Speed Technologies appeals from, has the highest reversal rate of any judicial circuit in the United States. Equally as interesting is the belief, amongst many intellectual property attorneys, that The Federal Circuit is more competent than The Supreme Court in patent related matters.

THE NON-REVIEWABILITY PROVISION AND ITS IMPLICATIONS

The America Invents Act (“AIA”) stipulates that the USPTO’s decision regarding the institution of a post-grant trial proceeding shall be final and non-appealable. This seemingly straightforward pragmatic law aims to delegate authority to the USPTO over matters that it possesses expertise on and is arguably uniquely situated to determine.  However, the issues are more complex than meets the eye because constitutional concerns governing the reviewability of an Article I court by an Article III court are believed by many to be mandated by the Constitution. In short the argument follows that an Article I court, under the direction of the Executive branch, cannot usurp power from an Article III court, by way of Legislative action. Consider for a moment the following thought provoking questions:

1. Is it constitutionally permissible for an Article I court, operated under the Executive Branch, to strip away patent property rights without the supposed constitutional guarantees of an Article III court’s oversight and that little elephant in the room called Due Process?
2. Does Due Process merely guarantee a procedural mechanism, not necessarily an Article III mechanism?
3. Is the presumption of reviewability of an Article I court validly rebuffed by the pragmatic desire for post-grant trial institutions to be final, non-appealable, and overseen by individuals of technical expertise?

If the “un-reviewability provision” were to be broadly accepted, where would it end? If Congress can make one agencies opinion infallible by the removal of judicial review the logical conclusion is that they can and would make other agencies insulated from judicial review.  Would Congress be able to delegate sweeping authority to the IRS to institute administrative trials for tax collection purposes and insulate the IRS from the checks and balances of Judicial Review? Would the EPA be able to broadly pass regulations, adjudicate those regulations, and go entirely unchecked just because Congress said so? Many would emphatically cringe as these scenarios are stupefyingly horrific.

THE DIFFERING CLAIM INTERPRETATION METHODS

The USPTO uses a claim interpretation standard known as the “Broadest Reasonable Interpretation” during administrative trials. This method, while similar to that used at District Courts is notably more expansive – meaning it has the ability to infuse additional ambiguity into claim language and the potential to invalidate more patents than the “ordinary meaning” standard used by the District Court.

Property rights are affected by the negative implication of the USPTO’s usage of the BRI standard. The co-existence of two different interpretive standards has lead and will continue lead to forum shopping because one venue is patent owner friendly while the other venue is friendlier to the patent opposition camp. The flip flopped approach should make anyone pause in concerned reflection and consider the following questions:

1. Should an administrative agency be allowed to use a different interpretive standard than that which is mandated at a Federal Court?
2. If so, will it create one-sided outcomes further compounding existing forum shopping?
3. When a patent is issued is it fair to say that it has created reliance interests?

When a patent issues it becomes a full-blown property right. Many would argue that it makes complete sense for the organization that granted that right to oversee any unforeseen required corrections. However, once a patent has issued others would argue that it has left, or at least partially left, the jurisdiction of the agency that created it. Many would argue that issued patents create reliance interests that deserve deference they are not currently afforded at the USPTO. After all deference to reliance interests is the very reason that a “patent is presumed valid” by an Article III court.  Again, it is for that very reason that Congress clearly stated that a patent is “presumed valid” in 35 U.S.C. § 282.

Congress intended for the USPTO’s Patent Trial and Appeals Board to provide parallel routes for District Court litigation concerning patent validity in order to ease judicial burden and have patent validity matters overseen by persons of technical expertise. One cannot help but question the underlying rationale of the USPTO’s usage of the BRI standard because the BRI standard, when used in relation to issued patents, is facially at odds with congressional intent that a patent be “presumed valid.” Many are left wondering how an alternate standard of review can be held to be simultaneously “parallel” by any normative understanding.

THE CUMULATIVE EFFECTS

The unforeseen consequences of the problems associated with the office’s use of the BRI standard adversely affect the pragmatic arguments in support of the non-reviewable provision of 35 U.S.C. § 314(d) in the first place. Hypothetically setting the constitutional concerns aside and focusing purely on pragmatism it would seem that if the USPTO used the same interpretive standard as the District Court they could be viewed as “partners” within the grander intellectual property scheme. Under the prevailing system they are distinct islands separated by miles of disputed territory.

While these two issues are problematic in their own right it is important to consider the combined cumulative effect they are having on property rights and innovation within this country. The question of whether judicial review exists for decisions of initiating post-grant proceedings is extremely important because the USPTO, an Article I court, may go wholly unchecked in its decisions and establish its own rules that are facially defiant of the plain and ordinary meaning of congressional statutes. To elaborate, the USPTO is currently riding the unstoppable wave of its very own preferred interpretations of petition requirements while citing its rule making authority as justification. The problematic tenure of this position is that the USPTO currently has unreviewable discretion to institute proceedings, and is the sole arbiter of what satisfies the procedural requirements of an institution in the first place. Currently, the agency is free to determine the interpretive standards and qualifications of prior art, affidavits, declarations, and expert opinions a petitioner and owner may rely on.

The full extent of this issue came to light most recently when the USPTO promulgated its latest rules on April 1st. The rules established that in instances of “disputed material facts” such as testimonial evidence or prior art the evidence will be construed in the light most favorable to the petitioner. This indicates that competing evidence will not be fully analyzed and the benefit of any doubt will virtually automatically be given to the petitioner. Here it is clear the USPTO does not want to have “trials within trials” but this decision appears to be mostly self-serving by easing institutional work load.

While problematic for Inter Partes Reviews and Post Grant Reviews alike we must not forget that the institution standard for a Post Grant Review is greater than that of an Inter Partes Review. The plain language of the statutory requirements to institute a PGR require that it is “more likely than not” that at least one claim in the petition is invalid. The troubling conclusion one can quickly reach is that when two parties submit competing evidence and the evidence is automatically presumed to favor one party over the other there simply cannot have been a showing that something is “more likely than not” because a full analysis was never performed. This glaring oversight showcases exactly why Article III court reviewability of an Article I court may be necessary. Consider the hypothetical situation where a petitioner puts forth a prior art reference from a lab journal or advertisement. That publication does not have a clear “time-stamp” and the petitioner attached sworn testimony swearing to a specific date. Likewise, the owner provides a prior art reference showing that they were in possession of the inventive concept but that prior art reference also lacks a clear “time-stamp.” Importantly, the owner swears behind the date of the reference and antedates the petitioner’s prior art reference. This scenario would lead to the institution of an administrative trial because the presumption favors petitioners and disfavors patent owners. On the other hand, the District Court would reach the exact opposite conclusion because there is a presumption favoring validity and anyone challenging validity has the burden to prove invalidity by “clear and convincing” evidence. Granted we are only referring to the institution of a trial rather than the final disposition this situation highlights how these nuances could play out.

Article III reviewability of the USPTO’s decisions, although timely and problematic in its own way, is the best mechanism we have to preserve concepts of “checks and balances” and “separation of powers” principles embodied in the Constitution and spirit of American Innovation.  It seems that the USPTO is deviating from the authority granted it by Congress and is going it alone so to speak.

The Supreme Court is the final arbiter of the metes and bounds of the meaning of the Constitution and they therefore are the only governmental branch that can determine the interplay of the numerous competing concerns. If the past is any indication of the future The Federal Circuit will likely be overruled on at least one of the two issues. Rarely, if ever, does The Supreme Court formulate a completely orthogonal opinion but it is of course possible and has happened in technical patent related cases recently. It is possible that The Supreme Court will hold that the non-reviewability provision of the decision to institute an administrative hearing at the USPTO is unconstitutional and that the usage of the BRI standard stands in stark contrast to the “uniformity and predictability” policy goals they frequently enunciate.

By: Maier and Maier PLLC – Timothy J. Maier and P. Marshall Ticer

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