America’s patent system, currently administered by the Patent and Trademark Office (“PTO”), was created when Congress enacted the Patent Act of 17901 pursuant to its power “to promote the Progress of … the useful Arts by securing for limited Times … to Inventors the exclusive Right to their … Discoveries.”2 Over the ensuing 220 years, Congress continued to exercise that power through successive legislative enactments the most recent comprehensive manifestation of which is the Patent Act of 1952,3 codified as title 35 of the United States Code.4 Subsequently, the Patent Act of 1952 has been revised a number of times by amending and deleting certain sections, and adding others.
The March 4, 2010 “Manager’s Amendment” of S.515 is the current Senate version5 of the pending “Patent Reform Act of 2010.” Despite the generally favorable reaction to the Manager’s Amendment as a whole by various commentators and bar associations, certain provisions in Sec. 6 and Sec. 8 of the Manager’s Amendment, if enacted, will abolish the fundamental statutory right of patent owners, as plaintiffs, to de novo judicial review by court trial of adverse decisions of the PTO in ex parte patent reexaminations, leaving owners with appeals to the CAFC as their only recourse. Because of the CAFC’s highly deferential “substantial evidence” standard of review, in the absence of reversible legal error, the PTO’s Patent Trial and Appeal Board (newly-named) would in effect become the tribunal of last resort in such cases. These changes could send the patent system down a slippery slope toward the eventual eradication of all statutory provisions for de novo judicial review in other types of ex parte matters decided by the PTO including patent applications, patent term adjustments6 and disciplinary proceedings,7 thereby attenuating long-standing rights to specific judicial relief for those aggrieved by the agency’s rulings.
A. Patent Reexamination
“Patent reexamination” is a statutory proceeding conducted in the PTO at the request of the patent owner, or any third party,8 during the period of enforceability of the patent,9 whereby the PTO re-evaluates the validity of one or more claims in the patent in light of published prior art cited by the requester as raising “a substantial new question of patentability” of the patented (claimed) subject matter.10 Reexamination can be either “ex parte” in which active participation during the prosecution phase is restricted to the patent owner and the PTO, or “inter partes” in which both the requester (always a third party) and the patent owner participate actively throughout the proceeding.11 Ex parte and inter partes proceedings have become a recognized adjunct to court enforcement litigation by which the patent owner, or a party challenging the patent, may seek to administratively validate or invalidate the patent(s)-in-suit.12
B. Judicial Review of PTO Decisions on Patent Applications and in Ex Parte Patent Reexaminations
Currently, patent applicants13 or owners of patents in ex parte reexaminations14 who are dissatisfied with the PTO’s decisions can seek judicial review in either of two fora. This is because the PTO is one of the agencies within the Executive Branch of the federal government whose final decisions in certain types of ex parte cases are statutorily subject to separate, dual jurisdictional review by Article III courts.15 Thus, inventors and patent owners who are dissatisfied with PTO rulings16 on examiners’ rejections of patent applications and claims in issued patents can seek judicial review by appealing directly to the U.S. Court of Appeals for the Federal Circuit (“CAFC”)17 or by suing the PTO for de novo review in the U.S. District Court for the District of Columbia.18 These alternative routes of judicial review are non-redundant and mutually exclusive.19
C. Civil Actions in District Court for De Novo Review of PTO Decisions
Under 35 U.S.C. § 306 a patent owner in an ex parte reexamination can seek judicial review of an adverse PTO decision by either of the two aforementioned routes. De novo review by trial in district court can be had by commencing a civil action against the Director of the PTO under § 145 which is incorporated by reference in § 306. Unlike a direct appeal to the CAFC under 35 U.S.C. § 306/§ 141, a civil action under § 306/§ 145 in an ex parte reexamination is an intermediate trial proceeding20 because the losing party at the district court can appeal to the CAFC as of right.21 A civil action under § 306/§ 145 seeks to set aside the PTO’s decision as being wrong on the facts, wrong on the law, or both and allows for the introduction of new evidence in addition to the evidence that was of record before the Board.
The availability of de novo district court review of PTO decisions in ex parte reexaminations is crucial to the public interest in the enforceability of valid patents and promotes fairness in the overall process. First, an appeal to the CAFC is decided on a closed fact-record. In contrast, at the district court, the parties may adduce new evidence such as live testimony, affidavits, test results, and the like while being subject to cross-examination in an adversarial courtroom proceeding unlike that at the PTO. Second, the trial judge in a district court action has the power to subpoena third parties and compel production of evidence that would otherwise be unavailable. Third, while the CAFC defers to PTO fact-findings, the district court reevaluates the totality of the evidence and fact-findings de novo when further evidence is presented.22 This type of judicial review thus serves as an important check on PTO decision making, and tends to promote the accuracy of ultimate rulings.
The March 4, 2010 Manager’s Amendment of S.515 – A Pandora’s Box of Negative Consequences
The Manager’s Amendment of S.515 would end the statutory right of patent owners to district court trial de novo review in ex parte reexaminations on an open record (35 U.S.C. § 145/§ 306) as an alternative to appeals in the CAFC under 35 U.S.C. § 141 on a record fixed below (id. at § 144) at the PTO. Nowhere is this mentioned in the Senate Press Release23 accompanying the Manager’s Amendment24 even though it would extinguish an existing right of judicial review that has always been important to the inventive community.
Subsection (c) of Sec. 6 on pages 67-8 is entitled “CIRCUIT APPEALS” and under the heading “(1) IN GENERAL,” would rewrite 35 U.S.C. § 141 into four parts (a)-(d). Part (b) would limit judicial review of all PTO decisions in patent reexaminations to appeals before the CAFC. Thus, the proposed revision of § 141 would expressly do away with the right of patent owners in ex parte reexaminations to de novo review in district court that has existed under 35 U.S.C. § 306/§ 145 since the inception of ex parte reexaminations in 1981. Subsection (c)(2) of Sec. 6 on page 69 under the heading “JURISDICTION” would alter the CAFC’s jurisdiction under 28 U.S.C. § 1295(a)(4)(A) to synchronize it with the proposed amendment of 35 U.S.C. § 141.
Because of the procedural similarities between ex parte reexamination and the prosecution of patent applications, if the Manager’s Amendment is enacted, then the abolition of de novo district court review of PTO decisions in patent applications could be next on the legislative agenda. Thus, the patent system now stands at the edge of a precipice. If the CAFC in its forthcoming en banc rehearing of Hyatt v. Kappos25 – a case involving the prosecution of a patent application – does not reverse its earlier panel decision, then the purpose of providing § 306/§ 145 district court trial de novo civil actions as an alternative to § 141 appeals to the CAFC would be undercut and the distinction between them would become blurred and indistinguishable and only embolden the PTO in its actions.26
The Manager’s Amendment of S.515 has as one of its provisions the elimination of the right of patent owners in ex parte reexaminations to seek correction of erroneous agency decisions and insulates the PTO from meaningful de novo review. Because the PTO’s decisions are subject only to a highly deferential “substantial evidence” standard of review by the CAFC, the presumptively renamed “Patent Trial and Appeal Board” for all intents and purposes would become the review-tribunal of last resort from which there would be no recourse in the form of de novo review. The Manager’s Amendment of S.515 would accomplish this by abrogating the fundamental, meaningful and necessary right of patent owners seeking judicial review of adverse PTO decisions in ex parte reexaminations to choose either civil actions in the district court or appeals to the CAFC. Such legislation would destroy existing rights and should be stricken from the current Manager’s Amendment of S.515.
Charles E. Miller is a partner at Dickstein Shapiro in the Intellectual Property Practice. He has doctorate degrees in both chemistry and law and practices primarily patent law in the firm’s New York office. Daniel P. Archibald is an associate in Dickstein Shapiro’s Intellectual Property Practice, where he focuses on patent counseling and enforcement in the firm’s New York office.
1. Act of Apr. 10, 1790, ch. 7, 1 Stat. 109-12.
2. Among the exclusive powers given to Congress by the U.S. Constitution, the power to enact laws relating to patents is set forth in Art. I, § 8, cl. 8. This was a major departure from the Articles of Confederation (1777-1789) entered into by the original thirteen states. Those Articles did not mention the granting of patents by the central government. See James Madison’s commentary in The Federalist No. 43 (January 23, 1788). For a contemporary analysis of the “Science and Useful Arts” clause of the Constitution, see Edward C. Walterscheid, To Promote the Progress of Science and Useful Arts: The Anatomy of a Congressional Power, 43 IDEA 1-81 (2002).
3. Act of Jul. 19, 1952, ch. 950, § 1, 66 Stat. 803.
4. The 1952 Act currently consists of four parts encompassing 35 U.S.C. §§ 1-376. Part I is entitled “United States Patent and Trademark Office” and includes §§ 1-42; Part II is entitled “Patentability of Inventions and Grant of Patent Rights” and includes §§ 100-212; Part III is entitled “Patents and Protection of Patent Rights” and includes §§ 251-318; and Part IV is entitled “Patent Cooperation Treaty” and includes §§ 351-376. The lacunal numbering of the sections indicates provisions that have been deleted since their enactment, or sections that have yet to be added.
5. 111th Congress, document GRA10134, the full text of which can be found at: http://judiciary. senate.gov/legislation/upload/PatentReform Amendment.pdf`
6. 35 U.S.C. § 154(b)(4).
7. Id. at § 32.
8. A third-party requester is statutorily defined as “a person requesting … reexamination … who is not the patent owner.” 35 U.S.C. § 100(e).
9.The period during which a patent can be enforced lasts six (6) years following the expiry of the statutory term of the patent under 35 U.S.C. § 154(a)(2) after which time a claim for money damages cannot be asserted. Id. at § 286. See Patlex Corp. v. Mossinghoff, 758 F.2d 594, 225 U.S.P.Q. 243, 249 (Fed. Cir. 1985).
10.35 U.S.C. § 303(a) [ex parte reexamination]; Id. at § 313 [inter partes reexamination]. See also the PTO’s Manual of Patent Examining Procedure (“MPEP”) at §§ 2216 and 2242.I.
11.The history, similarities, and differences between ex parte and inter partes reexamination are explained in chapters 2200 and 2600, respectively, of the MPEP.
12.Nationwide, about 60% of all contested motions to stay U.S. district court proceedings pending the reexamination of patents-in-suit are currently being granted. LegalMedia Nationwide Report on Stays Pending Reexamination Decisions (Sept. 2009). See, e.g., E-Z-Go v. Club Con Inc., Fed. Cir. Case No. 1-09-cv-00119 (Jan. 12, 2010) (“[ T]he court is particularly mindful that were it to decide that the [patent-in-suit] is valid, such finding is not binding on the PTO, and a contrary [prior] decision by the PTO could result in a substantial saving of judicial resources.”)
13. 35 U.S.C. §§ 111-133.
14. 35 U.S.C. §§ 302-307.
15. U.S. Const. art. III. 35 U.S.C. §§ 141, second sentence; Id. at § 145, first sentence; Id. at §§ 146 & 306; and 28 U.S.C. § 1295(a)(4)(a). Dual routes of court review are not unique to the patent system. For example, decisions of the Department of Agriculture involving plant variety protection certificates (7 U.S.C. §§ 2321-2582) may be appealed directly to the U.S. Court of Appeals for the Federal Circuit (“CAFC”) (Id. at § 2461) or by civil action against the Secretary of Agriculture (Id. at § 2462). Another such agency is the Internal Revenue Service (review by the U.S. Court of Federal Claims or by the U.S. Tax Court depending on whether or not the amount of the tax in dispute has been paid). 28 U.S.C. §§ 1346 & 1507. Also, contractor’s claims under the Contract Disputes Act of 1978 (41 U.S.C. §§ 601-613) may be appealed either to a tribunal within the Federal Contracts Dispute Board, or to the Court of Federal Claims. (28 U.S.C. §§ 1346(a)(2) & 1491(a)(2)). The contractor thus has a choice of fora from either of which an appeal to the CAFC may be taken. Id. at § 1295(a)(3) & (a)(10).
16. 35 U.S.C. § 134.
17. Id. at § 141 (patent applications); Id. at § 306/§ 141 (ex parte reexaminations).
18. Id. at § 145 (patent applications); Id. at § 306/§ 145 (ex parte reexaminations).
19. Id. at § 141, second sentence; Id. at § 145, first sentence; 28 U.S.C. § 1295(a)(4)(A).
20. Such trials are invariably bench trials because the Seventh Amendment right to trial by jury generally does not apply to civil actions against the Federal Government. See Jon L. Craig, Civil Actions Against The United States Its Agencies, Officers, and Employees, 2d ed., vol. 1, § 1:37 (2002).
21. 28 U.S.C. § 1295(a)(4)(C).
22. Winner Int’l Royalty Corp. v. Wang, 202 F.3d 1340, 1345-46 (Fed. Cir. 2000).
23. See 79 PTCJ 560 (03/12/10).
24. The PTO’s historic aversion to being a defendant in a civil action as opposed to being an appellee in the CAFC was discussed in Judge Moore’s dissent in Hyatt v. Doll, 576 F.3d 1246, 1254-68, 1280-82, 91 U.S.P.Q.2d 1865, 1871-85, 1891-92 (Fed. Cir. 2009), vacated and en banc rehearing granted sub nom. Hyatt v. Kappos, 93 U.S.P.Q.2d 1871 (Fed. Cir. 2010).
25. Sigram Schindler Beteiligungsgesellschaft MbH v. Kappos, 93 U.S.P.Q.2d 1756 (E.D. Va. 2009) is the first case in which the question was raised regarding district court trial de novo/review-jurisdiction over BPAI decisions in ex parte patent reexaminations requested following the November 29, 1999 effective date of the AIPA. In Sigram Schindler, the defendant in a patent infringement action (Cisco Systems Inc.) requested ex parte reexamination of the patent-in-suit in 2007. The PTO granted the request, and reexamined the patent. Following the examiner’s final rejection of the claims, the patent owner appealed to the BPAI. During that administrative appeal, the patent owner sued the PTO in a declaratory judgment action under the APA, 5 U.S.C. § 706(2)(C), challenging on Chevron grounds and under 35 U.S.C. § 2(b)(2) the legality of the agency’s interpretive rule, 37 C.F.R. § 1.303(d) which purports to preclude district court trial de novo/review-jurisdiction in ex parte reexaminations requested post-November 28, 1999. In response to the parties’ cross-motions for summary judgment, the court dismissed the action only because the Complaint did not present a justiciable case or controversy due to non-ripeness since the BPAI had not yet rendered a decision which, if adverse to plaintiff, would allow court review. And the fact that the BPAI’s decision had not yet been handed down rendered plaintiffs purported injury contingent and speculative. Hence, the decision in Sigram Schindler left this important question unresolved.
26. See Tafas v. Dudas, 541 Fed. Supp. 2d 805, 86 U.S.P.Q.2d 1623 (E.D. Va. 2008), aff’d in part and vacated in part sub nom Tafas v. Doll, 559 F.3d 1345, 90 U.S.P.Q. 2d 1129 (Fed. Cir. 2009), en banc rehearing granted July 6, 2009; motion to dismiss appeal granted and motion for vacatur denied sub nom. Tafas v. Kappos, November 13, 2009. This was a consolidated civil action against the PTO by Triantafyllos Tafas and by GlaxoSmithKline (GSK) under the APA, 5 U.S.C. § 706, challenging the agency’s final rules implementing (i) a limitation on the number of continuations and requests for continued examination of applications and (ii) a restriction on the number of claims as an alternative to submitting “examination support documents” in applications. The district court enjoined the implementation of the rules as being beyond the PTO’s rulemaking authority under 35 U.S.C. § 2(b)(2). The PTO later rescinded the rules by voluntarily removing them from the Code of Federal Regulations. 74 Fed. Reg. 52686 (Oct. 14, 2009). At the same time, the PTO together with one of the plaintiffs (GSK) sought to end the case by moving to dismiss the agency’s appeal from, and to vacate, the district court’s summary judgment (injunction). The CAFC denied the motion insofar as it sought to vacate the district court’s summary judgment, thereby happily preserving the status of the case as precedent in opposing future PTO attempts at ultra vires rulemaking.
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