US Government Asks for Increased Deference When Patent Applicants Challenge BPAI Decisions in Court

Kappos v. Hyatt (On petition for writ of certiorari, 2011) (Download Hyatt.GovtBrief)

Although the US Patent & Trademark Office (USPTO) and the Department of Justice (DOJ) have been at odds on the issue of the patent eligibility of genetic material isolated from a living organism, the two agencies are speaking with one voice against the Federal Circuit's recent decision in Hyatt v. Kappos. In that en banc opinion, the court broadened a patent applicant's rights associated with the "remedy by civil action" provided by Section 145 of the Patent Act. Under § 145, an applicant can file a civil action in DC District Court whenever "[a]n applicant dissatisfied with the decision of the Board of Patent Appeals and Interferences."

In a 6-2-1 decision, the Federal Circuit reversed its prior precedent and held that a patent applicant is allowed to introduce new evidence in a Section 145 civil action filed to challenge a USPTO refusal to grant patent rights and that the issues implicated by the new facts must be considered de novo.

Judge Moore wrote in the majority opinion that:

[W]e hold that the only limitations on the admissibility of evidence applicable to a § 145 proceeding are the limitations imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure. Therefore, we hold that the district court applied the wrong legal standard for the admissibility of evidence in a § 145 proceeding and abused its discretion when it excluded Mr. Hyatt's declaration. . . .

The particular significance of a § 145 civil action is that it affords an applicant the opportunity to introduce new evidence after the close of the administrative proceedings—and once an applicant introduces new evidence on an issue, the district court reviews that issue de novo.

However, the Court also held that an applicant may still be barred from presenting new "issues" in the civil action and that, when no new evidence is presented, that BPAI findings and rulings should be given deference under the Administrative Procedures Act.

Petition for Writ of Certiorari: In its petition to the Supreme Court, the US Government argues that the Federal Circuit decision is faulty because it "disregards fundamental principles of administrative law" and diverges from the traditional understanding of the statute.

Getting from the PTO to the Court: After losing at the Board, an applicant has two primary avenues for challenging the Board's decision: (1) Appeal to the Court of Appeals for the Federal Circuit under 35 U.S.C. § 141; or (2) File a civil action in district court under 35 U.S.C. § 145. In Dickinson v. Zurko, the Supreme Court held that Federal Circuit direct review of BPAI decisions under Section 141 must follow the deferential standards that govern judicial review of final agency action under the Administrative Procedure Act (APA). 527 U.S. 150 (1999).  In that decision, the Supreme Court distinguished between Section 145 and Section 141 actions – noting that Section 145 actions "permit the disappointed applicant to present to the court evidence that the applicant did not present to the PTO." However, the court did not address the particular circumstances in which new evidence may be permitted nor did it address how the new evidence should be treated.

Here, the government asks the Supreme Court to fill the gap in Zurko by holding that:

  1. The plaintiff in a Section 145 action may not introduce new evidence that could have been presented to the PTO in the first place; and
  2. When new evidence is introduced, the district court should still give deference to the prior decisions of the PTO.

Background: Gilbert Hyatt is a well-known inventor and successful patentee. Hyatt filed a civil action in 2003 after the BPAI sustained written description and enablement rejections for seventy-nine of Hyatt's claims. The examiner had issued "2546 separate rejections of Mr. Hyatt's 117 claims" based on the doctrines of inadequate "written description, lack of enablement, double patenting, anticipation, and obviousness." The Board reversed all of the examiner rejections except for the § 112 p1 arguments. Complicating this case is the fact that the application's claimed priority date is 1975. Hyatt has aggressively pushed the bounds of USPTO practice. This decision is one of more than a dozen Federal Circuit decisions focusing on Hyatt's patent rights. If the Supreme Court takes the case, it will be the second for Hyatt who won a 2002 case against California income tax collectors. In that case, California was pursuing Hyatt for tax revenue for his patent licenses. Hyatt took the case to the Supreme Court and eventually won a $388 million judgment against the state of California for invasion of privacy.

45 thoughts on “US Government Asks for Increased Deference When Patent Applicants Challenge BPAI Decisions in Court

  1. 45

    I’ve always wondered the same thing too. Section 102(e) seems pretty arbitrary. But, under the new patent reform bills, that would no longer be the case. The 102(e) date (or 102(a)(2) or whatever it will become)does go back all the way to the foreign priority date. Or at least that’s how I read it.

  2. 44

    “Unsubmitted” evidence is merely a label to refer to the evidence that wasn’t submitted during prosecution. The point is whether it makes a difference at the district court between the situation where the evidence had been introduced during prosecution and the PTO (both by the examiner and at the BPAI) had issued an opinion regarding that evidence, and the situation where the evidence isn’t presented to the PTO except at the district court, where it’s beyond the reach of the examiner and the BPAI.

    Sorry if my post was confusing, but it wasn’t supposed to be a tautology.

  3. 42

    Regulare chuckles too – this comin fromthe person who always be so – anti-bankster, now alla sudden, thinks debt be a wonderful thing.

    Dont look now Sunshine, but in your rush ta be contrarian to my views, ya stepped right inta duplicity. Yeah I know, feels just like a glove for ya.

  4. 41

    over-reach much?

    “Debt” in and of itself aint good. But a far cry from “illegal”.

    Ya tryin ta be like your new BFF and be obtuse? Or do you think that unrestrained spending more than you have is somehow a good thing?

  5. 40

    Unfortunately, they didn’t bother themselves to make a prop to limit the government from spending more than it took in.

    I see. So should we make debt illegal? Or does your philosophy just apply to states?

  6. 39

    Ned is right. The language is very clear about the “facts.” Not the decisions of the PTO, but the facts of the case. The decisions of the PTO are not facts and thus should be given no deference. NONE. Zero.

  7. 38

    District courts are not appellate courts and should not be relegated to such status. The idea that there should be any deference by the district court is ridiculous.

  8. 37

    It’s obviously not in the statute. But it’s clearly what the PTO is seeking by judicial decision.

    I just hope the court doesn’t go into a big discussion of “should have raised the issue before the PTO” when they mean “should have presented the evidence before the PTO”. That would be more uncertainty, because there are issues where the only evidence is barred before the PTO.

  9. 36

    Exactly. The government’s interpretation would bring into question why there is even a choice between 141 and 145. It wasn’t meant to be mere venue selection.

  10. 35

    Kinda hard to see how teh Office could give an official opionion during prosecution based upon unsubmitted evidence…

    tautology much?

  11. 33

    Ta view District Court as a review court akin to the CAFC is ta provide mere duplication. The Noonster be right here.

  12. 32

    Always a bad idea to spend more than ya take in – bad for personal budgets, no less bad for State budgets.

    Aint no reason (besides personal animus) to link the current state O that State to prop 13.

  13. 31

    Cause Prop 13, was like so just yesterday…

    O hwaits – that be llinked to our favorite Prez (favorite for different reasons, Natch)

  14. 29

    There is no reason to think it moot – The Office will have its day in court.

  15. 28

    Dennis, I have not read all the materials on this topic, but it simply strikes me that the language of the statute is not phrased as a review of the board decision as is the appeal to the Federal Circuit. It rather allows and even commands the court to decide the case on the facts. This language cannot be disregarded.

    In the whole of the government brief, I saw nothing at about this except to note in a footnote that the reason for the Federal Circuits decision was the language of the statute and that the nature of the action was not a review of the decision of the board. But the government brief ignored the thrust of the argument and continued to insist that Section 145 was ONLY an action to set aside a “judgment” of the board, an expert agency.

    The issue about “new” evidence is a side issue to the question of what is the basic nature of the action given the words of the statute. Is it an action that permits the court to decide the issue based on the facts (as stated by the statute itself) or is it an action for review of an agency decision as is the review by the court of appeals?

  16. 27

    Kevin, exactly. It actually makes no sense to allow an “appeal” to the district court. It makes no sense at all.

    The only rational thought then is that the DC action must be there for a reason, a de novo review of the facts. And, lo and behold, that is what the words of the statute actually say. It says the court can decide the issue on the facts. The statute in no way even hints that the action is to review a decision of the board.

    It appears to me, reading the government brief, that the government is rewriting the statute by quoting old case law, such as the Morgan case, that predate a 1927 amendment, iirc, that proponents at the time urged congress to turn the district court review into a de novo review.

  17. 26

    I actually think Judge Newman’s opinion was the best; besides what applicant would deliberately withhold evidence of patentability just to go through expensive appeal after expensive appeal. Bless that woman’s heart, this and her Bilski opinion were great!

  18. 25

    Is it truly moot, though, or does it matter that the USPTO was never able to issue an official opinion during prosecution based upon the unsubmitted evidence?

  19. 24

    As the Office is the adversary, do you think that the any information would not be disclosed to them under the Federal Rules of Evidence?

  20. 23

    Not only is it stacking the deck, but on both sides of the deck there is an particular boss to please, and under whose direction you are subservient in more ways than one. There can be no impartiality as is possible in a true judicial body.

  21. 22

    This is what I’m thinking.

    Be “judge-like” or be a “super” examiner.

    But. Not. Both.

    It’s not right or fair to applicants to play both sides of the “decision” fence to suit yourself.

  22. 21

    Reminds me of the color choices of the cars:

    Any customer can have a car painted any color that he wants so long as it is black.

  23. 20

    What are the implications here of the duty to disclose to the USPTO information material to patentability, as it relates to presenting new evidence to the district court?

  24. 19

    The better rationale is that, absent new facts, the district court must use the same record as the CAFC. Beside making the district court proceedings redundant, this would provide applicants with three bites at the appellate apple: the BPAI, the district court and the Federal Circuit. Doesn’t seem to make much sense to have two alternative appellate review proceedings that are equivalent (and where one permits you to appeal to the other).

  25. 18

    Big D – yous gotsta do somethin about your software – my earlier comment vanished into the aether, and now I gets a double post.

  26. 17

    bja, teh jokes on you.

    You be trying to imply estoppel on the Big D comment – not on what the law actually says. Ya shoulda noticed my comment below which posted before yours and gleaned the wisdom O my observation, rather than be the chuckle provider.

  27. 16

    bja, teh jokes on you (implied whozwhat?).

    You be trying to imply estoppel from the Big D comment – not on what the law actually says (or dont say). Ya shoulda noticed my comment below which posted before yours and gleaned the wisdom O my observation, rather than be the chuckle provider. The case be that there case that be in front of the court. Not to be all federal about it, but the En Banc simply got it right, and only a dweeb with a twisted agenda misreads the statute and the governing rules O Federal Evidence and Civil Procedure (acadamic dweebs inherently have twisted agendas).

    If my main man were here (bow your heads), heda told you that the statutes apply to how courts act too (ala 35 USC 283).

  28. 15

    This pre-supposes that the BPAI is an actual appellate body, which it really is not. It is a hybrid body that choose to re-do/restate the facts in any way that it likes, including making new grounds of rejection. It doesn’t really follow the APA.

    Oftentimes, it acts more as an advocate than a dispassionate appellate body.

    It’s the having it both ways that makes a mess of the whole thing.

    If they want deference, that’s fine, as long as they accept that they really do have to follow the APA and all of the other baggage associated with Zurko.

    If they want to be superexaminers, that’s fine.

    Just pick one.

  29. 14

    I guess it is fair to presume you know something about this and are likely a CA resident or were in the past. I have to say, I like prop 13. Unfortunately, they didn’t bother themselves to make a prop to limit the government from spending more than it took in. Shouldn’t have one without the other.

  30. 13

    1

    but I see no reason to open the doors to it.

    In any event, can someone tell me the reasoning behind allowing applicants to claim foreign priority to overcome a reference that has a foreign priority (many times in the same country as the other person) date which precedes that date? Why in the heck would we allow that nonsense? Or is it just a legislative oversight?

  31. 12

    Paul and Dennis, what I was questioning is the point that the court must decide the same way as the Board if the facts are unchanged (or substantially unchanged). I think this thought cannot be reconciled with the words of the statute that entitle the court to decide the issued based on the facts — seemingly regardless of the prior decision of the Board. If the court is bound in any way by the prior legal determinations of the Board, the whole appeal to the district court seems a waste of judicial time and expertise.

    Once this basic issue is established, the I think it is manifest that the court can receive new testimony. The issue might be decided the other way if the court were in any way bound by the legal conclusions of the Board.

  32. 10

    “could have been introduced”

    Implied estoppel is the key here. You should have presented the evidence back at the PTO if you were able.

  33. 9

    “But it does encourage applicants to game the system which is never good.”

    It’s highly doubtful that applicants are witholding evidence during prosecution just to have the opportunity to present it during a section 145 action.

    How many section 145 actions have there been in the past 10 years? 20 years?

  34. 8

    Dennis, re “..the Federal Circuit reversed its prior precedent and held that a patent applicant is allowed to introduce new evidence in a Section 145 civil action filed to challenge a USPTO refusal to grant patent rights and that the issues implicated by the new facts must be considered de novo.”
    ?
    I thought it was the other way around, that this was the law, up until the recent Fed. Cir. panel decision below that was reversed by this en banc decision? E.g., Winner International Royalty Corp. v. Ching-Rong Wang 98-1553 (Jan. 27, 2000 Fed. Cir.),* and in particular Fregeau v. Mossinghoff, 776 F2d 1034, 227 USPQ 848 (Fed. Cir. 1985), which seems to be the earliest CAFC case on “de novo” review by the D.C. [and also has a discussion of 35 USC 145 vs. 146], and thus should have been “controlling” stare decisis case law?
    *Dicta, but note these other cites: “In the context of a section 145 action, in which the Board has conducted an ex parte proceeding, we have noted that the admission of live testimony at trial requires the factfinder to make its own findings. See Burlington Indus., Inc. v. Quigg, 822 F.2d 1581, 1584, 3 USPQ2d 1436, 1439 (Fed. Cir. 1987). The rationale is that the applicant was at least partly unable to present the live testimony in the ex parte proceeding before the Board. See id. In Burlington Industries, the Commissioner argued that “the district court cannot reach a different conclusion on the same evidence that was before the PTO.” Id. (emphasis added). We rejected the Commissioner’s argument. Although the import of the evidence before the Board and the district court might be the same in many or all ways, the form in which it is presented is fundamentally different. As we noted in Burlington Industries:
    In its evaluation of the evidence on which this conclusion was based, the district court had a powerful advantage over the patent examiner and the Board, an advantage characteristic of section 145 appeals, in that the court heard and saw witnesses, testifying under examination and cross-examination, and had the benefit of extensive discussion and argument. Id. at 1582, 3 USPQ2d at 1437-38 (emphasis added). The fact that the district court heard live testimony, gave more weight to some witnesses than to others, and came to a different conclusion than that reached by the Board, was not improper. This trial before the district court partook of the quality that is available only with the examination and cross-examination of live witnesses. . . . If the evidence adduced before the district court led to a decision different from that reached by the PTO, that is not contrary to the legislative purpose of section 145 de novo review. Indeed, it is in fulfillment of that purpose. Id. at 1584, 3 USPQ2d at 1439 (emphasis added). Thus, after a “full trial of the issues” the district court was free to come to its own “independent conclusion,” contrary to the argument by the Commissioner. Id.; see also Gould, 822 F.2d at 1079, 3 USPQ2d at 1305…”

  35. 7

    ” as specified in any of his claims involved in the decision of the Board of Patent Appeals and Interferences, as the facts in the case may appear”

    That little portion always seemed rather clear to me that the court must use the facts in the case before the board. That is, that it specifically excludes entering new evidence. The Fed just seems to gloss right over what seems to me to be the blatant and preimminent interpretation.

    I don’t think anyone has a problem with them entering some evidence if it absolutely could not have been entered before just so everyone doesn’t have to go back to square 0, but there appears to be no statutory grounds for such allowance of new evidence.

    On the other hand, allowing the CAFC’s interpretation to stand isn’t the worse thing in the whole entire world. But it does encourage applicants to game the system which is never good.

    The problem, as with many of these fedeeral statutes, is that it was written by a re tard who just can’t help but use run on sentences with many comma’ed off portions that are all but indefinite in regards to what they refer to. Use commas responsibly.

  36. 6

    counterpoint:

    The statute does not explicitly indicate that the court must not allow new evidence that could have been introduced before the lower tribunal.

    The phrase “as the facts in the case may appear” seems ta allow both the Big D point and the counterpoint listed here.

    The counterpoint bein that the facts in the (federal) case are those governed only by limitations on the admissibility of evidence imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure, as held by the En Banc CAFC.

    Just an observation.

  37. 5

    The statute says:

    “The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims involved in the decision of the Board of Patent Appeals and Interferences, as the facts in the case may appear, and such adjudication shall authorize the Director to issue such patent on compliance with the requirements of law.”

    The statute does not explicitly indicate that the court must allow new evidence that could have been introduced before the lower tribunal.

  38. 2

    I don’t understand just how one can reconcile the government’s position with the statute. Doesn’t it say that the court can decide the case on the facts? How is this consistent with giving deference to the Board’s conclusions of law?

  39. 1

    “Hyatt took the case to the Supreme Court and eventually won a $388 million judgment against the state of California for invasion of privacy.”

    Lulz Hyatt is personally responsible for CA’s bankruptcy.

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