by Dennis Crouch
Hyatt v. USPTO (Fed. Cir. 2018) (Judges HUGHES, Reyna, and Wallach)
This billionaire gets no respect! Gilbert Hyatt is the named invenetor on 70+ US patents and has 400+ pending patent applications “all of which were filed prior to June 8, 1995.” That date is critical because those “pre-GATT” applications will remain in force for 17-years from their issue date (if they ever issue). These applications claim priority back to the early 1970s. For the past 10 years, Hyatt has been trying to get his cases heard by the PTAB – but has been repeatedly foiled by PTO delays and unilateral reopening of prosecution. Here, the Federal Circuit sided with the PTO in Hyatt’s generalized challenge to this practice — finding portions of his his petition time-barred and that the substance of his challenge lacked merit.
The Big Deal for this case for the rest of us: If the PTO has spelled out an improper practice within the MPEP, an APA challenge on procedure or policy must be filed within six years of MPEP publication, if at all. Also, the Court says its fine for the USPTO to reopen prosecution rather than hearing the appeal.
The USPTO has been quite frustrated with Mr. Hyatt. It turns out though that the frustration – lets call it that – is mutual. Under Dir. Kappos, the PTO formed a special HYATT Unit that basically did nothing — refusing to examine his applications or hear pending PTAB appeals. In Hyatt v. USPTO, 797 F.3d 1374 (Fed. Cir. 2015), the Federal Circuit sided with the PTO on the special “requirements” the PTO had placed on HYATT applications that forced him to limit each patent family to 600 claims (absent a showing that more claims were necessary) and to identify the earliest priority date for each claim (with evidence). The PTO then re-opened prosecution (rather than hearing the appeals he had filed). And, the E.D.Va. district court sided with the PTO that re-opening prosecution was appropriate. Hyatt v. USPTO, 146 F. Supp. 3d 771 (E.D. Va. 2015).
This case arose from a “petition for rulemaking” filed by Mr. Hyatt under 5 U.S.C. 553(e). That provision specifically provides that “(e) Each agency shall give an interested person the right to petition for the issuance, amendment, or repeal of a rule.” Hyatt’s petition here was a request to promulgate a rule cancelling MPEP § 1207.04 (Reopening of Prosecution After Appeal). In relation to Hyatt’s case, the manual provides that an examiner can “reopen prosecution” with a new ground of rejection rather than continue an appeal:
The examiner may, with approval from the supervisory patent examiner, reopen prosecution to enter a new ground of rejection in response to appellant’s brief.
The USPTO Denied Hyatt’s petition and he sued in Nevada District Court — arguing that the PTO procedures are “arbitrary and capricious, in excess of statutory authority, and without observance of procedure required by the law.” Rather than deciding the case, however, the district court dismissed for lack of jurisdiction — and noted that they were “likely precluded” by prior lawsuits brought by Hyatt.
On appeal, the Federal Circuit first rejected the district court analysis — holding that “the district court has subject mater jurisdiction” over Mr. Hyatt’s APA claim.* Although E.D. Va. has exclusive jurisdiction to hear civil actions under 35 U.S.C. 145 that ask for review of PTAB decisions, that exclusive jurisdiction “does not displace the district court’s jurisdiction over APA challenges to the PTO’s denial of a petition for rulemaking.”
Claim Preclusion The Federal Circuit also rejected the PTO’s claim that Hyatt is precluded bringing his APA claim under general principles of claim preclusion — Holding that his prior lawsuit against the agency related to a different set of facts than the present lawsuit. This setup is pretty interesting. In a 2013 lawsuit, Hyatt challenged the USPTO’s refusal to hear appeals in 80 of his cases. He lost that lawsuit (and did not appeal). In the present lawsuit, he is seemingly looking for a similar outcome by challenging the PTO procedure, but is not actually asking for any relief regarding those 80 cases. The Federal Circuit distinguishes these situations:
The PTO’s argument that the two sets of claims arise from the same set of transactional facts relies on a misunderstanding of Mr. Hyatt’s claims. The PTO frames Mr. Hyatt’s suit as a collateral attack on the agency’s reopening prosecution for the 80 applications at issue in his unreasonable delay case. But Mr. Hyatt’s present suit does not seek any relief related to those 80 applications. His claims challenge the PTO’s denial of his petition for rulemaking and his complaint only seeks forward-looking relief such as “[a] declaration that MPEP § 1207.04 is unlawful,” “[a] declaration that the PTO . . . unlawfully denied the Director Petition,” and “[a]n order enjoining the PTO . . . from enforcing MPEP § 1207.04.” The requested relief makes clear that Mr. Hyatt is not collaterally attacking the PTO’s prior prosecution reopenings.
In a footnote, the court remarks that its no-preculsion decision would be different if the case requested any specific action regarding appeals of those 80 pending cases:
Because Mr. Hyatt undoubtedly could have challenged the validity of MPEP § 1207.04 in his unreasonable delay suit, claim preclusion would bar him from doing so in any future case arising from the PTO’s reopening of prosecution for the 80 applications at issue in his prior case.
. . . . .
Time Barred by MPEP Implementation: The winner for the PTO is its third argument — that Mr. Hyatt’s claims are time-barred. The APA does not have a specific statute of limitations, but 28 U.S.C. § 2401(a) provides a general six year statute of limitations for cases against the US Government: “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.”
The question here is when did Mr. Hyatt’s “right of action first accrue.” In the appeal, the Federal Circuit ruled that Hyatt could have raised a challenge as early as 2005 when the MPEP provision was adopted. Although it was amended in 2014, that amendment did not “substantively alter” the provision. The oddity of this case though is that the MPEP is not a “rule” adopted through ordinary notice-and-comment. Still, the Federal Circuit held that the 10 year delay killed the deal.
Note here that the Federal Circuit ruled that some of the challenge are seen as “procedural . . . under the APA”: e.g., that adopting the MPEP provisions without notice-and-comment. Some of the challenges were also “policy challenges”: e.g., that the MPEP provision conflicts with an already promulgated rule. “This challenge is not ‘substantive’ because an agency can violate its own regulations while remaining within its statutory and constitutional authority.” According to the court, the statute of limitations of these procedural and policy-based challenges started to run as soon as the MPEP was published.
On the other hand, Hyatt’s argument that the MPEP violates 35 U.S.C. § 6(b)(1) is a substantive APA challenge since it argues that agency rule/practice violates a statute or constitutional duty. Here 6(b)(1) states that the PTAB has the “duty. . . . on written appeal of an applicant, review adverse decisions of examiners upon applications for patents pursuant to section 134(a).” Here, the court ruled that the statute of limitations for such a substantive challenge only begins ticking once the rule is adversely applied to the challenger. “The PTO denied Mr. Hyatt’s petition for rulemaking in 2015, which qualifies as an adverse application of MPEP § 1207.04 against him.” As such, that statute of limitations has not run.
The court then looked particularly at Section 6(b)(1) — and concluded that “the text
does not require the PTAB to reach the merits of every appeal that is filed. . . . ” Here, the court noted that the PTO is able to impose conditions on the process such as time limits for filing, and content restrictions. This condition (that the examiner not reopen prosecution” is simply just “another condition that must be satisfied before an
appeal reaches the Board.”
Mr. Hyatt expresses concern that examiners could use repeated prosecution reopenings to prevent the PTAB from ever reviewing application rejections. But the prospect that prosecution reopenings after the filing of an appeal brief might be used abusively cannot override the plain meaning of § 6(b)(1). . . . There is no evidence in the record that, in the wake of that decision, PTO examiners have repeatedly reopened prosecution of Mr. Hyatt’s applications for the purpose of further delaying PTAB review.
On remand, the district court needs to withdraw its original dismissal for lack-of-jurisdiction and re-enter judgment in favor of the PTO on the substance.
[Note – Lots more, but I have to run to teach my class…]