by John M. Golden, Professor in Law at the University of Texas School of Law
As noted in a Patently-O post of September 18, in Facebook, Inc. v. Windy City Innovations, LLC, Nos. 2018-1400 et al. (Fed. Cir. Aug. 12, 2019), the U.S. Court of Appeals for the Federal Circuit requested supplemental briefing on the extent to which it should give deference to the precedential interpretation of a Patent Act joinder provision that the Precedential Opinion Panel (“POP”) of the Patent Trial and Appeal Board (PTAB) adopted in Proppant Express Investments, LLC v. Oren Technologies, LLC, IPR2018-00914 (P.T.A.B. Mar. 13, 2019). As explained in the earlier post, in Proppant, the POP interpreted the language of 35 U.S.C. § 315(c), which permits the Patent and Trademark Office (PTO) Director, in instituting an inter partes review (IPR), to “join as a party to that inter partes review any person who properly files a petition under section 311 that the Director … determines warrants the institution of an inter partes review under section 314.” This post is not concerned with the substance of the POP’s interpretation but instead the different ways in which the Federal Circuit might resolve or avoid the deference question, which could determine more generally (i.e., in cases involving interpretation of other provisions of the Patent Act) the extent to which the Federal Circuit gives deference to statutory interpretations of the POP. The deference question is relatively easily stated, but arguments about it can become intricate.
For starters, there are two basic forms of deference that the Federal Circuit might apply to the POP’s precedential interpretation. First, the court may determine that the Chevron deference framework applies. See generally Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under United States v. Mead Corp., 533 U.S. 218 (2001), the Chevron deference framework applies if two threshold conditions are met: (a) Congress delegated to an agency relevant authority “to make rules carrying the force of law” in relation to a statutory scheme and (b) “the agency interpretation claiming deference was promulgated in the exercise of that authority.” Id. at 226–27; see also Gonzales v. Oregon, 546 U.S. 243, 258–59 (2006). If the Chevron deference framework applies, the court is to defer to the agency’s interpretation of the statute if two further conditions are met: (1) the statute is ambiguous after all the traditional tools for statutory interpretation are brought to bear and (2) the agency’s interpretation is reasonable. See, e.g., Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2142 (2016); Horvath v. United States, 896 F.3d 1317, 1321 (Fed. Cir. 2018). The court’s assessment of whether the statute is ambiguous is often described as Chevron Step One analysis, and the court’s assessment of whether the agency’s interpretation is reasonable in light of any found ambiguity is often described as Chevron Step Two analysis. Finally, even if the court determines that the threshold conditions for the Chevron deference framework—sometimes characterized collectively as “Chevron Step Zero,” see, e.g., Cass R. Sunstein, Chevron Step Zero, 92 Va. L. Rev. 187, 191 (2006)—are not satisfied, the court should consider giving substantial, albeit presumably less decisive, weight to the agency’s statutory interpretation in accordance with Skidmore v. Swift & Co., 323 U.S. 134 (1944); see also Mead, 533 U.S. at 234 (“Chevron did nothing to eliminate Skidmore’s holding that an agency’s interpretation may merit some deference whatever its form ….”).
In light of the Chevron and Skidmore frameworks, the Federal Circuit could resolve its deference question in any of various ways:
- The court could duck the question of what deference framework applies by determining that its holding on statutory interpretation will be the same regardless of any potentially applicable deference or lack thereof. For example, the court could conclude that, even without giving any weight to the POP’s statutory interpretation, the Court agrees with and therefore upholds that interpretation. Alternatively, the court could duck the deference-framework question by (a) assuming that the Chevron framework applies (i.e., that Chevron Step Zero is fully satisfied) but (b) determining that the POP’s interpretation nonetheless must be overridden because that interpretation is contrary to unambiguous statutory language (failure at Chevron Step One) or otherwise unreasonable (failure at Chevron Step Two). Because Skidmore deference is generally understood to be weaker than Chevron deference, the court could conclude that the POP’s interpretation likewise fails any potentially applicable deference under Skidmore. Such a decision would resolve the statutory-interpretation question at issue but would leave unanswered questions about the degree of deference, if any, that the POP’s interpretations of the Patent Act might more generally warrant.
- The court could determine that the POP’s precedential statutory interpretation satisfies Chevron Step Zero and thus that the Chevron deference framework applies to the court’s review. The United States argues for such a ruling in its amicus curiae brief and further contends that the POP’s statutory interpretation should be upheld under Chevron because it “is not foreclosed by the text and is ‘reasonable in light of the text, nature, and purposes of the statute’ ” Brief for the United States as Amicus Curiae 11–12 [hereinafter “U.S. Brief”] (quoting Cuozzo, 136 S. Ct. at 2142). Even after determining that the Chevron deference framework applies, however, the Federal Circuit could rule against the POP’s statutory interpretation if the court finds this interpretation to be clearly contrary to the statutory language or an unreasonable reading of ambiguous statutory language (i.e., not within a set of alternative interpretations that the ambiguous language reasonably permits). Moreover, the Federal Circuit might limit a holding that the POP’s precedential statutory interpretations may satisfy Chevron Step Zero to apply only for interpretations resolving questions that fall within the ambit of express statutory grants of PTO rulemaking authority. See 35 U.S.C. § 316(a)(4) (“The Director shall prescribe regulations . . . establishing and governing inter partes review. . .”); see also id. §§ 2(b)(2)(A) (“The Office … may establish regulations, not inconsistent with law, which … shall govern the conduct of proceedings in the Office”). By disclaiming an effort to claim Chevron deference for “the POP’s interpretations of patentability provisions of the Patent Act,” U.S. Brief, supra, at 5 n.2, the Government appears to seek only such a limited holding on Chevron Step Zero.
- The court could determine that the POP’s precedential statutory interpretation does not satisfy Chevron Step Zero. The court would then need to determine how much weight to give the POP’s interpretation in accordance with Skidmore as well as what interpretation of the statute ultimately controls. See Mead, 533 U.S. at 234 (“Chevron did nothing to eliminate Skidmore’s holding that an agency’s interpretation may merit some deference whatever its form ….”); Merck & Co. v. Kessler, 80 F.3d 1543, 1550 (Fed. Cir. 1996). The significance of Skidmore deference is sometimes questioned, but Yoav Dotan discusses in a forthcoming article how Skidmore deference may be viewed as a form of deference that is distinct from that of Chevron but still meaningful, Yoav Dotan, Two Concepts of Deference, 71 Admin. L. Rev. (forthcoming 2020); John M. Golden, The USPTO’s Soft Power: Who Needs Chevron Deference?, 66 SMU L. Rev. 541, 549 (2013).
The Federal Circuit’s rulings in Facebook can have significance extending substantially beyond its particular joinder question if the court goes down either routes (2) or (3)—i.e., if the court resolves the question of whether, at least under circumstances like those in Proppant, the POP’s statutory interpretation satisfies Chevron Step Zero. Various Federal Circuit judges opined on related questions in Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc). For example, Judge Moore wrote an opinion, joined by Judges Newman and O’Malley, that explicitly contended that, “where Congress has delegated authority to ‘prescribe regulations,’ ” an agency must generally engage in “regulation” in order to exercise Chevron-level interpretive authority. Id. at 1330–31 (Moore, J.); see also id. at 1316–22 (O’Malley, J.) (indicating a similar view). By “regulation,” Judge Moore apparently meant a rulemaking process conducted separately from adjudication, rather than the issuance of precedential holdings in adjudication. See id. at 1331 (Moore, J.).
The United States’ brief rejects the notion that a specific statutory authorization to issue “regulations” implicitly precludes an agency from “issu[ing] binding [statutory] interpretations through other mechanisms Congress also provided”—in this case, PTAB adjudication. U.S. Brief, supra, at 8. In support of this position, the Government invokes a principle that agencies generally have a choice of policymaking mode—a principle with long-standing resonance in U.S. administrative law, see, e.g., Peter L. Strauss et al., Gellhorn and Byse’s Administrative Law: Cases and Comments 385 (11th ed. 2011). U.S. Brief, supra, at 8–11 & n.4. Alternatively, the United States’ brief might have sought to distinguish Judge Moore’s position in Aqua Products on the narrower ground that this position primarily contemplated substantive “standards,” not “rules on procedure,” which the opinion explicitly noted “are exempt from the notice-and-comment rulemaking requirements of § 553,” 872 F.3d at 1331–32 & n.4. Perhaps the United States declined to rely on this distinction because the Government wishes to avoid having deference questions turn on sometimes tricky classifications of substance and procedure. Joinder rules, for example, might on their face seem fundamentally procedural, cf. Luxliner P.L. Export, Co. v. RDI/Luxliner, Inc., 13 F.3d 69, 71–72 (3d Cir. 1993), but there might be an argument that the IPR joinder provision’s relationship with the statutory time bar for IPR petitions under 35 U.S.C. § 315(b) muddles its status, cf. Joseph v. Athanasopoulos, 648 F.3d 58, 65 (2d Cir. 2011) (quoting the New York Court of Appeals’ statement that “the impact of the Statute of Limitations, though often denominated as procedural, in a practical sense may also be said to be substantive,” Smith v. Russell Sage Coll., 429 N.E.2d 746, 750 (N.Y. 1981)).
In any event, given the background principle invoked by the United States, I tend to agree with Judge Hughes’ opinion in Aqua Products that Judge Moore’s opinion relied too much on the Patent Act’s specific use of the word “regulations” in expressly providing for PTO rulemaking. See Aqua Products, 872 F.3d at 1364–67 (Hughes, J., dissenting). The amicus curiae brief from David Boundy shows a way that Judge Moore’s position might be fortified, at least in principle, by reference to such language’s broader statutory context. Although the Patent Act gives the Director power to act through rulemaking, the Patent Act generally assigns adjudication of proceedings such as IPRs to the PTAB. See 35 U.S.C. § 6(b)(4); see also id. § 316(c). Moreover, although the PTO Director can sit as a member of a multi-member PTAB panel such as the POP, the PTAB’s final decisions in such proceedings are not subject to reversal by the Director acting alone, see John M. Golden, Working Without Chevron: The PTO as Prime Mover, 65 Duke L.J. 1657, 1680 (2016), and the PTAB therefore appears to be something other than “a mere alter ego” of the Director, John M. Golden, PTO Panel Stacking: Unblessed by the Federal Circuit and Likely Unlawful, 104 Iowa L. Rev. 2447, 2454 (2019); see also id. at 2456. Consistent with this apparent separation between the Director and the PTAB, Boundy’s brief suggests that the PTAB should be treated as an adjudicative entity that does not share in any Chevron-level interpretive authority that Congress delegated to the Director. Brief of Amicus Curiae David E. Boundy, in Support of Neither Party 1–3 [hereinafter “Boundy Brief”]; cf. Martin v. Occupational Safety & Health Rev. Comm’n, 499 U.S. 144, 154 (1991) (stating that, with respect to “traditional agencies—that is, agencies possessing a unitary structure—the Court had “concluded that agency adjudication is a generally permissible mode of lawmaking and policymaking only because the unitary agencies in question also had been delegated the power to make law and policy through rulemaking” (emphasis in original)).
In the context of Facebook, however, there appears to be a problem for Boundy’s invocation of a lack of “consolidated rulemaking and adjudicatory authority,” Boundy Brief, supra, at 5. Specifically, in contrast to the generality of decisions in an IPR that occur after institution, the Patent Act expressly assigns to the Director the authority to decide on IPR institution and joinder. See 35 U.S.C. §§ 314–15. In combination with the Director’s express power to issue regulations, this original assignment to the Director of case-by-case determination of institution and joinder issues indicates that, from the statutory standpoint, there is “consolidated rulemaking and adjudicatory authority” over these issues. In deciding institution and joinder issues, the PTAB’s POP apparently exercises authority delegated downward to it by the Director, rather than laterally vested in the PTAB by Congress directly. Thus, in deciding questions of institution and joinder, the PTAB generally and the POP specifically might be viewed as acting in a manner relatively analogous to that of an adjudicatory body within a more traditionally unitary agency structure—for example, the Board of Immigration Appeals (BIA), an adjudicative body that decides matters based on authority delegated to it by the Attorney General and whose decisions, the Supreme Court has held, may merit Chevron deference. See Golden, Working Without Chevron, supra, at 1687–89. In short, even if the Federal Circuit is impressed by the consolidated-authority point, it might still find that the statutory interpretation in Proppant satisfies Chevron Step Zero but at the same time limit the significance of this finding by holding only that the POP’s precedential statutory interpretations are eligible for Chevron deference when those interpretations involve an issue with respect to which the Patent Act has vested both relevant rulemaking and relevant case-by-case decision-making authority in the Director—perhaps, in some circumstances, through an express grant of power to “[t]he Office,” 35 U.S.C. § 2(b)(2), whose “powers and duties” are in turn “vested in” the Director, id. § 3(a)(1).
The intricacies of the above arguments suggest that the Federal Circuit could do the patent community a substantial service by engaging with the question of what deference framework applies to a POP statutory interpretation such as that in Proppant—i.e., by pursuing path (2) or (3) in the three bullets above. Of course, if the Federal Circuit does answer such a question of general significance, that could increase Supreme Court interest in reviewing the decision. Several Justices have already signaled interest in reconsidering the reach and validity of the Chevron deference framework. This past June, five Justices went out of their way to indicate a belief that the framework’s validity is an open question. See Kisor v. Wilkie, 139 S. Ct. 2400, 2425 (2019) (Roberts, C.J., concurring in part); id. at 2446 n.114 (Gorsuch, J., concurring in the judgment); id. at 2449 (Kavanaugh, J., concurring in the judgment). Could Facebook be yet another patent case taken up by the Supreme Court?
BTW, if, like David Boundy, you wonder why the PTO historically did not pay more attention to principles of Administrative Law from the APA Statute and decisions as to other agencies, remember that until forced to by the Sup. Ct. in Dickinson v. Zurko (1999), that even the Federal Circuit did not think that it had to use the APA’s “substantial evidence” standard when reviewing PTO factfindings.
That’s an interesting tidbit.
Another tidbit may be that the Office grew bolder in its attempts to enforce its views outside of the proper admin law channels.
A very nice legal analysis of the pre-signaled PTAB POP decision’s Chevron or other deference issues in the Fed. Cir. “Facebook, Inc. v. Windy City Innovations” requesting supplemental briefing.
Re: “whether the agency’s interpretation is reasonable in light of any found ambiguity.” Must the statutory provision in question really always be ambiguous? What if its words are not at all ambiguous, but it is literally applied to a fact situation that would result in an administrative decision contrary to Constitutional or other fundamental legal principles, or inconsistent with Congressional intent that is clear from other provisions of the same agency enabling statute? Isn’t that judicial “wiggle room” clear from Cuozzo, but to what extent?
BTW, as for the PTO generating mandatory proceedural rules without any rulemaking, that was done years ago on a massive scale for interferences, without any Board decision or APA authorization, but apparently never legally challenged.
BTW, as for the PTO generating mandatory proceedural rules without any rulemaking, that was done years ago on a massive scale for interferences, without any Board decision or APA authorization, but apparently never legally challenged.
This is really the most important point at issue here. When I read David Boundy’s work in this area, I come away convinced that he has the PTO dead to rights. The APA says what it says (or, at least the APA says that which the SCotUS says that the APA says), and the PTO’s current operations do not comply with the statute, as interpreted by the PTO’s review courts.
Still and all, the PTO has been operating in this (evidently) non-compliant manner for decades. No one seems over-much fussed about the results. Does this mean that the APA (and the Court’s interpretation thereof) are too fussy for practical application? Or does it mean that we should be scandalized by the PTO and we are just numbed by overlong exposure to administrative impropriety?
I favor the latter (we should be more up in arms), but I do not see much agitation in the field on this subject.
Greg, there is a significant difference here, in that this is an Expanded Board decision on a subject of statutory delegation [to some extent], undoubtedly with PTO Director approval, and clearly validly binding on the Board unless and until overruled by the Fed. Cir., which it can be if it was case-dispositive.
Dear Paul —
I don’t understand the relevance of your question. Where does the APA mention “Expanded Board” as a substitute mechanism for rulemaking? (Read my brief, that Dennis posted earlier this week, and some of the articles in the “Table of Authorities” to that brief.)
As I noted in my five-minutes-ago reply to you, there is some area in which the PTAB can properly exercise authority to interpret. My gripe is the way the PTAB ignores that there’s any boundary at all, let alone attempt to confine itself within that boundary.
Your post also makes an important point — an agency pronouncement can be binding on agency staff (though only when no member of the public is adversely affected, which typically covers only issues of ex parte procedural adjudication), while totally nugatory as to the public. See my Part 3 article, link to ssrn.com , there’s a long footnote on Accardi v. Shaughnessy
David
David, I was drawing distinctions between this case and what the PTO did in interferences, not asserting that those are necessarily winning Chevron arguments.
BTW David, if my recollection is correct, the big fat interference procedural rules package rationale was that since it was an inter partes proceeding using other FRCP rules that they should be entitled to have “local rules” like D.C. courts do. [I assume that would give you conniptions?]
Paul,
Are you suggesting that point blank (with no further considerations) that adjudicatory elements within ANY Executive Branch Administrative Agency should be operate at the same level as Judicial Branch elements?
How would you NOT have conniptions with such a flagrant violation of separation of powers and disregard for administrative law?
Modus Operandi:
Step 1: Accuse commentator of something they never actually said.
Step 2: Attack Step 1.
Except for the fact that I was asking a clarifying question…
My, you are quick to jump in the weeds.
“Modus Operandi:”
PFM, you have “engaged” the Clown Prince. What an effing waste of time. You know this.
But, regarding the “new” interference rules, wasn’t it nice that all interferences were resolved inside of 2 years? Instead of 14 or so?
PFM, you have “engaged” the Clown Prince. What an effing waste of time. You know this.
Indeed. Well nigh everyone knows that this is a waste of time. There is a very simple solution to that particular problem. I highly recommend ignoring.
“PFM, you have “engaged” the Clown Prince. What an effing waste of time. You know this.”
LOL – coming from Shifty who has done nothing but exemplify the very Accuse Others of being the “Clown Prince,” and who has “engaged” (albeit in NO meaningful manner) on a post now WAY under the fold, in not one but two threads LONG past their numbered reply limits,
THIS
IS
HILARIOUS
There is an underlying distinction that appears at the heart of Paul’s question here.
And that has to do with the relative lack of impact of the affected sections for which the Office has “applied” its “Rule Making” schemes.
So tell us all Shifty, since you are an examiner and may be able to plumb the tidbits of Office information, what is the percentage of all actions associated with the Office that are affected with interference proceedings?
Feel free to normalize any number with a cogent normalization factor to show the relative frequency of effect.
“I highly recommend ignoring.”
Also hilarious — given that Greg has done more of late NOT ignoring in his nigh constant sniping from the sidelines.
Here’s a hint for you, Mr. “I Use My Real Name,” you are only NOT ENGAGING in your current “tactics,” rather than “ignoring.”
When nearly every third or fourth comment of yours is SO OBVIOUSLY geared to me, it is beyond clear that you cannot ignore me — even as you have taken the path of the inte11ectual coward and have refused to engage.
You should come up with a better recommendation.
Absolutely Morse. The speed and disposition of interferences was greatly improved by legally-brilliant SAPJ McKelvey’s extensive sua sponte proceedural “rules.” Especially, I think, by getting the assigned APJ to become more like an aggressive D.C. magistrate, and by scaring away do-it-yourself interference amateurs.
But the real solution was getting rid of all new interferences altogether, which I lived long enough to finally see accomplished. [Note the absence of grieving mourners for the gradual death of interference litigation, and the complaints about the “Crisper” interferences messes still left.] For all the crocodile tears about “stolen inventions,” for which the AIA provided “Derrivation” proceedings, not a single one has been proven.
“Note the absence of grieving mourners”
Having fun with that strawman, Paul?
As has been noted, the section of law dealing with interferences simply does not have the impact that other sections have (so the “view” of throngs screaming ‘injustice‘ is more than a little disingenuous).
I notice as well that you would rather sulk than actually clarify.
It is not difficult to see why.
“Especially, I think, by getting the assigned APJ to become more like an aggressive D.C. magistrate, and by scaring away do-it-yourself interference amateurs.”
That is true, but that’s only a small part of it. Under the “new” rules, most interferences went away at the preliminary motion stage. But there were also the more sophisticated (I’m not naming names) counsel who were trying to use interferences as post-grant proceedings. Fred got the interferences under control because, if people wanted to have post-grant proceedings, you do post-grant proceedings. A little talking to Congress, and now, we have the post-grant proceedings. But also, don’t forget, the “new” interference rules went through notice and comment rulemaking. The “local rules” were actually to help the attorneys by setting forth standard expectations because, otherwise, an individual Examiner-in-Chief had the discretion to make his/her own “local rules” during trial.
Thanks for all the hard work as always.
I think the point Prof. Golden raised and that Paul was highlighting is one that I have been thinking about as well, specifically whether some claim to Chevron deference can potentially be made even under the reasoning of Martin v. Occupational Safety & Health Review Comm’n, 499 U.S. 144, 154 (1991) because the decision here was issued “on behalf of the Director,” 37 CFR § 42.4, who has both (i) the rule making power to “prescribe regulations … establishing and governing inter partes review … and the relationship of such review to other proceedings,” 35 U.S.C. § 316, and (ii) the adjudicatory power to “determine whether to institute an inter partes review,” 35 U.S.C. § 314, and to “join as a party to that inter partes review any person who properly files a petition … that the Director… determines warrants the institution of an inter partes review.” 35 U.S.C. § 315(c).
Regardless of the answer to this question, it seems like any broader claim for deference becomes problematic when considering situations where the Board, rather than acting “on behalf of the Director” to exercise the Director’s adjudicatory authority, is exercising its own adjudicatory authority, as it it strains credulity to suggest that Congress intended the Director to utilize his rulemaking power during the Board’s exercise of adjudicatory authority that Congress specifically chose to assign to the Board rather than the Director.
I think that the bottom line “problematic” aspect here is that THIS particular administrative agency does not have unfettered rule making authority, and that even for ANY rule making authority that it MAY have, there are constraints (safeguards) in place that the administrative agency have ignored — even (or perhaps more accurately, especially) after being informed that they may NOT disregard the particularly identified safeguards.
It is more than a bit ironic (to me) as well that Dave has reminded the Office of an ethical responsibility that the attorneys within the Patent Office should be remembering, as it mirrors my own reminders of ethical treatment and holding the judicial branch accountable and NOT treating any section of that branch — even (or perhaps more accurately, especially) the Supreme Court. ALL branches operate under the Constitution, subject to its system of checks and balances, and we as sworn attorneys (per each of our own State attorney oaths) are NOT to place the Supreme Court above the Constitution. IF they err, we have a duty to say so.
“No one seems over-much fussed about the results.”
Did you sleep through Tafas and subsequent Appeals Rules (and current Fee ‘Rules’) eras?
Tafas was about actual [attempted], and substantive, PTO rule-making [limiting the number of continuations] without any statutory basis.
Are you denying the parallels, Paul? What exactly is the point that you are attempting?
Also, you seem to have left out the Appeals Rules attempt as well as the current Fees Rules attempt. Are you also denying the parallels there?
Or are you merely seeing a post by “anon,” and reacting emotionally in a contrary manner?
I see from your response above that the answer is that you are reacting emotionally.
Dear Paul —
Your “facially ambiguous” vs “ambiguous as applied” question is a good one. The Supreme Court took a stab at an answer in Kisor v Wilkie, link to supremecourt.gov There’s a grey zone — by necessity, an agency has some discretion to “interpret” and deal with unexpected situations that aren’t covered by the text of a statute or regulation, but can’t go so far as to promulgate “de facto a new regulation.” The transition zone between is the stuff that good administrative law cases are made of. But of course the PTO never goes anywhere near that transition zone. 🙂
And an agency always has to recognize carveouts by superior law, as you point out–a statute or reg has to be interpreted to be constitutional, and all the rest.
David
There are more than two ways.
For this and other admin law matters, one cannot go wrong with starting with the writings of David Boundy.
Pretend patents and a pretend court.
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