Guest Post by Emil J. Ali and David E. Boundy. Emil J. Ali is a partner at Carr Butterfield, LLC, and David Boundy is a partner at Cambridge Technology Law. More detail about the authors is provided at the end of the post.
On October 9, 2019, the White House issued two executive orders, Promoting the Rule of Law Through Improved Agency Guidance Documents, (E.O. 13891), reprinted at 84 Fed. Reg. 55235 (Oct. 15, 2019), and Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication (E.O. 13892), reprinted at 84 Fed. Reg. 55239 (Oct. 15, 2019). Both Executive Orders are generally directed to requiring federal agencies to “act transparently and fairly with respect to all affected parties … when engaged in civil administrative enforcement or adjudication.” E.O. 13892 goes on to explain that individuals should not be subject to enforcement actions without “prior public notice of both the enforcing agency’s jurisdiction over particular conduct and the legal standards applicable to that conduct.”
Executive Orders 13891 and 13892—in General
For the most part, Executive Orders 13891 and 13892 are simple reminders and restatements of long-standing requirements of the Administrative Procedure Act (APA). For example, E.O. 13891 § 1 and E.O. 13892 § 3 remind agencies that they may not enforce “rules” against the public unless those rules are promulgated as “regulations,” in full compliance with the APA and similar laws. E.O. 13892 § 3 and § 4 remind agencies that the APA allows agencies to use sub-regulatory guidance documents to “articulate the agency’s understanding” of other law, or announce tentative positions, but may not apply those soft-edged understandings as if they were hard-edged enforcement standards, unless the agency has followed certain procedures required by the APA. E.O. 13891 and 13892 each state that agencies have sometimes inappropriately exerted authority, without following statutorily-required procedures.
In addition, Executive Orders 13891 and 13892 go above statute to add a few additional requirements for fairness and transparency. These above-statutory requirements ask agencies to give notice of all their sub-regulatory guidance documents. Covered guidance documents are defined to include anything to which the agency intends to give prospective effect, that is promulgated without the formality of “regulation” (E.O. 13291 § 2(b)). That class includes the Manual of Patent Examining Procedure, the Patent Trial and Appeal Board’s Trial Practice Guide, and the Manual of Trademark Examining Procedure, and likely includes decisions of the Patent Trial and Appeal Board, Trademark Trial and Appeal Board, and OED on which the agency intends to rely for future effect, including ones the USPTO considers “precedential.” (These decisions are excluded from coverage to the extent they decide past issues in specific cases, E.O. 13892 § 2(c)(iv); they’re covered only to the extent an agency relies on them for future effect.) For example, E.O. 13892 requires agencies to “afford regulated parties the safeguards described in this order, above and beyond those that the courts have interpreted the Due Process Clause of the Fifth Amendment to the Constitution to impose” (emphasis added). E.O. 13892 explains that agencies, like the USPTO, must work to “foster greater private-sector cooperation in enforcement, promote information sharing with the private sector, and establish predictable outcomes for private conduct.”
Among the new requirements added by Executive Orders 13891 and 13892 to promote transparency and predictability are the following:
- Each agency must list all its sub-regulatory guidance documents in one consolidated database of its web site, which must be indexed and searchable. The public should be able to rely on two sources, the Federal Register and one web page, rather than being in a sports bar confronted with twenty screens following twelve simultaneous games. Agencies should avoid relying on guidance documents that pop up without prior notice, or confound the public with fragmented guidance flowing through dozens of web pages, the Official Gazette, the Federal Register, several manuals and guides that are updated without statutorily-required notice, several email lists, web widgets, and the like.
- After the Office of Management and Budget issues further implementing guidance, agencies will have a year to purge guidance documents of invalidly-promulgated requirements. We expect that, by the end of 2020, MPEP §§ 714.14, 802.01, 819, 1207.04, the 2015 rewrite of MPEP § 601.05(a), and Ex parte Quayle, among others, will be reviewed. They must either be repromulgated as regulation with full cost-benefit analysis, or else dropped.
- The orders set additional procedures to promulgate, and provide ongoing periodic review, of various sub-regulatory guidance documents.
The Orders then return to statutory underpinnings, and require agencies to apply them in a consistent and predictable fashion.
“When an agency takes an administrative enforcement action, engages in adjudication, or otherwise makes a determination that has legal consequence for a person, it may apply only standards of conduct that have been publicly stated in a manner that would not cause unfair surprise.” E.O. 13892 § 4. Anyone that has ever phoned the USPTO and been told that words on a page don’t mean what the words look like they mean will be reassured that that is never supposed to happen again after October 9, 2019.
Moreover, the definitions section of E.O. 12892 highlights the breadth of what it means for an Agency’s position to be an “unfair surprise,” as discussed in Christopher v. SmithKline Beecham Corp., 567 U.S. 142 (2012). In Christopher, the Supreme Court noted that agencies are required to provide fair warning regarding the conduct that a regulation requires or prohibits and can’t rely on principles of judicial interpretation to save an unfairly-vague rule or give it enforceable “teeth” ex post. See 567 U.S. at 156. E.O. 13892 explains that agencies “must avoid unfair surprise not only when it imposes penalties but also whenever it adjudges past conduct to have violated the law.” E.O. 13892 appears to be a step in the right direction to help inform practitioners (and others) about the practical implications of otherwise innocuous conduct.
When an agency states a position in sub-regulatory guidance, the law has long recognized that the agency may not stand on that guidance as the last word; rather, the agency must entertain alternative positions. “Interpretive rules do not have the force and effect of law and are not accorded that weight in the adjudicatory process.” Perez v. Mortgage Bankers Ass’n., 135 S.Ct. 1199, 1204 (2015). E.O. 13892 § 6 requires the agency to give an aggrieved person an opportunity to be heard to contest an agency guidance position, and give a written decision that articulates a basis for its action.
Example: the Office of Enrollment and Discipline
The Office of Enrollment and Discipline (OED) may be considered as one example office within the USPTO, which may have to retool to comport its conduct to the new Executive Orders. Simply reading 37 C.F.R. Part 11 and the Final Orders issued by OED does little to instruct practitioners of the practical standards applied by OED, or implications of practitioners’ conduct. While OED appears to attempt to provide helpful guidance to practitioners into Final Orders, much of this guidance is after the USPTO has already disciplined others, who themselves likely were not aware of the ramifications of their own acts, omissions, or mistakes. While OED may inform individual practitioners that their response to a Request for Information is an opportunity under 5 U.S.C. § 558(c) to demonstrate compliance with the USPTO Rules of Professional Conduct, OED often finds that compliance to be “too little too late,” leaving practitioners subject to discipline.
Of course, many practitioners claim they either never heard of OED because they practice only in trademark law, or they were not properly informed that their conduct, including outside of patent and trademark law, implicated OED’s interpretation of the USPTO Rules of Professional Conduct. Many practitioners, on first hearing of an OED position asserted against them in a Request for Information and Evidence (the typical “first knock at the door” from OED), complain of unfair surprise, because the USPTO does not give practitioners fair advance notice of its standards. That is truly a fair criticism, often not understood by OED.
Case in point—OED’s “publication” of decisions does not comport with legal requirements set by the APA, at least if the agency intends to rely on these past decisions as precedent for future decisions. 5 U.S.C. § 552(a)(1) and (2) (and now E.O.s 13891 and 13892) require agencies to publish their adjudicatory decisions in the Federal Register, and/or provide useful indexing on their websites (depending on the level of future reliance the agency intends to apply to its own past decisions). Admittedly, OED does publish its decisions on its website and in the Official Gazette, but only those who know where to look can find them, and they aren’t “indexed” as required by law. Truly, it is troubling to see the “enforcement arm” of the USPTO, which has the power to end careers, exercise discretion without careful observance of statutory due process. Furthermore, many such practitioners are caught in the reciprocal discipline web, as we described in an earlier post on Mr. Ali’s blog, which could result in double disbarment by the USPTO.
Implementation for the USPTO
The USPTO faces a scramble to clean up decades of noncompliance with law. With very few exceptions, Executive Orders 13891 and 13892 are simply restatements of principles that have been in effect for decades, under the Administrative Procedure Act (in effect since 1948), Regulatory Flexibility Act (since a large statutory amendment in 1996), Paperwork Reduction Act (1995), Executive Order 12866 (1992), prior Executive Orders 13258 and 13422 (which were in effect until 2009, and significantly overlap with E.O. 13891), and the Bulletin on Agency Good Guidance Practices, 72 Fed. Reg. 3432 (2007). The USPTO has on occasion expressed overt hostility to Presidential authority. For example, in 2011, one of the USPTO’s senior-most officials plainly refused to implement one of these predecessor orders of the President of the United States.[i] Because of these decades of what appears to be noncompliance, what should be a straightforward addition to various pages of the USPTO’s website may require a ground-up rebuild of the USPTO’s compliance/regulatory function, and review of the entirety of the USPTO’s regulatory corpus.
Long-standing statutory requirements that might now be implemented because of the two Orders, and corrective action we may expect from the USPTO, include:
- Agencies must observe requirements of the Paperwork Reduction Act (E.O. 13892 § 8(b)) and Regulatory Flexibility Act (E.O. 13892 § 10), two statutes of which the USPTO has been particularly dismissive. For example, the Regulatory Flexibility Act requires agencies to avoid imposing costs on small entities. The USPTO’s analyses have historically only considered the effect on small entity applicants, and ignored to effects on small entity law firms. The USPTO’s Paperwork Reduction Act filings fail to reflect the regulations that define scope of coverage, e.g., 5 C.F.R. § 1320.3(b)(1) and (c)(4)(i). The USPTO should, by new regulation that restates existing law for guidance of USPTO staff, require staff to perform required cost-benefit analyses.
- PTAB decisions, to be “precedential” or otherwise relied on, must be published in the Federal Register. 5 U.S.C. § 552(a)(1); E.O. 13892 § 3. In winter 2018-19, when one of the Vice Chief APJ’s was answering Q&A questions at a conference, one of the authors, Mr. Boundy asked why the PTAB did not publish its precedential decisions as required by statute. The answer was “Mr. Boundy, aren’t you elevating form over substance?” Mr. Boundy pointed out that the requirement was statutory. Mr. Boundy indicated several similar anecdotes in his brief to the Federal Circuit in Facebook v. Windy City. We have now had nearly a year to see how much weight statutes carry with the PTAB, if a reminder comes from a member of the public. Perhaps a reminder coming from the President will be more effective.
- O. 13891 § 4 requires all agencies to promulgate regulations governing promulgation and amendment of guidance documents. One of the key requirements required by E.O. 13891 is that the agency must inform all its employees that guidance documents do not bind the public. See also E.O. 13892 § 3. That’s always been the law; now the USPTO will be obligated to inform and train its examiners and petitions decision-makers that they are not to cite the MPEP in any manner adverse to applicants. (The USPTO may use guidance to give tentative resolutions of ambiguity, but not to create new obligations or attenuate rights.) One of our recent articles, Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem, laid out the magnitude of the problem. Another recent article, The PTAB is Not an Article III Court, Part 3, spelled out a good first draft of the necessary regulations.
Practical implementation for the public
Some practical implications for practitioners are immediately clear, as the White House reminds parties of rights they’ve had under statute and regulation for decades. Others will become clearer over time, as the Office of Management and Budget issues implementing guidance, as the USPTO implements the Orders and guidance, and as OED and the rest of the USPTO issue decisions. Practitioners should review forthcoming regulations and notices published in the Federal Register. For example, going back to our case study with OED, the office may propose procedures under this Executive Order, which discusses self-reporting, voluntary information setting, and other actions related to practitioners. Of course, those practitioners currently facing OED proceedings may benefit from this Executive Order by offering an explanation that the public was not properly put on notice of OED’s newfound interpretations of its rules.
We hope to see the USPTO create a dialogue with stakeholders of all shapes and sizes, and institute a new commitment to the rule of law, with predictable compliance with statutes, regulations, and Executive Orders. We’re available to help in any way we can. Director Iancu, you know where to find us.
[i] Then-Acting Associate Commissioner for Patent Examination Policy Robert Bahr, Decision on Petition, 10/113,841 (Jul. 14, 2011) at pages 19-20, refusing to implement the Bulletin for Agency Good Guidance Practices, OMB Bulletin 07-02 (Jan. 18, 2007), reprinted in 72 Fed. Reg. 3432-40 (Jan. 25, 2007). The Bulletin carries the same binding effect against agencies as an executive order.
Emil J. Ali is a partner at Carr Butterfield, LLC where his practice includes advising and representing intellectual property attorneys in ethics investigations and litigation matters before the Office of Enrollment and Discipline (OED), as well as various state bars. Mr. Ali also provides conflicts and compliance advice to various law firms and in-house departments regarding managing effective compliance policies, and transitioning intellectual property professionals.
Mr. Ali is active in several intellectual property and ethics associations, and serves as the Vice-Chair of the ABA-IPL Ethics & Professional Responsibility Committee as well as being part of the Oregon State Bar Unlawful Practice of Law Committee. In addition to being a Registered Patent Attorney, Mr. Ali is admitted to practice in California, the District of Columbia, and Oregon. Emil writes about intellectual property legal ethics and OED procedure at www.oedethicslaw.com/blog.
David Boundy is a partner at Cambridge Technology Law. Mr. Boundy practices at the intersection of patent and administrative law, and consults with other firms on court and administrative agency proceedings, including PTAB trials and appeals. In 2007–09, Mr. Boundy led teams that successfully urged the Office of Management and Budget to withhold approval of the USPTO’s continuations, 5/25 claims, information disclosure statements, and appeal regulations under the Paperwork Reduction Act. In 2018, the Court of Appeals for the Federal Circuit asked Mr. Boundy to lead a panel of eminent administrative law academics and the President’s chief regulatory oversight officer in a program at the court’s Judicial Conference on administrative law issues. Judge Plager recommended Mr. Boundy’s article published in ABA Landslide, The PTAB is Not an Article III Court, Part 1: A Primer on Federal Agency Rulemaking, to the patent bar. Another recent article, The PTAB is Not an Article III Court, Part 3: Precedential and Informative Opinions explains the role of sub-regulatory guidance. He may be reached at DBoundy@CambridgeTechLaw.com.