by Dennis Crouch

In Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC, the Federal Circuit reaffirmed its general ruling that newly invented diagnostic methods will generally be seen as directed toward unpatentable natural laws absent some new machinery for performing the method.  Athena’s patented method is a three-step process for identifying MuSK antibodies in body fluid (such as blood): Mixing labelled MuSK with the body fluid; immunoprecipitating any antibody/MuSK complex from the fluid; and monitoring for the label in the left-over precipitate. The test is important because the existence of MuSK helps diagnose a particular form of Myasthenia gravis (MG).

In its decision, the Federal Circuit found that the core discovery here is the relationship between MuSK antibodies in the body and MG.  That relationship though is a natural law.  The court then looked to the particular steps in the method and found no inventive concept.  Even though the claims required specific chemical reactions, the specification also made clear that development of the particular steps would be within reach of one skilled in the art — once they understand that MuSK is important. The Federal Circuit decision was penned by Judge Lourie and joined by Judge Stoll.  Judge Newman wrote in dissent.  A 7-5 court then denied Athena’s petition for en banc rehearing — writing effectively that its hands were tied by Mayo & Alice.  The Athena denial is interesting because it includes eight opinions (seven substantive) that generally lament the current situation.

Athena then filed a petition asking the Supreme Court to take-up the case on the following question:

Whether a new and specific method of diagnosing a medical condition is patent-eligible subject matter,where the method detects a molecule never previously linked to the condition using novel man-made molecules and a series of specific chemical steps never previously performed.

[Petition]. Now, 11 amici briefs have filed in support of review.  Each of the briefs have lots to say, but I have included below one thought from each that I see as an important contribution:

1. Professors Jeffrey A. Lefstin and Peter S. Menell (Congress intended for patents to cover practical applications of scientific discoveries; We should all reread the original cases on the topic from England – Nielson)
2. Chicago Patent Attorneys (Noonan) (the court should focus on preemption)
3. Intellectual Property Law Association of Chicago (The test here is unduly biased against methods)
4. The Chartered Institute of Patent Attorneys (UK) (Athena conflicts “with international treaties to which the United States is a party, as well as established international practice”)
5. Biotechnology Innovation Organization (BIO) (The Federal Circuit has created a heightened inventive concept test for diagnostic methods)
6. Freenome Holdings, Inc. and New Cures For Cancers, Inc.  (Alice and Mayo are inconsistent with Dawson Chem. Co. v. Rohm & Haas Co., 448 U.S. 176 (1980)).
7. New York Intellectual Property Law Association (The Mayo test was not intended as the exclusive test)
8. Blaine Laboratories, Inc. (See Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524 (2019) (judicial exceptions to broad statutes are inappropriate))
9. Pharmaceutical Research and Manufacturers of America (PhRMA) (patent eligibility for diagnostic methods is a critical incentive for advancement in the field).
10. Intellectual Property Owners Association (Look to the USPTO guidance to see the trouble — especially its diagnostic method examples)
11. Honorable Paul R. Michel (ret.) (“Never before has the Federal Circuit been so splintered on a fundamental doctrine of patent law.”)

These are very interesting and important briefs. Yes, they show support, but they also include useful legal analysis.

Mayo’s responsive brief is due on November 22, 2019 with any amici in support of the current-state-of-affairs due shortly thereafter.

by Dennis Crouch

In ChargePoint, the Federal Circuit discussed the 19th Century patent case of Wyeth v. Stone, 30 F. Cas. 723 (C.C.D. Mass. 1840) (Justice Story).

The case involved a patented ice-cutting invention created by Nat Wyeth who was known to have invented “practically every implement and device used in the ice business.” The disputed patent in the case issued in 1829 and is now identified as No. X5,405. The drawings appear to be lost to history, probably in the 1836 Patent Office Fire. By 1840, Joseph Story had been on the Supreme Court for almost 30 years.  At that time, however, the Justices “rode circuit” to hear local cases such as this one.

According to Justice Story, the patent document describes a new and useful invention whose closest relative may be a carpenter’s plough.  Story walks through some of the differences that he found sufficient to distinguish the two.  However, the patent itself asserts a much broader claim.

‘It is claimed, as new, to cut ice of a uniform size, by means of an apparatus worked by any other power than human.’

As Justice Story explains, that claim is for “exclusive title to the art of cutting ice by means of any power, other than human power.”  Such a broad claim — abstracted from “any particular method or machinery” — is not patentable but rather is an unpatentable “art or principle in the abstract.”

No man can have a right to cut ice by all means or methods, or by all or any sort of apparatus, although he is not the inventor of any or all of such means, methods, or apparatus. A claim broader than the actual invention of the patentee is, for that very reason, upon the principles of the common law, utterly void, and the patent is a nullity.

Notice the explanation that Justice Story used here — no one can have a claim this broad – to all means or methods — unless the person invented “any or all of such means, methods, or apparatus.”  Thus, although the courts have cited Wyeth on eligibility grounds, the case might be better seen as a source for written description doctrine.

In addition to the abstract principle claim, the patent document further claims the “particular method of the application of the principle” described in the specification.  Applying the latin maxim “ut res magis valeat, quam pereat,” Justice Story interpreted the patent to more narrowly cover the machines described (the cutter and saw).  “Although inartificial”, the specification could be “reasonably interpreted” so in a court of equity (although not upon the principles of common law).

The Federal Circuit has written about Wyeth in a number of cases — focusing upon the “results oriented” claims that end up encompassing an abstract principle. Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335 (Fed. Cir. 2018); ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (Fed. Cir. 2019).

Customedia Tech v. Dish Network (Fed. Cir. 2019)

Customedia … submits a notice of supplemental authority identifying this court’s recent decision in Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140 (Fed. Cir. Oct. 31, 2019). That decision vacated and remanded for the matter to be decided by a new panel of Administrative Patent Judges (“APJs”) at the Patent Trial and Appeal Board after this court concluded that the APJs’ appointments violated the Appointments Clause. Customedia’s letters seek to assert the same challenge here, which the court construes as a motion to vacate the Board decisions here and remand in accordance with Arthrex.

We conclude that Customedia has forfeited its  Appointments Clause challenges. . . .  Customedia did not raise any semblance of an Appointments Clause challenge in its opening briefs or raise this challenge in a motion filed prior to its opening briefs. Consequently, we must treat that argument as forfeited in these appeals.

Guest post by Arti K. Rai, Elvin R. Latty Professor of Law and Faculty Director, The Center for Innovation Policy, at Duke Law.

Last Thursday, in Arthrex v. Smith & Nephew (Fed. Cir. 2019), a panel of the Federal Circuit held that the administrative patent judges (APJs) at the PTAB are “principal officers” who must, under the Appointments Clause of the Constitution, be appointed by the President and confirmed by the Senate.  In contrast, the current patent statute provides for APJs to be appointed by the Secretary of Commerce in consultation with the PTO Director.  The panel further determined that it could remedy the constitutional defect by severing APJ removal protections, thereby rendering them inferior officers who can be appointed by “Heads of Departments” like the Commerce Secretary.

As this post details, the panel did a careful job of addressing one of the most knotty constitutional issues raised by PTAB adjudication.  But precisely because the issue is knotty, the panel’s decision is unlikely to represent the last step in the road.  Indeed, the USPTO has already indicated that it may seek en banc review.

All parties agreed, as did the panel (citing Professor John Duffy’s prominent 2007 Patently-O paper), that APJs are officers within the meaning of the Appointments Clause.  The only question was whether APJs are principal or inferior officers.

The panel’s conclusion regarding principal officer status rested on Justice Scalia’s 1997 opinion for the Court in Edmond v. United States.  In that case, the Court held that inferior officers must be “directed and supervised at some level by others who were appointed by Presidential nomination with the advice and consent of the Senate.”

According to the panel, PTAB judges lack adequate direction and supervision for two reasons: first, “presidentially appointed officers” cannot “review, vacate, or correct decisions by the APJs”; and, second, these presidentially appointed officers (specifically the Secretary of Commerce and Director) have only “limited removal power.” Although severing APJ removal protections would not give the Director review power over individual decisions, it would, according to the panel, be sufficient to demote APJs to inferior status.

The road ahead will likely be tumultuous.  At the Supreme Court, administrative law has long been a battlefield between various flavors of formalist and functionalist reasoning about how agencies fit into the executive branch and interact with the legislative and judicial branches.  Indeed, in taking its relatively formal approach to the distinction between principal and superior officer, the Edmond Court had to distinguish the considerably less formalist opinion in Morrison v. Olson, written only 9 years earlier.  In Morrison, Justice Scalia had written a stinging dissent, castigating the majority for relying on multiple indicia of inferiority, including limited responsibility, and for not recognizing that “inferior” necessarily means subordinate. Nine years later, Justice Scalia was able to secure 8 votes for his position. (Justice Souter concurred only in part.)

The Arthrex decision also comes during a period of even greater-than-usual Supreme Court turmoil over administrative adjudication.  Most relevant for present purposes, the Court has already decided a steady stream of constitutional and nonconstitutional cases involving the PTAB.  In the most prominent of these cases, Oil States Energy Services v. Greene’s Energy Group, an ideologically diverse coalition of seven Justices ultimately concluded that administrative adjudication of granted patents survived constitutional scrutiny.  But Justice Gorsuch, joined by Chief Justice Roberts, dissented in strong terms, warning against the perils of adjudication by judges who don’t enjoy Article III protections.

Of course, as the Arthrex opinion illustrates, under more formal versions of Appointments Clause jurisprudence, decisions made by actors who are not subject to significant direction and control by a presidentially appointed official may themselves be unconstitutional.  The Supreme Court’s 2018 decision in Lucia v. SEC makes it clear that the Court’s more formalist Justices, including Justices Gorsuch and Roberts, continue to take the Appointments Clause very seriously.  In that decision, all of the Justices who tend to embrace formalism, joined by Justice Kagan, held that as a constitutional matter the administrative law judges of the SEC were officers (albeit inferior officers) who had to be appointed by the politically accountable Commission.

As commentators have discussed, the juxtaposition of Oil States and Lucia in the 2018 term illuminates potential constitutional tensions in administrative adjudication.  Some formalist academics who are particularly concerned about the tension have suggested simply removing large swaths of adjudication from the administrative state and placing it instead in Article III.

Conventional administrative law has taken a different, but still relatively formal, approach.  Conventionally, whether the judge is an administrative law judge (ALJ) (a specific type of judge who enjoys very strong protections against removal) or some other type of administrative judge, she has some level of decisional independence and protection against firing.  However, the judge’s decisions are subject to a right of review by a politically appointed agency head.

What about the patent statute? The statute gives the Director overall responsibility for USPTO “policy direction and management supervision” as well as power to promulgate regulations by which the PTAB is bound.  As for specific PTAB decisions, it provides for “rehearing” of such decisions.

Consistent with the academic literature (for example, this article I coauthored) suggesting that the rehearing mechanism be used to distill from the hundreds of PTAB opinions issued each year certain precedential opinions that bind the agency, the Director has set up an elaborate “Precedential Opinion Panel” (POP) process to rehear PTAB cases that raise important issues. The POP is selected by the Director and by default consists of the Director, the Commissioner for Patents, and the Chief Judge.

The Arthrex panel did note the Director’s general supervisory powers over the PTAB, his regulatory authority, the rehearing provision, and the POP procedure. It emphasized, however, that neither the statute nor the POP procedure explicitly provide for a right of rehearing over specific cases by the Director only.  Presumably, any functional ability the Director might have to persuade the Commissioner for Patents and the Chief Judge is insufficient.

If the Supreme Court were to take the case, what it might decide is anyone’s guess. The cleanest path forward is therefore surgical Congressional intervention that gives the Director an explicit, unilateral right of review.  This approach would cure any perceived constitutional infirmity without subjecting APJs to at-will firing.  If subordination is the key to inferior status, then both formalists and functionalists might agree that, for adjudication, subordination through transparent and reasoned review of the adjudicator works better than subordination through firing.

by Dennis Crouch

We have a more complete post coming on Monday, but wanted to highlight Arthrex v. Smith & Nephew (Fed. Cir. 2019). In Arthrex, the Federal Circuit held that the PTAB Judge (APJ) appointments process “violates the Appointments Clause, U.S. Const., art. II, § 2, cl. 2.”  In particular, the court held that APJs are “principal officers” and thus require appointment by the President rather than merely the Secretary of Commerce.  The court cited and relied upon Prof. John Duffy’s paper that started this whole process: John F. Duffy, Are Administrative Patent Judges Constitutional?, 2007 Patently–O Patent L.J. 21, 25 (2007) (concluding that administrative patent judges are officers as opposed to mere employees).

In the case, the court also provided a remedy — invalidating a portion of the statute that limited the PTO’s ability to remove APJs from the board. By making removal easier, the PTAB Judges are then re-classified as inferior officers — and thus were properly appointed.

[Decision]

by D.Crouch

The Senate IP Subcommittee heard testimony today on the topic of patent quality:

Promoting the Useful Arts: How can Congress prevent the issuance of poor quality patents?

Testimony from PTO Commissioner Drew Hirshfeld; Professors Polk Wagner, Melissa Freeney Wasserman, Colleen Chien; and Former PTO Acting Driector Teresa Stanek Rea.  Sen. Tillis began with his remarks with a statement that about the “madness” of patent eligibility, including the Chamberlain case that found a garage door opener to lack patent eligibility. “No one can blame the USPTO” for this situated by the courts. That said, Sen. Tellis is looking for a consensus option.

In his testimony, Commissioner Hirshfeld began with an interesting statement on new examiner time allotment program:

Starting this month, all examiners began receiving additional examination time tailored to specific attributes of an application, including the overall number of claims, the length of the specification, and the number of pages in any filed information disclosure statements. Also starting this month, examiners with the least amount of examination time in our production system also began receiving additional time to align their time allotments with the requirements for current patent examination.

Beginning next fiscal year, we will utilize an updated process for assigning patent applications to patent examiners. This process will automatically match each application to the examiner best suited to examine the application, taking into account the complete technological profile of the applications, the work experience of each patent examiner, and the workload balancing needs of the agency.

[Hirshfeld Testimony].

Prof. Wagner:

One lesson here, I think, is to tread quite carefully when seeking to improve patent quality. The small firms and individuals who desperately need the patent system to bridge the gap between great idea and successful technology can be (and often are) disproportionately impacted by reforms that are of little consequence for large companies. . . . .

Many patentees have incentives to make their patent documents as unclear as possible.

[Wagner Testimony]

Prof. Wasserman:

Indeed, invalid patents are unnecessarily reducing consumer welfare, stunting productive research, and discouraging innovation. . . . Patent Office’s fee schedule should be restructured to minimize the risk that the Patent Office’s revenues will be insufficient to cover its operational costs and to diminish the Agency’s financial incentive to grant more patents when revenues fall short.

[Wasserman Testimony]

Ms. Stanek Rea:

But we do not want to rely exclusively on reviewing the quality of a patent only after it has issued. We also need to focus on front end modifications during examination.

[Stanek Rea Testimony]

Prof Chien:

[Congress should] encourage and expect the USPTO to engage in bold, persistent, and rigorous policy piloting and evaluation.

[Chien testimony]

[A]s to the supposed public use of Wyeth’s machine before his application for a patent. To defeat his right to a patent, under such circumstances, it is essential, that there should have been a public use of his machine, substantially as it was patented, with his consent.

If it was merely used occasionally by himself in trying experiments, or if he allowed only a temporary use thereof by a few persons, as an act of personal accommodation or neighbourly kindness, for a short and limited period, that would not take away his right to a patent. To produce such an effect, the public use must be either generally allowed or acquiesced in, or at least be unlimited in time, or extent, or object. On the other hand, if the user were without Wyeth’s consent, and adverse to his patent, it was a clear violation of his rights, and could not deprive him of his patent.

Wyeth v. Stone, 30 F. Cas. 723, 726 (C.C.D. Mass. 1840)

I went through the STEPP training and thought it was really excellent:

If you are a patent attorney or agent, it helps to think like an examiner. Sunday, November 10, 2019 is the last day to sign up for the January Stakeholder Training on Examination Practice and Procedure (STEPP) agent/attorney course. This three-day course takes place on January 28-30, 2020 at the Miami Beach Regional Library in Miami, Florida.

The training is limited to those who have passed the patent bar, since it will make use of statutes, rules, and guidelines relevant to practicing before the USPTO. Priority will be given to those who have recently passed the patent bar. USPTO trainers lead the course, which is based on material developed for training USPTO employees.

We are applying for CLE credit in Florida for this course.

Use the STEPP sign-up form to register.

You can learn more about the program and upcoming sessions on the STEPP page of the USPTO website.

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.

“Unfair surprise”

“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.

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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.

by Dennis Crouch

In Arthrex, Inc. v. Smith & Nephew, Inc., 935 F.3d 1319 (Fed. Cir. 2019), the patentee (Arthrex) argued that the inter partes review is an unconstitutional due process violation when applied retroactively against pre-AIA patents. The Federal Circuit rejected the basis for the argument — Although Arthrex filed its patent applications prior to passage of the AIA, the patent issued afterward. In somewhat cryptic analysis the court worte:

That Arthrex filed its patent applications prior to passage of the AIA is immaterial. As the Supreme Court has explained, “the legal regime governing a particular patent ‘depend[s] on the law as it stood at the emanation of the patent, together with such changes as have since been made.’” Eldred v. Ashcroft, 537 U.S. 186, 203 (2003) (quoting McClurg v. Kingsland, 42 U.S. 202, 206 (1843)). Accordingly, application of IPR to Arthrex’s patent cannot be characterized as retroactive.

Id. The two cases cited by the Federal Circuit here are interesting.

McClurg is best known as the case establishing “shop-rights doctrine.”  In the case, the inventor (Harley) created a mold for casting metal cylinders so that the strongest material was toward the outer wall. Harley made the invention while on the job for the defendant Kingsland and Kingsland continued to use the invention for some time with without objection from Harley. Meanwhile, Harley obtained a patent and assigned it to McClurg who later sued Kingsland for infringement. The Supreme Court explained that such a situation created an implied license:

The Circuit Court … held that the defendants might continue to use the invention, … that they might presume a license or grant from Harley.

McClurg v. Kingsland, 42 U.S. 202 (1843).

In Arthrex, the focus on McClurg is for a different reason — congressional plenary power to legislate in the area of patent law — even retroactively.

The inventor in McClurg (Harley) obtained his patent in 1835 – a few months before passage of the Patent Act of 1836 that constituted a major revision of U.S. Patent Law.  By its terms, the new law applied to old patents (with a few exceptions) but the case challenged whether Congress had the power to take such action.  And the Supreme Court offered strong words allowing for Congress modify the law of patents without any restraint:

Whether [the appeal is] well taken or not, must depend on the law as it stood at the emanation of the patent, together with such changes as have been since made; for though they may be retrospective in their operation, that is not a sound objection to their validity; the powers of Congress to legislate upon the subject of patents is plenary by the terms of the Constitution, and as there are no restraints on its exercise.

Id. This is the portion of the decision that is quoted by the Supreme Court in Eldred and again in Arthrex. I should note that the court actually goes on to put a pretty big caveat on congressional plenary power (as mentioned justice Stevens dissent in Eldred):

… so that they do not take away the rights of property in existing patents. . . . This repeal, however, can have no effect to impair the right of property then existing in a patentee, or his assignee, according to the well-established principles of this court in 8 Wheat. 493 [a real property case]; the patent must therefore stand as if the acts of 1793 and 1800 remained in force; …

Patentee Cannot Escape Estoppel via Pre-IPR-Institution Disclaimer

Google LLC v. Koninklijke Philips N.V. (Fed. Cir. 2019)

Although the PTAB granted Google’s IPR petition, it ultimately concluded that Google had failed to prove the challenged claims unpatentable. On appeal, the Federal Circuit has affirmed. U.S. Patent No. 6,772,114; IPR2017-00437.

The non-precedential decision includes an interesting bit on PTAB procedure.  The IPR was instituted on both obviousness and anticipation grounds.  During the trial briefing Google shifted obviousness theory. In particular, Google began to argue that the claimed high-pass-filter element would have been obvious. This was a change because Google had previously argued that the filter was disclosed in the cited art.  Note here that Google did not present this argument until the reply-brief stage. At that point, the Board refused to consider the argument because it was raised at such a late stage and that Philips “did not have a fair and meaningful opportunity to respond.”

On appeal, the Federal Circuit has affirmed — holding that the “Board was within its discretion in declining to consider this obviousness theory that was outside the scope of the petition for inter partes review.”

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