Delegating Authority

CustomPlay, LLC v. Amazon.com, Inc. (Supreme Court 2022)

New challenge to inter partes review. In this case, the patentee argues: (1) anti-delegation and (2) due process. Questions:

  1. Whether the Patent and Trademark Office (PTO) violated the statutory text and legislative intent of the America Invents Act (AIA) by delegating the PTO Director’s responsibility to determine whether to institute inter partes review (IPR) of issued patents to the Patent Trial and Appeal Board (PTAB), which is the entity that the AIA directs to render final decisions in instituted proceedings.
  2. Whether the PTO’s administration of IPR proceedings violates a patent owner’s constitutional right to due process by having the same decisionmaker, the PTAB, render both the institution decision and the final decision.

On question 1, remember that the statutory language calls for the USPTO “Director” to decide whether to institute an IPR, and then for the “Patent Trial and Appeal Board” to actually conduct the review.  35 U.S.C. 314, 316.  But, in its rulemaking, the USPTO gave authority to the PTAB to both institute and review.

https://www.supremecourt.gov/DocketPDF/21/21-1527/225545/20220516181434359_21-Petition.pdf

 

33 thoughts on “Delegating Authority

  1. 7

    Compare it to a criminal case. Who institutes those ? Prosecutors. Who makes the final decision ? Jurors, and sometimes bench trials. There is a separation, btw the Instituter and the decisionmakers. Why ? Issues of public trust ? How would things be changed if Prosecutor also made the final decision in criminal cases ?

    In a civil trial Plaintiff is the instituter, yet not the decisionmaker.

    When IP is worth money, and money is recognized integral to the pursuits and liberty and life, you’ve got at least as important subject matter, as is present in crim. and civil trials.

    So, it is wholly improper for the Instituter at the PTO, to also be the Decider. Its a huge Breach of Trust by gov. with the covenants.

    1. 7.1

      Glibertarian idiocy in a nearly pure form. Where did you find this cornball, Dennis?

      1. 7.1.1

        Malcolm placing Chrissy and I in his (HUGE) “one-bucket” of “glibertarians.”

        Of course, that is one massively huge bucket, as ANYONE disagreeing with ANY of Malcolm’s “Beliebs” are automatically placed into that same bucket.

  2. 6

    The silly thing about argument #1 is that the Patent Act consistently, throughout its history, has had sections specifying that “the Director” perform functions that were obviously intended to be delegated to lower level officers or employees. The Patent Act even has “the Director” doing ministerial things like notifying an applicant of Office Action rejections (35 U.S.C. 132(a)), and transmitting a certified appellate record to the Federal Circuit (35 U.S.C. 143), among others.

    If argument #1 actually got traction, and “the Director” in the Patent Act was interpreted as precluding delegation, it would dismantle the PTO by making the Director personally responsible for pretty much every thing the PTO does. It is obvious that when Congress enacted Section 314(a) to say that “the Director” decides whether or not to institute IPR, it was simply following the pattern and usage of that phrase that had been followed in countless other sections of the Patent Act throughout its history.

    1. 6.1

      Best counter-argument yet.

    2. 6.2

      Agreed – but does context matter?

      I am certain that it does (even if — or perhaps especially since the USSC Arthrex I decision is botched with Arthrex II).

      The Supreme Court certainly did not have the context of what LR mentions in mind in their decision.

    3. 6.3

      Post-Arthrex, is there a difference between a normal PTO employee and an PTAB ALJ? i.e., can the Director micro-manage the ALJs?

      It’s one thing to delegate to your direct reports. It’s another to delegate to a quasi-independent group.

      1. 6.3.1

        Post-Arthrex, is there a difference between a normal PTO employee and an PTAB ALJ? i.e., can the Director micro-manage the ALJs?

        Of course there is a difference between an APJ and the examiner corps, and of course the Director may not “micro-manage” the APJs. To note that there is a difference, however, does not mean that it is the sort of difference that matters to this particular challenge.

        The important point in Arthrex is that the “take care” clause means that there must be a direct line of political accountability for each IPR (and for each ex parte appeal, come to that). So long as the Director has the ability to change the outcome of every PTAB decision, that line of direct political accountability exists, making other considerations about what the PTAB does irrelevant to the analysis. Delegating the institution decision or not delegating the institution decision is totally irrelevant to the Arthrex analysis. Delegation and political accountability are cheese and chalk.

        1. 6.3.1.1

          >mean that it is the sort of difference that matters to this particular challenge.

          Arthax was a slight different problem i.e., whether Congress improperly assigned a task to an inferior officer.

          Here, Congress properly gave the task to the Director, so the question is whether he/she/they/it can delegate that task to someone he/she/they/it doesn’t actually manage (e.g., can’t control their timeliness). It *should* matter, imho, but the remedy won’t affect the IPR statute, just the IPR regs. And, even there, probably not in a particularly meaningful way.

          1. 6.3.1.1.1

            Congress properly gave the task to the Director, so the question is whether he/she/they/it can delegate that task to someone he/she/they/it doesn’t actually manage (e.g., can’t control their timeliness).

            You are trying to make Arthrex take away with one hand what Mohawk Wrecking gave with the other. I do not think that this is what the Supreme Court understood itself to be doing here.

            There are some powers that Congress makes clear are not to be delegated, and those may not be delegated. Where Congress does not make clear that the power is not to be delegated, however, then there is not typically some further check on the delegation power (you may delegate to this one, but not to that one).

            The concern in Arthrex is that the president is ultimately answerable for “tak[ing] care” that the law be faithfully executed. In order for the president to “take care” of such a duty, the president must have the power to discipline appointees who are not faithfully executing the law. The APJs lay outside of this line of accountability (they are neither appointed by the president nor removable at the president’s will), so that was the problem in Arthrex. The Supreme Court resolved that problem by making it such that an employee who does serve at the president’s pleasure (the Undersecretary of Commerce for the PTO) has ultimate authority to change the outcome in cases decided by the APJs.

            Nota bene, because this power rests with the Director (who can be removed at the president’s discretion), it really does not matter to whom the Director delegates this power. The power rests ultimately with the Director, and therefore there is no lack of political accountability if the director delegates the task to the PTAB, or the examiner corps, or to the TTAB, etc. Nothing about the ultimate destination of the delegated power affects the line of political accountability that rests in the Director.

            1. 6.3.1.1.1.1

              +1 – nice walk through.

      2. 6.3.2

        As I understood it, the new PTO Director just surprisingly pulled an IPR institution decision away from the PTAB to [apparently] decide it herself? – see Scott’s latest Post-Grant blog. [The one where some non-infringing third party, allegedly for financial gain, allegedly copied and re-filed the Fintiv-denied IPR petition of the actual lawsuit defendant.]

    4. 6.4

      Exactly. The CAFC has already addressed this line of argument in Ethicon Endo-Surgery v. Covidien LP, 812 F.3d 1023, 1032 (Fed. Cir. 2016)

      There is nothing in the statute or legislative history of the statute indicating a concern with separating the functions of initiation and final decision. Ethicon ignores the longstanding rule that agency heads have implied authority to delegate to officials within the agency, even without explicit statutory authority and even when agency officials have other statutory duties. Congress regularly gives heads of agencies more tasks than a single person could ever accomplish, necessarily assuming that the head of the agency will delegate the task to a subordinate officer. For example, more than 100 years ago, the Supreme Court in Parish v. United States found that the Surgeon General had properly delegated authority to an assistant Surgeon General to place orders with vendors because “it is impossible for a single individual to perform in person all the duties imposed on him by office.” 100 U.S. 500, 504, 25 L.Ed. 763 (1879).

      The implicit power to delegate to subordinates by the head of an agency was firmly entrenched in Fleming v. Mohawk Wrecking & Lumber Co., where the Supreme Court held the administrator of an agency could delegate the power to sign and issue subpoenas to regional administrators despite absence of an explicit authorization in the statute. 331 U.S. 111, 122, 67 S.Ct. 1129, 91 L.Ed. 1375 (1947). “When a statute delegates authority to a federal officer or agency, subdelegation to a subordinate federal officer or agency is presumptively permissible absent affirmative evidence of a contrary congressional intent.” U.S. Telecom Ass’n v. FCC, 359 F.3d 554, 565 (D.C.Cir.2004); see also Kobach v. U.S. Election Assistance Comm’n, 772 F.3d 1183, 1190 (10th Cir.2014) (finding that the courts of appeals that have spoken on the issue are “unanimous in permitting subdelegations to subordinates 1032*1032… so long as the enabling statute and its legislative history do not indicate a prohibition on subdelegation”). The general principle is so well accepted that the Supreme Court has called it “unexceptional.” See United States v. Giordano, 416 U.S. 505, 514, 94 S.Ct. 1820, 40 L.Ed.2d 341 (1974).

      1. 6.4.1

        of course the CAFC rejected it, thats why theres now a cert petition to scotus…

        1. 6.4.1.1

          Sure. I suppose that my point was that the CAFC’s disposition was fairly sound and convincing.

  3. 5

    >>But, in its rulemaking, the USPTO gave authority to the PTAB to both institute and review.

    Pretty sure this is reviewable by the Director, which sort of negates their argument.

    1. 5.1

      This one isn’t going anywhere.

  4. 4

    Arthrex was a better attempted attack on the AIA statute’s IPR system than this latest Don Quixote cert windmill charge, which is why last weeks Fed. Cir. Arthrex-deflation-decision is more important.

    1. 4.1

      I hear you – and am still somewhat surprised at the lax attitude being taken with the Arthrex deflation (which is clearly legally wrong, given the changes in admin law from the cases cited in that decision).

      As Arthrex has shown some grit in fighting this far, I wonder if they have any further fight on that case.

  5. 3

    Don’t trial judges constructively make both institution decisions and final decisions all the time?

    1. 3.1

      Exactly. It arrives all the time in bench trials that the same judge who rules on summary judgment motions also presides at the trial and delivers the final judgment. If allowing the PTAB to make both the institution and final decisions is a failure of due process, then presumably it is similarly a due process problem to have one district judge make both summary and final judgments. Somehow, however, this point has never been carried in the Art. III context.

      1. 3.1.1

        If a motion for SJ is denied the issue goes to the jury, not to the judge. So the judge either decides the issue on SJ, or he doesn’t decide it at all (the jury does). I don’t see that being at all analogous to IPR. Anyway, as I noted before, the due process argument is terrible.

        1. 3.1.1.1

          Now I see that you limit your remark to “bench trials.” Well, the party has to waive the jury right to have that scenario. And denying a motion for SJ doesn’t actually “decide” anything; it just means that there are disputed fact issues that can NOT be decided as a matter of law. That is not what happens in IPR. When a proceeding is instituted, it just means that there’s enough there to show a likelihood that one claim might be cancelled. When the Petition is denied institution, that is either because of some discretionary issue or else the argument obviously fails on the merits. And in that case, there won’t be TWO “decisions,” there will be just nothing after that.

          1. 3.1.1.1.1

            I will cheerfully concede that the analogy to summary judgment is imperfect. If you need a better example, consider a bench trial in which a preliminary injunction is sought. The same judge decides both the preliminary injunction (in which “likelihood of success” is one of the elements) and the ultimate outcome.

            This is precisely analogous to the PTAB deciding both the institution and the final decision. At institution, the PTAB is supposed to decide whether the challenger is reasonably likely to prevail with respect to at least 1 of the claims challenged in the petition, and then the same PTAB decides at the final decision whether the challenger has succeeded at proving that any one or more of the challenged claims are more likely than not to be unpatentable.

            Do we regard it as a “due process” violation when a district judge decides both to issue a preliminary injunction against an accused infringer, and then later finds the same defendant liable for infringement? If not, then how is it a “due process” violation when the PTAB does essentially the same, except for the benefit of the defendant instead of the plaintiff?

            1. 3.1.1.1.1.1

              Yes, the same judges deciding preliminary injunctions and final bench trial decisions is a better analogy that summary judgments, and IPR initiation decisions are far less significant than that – they do not change the status or rights of either party.

              1. 3.1.1.1.1.1.1

                Au contraire – institution decision point DOES the status and rights of a party – there is a rather important stick in the bundle of property rights that is taken when a post grant review institution decision is made to institute.

                Ask i4i how important that little stick was.

    2. 3.2

      yes, the constitutional due process of the brief is pretty weak. it relies on the well established principle that you cant have the same people both investigating/enforcing AND adjudicating a case. so like you cant have someone from the SEC both investigate a potential securities violation, formally allege the violation, and then adjudicate that violation. It is a pretty huge stretch to say anything the PTAB does is “investigative” in nature, and even the brief recognizes that institution decisions are adjudicatory.

      the statutory basis– that is, the idea that congress intended to bifurcate the institution and final decision process to provide additional due process (even if not constitutionally required)– seems to be massively complicated by arthrex’s consequence that the director now actually makes the final decision. so you arent getting a bifurcated instutition/final decision process either way.

      1. 3.2.1

        I agree the due process argument is terrible. They should not have even made it; makes them look foolish.

        The statutory question is pretty neat, though. It does appear that the rule delegating the authority to the PTAB flies in the face of the statute. At least, technically. I guess one could argue that the Director “IS” making the institution decision, but he does so “through” his delegated powers to the Board. That seems like not a fair reading though. I don’t think the Arthrex issue is at all on point. The issue there was just a “constitutional” issue that having the PTAB invalidate a patent violates the Appointment Clause. They got around that by (at least in principle) having the Director be able to over-rule the Board. That won’t aid the situation here when the PTAB (and NOT the Director) declines to institute review in the first place. And that decision is also not appealable at all.

        1. 3.2.1.1

          The arthrex point I was trying to make is this: Supposedly congress intentionally bifurcated the IPR process by assigning (a) institution decisions to the director and (b) final decisions to the PTAB . The reason this is so important is specifically in order to avoid prejudgment and increase due process protections– If the same person(s) were to make both institution decisions AND final decision, then there would be a possibility/appearance of prejudgment or bias (after making the institution decision, it would look bad if the final decision was often reversed; so if the same person makes both institution and final decision, they would be incentivized to ensure that at least a majority of institutions resulted in invalidation ).

          But, because of Arthrex, it is now the director (not PTAB) that really makes the “final decision” (or at least, decides to make the ptab decision final). So the argument that requiring the director to make institution decisions would increase due process by bifurcating the responsible parties to avoid prejudgment or bias doesnt really work out so cleanly.

          1. 3.2.1.1.1

            That after the Supreme’s Arthrex decision the Director is now empowered overrule the PTAB’s final decision is an interesting new argument to make against this cert petition’s bifurcation argument, if anyone bothers to oppose this cert petition.

      2. 3.2.2

        As with ALJs in other administrative tribunals like Social Security and Unemployment cases, in IPRs the APJs do not themselves allege any violation or “investigate” for a “violation.” The IPR Petitioner alleges claim invalidity and presents all patent or publication support for that to the APJs and the patent owner [to rebut], and the APJs check if it meets jurisdiction, deadline and formal requirements and if the petitioner’s evidence passes a statutory threshold level of evidence sufficiency to start an IPR trial. It is not a SJ decision and has no estoppel effect.

  6. 2

    Should SCOTUS take this case? Yes.

    Will they? Not. A. Chance.

  7. 1

    Prediction: cert denied (yes, this was low hanging fruit)

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