A few initial thoughts on Loper and the end of Chevron Deference

by Dennis Crouch

This is just a first look at how overturning Chevron may impact patent practice. 

In the past, both the USPTO and patent attorneys have largely ignored the larger scope of administrative law, but in recent years USPTO operations have been under tighter control from the White House, and courts have increasingly asked whether the agency is following the rules.  Administrative patent law was truly launched with  the American Invents Act of 2011 and the resulting administrative patent trials by the PTAB — resulting in hundreds of appeals arguing that the USPTO’s procedural approach is an abuse of administrative power.  Importantly, the Supreme Court in Cuozzo Speed Techs. v. Com. for Intell. Prop., 579 U.S. 261 (2016) provided the patent office with Chevron deference for its determinations regarding AIA trials, including issues such as its approach to claim construction.  But Chevron has now been overruled, and many are wanting the Federal Circuit to revisit the USPTO approach.

Although I expect that the outcome will be relatively minor in the patent area, it is still a big deal.  When reason why it is so big is that Chevron deference is premised on ambiguity in the statute. In other words, any case where Chevron deference has been provided includes a ruling that the statute in question has an ambiguous gap, and the new Loper decision indicates that courts have an obligation to ensure that gap was properly filled by agency action.

The Loper decision: In Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024), the Supreme Court overruled the Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The 6-3 decision authored by Chief Justice Roberts explained that the Chevron doctrine, which required courts to defer to “permissible” agency interpretations of ambiguous statutes, is inconsistent with the Administrative Procedure Act (APA). The Court emphasized that under the APA, “courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

The majority opinion traced the history of judicial review of agency action, noting that prior to Chevron, courts exercised independent judgment in construing statutes while according “respect” to executive branch interpretations.  The Court found that Chevron represented a sharp break from this tradition and could not be reconciled with the APA’s command that “the reviewing court shall decide all relevant questions of law.” 5 U.S.C. § 706. The Court also rejected arguments that Chevron deference rested on a presumption of congressional intent, stating that “a statutory ambiguity does not necessarily reflect a congressional intent that an agency, as opposed to a court, resolve the resulting interpretive question.”

Justice Thomas authored a concurring opinion arguing that Chevron deference also violates the Constitution’s separation of powers. He contended that by requiring judges to defer to agency interpretations, Chevron “prevents judges from exercising their independent judgment to resolve ambiguities” and “allows the Executive . . . to dictate the outcome of cases.”  Justice Gorsuch filed a lengthy concurrence, portions of which were joined by no other Justice, in which he argued that stare decisis principles supported overruling Chevron because the decision was inconsistent with “the laws adopted by the Nation’s elected representatives,” the APA, and the Constitution. Justice Gorsuch also argued that Chevron had proved unworkable in practice and that reliance interests did not justify retaining the doctrine, as Chevron‘s “whole point” was to “upset” such interests by allowing agency interpretations to change over time.

A dissenting opinion by Justice Kagan was joined by the other two liberal justices, Justices Sotomayor and Jackson. Justice Kagan argued that the majority’s decision was not based on the APA or any other law, but rather on a “bald assertion of judicial authority.” Justice Kagan contended that Chevron deference rested on a presumption about congressional intent that was justified by agencies’ expertise, experience, and political accountability. She also argued that the majority’s decision subverted stare decisis principles, as Chevron was a “cornerstone of administrative law” that had engendered significant reliance interests.

Chevron and the USPTO: The Federal Circuit has long been stingy on providing deference to USPTO decisions.  In particular, the court has never given deference to USPTO for its interpretation of the substantive patent laws, such as the requirements for proving obviousness under Section 103 or ineligibility under Section 101.  However, the court has granted deference in traditional areas involving “interpretative” rather than “substantive” rulemaking.  See, Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir. 2008) (giving Chevron deference to PTO’s interpretation of “original application” under the reexamination statute).  But, as noted in Cuozzo, Congress expanded PTO authority with respect to AIA trials.  Although this obviously does not permit the agency to rule contrary to the statute. SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018) (holding that the court owned no deference to USPTO interpretation allowing partial institution because the statute was not ambiguous and the PTO’s interpretation was not supported by the statute).

Sonos v. Google: Bloomberg’s Michael Shapiro reported on one case where Google filed an en banc petition relying upon this likely outcome – arguing that the USITC is not deserving deference for its interpretation of section 337 of the Tariff Act.  In Suprema v. ITC (Fed. Cir. 2015), the en banc Federal Circuit affirmed an ITC final determination of an exclusion order to block importation based upon an inducement theory of infringement. The key here is that the hardware being imported is infringing at the moment of importation, but once it arrives in the US it is loaded with software that leads to infringement.  There is a similar setup in Sonos v. Google, and Google is arguing that the Suprema decision must be revisited by the Federal Circuit, asking “whether the ITC’s authority under 19 U.S.C. § 1337(a)(1)(B)(i) is limited to articles that infringe a patent as imported, or instead extends to cases where infringement can occur only when additional features are added or additional steps are per-formed after importation.”

Another pending case on point is United Therapeutics v. Liquidia that is pending on petition for certiorari before the Supreme Court.  Petitioner in that case argues that the Federal Circuit improperly deferred to the USPTO’s decision to permit additional arguments beyond those made in the IPR petition itself.

PTA Calculations: One of the Federal Circuit’s most recent Chevron decisions was Eurica Califorrniaa v. Vidal (Fed. Cir. Nov. 7, 2022). In that case, the court gave Chevron deference to the PTO’s interpretation of the PTA statute barring PTA for applicant actions that constitute “a failure to engage in reasonable efforts to conclude prosecution.”  In the particular case, the USPTO had created a rule that an “applicant’s amendment of a patent application after receiving a notice of allowance  [constitutes] one such failure.”  In the appeal, the Federal Circuit provided substantial deference to this rule and sided with the PTO — writing that under Chevron, “we accept an agency’s construction of the statute even if the agency’s reading differs from what a court believes is the best statutory interpretation.”