CAFC Rules New Evidence OK in BPAI Appeal to District Court
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course Posted: November 9, 2010 @ 6:16 pm
Yesterday, November 8, 2010, the United States Court of Appeals for the Federal Circuit issued a decision in a case that will likely have limited applicability for most, but will definitively add another weapon in the arsenal of those who wish to challenge the final determinations of the United States Patent and Trademark Office. In a peculiar oddity (redundancy on purpose) those who choose to challenge the final determinations on patentability of the Board of Patent Appeals and Interferences (BPAI) can elect to either proceed directly to the United States Court of Appeals for the Federal Circuit, or they can elect to proceed to the United States Federal District Court for the District of Columbia. The question presented and considered by the full Court at the Federal Circuit was whether new evidence (i.e., evidence not previously presented to the USPTO) can be presented to the District Court when challenging a decision of the BPAI. The short answer — YES. However, without new evidence at the District Court the Federal Circuit must continue to give deference to the USPTO on further appeal.
Under the patent laws, a patent applicant who is dissatisfied with the decision of the Board regarding a patent application may choose one of two paths. Pursuant to 35 U.S.C. 141, the applicant may appeal the Board’s decision to the Federal Circuit, which will review the Board’s decision only on the record that was before the Patent Office. Alternatively, pursuant to 35 U.S.C. 145, the applicant may file a civil action in the District Court for the District of Columbia and the court will determine whether the applicant “is entitled to receive a patent for his invention . . . as the facts in the case may appear.” 35 U.S.C. § 145. Hyatt v. Kappos presented the issue of what limitations exist on an applicant’s right to introduce new evidence in a § 145 civil action.
Before proceeding to the specific ruling of the Federal Circuit, this area of law is particularly strange, hence my referring to it above as a peculiar oddity. Not only is there a dual path out of the USPTO to challenge the Board, but an appeal must go to the District Court for the District of Columbia and none of the 93 other Federal District Courts spread across the United States.
More peculiar still, thanks to the Supreme Court’s ruling in Dickinson v. Zurko, 527 U.S. 150 (1999), the Federal Circuit must grant deference to the determinations of the Patent Office, as required by the Administrative Procedures Act. On this front the Supreme Court in Zurko stated succinctly at the start of the opinion that:
The Administrative Procedure Act (APA) sets forth standards governing judicial review of findings of fact made by federal administrative agencies. 5 USC 706. We must decide whether section 706 applies when the Federal Circuit reviews findings of fact made by the Patent and Trademark Office (PTO). We conclude that it does apply, and the Federal Circuit must use the framework set forth in that section.
In Zurko the question was whether deference was required to be given that would lead to a dual standard of review, which would change depending upon whether the case proceeded from the Board directly to the Federal Circuit versus when the case was first routed through the District Court for the District of Columbia. The Supreme Court gave lip service to this problem, basically telling the Federal Circuit they should figure it out when it mattered, which they did in Mazzari v. Rogan, which was decided by the Federal Circuit in 2003.
The issue in Mazzari presents itself as a result of the patent applicant choosing to go to the United States District Court for the District of Columbia. The Federal Circuit explained (citations omitted):
A decision by the PTO is reviewed on the administrative record of an agency hearing provided for by statute. Therefore, a reviewing court, whether this court or the district court, applies the “substantial evidence” standard of review to findings of fact made by the board.
If the parties choose to present additional evidence to the district court, as they did here, the district court would make de novo factual findings if the evidence is conflicting. We then would review the district court’s legal conclusions without deference and its de novo factual findings under the traditional court/court standard of review, clear error. Because this case is before us on summary judgment, however, we review a district courts grant of summary judgment de novo and construe the facts in the light most favorable to the non-movant. Obviousness is a question of law with underpinning factual findings.
As a result of the Supreme Court acknowledging and dismissing the Federal Circuit’s concern of a dual standard of review in Zurko, and the aforementioned statement from Mazzari, it seemed strange to me that there was any viable question relating to whether new evidence could be introduced at the District Court for the District of Columbia.
The original panel of the Federal Circuit that heard the Hyatt appeal explained “it is beyond question that in appropriate circumstances new evidence may be submitted to the district court in a § 145 action…” But the majority then went on to defer to what they referred to as “general practice” among federal courts “in some circumstances to exclude evidence which a party could and should have introduced before the Patent Office but did not despite an obligation to do so.” Oddly, the panel majority concluded that the Administrative Procedure Act (APA) imposed restrictions on the admission of new evidence in a § 145 action. Ultimately, evidence Hyatt wanted to introduce was excluded because the failure to submit the evidence in his declaration earlier was negligent, which lead the majority of the panel to conclude that “it is clear from the record that Hyatt willfully refused to provide evidence in his possession in response to a valid action by the examiner.”
The trouble with the panel majority in the original Hyatt appeal is that it ignored the fact that the only reason to proceed from the Board to the District Court would be to present new evidence, otherwise the path leading to the CAFC through the District Court would just be added expense for no reason. The majority also ignored the fact that the Supreme Court acknowledged in Zurko that the dual appeal option does, in fact, allow for new evidence to be submitted to the District Court and that new evidence, having been entertained for the first time by the District Court would be reviewable by the Federal Circuit outside of the APA deference it must provide to the USPTO. The Supreme Court explained in Zurko (citations omitted):
[T]he Circuit and its supporting amici believe that a change to APA review standards will create an anomaly. An applicant denied a patent can seek review either directly in the Federal Circuit, see 35 U. S. C. §141, or indirectly by first obtaining direct review in federal district court, see §145. The first path will now bring about Federal Circuit court/agency review; the second path might well lead to Federal Circuit court/court review, for the Circuit now reviews Federal District Court factfinding using a “clearly erroneous” standard. The result, the Circuit claims, is that the outcome may turn upon which path a disappointed applicant takes; and it fears that those applicants will often take the more complicated, time-consuming indirect path in order to obtain stricter judicial review of the PTO’s determination.
We are not convinced, however, that the presence of the two paths creates a significant anomaly. The second path permits the disappointed applicant to present to the court evidence that the applicant did not present to the PTO. Ibid . The presence of such new or different evidence makes a factfinder of the district judge. And nonexpert judicial factfinding calls for the court/court standard of review. We concede that an anomaly might exist insofar as the district judge does no more than review PTO factfinding, but nothing in this opinion prevents the Federal Circuit from adjusting related review standards where necessary.
Returning to the en banc decision in Hyatt v. Kappos, this history seems calculated to lead to but one conclusion, which was that reached by the majority of the en banc Court; namely that there is no limit on the evidence that can be supplied in a § 145 appeal from the Board. The Federal Circuit, per Judge Moore, explained:
The particular significance of a § 145 civil action is that it affords an applicant the opportunity to introduce new evidence after the close of the administrative proceedings—and once an applicant introduces new evidence on an issue, the district court reviews that issue de novo. Thus, an applicant’s ability to introduce new evidence is the hallmark of a § 145 action. It is the primary factor that distinguishes a civil action under § 145 from an appeal.
The Federal Circuit went on to announce its ruling:
We hold that 35 U.S.C. § 145 imposes no limitation on an applicant’s right to introduce new evidence before the district court, apart from the evidentiary limitations applicable to all civil actions contained in the Federal Rules of Evidence and Federal Rules of Civil Procedure. In doing so, we reject the Director’s proposal that only “new evidence that could not reasonably have been provided to the agency in the first instance” is admissible in a § 145 action. Dir. Br. at 8. While the proceedings before the Patent Office do not limit the admissibility of new evidence in the district court, they may be considered by the district court if they cast doubt on the reliability of late-produced evidence, as with inconsistent statements or new recollections of previously forgotten events. As with any evidence introduced in a civil action, the district court as factfinder may give less weight to evidence introduced by an applicant in a § 145 action if the district court questions its credibility or reliability. Because the district court abused its discretion when it excluded Mr. Hyatt’s declaration under the wrong legal standard, we vacate the decision of the district court and remand.
The majority opinion in the en banc proceeding found Judge Newman filing a concurring opinion. She wrote:
I join the en banc court’s holding that new evidence may be provided in a civil action brought in the district court under 35 U.S.C. §145. However, the court also holds that when no new evidence is provided, the findings and rulings of the PTO receive the same deferential treatment in the district court as would apply if the cause were not a civil action under section 145, but instead were an Administrative Procedure Act direct appeal to the Federal Circuit under 35 U.S.C. §141. That is not the statutory plan.
The statutory plan is designed to differ from such a duplicative procedure, not to create it. Nonetheless, the court today holds that for those issues for which the applicant relies on the same evidence as was before the patent examiner, the ruling of the PTO is not determined de novo but is reviewed with APA deference, identically to the section 141 appeal, except that the decision is initially made by one judge in the district court, en route to three-judge review if appeal is then taken to the Federal Circuit. No party presented or even contemplated such a redundant procedure, and no amicus discussed it. It is contrary to statute, to precedent, and to almost two centuries of legislative policy.
Judge Newman went on to say: “Neither the APA nor Zurko obliterated the purpose or changed the structure of the section 145 action as a full de novo proceeding.”
It is no great secret that I almost universally agree with Judge Newman, so it won’t be a surprise to anyone that I agree with her here as well. I understand why the majority of the Federal Circuit adopted the APA deferential review standard when no new evidence is submitted to the District Court, but that is simply not required by Zurko. In fact, the exact opposite seems required by any fair reading of Justice Breyer’s decision in Zurko.
While many may be tempted to believe the Justice Breyer meant to suggest that the review by the de novo review by the Federal Circuit would be limited to where there is new evidence, the specific and unambiguous language of Justice Breyer says the exact opposite. In fact, Justice Breyer recognized the anomaly in the standard of review pointed out by the CAFC with respect to the situation where the District Court does nothing more than review what was considered by the USPTO. The anomaly recognized by Justice Breyer couldn’t exist unless Judge Newman’s view of a §145 proceeding being de novo is correct.
One final point regarding Judge Newman’s dissent is her rebuttal of the argument raised by the PTO Solicitor and Judges Dyk and Gajarsa in dissent; namely that applicants will withhold winning evidence from the examiner in order to introduce it on appeal to the District Court for the District of Columbia. Judge Newman succinctly, and correctly, points out in the only footnote of her concurring/dissent:
The PTO Solicitor and my colleagues in dissent argue that applicants will deliberately withhold evidence in their possession, in order to spring it on the district court under section 145. I share the view of the amici curiae that it is unlikely that applicants will withhold winning evidence from the examiner, in favor of a multi-year and expensive civil action in the district court.
I understand that the PTO Solicitor has to make arguments and represent the Office, but the argument that an applicant would withhold evidence and embark on a long, drawn-out and expensive appeals process that first goes through the Board, then to the District Court and ultimately to the Federal Circuit is absurd on its face. First, it has been known since Zurko that a potentially more applicant friendly standard of review is offered by going through the District Court, yet it remains rare. Second, the thought that any applicant would willingly hide evidence that shows they are entitled to a patent demonstrates an acute unfamiliarity with the patent process and the mindset of applicants. For crying out loud, there are upwards of 480,000 applications filed every year and even with appeals growing rather sharply there are less than 20,000 appeals. Applicants want patents, not ridiculous legal bills and years of uncertainty.
So the moral of this story is this: if you want to submit new evidence in the District Court proceeding you can without restriction, but without new evidence to submit you might as well go straight to the CAFC because Judge Newman’s view of a §145 proceeding being de novo did not win the day. So an appeal to the District Court for the District of Columbia is probably a lot less attractive than it was previously in most cases, which should make them all the more rare.- - - - - - - - - -
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.