Several days ago the 717 Madison Place blog published a disturbing article detailing how the United States Patent and Trademark Office (USPTO) picks Administrative Patent Judges (APJs) for expanded panels. According to admissions made by the USPTO during oral arguments at the United States Court of Appeals for the Federal Circuit the selection of Judges for expanded panels is done with the express intent to ensure the ruling desired by the Director. In other words, the Director stacks PTAB panels with Judges that are known to hold views on issues in alignment with the Director.
The case where this nearly unbelievable admission was made during oral argument was Yissum Research Development Co. v. Sony Corp. (Fed. Cir. 2015). The pertinent part of the oral argument, which 717 has conveniently provided here, reads as follows:
USPTO: And, there’s really only one outlier decision, the SkyHawke decision, and there are over twenty decisions involving joinder where the –
Judge Taranto: And, anytime there has been a seeming other-outlier you’ve engaged the power to reconfigure the panel so as to get the result you want?
USPTO: Yes, your Honor.
Judge Taranto: And, you don’t see a problem with that?
USPTO: Your Honor, the Director is trying to ensure that her policy position is being enforced by the panels.
Judge Taranto: The Director is not given adjudicatory authority, right, under § 6 of the statute that gives it to the Board?
USPTO: Right. To clarify, the Director is a member of the Board. But, your Honor is correct –
Judge Taranto: But after the panel is chosen, I’m not sure I see the authority there to engage in case specific re-adjudication from the Director after the panel has been selected.
USPTO: That’s correct, once the panel has been set, it has the adjudicatory authority and the –
Judge Taranto: Until, in your view, it’s reset by adding a few members who will come out the other way?
USPTO: That’s correct, your Honor. We believe that’s what Alappat holds.
So the USPTO admits that the Director does not have statutory authority to adjudicate an issue after a panel has been chosen, but argues that the Director can assert administrative authority to intentionally select Judges that will rule diametrically opposite to those Judges originally assigned to the case, thereby stacking any panel the Director chooses to achieve the result the Director wants in any case.
The USPTO also made a similar, although not so direct, admission during oral argument in Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., which was decided by the Federal Circuit on Tuesday, August 22, 2017. In his concurring opinion Judge Dyk (joined by Judge Wallach) mentioned concern with the USPTO stacking PTAB panels, but said the Court did not need to reach the issue. “While we recognize the importance of achieving uniformity in PTO decisions, we question whether the practice of expanding panels where the PTO is dissatisfied with a panel’s earlier decision is the appropriate mechanism of achieving the desired uniformity,” Dyk wrote.
These admissions by the USPTO are both stunning and scandalous for at least two reasons.
First, although APJs of the Patent Trial and Appeal Board (PTAB) are not Administrative Law Judges (ALJs), the Administrative Procedures Act (APA) does apply to PTAB proceedings. Indeed, the Federal Circuit has applied the APA to PTAB proceedings strictly. The importance of this is simple. The APA demands decisional independence, which obviously is not happening when the Director of the USPTO can stack a panel to achieve a particular desired outcome.
In Nash v. Califano, a case dealing with the Social Security Administration, an ALJ sued because he felt his judicial independence was being compromised by the agency. The case was dismissed by the district court, but was reinstated by the United States Court of Appeals for the Second Circuit. “The APA creates a comprehensive bulwark to protect ALJs from agency interference. The independence granted to ALJs is designed to maintain public confidence in the essential fairness,” Judge Kaufman explained.
Certainly, if an ALJ has standing to file a lawsuit that challenges an agency interfering with his guaranteed judicial independence, then it would seem logical to assume that all the patent owners who have lost at the PTAB where there were expanded panels would have standing to sue the USPTO. The discovery in such lawsuits, if they come and I suspect they will, should be very enlightening.
Second, multiple patent owners have been harassed with large numbers of post grant challenges. For example, Zond was faced with 125 petitions. Some of these patent owners reached out directly to USPTO Director Michelle Lee to ask her assistance. Trading Technologies International, the owners of multiple patents on graphical user interfaces that should never qualify for covered business method review, have been hauled into CBM review after CBM review. TTI asked Lee use her power — a power the Patent Office specifically and correctly acknowledges was given to the Director in the America Invents Act — to step in and put an end to this harassment at the hands of multiple petitioners and a complicit PTAB. Lee refused, explaining she did not want to place her finger on the scales. That justification is laughable in light of the admissions about what was really happening inside the USPTO. Lee was stacking PTAB panels when necessary to intentionally place her finger on the scale so that cases would come out as she wanted.
What, you didn’t know this was happening at the USPTO? You didn’t realize the Office was knowingly and intentionally ensuring that decisions were to the liking of Michelle Lee, who was the one running the USPTO as either Director or in Acting Capacity ever since then Acting Director Teresa Rea left the USPTO in the fall of 2013 and up until Spring 2017.
Don’t beat yourself up for not realizing that the USPTO has been stacking the deck in an egregiously unfair game of whack-a-patentee at the PTAB. How could you be expected to know really, at least before the somewhat vague hint in the Dyk/Wallach concurring opinion in Nidec? The Federal Circuit decided the Yissum case, where the most glaring admission was made, with a Rule 36 affirmance in December 2015. That means no substantive opinion, just a one-word decision: “Affirmed.” So despite Judge Taranto seemingly having an issue with the USPTO’s shocking interpretation of the Director’s power to unilaterally decide any case by stacking panels with sympathetic Judges, the only mention of this appeared in the oral argument transcript because there was no opinion.
As understandable as the need for a mechanism to quickly resolve cases is for the Federal Circuit, there is something fundamentally wrong with using Rule 36 as often as the Court does – which is now over 50% of the time. A judgment providing no insight into the rationale applied is problematic. A judgment that does not alert the public to what seems to be a striking abuse of power by the USPTO is unconscionable.
What exactly does the Federal Circuit envision as their role if it is not to oversee the USPTO? How could it be that in America a Court of Appeals is made aware that an appointed government official is stacking the deck intentionally against patent owners and effectively in a unilateral way deciding the outcome of cases that the statute mandates be decided by a panel of impartial Judges?
And on top of all of this, just yesterday Patrick Anderson of IPWire wrote that it appears that a pro-patent 101 decision that chastised the patent examiner was scrubbed from the Office Database. Was this intentional? Was this just a computer glitch? It is impossible to say, but when you look at the litany of growing transgressions of the PTAB it becomes increasingly difficult to give the Office the benefit of the doubt.
Make no mistake; there is no impartiality at the PTAB. The PTAB is a fake court that has the trappings of a fair and balanced tribunal on the surface, but the closer you look at the inner workings the more you realize the tribunal is hopelessly broken and wholly incapable of being fixed. Given the lack of due process, the arbitrary and capricious rulings, refusing to consider timely submitted evidence, fundamentally misapplying the law of obviousness, determining that an MRI machine is an abstract idea, the PTAB ignoring the law, very serious conflicts of interest where Judges decide cases dealing with former clients, missing pro-patent eligibility PTAB decisions from the Office database, and now stacking PTAB panels to ensure outcomes, it is time to realize only viable solution is to disband the PTAB and search for a different answer.
It is also time for someone to do something about the Federal Circuit’s love affair with Rule 36. It is bad enough when Rule 36 is used to contrary to its explicit terms in clearly precedential cases, and it is bad enough when it is used to deprive the public of the benefit of the development of uncertain, even chaotic areas of law. It is entirely a different matter when Rule 36 hides what on the surface appears to be governmental abuse by the Executive Branch, and in this case that abuse is directed at the deprivation of a property right of constitutional importance. The Constitution is a document not known for its length and specificity, but patents are explicitly mentioned, and here we have the Director of the USPTO stacking panels to deprive patentees of their property? And the Federal Circuit says nothing?
Clearly the PTAB is not the only institution in need of substantial reforms.
UPDATED on Wednesday August 23, 2017 at 2:30pm ET. An earlier version of this article incorrectly stated the Federal Circuit had not yet decided Nidec, which was decided on August 22, 2017.