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Finding a Nut: Supremes Get a Patent Case Right!

Justice Clarence Thomas

Maybe it is the result of the case being of such little importance to the patent system as a whole (See Jump the Shark Patent Style), or maybe it is just evidence that even a blind squirrel finds a nut every once in a while.  Whatever the case may be, the United States Supreme Court yesterday did get it right in a patent case.  Now if they can only build on this momentum and go back and reconsider all the truly awful, illogical and silly rulings of the past.  [INSERT CHUCKLE AND YOUR OWN JOKE HERE].  Right… I’m not holding my breath either!

From a procedural standpoint, Kappos v. Hyatt came to the Supreme Court after an en banc decision by the United States Court of Appeals for the Federal Circuit. The question presented and considered by the full 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 was — YES. However, the Federal Circuit said that without new evidence at the District Court the Federal Circuit must continue to give deference to the USPTO on further appeal. See CAFC Rules New Evidence OK in BPAI Appeal to District Court.

This case arose due to a oddity of patent law. 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.

The appeal was taken to the Supreme court by the Patent Office arguing that a district court should admit new evidence in a §145 action only if the proponent of the evidence had no reasonable opportunity to present it to the PTO in the first instance. The Patent Office also argued that when new evidence is introduced, the district court should overturn the PTO’s factual findings only if the new evidence clearly establishes that the agency erred. To support this interpretation of §145, the Director relied on background principles of administrative law and pre-existing practice under a patent statute that predated §145.

Justice Thomas delivered the opinion for the Supreme Court, which was unanimous although Justice Sotomayor concurred in a separate opinion that was joined by Justice Breyer.  Justice Thomas explained that there were essentially two questions for the Supreme Court to determine, mimicking the presentation by the Patent Office.  First, whether there are any limitations on the patent applicant’s ability to introduce new evidence before the district court.  Second, what standard of review the district court should apply when considering new evidence.  To the first question the Supreme Court concluded that there are no limitations on a patent applicant’s ability to introduce new evidence in a §145 proceeding beyond those already present in the Federal Rules of Evidence and the Federal Rules of Civil Procedure.  To the second question the Supreme Court concluded if new evidence is presented on a disputed question of fact, the district court must make de novo factual findings that take account of both the new evidence and the administrative record before the PTO.

In an affirmation of the Federal Circuit that is rarely seen, Justice Thomas said:

[W]e agree with the Federal Circuit that “Congress intended that applicants would be free to introduce new evidence in §145 proceedings subject only to the rules applicable to all civil actions, the Federal Rules of Evidence and the Federal Rules of Civil Procedure.”

We also agree with the Federal Circuit’s longstanding view that, “where new evidence is presented to the district court on a disputed fact question, a de novo finding will be necessary to take such evidence into account together with the evidence before the board.”

But let’s not get carried away with a love-affair over the Federal Circuit decision in the case, then styled Hyatt v. Kappos.  The Federal Circuit was incorrect (at least in part) in its ruling in the case. As Judge Newman pointed out in a concurring opinion, there is absolutely no statutory support for the distinction drawn by the majority regarding deference owed to the Patent Office.  Remember, the Federal Circuit said that district courts must continue to give deference to the Patent Office where there is no new evidence provided.  As Judge Newman pointed out, this part of the holding is inconsistent with the Supreme Court’s ruling in Dickinson v. Zurko. Newman 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.”

Unfortunately, this issue was not directly appealed by the Patent Office and, thus, not directly addressed by the Supreme Court.  So while we can rejoice that the Supreme Court got one correct in the patent sphere, they got it correct only in so far as they went.  The incorrect aspects of the Federal Circuit decision were not appealed and, therefore, largely remain intact.

Having said that, Justice Thomas did write the following:

Though the PTO has special expertise in evaluating patent applications, the district court cannot meaningfully defer to the PTO’s factual findings if the PTO considered a different set of facts. Supra, at 8; cf. Microsoft Corp. v. i4i Ltd. Partner- ship, 564 U. S. ___, ___ (2011) (slip op., at 19) (noting that “if the PTO did not have all material facts before it, its considered judgment may lose significant force”). For this reason, we conclude that the proper means for the district court to accord respect to decisions of the PTO is through the court’s broad discretion over the weight to be given to evidence newly adduced in the §145 proceedings.

This language seems to suggest that bifurcation of new evidence from old evidence cannot neatly and cleanly be accomplished in a real sense.  So if there is at least some new evidence at the district court the patentee will need to argue that the new evidence submitted changes the character and scope of the entirety of the record, making the record facts before the district court “a different set of facts.”  This should then entitle the applicant to a de novo review without deference to the Patent Office determination, as is truly and fairly envisioned by 35 U.S.C. 145.

I am bolstered in this belief by the Supreme Court shooting down the specious argument made by the Patent Office regarding patent applicants hiding the best evidence during the application phase.  All along the USPTO has argued that if all admissible evidence is subject to a de novo review this will encourage patent applicants to withhold evidence from the PTO intentionally with the goal of presenting that evidence for the first time to a non-expert judge.

As if patent applicants are actually trying to stall for a decade or more and then spring new evidence on the district court.  Really!?!?!  The average time it takes to go from application filing to Board Decision at the USPTO is currently 83.8 months according to the USPTO Patent Dashboard.  That is almost 7 years!  Then add the time it takes to get through the district court process and the inevitable appeal to the Federal Circuit if the patent applicant prevails at the district court and it is ludicrous to believe patent applicants will engage in a hide the ball during prosecution to spring evidence for the first time some 8 or so years later.

Justice Thomas saw through this PTO argument, saying:

We find that scenario unlikely. An applicant who pursues such a strategy would be intentionally undermining his claims before the PTO on the speculative chance that he will gain some advantage in the §145 proceeding by presenting new evidence to a district court judge.

Therefore, if you weave the dismissal of the PTO’s argument that de novo consideration of all admissible evidence would lead to catastrophe together with new facts changing the record actually considered by the USPTO, I think you get close to overruling that what the Federal Circuit got wrong in the underlying Hyatt v. Kappos decision.  Of course, if you don’t provide at least some new evidence at the district court then you ought to expect the Federal Circuit will expect the district court to give deference to the Patent Office.  But how hard is it to submit at least some new evidence?  Not very — so just do it!

Finally, a reality check.  This case matters to Hyatt, but to hardly anyone else.  Virtually no one brings appeals from the Patent Office to the district court under § 145 despite the far more favorable review standard, which we have known about at least since 1999 in Dickinson v. Zurko.  Thus, it seems foolish to think much will change.  § 145 will remain an infrequently used relic of the patent system, and we are left to lament that it would have been far better for the Supreme Court to get Mayo v. Prometheus right than for them to get Kappos v. Hyatt right.  Sigh.


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Join the Discussion

3 comments so far.

  • [Avatar for step back]
    step back
    April 20, 2012 02:31 pm

    Your link (not here but in earlier WatchDog page) to the original Fed. Cir decisions on Hyatt v. Kappos appears broken. Can you fix it please?
    IIRC, there was more to the fact pattern than Hyatt being “negligent” in not providing the disputed minutiae of evidence, wasn’t there? It appears that the SCt. has erased that inconvenient set of facts. Before we applaud the SCt. for getting it right, let’s first get all the facts out on the table. Thanks. 🙂

  • [Avatar for Stan E. Delo]
    Stan E. Delo
    April 21, 2012 07:29 am


    What do you mean by IIRC? An inquiring mind would really like to know. Cryptic Lawyerspeak perhaps?


  • [Avatar for Stan E. Delo]
    Stan E. Delo
    April 21, 2012 07:35 am

    Maybe If I Recall Correctly?