Chenery doctrine another legal norm not respected by the CAFC

EDITORIAL NOTE: What follows is adapted from the Summary of the Argument of the Amicus brief filed by US Inventor on May 4, 2018, in support of the Petitioner, Droplets, Inc. Published here with permission of US Inventor.

 

This petition for writ of certiorari file by Droplets, Inc. presents a square conflict over the Chenery doctrine in a context of exceptional legal and practical importance for patent practitioners. Under Chenery, an agency’s decision must stand or fall on its own terms, leaving reviewing courts to only the actions of the agency. SEC v. Chenery Corp., 332 U.S. 194, 196 (1947) (Chenery II) ; accord Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 50 (1983).

In the proceedings below, the Patent Trial and Appeal Board invalidated the claims of petitioner’s patent. The sole dispositive issue before the Board was the proper construction of the patented claims, yet the Board’s disposition of that issue consisted of a single, unsupportable sentence. In the Federal Circuit, the government accordingly defended the Board’s decision on new legal grounds not articulated by the Board itself. Although that tactic is precluded by Chenery and the prevailing law in multiple courts of appeals, it is permitted by entrenched precedent in the Federal Circuit, which, once again, has departed from the baseline legal norms applied in other courts.

More than half a century ago, the Supreme Court announced a “simple but fundamental rule” of administrative law: “that a reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency.” Chenery II, 332 U.S. at 196 (emphasis added). Thus, an agency’s “action must be measured by what [the agency] did, not by what it might have done,” SEC v. Chenery Corp., 318 U.S. 80, 93–94 (1943) (Chenery I), so if the agency’s “grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis,” Chenery II, 332 U.S. at 196.

Chenery remains a “bedrock principle of federal administrative law,” Gary Lawson, Federal Administrative Law 362 (5th ed. 2009), that “continues to be cited with approval by the Court,” Stephen G. Breyer et al., Administrative Law and Regulatory Policy 433 (6th ed. 2006); e.g., Gonzalez v. Thomas, 547 U.S. 183, 186 (2006); INS v. Orlando Ventura, 537 U.S. 12, 16 (2002). And time has only magnified Chenery’s influence. Chenery’s rule has been applied to the full range of agency decision- making, encompassing everything from informal actions, Camp v. Pitts, 411 U.S. 138, 138 (1973), to formal notice- and-comment rule-making, Motor Vehicle Mfrs. Ass’n of the U.S., Inc., 463 U.S. at 34 (1983). And its crucial insight—that agencies should be bound by their written word in justifying their actions—has been adopted in other areas of administrative law as a prerequisite for judicial deference, as well as the foundation for Congress’s enactment, a decade after Chenery, of the Administrative Procedures Act, Pub. L. No. 79-404, 60 Stat. 237 (1946). See Kevin M. Stack, The Constitutional Foundations of Chenery, 116 Yale L. J. 952, 1004 (2007).

Unfortunately, Chenery is yet another baseline legal norm that is not given due respect in the Federal Circuit. That court swims against the tide of Chenery’s expansion, enacting a restriction on its operation that dramatically reduces the rule’s scope. In the Federal Circuit, Chenery’s rule is reserved for “fact” or “policy” questions—or things that require “agency expertise.” In re Comiskey, 554 F.3d 967, 974 (Fed. Cir. 2009). But when an agency’s action turns on legal questions, the Federal Circuit has declared that it will “affirm on grounds other than those [the agency] relied upon in rendering its decision.” Ibid.

The Federal Circuit’s contraction of Chenery presents a question of great consequence for intellectual-property owners, and an issue worthy of Supreme Court attention because it directly impacts the operations of the PTO. That agency is responsible for granting, invalidating, and administering many intellectual-property rights, and it is uniquely under the sway of the Federal Circuit’s jurisprudence. Because the Federal Circuit has exclusive appellate jurisdiction over many of the PTO’s actions, that court’s interpretation of Chenery’s appellate-review rule gives the PTO sweeping license to change its own legal interpretations, including by varying the very metes and bounds of property rights—even years after they are originally granted. The importance of this case is only magnified by the fact that the PTO’s decisions occur within an administrative environment that runs up to the limit of the constitutionally permissible, where inventors’ property rights are adjudicated without access to a jury or a disinterested, life-appointed judge. In this boundary-pushing context, scrupulous insistence on reasoned agency decision-making and procedural regularity provide the only protection to the individual, and the only meaningful checks on the agency’s powers.

This a very important case. The Federal Circuit’s interpretation of Chenery makes for very bad administrative law.

Chenery could not be plainer. It pertains to all questions that “the agency alone” is authorized to decide, without discriminating among legal, factual, and policy questions, even if such discrimination were possible. The premise underlying the Federal Circuit’s narrowing of Chenery— that agencies ought to be subject to the same rules for appellate review as litigants on appeal from the decisions of district courts—is fatally flawed. While it is common in appeals from ordinary district court litigation for appellate courts to substitute a proper legal rationale to affirm when the district court’s grounds for its judgment are unsupportable, an agency appearing in court is no ordinary litigant. It is a co-equal branch with its own congressionally conferred responsibility to make legally binding legal decisions—decisions that often trump judicial ones. For agency decisionmakers to shift their decision-making authority to appellate lawyers slips those congressionally imposed bounds. And for an appellate court to supplant bad agency decision-making with a replacement of the court’s own creation is a usurpation of Congress’s power, and a derogation of the court’s legitimate authority to hold agencies to account for their decisions.

Excusing such shifts in legal rules also undermines one of the most important principles derived from Chenery: that agencies must properly justify the legality of their actions before they would wield the colossal power of government to seize property and affect basic aspects of people’s everyday lives. To allow otherwise is simply inconsistent with the rule of law.