Facebook v. Windy City Settles It: The CAFC Does Not Care About the PTAB’s Opinions

By Brad Close
March 26, 2020

“The Patent Office itself must follow the Board’s guidance until contradicted by the Federal Circuit. Beyond that, at the court level, the Precedential Opinion Panel’s opinions are little more than an indication of how their briefs will read.”

https://depositphotos.com/52890055/stock-photo-not-important.htmlThe Supreme Court in SAS (SAS Institute Inc. v. Iancu) was quite clear that the Patent Trial and Appeal Board (PTAB or Board) has to follow the statute when conducting Inter Partes Review (IPR). So, when Facebook sought to enter patent claims into their IPR against Windy City Innovations past the one-year deadline dictated by 35 USC § 315(b), the PTAB had conveniently written themselves an opinion that allowed Facebook to join Facebook to circumvent the deadline. The Board’s Precedential Opinion Panel (POP) used the language in USC § 315(c) and had written that the statutory use of the words “any person” allowed them to join a party to itself. See Proppant Express Invs., LLC v. Oren Techs., LLC, No. IPR2018-00914, Paper 21, at 4–6 (P.T.A.B. Nov. 8, 2018).

No Deference Owed

In Facebook, Inc. v. Windy City Innovations, LLC (Windy City), the CAFC stated that the Proppant Express opinion is contrary to the unambiguous language of the statute and vacated relevant parts of the Board’s decision that allowed Facebook to join itself as a party, as well as vacating the allowance of Facebook adding new claims in that joinder, which otherwise would have been past the one-year deadline.

The main opinion in Windy City looked into what deference the Court owed the POP:

We now turn to the question of what, if any, deference is owed to the PTO’s interpretation of § 315(c). Because we conclude that the clear and unambiguous language of § 315(c) does not authorize same-party joinder or joinder of new issues, we need not defer to the PTO’s interpretation of § 315(c). See Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842–43 (1984). [Pg. 23]

The reason the CAFC addressed Chevron is because Facebook and the PTAB argued in their brief that the POP opinion deserved deference in view of Chevron. As stated above, they found that argument non-applicable. This, even though the deference owed in Chevron is minimal:

 “Even under Chevron, we owe an agency’s interpretation of the law no deference unless, after ‘employing traditional tools of statutory construction,’ we find ourselves unable to discern Congress’s meaning.”  SAS, 138 S. Ct. at 1358 (quoting Chevron, 467 U.S. at 843 n.9). [Id.]

In other words, they look for plain meaning. If that is not clear, then they look to Congressional intent. Only after the attempt to divine Congressional intent has failed should the courts defer to an agency’s interpretation. Note that the main opinion did not say that the Chevron deference is owed to the Board, only that when looking at the steps in Chevron, its applicability to Windy City failed at the first step, so is moot.

Chief Judge Prost, as well as Judges Plager and O’Malley, were concerned enough about the nuances of that distinction that they went on to pen a concurring opinion. In that concurrence they detail why a POP opinion is not due any deference, even if the plain meaning of the statute is ambiguous. In short, they say the Director would have Chevron deference only if Congress were to expressly delegate the ability to adopt legal standards and procedures by prescribing regulations. What they determined was:

There is no indication in the statute that Congress either intended to delegate broad substantive rulemaking authority to the Director to interpret statutory provisions through POP opinions or intended him to engage in any rulemaking other than through the mechanism of prescribing regulations. [Concurrence, pg. 7.]

The result of this is any opinion of the POP on statute has no effect:

In light of the limited authority delegated by the AIA, we decline to defer to the POP opinion on this issue of statutory interpretation—a pure question of law that is not within the specific expertise of the agency.  [pgs. 10-11.]

The Court also determined that the Skidmore deference, which is even less deferential than Chevron, does not apply either.

In sum, even if § 315(c) were ambiguous—which it is not—we would conclude in the alternative that on appeal the PTO’s interpretation set forth in the POP opinion in Proppant is not deserving either of Chevron or Skidmore deference. [pg 15]

Do Not Accept the Board’s Interpretation

Therefore, any POP statutory interpretation is irrelevant. Practitioners should not accept any conclusions made by the Board about a statute, and petitioners should be more assured that a reasoned argument will prevail. Originally, the Board tried to pick and choose what parts of the statute to use. (The practices of the PTAB were likely unconstitutional, though they were never challenged on the proper grounds). When that was stopped, they started making up their own interpretations, even when it clearly conflicted with the unambiguous meaning of the statute. This will hopefully put an end to that practice.

If the opinion in Windy City holds, then the obvious question is “what use is any POP opinion on statutory interpretation?” The Patent Office itself must follow the Board’s guidance until contradicted by the Federal Circuit. Beyond that, at the court level, the POP’s opinions are little more than an indication of how their briefs will read. Of course, the Court also noted–ironically enough—that the Board has often issued conflicting decisions on statutory interpretation.

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The Author

Brad Close

Brad Close is an accomplished patent broker, having transacted patent sales since 2007 for a variety of clients, from international fortune 50 to small Silicon Valley startups. He is a leading expert on buying, selling, valuing and tailoring patent portfolios. He has spoken on such topics at conference in the US, Canada, Europe, and China.

For more information or to contact Brad, please visit his LinkedIn Page.

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Discuss this

There are currently 11 Comments comments. Join the discussion.

  1. TFCFM March 26, 2020 10:03 am

    BC: “Therefore, any POP statutory interpretation is irrelevant.

    I believe that this is a dangerously over-broad reading of the Facebook v. Windy City.

    The Federal Circuit held:

    Because we conclude that the clear and unambiguous language of § 315(c) does not authorize same-party joinder or joinder of new issues, we need not defer to the PTO’s interpretation of § 315(c).

    That is, in the face of clear and unambiguous statutory language, “Chevron deference” is irrelevant. That three judges opined that, even though the issue wasn’t squarely presented, they might have held that they weren’t going to defer to the PTO’s interpretation — at least in this instance — does not, in my opinion, justify any reasonable reliance that the Federal Circuit wouldn’t defer regarding different issues (especially where statutory language is unclear and Congressional intent is ambiguous).

    In this regard, this seems like “just another Chevron case”: clear statute = no deference. I think one would be wise to NOT assume that the Federal Circuit will practice no deference to PTO interpretations in all future situations.

  2. Pro Say March 26, 2020 10:07 am

    POP goes the . . .

  3. Curious March 26, 2020 2:13 pm

    That three judges opined that, even though the issue wasn’t squarely presented, they might have held that they weren’t going to defer to the PTO’s interpretation — at least in this instance — does not, in my opinion, justify any reasonable reliance that the Federal Circuit wouldn’t defer regarding different issues (especially where statutory language is unclear and Congressional intent is ambiguous).
    The issue isn’t merely the “PTO’s interpretation.” The issue involves how the PTO goes about implementing that interpretation. Regulations are OK (if rulemaking authority is delegated). What I believe David Boundy argued was that POP opinions are not regulations — POP opinions aren’t promulgated in the way regulations are promulgated (among other reasons). They are a different animal altogether. As stated by the Federal Circuit:
    The express delegation of rulemaking authority, thus, is for the Director to promulgate regulations governing the conduct of IPRs. … There is no indication in the statute that Congress either intended to delegate broad substantive rulemaking authority to the Director to interpret statutory provisions through POP opinions or intended him to engage in any rulemaking other than through the mechanism of prescribing regulations.
    As further stated:
    Notably absent from the AIA, accordingly, is any congressional authorization, for either the Director or the Board, to undertake statutory interpretation through POP opinions. Thus, just as we give no deference to nonprecedential Board decisions, we see no reason to afford deference to POP opinions.
    You also write:
    In this regard, this seems like “just another Chevron case”: clear statute = no deference.
    If this was “just another Chevron case,” we wouldn’t have gotten the very unusual “Additional views.” I would ignore those additional views at your own peril.

  4. Anon March 26, 2020 5:15 pm

    Great points, Curious.

  5. Josh Malone March 26, 2020 6:30 pm

    35 U.S.C. 326(a)Regulations.—The Director shall prescribe regulations…setting forth the standards for the showing of sufficient grounds to institute a review under subsections (a) and (b) of section 324; …establishing and governing a post-grant review under this chapter and the relationship of such review to other proceedings under this title;…

    Precedential Opinions ? Regulations

  6. Night Writer March 27, 2020 7:08 am

    @5 Josh

    It is administrative law, which is a bigger can of worms than patent law.

    If you want to understand what has happened to patent law, then just look at the history of anti-trust law. The Scotus for reasons likely to help large corporations eviscerated the Sherman Anti-Trust Act with the rule of reason.

    And the Scotus has done the same with patent law in eBay, KSR, and Alice. In each case it is the same game they play where they set up some test that the fact finder can use to do pretty much whatever they want.

  7. Anon March 27, 2020 8:01 am

    Night Writer,

    I do not disagree.

    Further, I am reminded of past positions of mine in thinking about just why the Supreme Court has such a fixation on inserting this type of “Anti-Brightline Rule” in matters of patent law:

    I have variably called this ‘thumb on the scale,’ ‘legislating from the bench,’ and even ‘fingers in the nose of wax.’

    Several of my Uncle Ben’s adages echo through the ages.

    With great power comes great responsibility.

    Power corrupts, and absolute power corrupts absolutely.

    Those that do not learn from history are bound to repeat it.

    MANY otherwise solid legal minds fall asleep when it comes to critically appraising the situation of the Supreme Court and that body’s role in the denigration of patent law.

    You are not one of those that have so fallen asleep.

    Prior to 1952, the Supreme Court had been invited by Congress to share in the power allocated TO Congress for shaping patent law with the use of Common Law to develop over time the meaning of ‘invention.’

    The Supreme Court abused this power, and rather than using Common Law to winnow and sift down to a solid state, the Court — enamored with the power of their having fingers in the nose of wax law of eligibility for a basic foundation of patent law — settled instead for a morass of dozens of different terms effectively being “Gist of the Invention.” They set themselves up as perpetual guardians of what should be allowed to be patented.

    Couple this power grab with a Court that self-labeled with the phrase: “The only valid patent is one that has not yet appeared before us” and you have the situation that birthed the Act of 1952 which stripped the Court of its role in fashioning “what does invention mean” and carved the former single paragraph from Congress into the modern several different sections of patent law.

    Ever since that Act of 1952, the Court, as an institutional body, and addicted to its former power, has sought to re-insert itself into being the arbiters of what should be allowed to be a patent.

    MANY have not learned from history, and fail to see the power grab across the separation of powers by the Court.

    Even today, now a year past the point where it was made evidently clear that all three branches of the government reflected on the Court’s ‘fingerprints’ in the mess (or Gordian Knot) of patent eligibility, we are no closer to cleaning up that mess — or cutting through that knot.

    I have provided the blue print to resolve this. Both in the short term and in the long term.

    Time will tell. Unfortunately, some will never learn.

  8. David Boundy March 27, 2020 10:28 am

    Dear Mr. Close —

    I agree with those above. I think you’re overreading the “additional views” section. The panel does not hold that no POP decision can ever warrant any deference. All they hold is that no POP decision can warrant Chevron deference. So, at least on issues of patent law, POP decisions fall into the default, Skidmore deference. My friend Jonathan Stroud thinks that Skidmore deference is essentially no deference at all, and I think that’s overstating it in the other direction.

    I am pleased that I predicted this outcome — these are nice primers on the topic —
    My amicus brief to the Federal Circuit — it’s only seven pages https://cdn.patentlyo.com/media/2019/09/BoundyBrief.pdf
    My amicus brief to the PTAB — only 15 https://www.patentspostgrant.com/wp-content/uploads/sites/34/2019/01/d2166277-46ac-4da1-8c7e-fc1088bdece6.pdf
    My article at patently o https://patentlyo.com/patent/2019/10/deference-labyrinth-response.html
    My article at IP Watchdog https://www.ipwatchdog.com/2019/10/09/re-examining-usptos-bid-adjudicatory-chevron-deference-response-one-analysis-facebook-v-windy-city/id=114364

    If you are a complete masochist who wants to understand this issue deeply, my article from last year is an embarrassingly exhaustive treatment —

    David Boundy, The PTAB Is Not an Article III Court, Part 3: Precedential and Informative Opinions, AIPLA Q. J. vol. 47 No. 1 pp. 1-99 (June 2019). The SSRN edition has updates reflecting cases decided after press date, https://ssrn.com/abstract=3258694

  9. David Boundy March 27, 2020 10:33 am

    Dear Mr. Close —

    I agree with those above. I think you’re overreading the “additional views” section. The panel does not hold that “any opinion of the POP on statute has no effect,” nor that no POP decision can ever warrant any deference. All they hold is that no POP decision can warrant Chevron deference. They also hold that this decision is not Skidmore-eligible, but that doesn’t mean that no POP decision can be Skidmore-eligible.

    So, at least on issues of patent law, POP decisions fall into the default, Skidmore deference. My friend Jonathan Stroud thinks that Skidmore deference is essentially no deference at all, and I think that’s overstating it in the other direction.

    I am pleased that I predicted this outcome. Here are some nice primers on the topic —
    My amicus brief to the Federal Circuit — it’s only seven pages https://cdn.patentlyo.com/media/2019/09/BoundyBrief.pdf
    My amicus brief to the PTAB — only 15 https://www.patentspostgrant.com/wp-content/uploads/sites/34/2019/01/d2166277-46ac-4da1-8c7e-fc1088bdece6.pdf
    My article at patently o https://patentlyo.com/patent/2019/10/deference-labyrinth-response.html
    My article at IP Watchdog https://www.ipwatchdog.com/2019/10/09/re-examining-usptos-bid-adjudicatory-chevron-deference-response-one-analysis-facebook-v-windy-city/id=114364

    If you are a complete masochist who wants to understand this issue deeply, my article from last year is an embarrassingly exhaustive treatment —

    David Boundy, The PTAB Is Not an Article III Court, Part 3: Precedential and Informative Opinions, AIPLA Q. J. vol. 47 No. 1 pp. 1-99 (June 2019). The SSRN edition has updates reflecting cases decided after press date, https://ssrn.com/abstract=3258694

  10. Curious March 27, 2020 10:40 am

    Judges abhor bright-line tests because it prevents them from doing what they think is the right thing. Conversely, they love flexible tests because they want to be able to craft distinctions to justify their preordained conclusion as to how any particular case should come out.

    As a matter of business/economics, bright-line tests are far preferable. They are easier (i.e., cheaper) to administer. They are more reliable. They are more predictable. Unpredictability is the bane of business. There are businesses that will invest in a project that only produces 10% profit if they are very certain that it will always produce 10% profit. However, a lot of business won’t touch a project that has the potential to produce 50% profit if there is a substantial chance that the project will also product a loss.

    Unpredictability is sand thrown into the gears of our economy, and judges seem to excel at creating unpredictability with the law.

    Judges do not appreciate that the judicial system isn’t for their benefit — it is for the benefit of the parties who use it. However, many judge-made laws have been created for the judge’s own benefit.

  11. David Boundy March 27, 2020 12:05 pm

    Dear Night Writer @ 6 and TFCFM @ 1 —

    In my view, the can and worms of administrative law have remarkably reduced in the last ten years. 20 years ago, John Manning (then my administrative law professor at Columbia, now Dean of the Harvard Law School) wrote an article decrying how unpredictable this very area of law was,

    In the last 10 years (starting in 2006), the Supreme Court and Courts of Appeals have largely gotten into agreement, and the law of rulemaking has fallen into a nice regular pattern. Both Justice Breyer and Justice Scalia taught admin law, and they did a lot to shave the shaggy dogs.

    I produced a nice “periodic table” of rules — it’s a little more complex than Mendeleeyev’s, but has similar explanatory power. The best published explanation of it is in my article

    David Boundy, The PTAB Is Not an Article III Court, Part 3: Precedential and Informative Opinions, the SSRN update edition at https://ssrn.com/abstract=3258694

    TFCFM, the upshot is that PTAB decisions can be eligible for Skidmore deference, but not Chevron.

    Read the first 25 pages and let me know what you think.

    David

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