Amici Cite Relevance of GAO Report, Empirical Data, to Back New Vision’s Claim that AIA Review Structure Violates Due Process

Inventor organization US Inventor (USI) and Ron Katznelson—the author of a widely cited study detailing the link between Patent Trial and Appeal Board (PTAB) judges’ decisions and their compensation—have filed separate amicus briefs supporting New Vision Gaming and Development, Inc. in its most recent appeal to the U.S. Court of Appeals for the Federal Circuit (CAFC). New Vision is arguing that America Invents Act (AIA) trials violate the Due Process Clause and that the recent Government Accountability Office (GAO) Report documenting how U.S. Patent and Trademark Office (USPTO) and PTAB management control influences Administrative Patent Judges’ (APJ) decision making bolsters its previous arguments and warrants a new appeal. While USI’s brief expands upon this argument, Katznelson’s provides both old and new data that he says proves a “structural bias” exists.

New Vision filed a brief with the CAFC on September 6, on return from remand after the USPTO denied its request for Director Review. The case relates to a PTAB decision canceling all claims of U.S. Patent No. 7,325,806 (‘806 patent) and was previously appealed to the CAFC. But since the last appeal, the GAO released a preliminary report revealing that PTAB judges are influenced by USPTO leadership, giving new weight to New Vision’s arguments.

We Should Be Eschewing Soviet-Style ‘Telephone Justice’

US Inventor filed an amicus brief on September 12 arguing that “all litigants (petitioners and patent owners) have endured a [PTAB] system that, since inception, betrayed American ideals of impartial and unbiased judicial decision making.” The brief further claims that the GAO’s “bombshell report” bolsters New Vision’s due process case, revealing that “APJs are subject to PTO and PTAB oversight and interference, such as Management Review and ARC, that lead to changed AIA outcomes.”

The House Judiciary Committee’s Subcommittee on Courts, Intellectual Property, and the Internet in July held Part II in a series of hearings to consider reforms to the PTAB 10 years after it was created by the AIA. The hearing coincided with the release of a preliminary report by the GAO that was commissioned in June of last year by IP Subcommittee Chair Hank Johnson (D-GA) and Ranking Member Darrell Issa (R-CA) to investigate PTAB decision-making practices. The GAO’s preliminary findings revealed that “the majority of [administrative patent] judges (75 percent) surveyed by GAO responded that the oversight practiced by U.S. Patent and Trademark Office (USPTO) directors and PTAB management has affected their independence, with nearly a quarter citing a large effect on independence.”

USI’s brief cited to other circuit courts of appeal decisions underscoring the importance of judicial independence to American values and said that the situation revealed by the GAO report amounts to “telephone justice.” Using the example of Supreme Court Justice Breyer’s account of his visit with a convention of Russian judges just after Boris Yeltsin’s election, during which the party boss called the judges to tell them how to decide the outcome of a particular case, USI said the United States should abhor such behavior as contrary to the “rule of law” and the “foundation of freedom.” USI added:

Amicus does not lightly make this comparison between internal operations of the PTAB and the former Soviet Union’s depraved system of justice. However, the GAO Report permits no lesser conclusion. The GAO Report cites facts that show the PTAB broke the “universal rule against secret trials,” In re Oliver, 333 U.S. 257, 266 (1948), and contravened the principle that “the administration of justice cannot function in the dark.”

USI also said the Federal Circuit should grant New Vision’s appeal in order to obtain relief for the APJs themselves. “They each suffer their own harm from being tethered to employment that forbids their comportment with national and international norms of judicial conduct,” said the brief.

Finally, USI recalled its previous argument that a study it conducted “found that there is an ‘October Effect’ supporting New Vision Gaming’s due process arguments about financial incentives.” The October Effect refers to the phenomenon uncovered by the study in which “the first month of the performance review year has consistently revealed APJ panels stretching farther to grant less meritorious petitions than they do in the final month when their pipeline for the prior year’s “decisional units” is already full. PTAB APJs disproportionately institute trial on weaker petitions when their decisional counter has reset to zero.”

Decisional Unit Credits are Not ‘Fungible’

Katznelson’s amicus brief, filed yesterday, is based on his July 2021 study, titled “The Pecuniary Interests of PTAB Judges—Empirical Analysis Relating Bonus Awards to Decisions in AIA Trials” but also includes some new information. Katznelson’s study examined the features of the PTAB bonus plan and the relationship between the awards paid to APJs in fiscal year 2016 and the number and type of decisions they made that year. “Specifically, APJs are awarded Decisional Unit (DU) credits for the work done on decisions they make in adjudicating any ex parte appeal” or AIA trial, says the amicus brief. “The larger number of DU credits APJs receive, the easier it is for them to obtain larger bonus awards and improve their opportunity for a salary increase.” While the USPTO has argued that the DU credits are fungible and that APJs could work on the large backlog of ex parte appeals rather than instituting AIA trials if they wanted to, Katznelson claims this assertion is false:

“This Brief shows that this PTO proposition is false and that APJs do not only have the capability and substantial incentives to earn the same number of DUs by working significantly fewer hours through institution and work on AIA trials, but that they are also subject to other organizational impediments and may be forbidden from taking on additional ex parte appeal work. As such, APJ’s are manifestly subject to ‘structural bias’ to institute more AIA trials, in violation of the Due Process Clause.”

Next, using data published by the USPTO to support its “aggregate costs” to justify changes to user fees, Katznelson showed that there is “a consistent trend, wherein APJs worked fewer hours on AIA trials to earn the same amount of DU credits they would earn from working on ex parte appeals.” As detailed in his July 2021 study, the brief explained:

“[T]he top 20 APJ bonus earners were predominantly engaged in AIA trials, with the median of only 5.1% work share of decisions in ex parte appeals. In contrast, the bottom 20 bonus earners were predominantly engaged in ex parte appeal decisions, with a median of 54.2% share of decisions being ex parte appeal decisions.”

See Katznelson’s brief for more information about  the charts below:

Leadership is Incentivized to Favor AIA Trials Too

Furthermore, the APJs must seek permission from PTAB leadership who “have presumptive pecuniary interest in denying permission,” according to Katznelson. The July 2021 study showed that senior PTAB official’s performance plans “contain critical element goals that require maintaining AIA trial completion in 12 months and issuance of institution decision within [the] statutory period of 3 months, and further requiring them to ‘[e]nsure PTAB employees are efficiently working on mission-critical tasks.’” Katznelson said this shows the leadership interests are in ensuring that APJs are focused on AIA proceedings and “are not distracted by extraneous appeals work that could undermine their ability to meet the statutory deadlines on AIA trial work already in progress.”

While there is an incentive for senior PTAB officials to reduce the backlog of ex parte appeals, the language used in their performance plans qualifies this goal as being “within limits imposed by AIA trial inventory and deadlines.” This puts AIA trials first, causing PTAB leadership “to protect the resources required to institute and adjudicate AIA trials at the expense of delaying ex parte appeal decisions if necessary, which have no statutory completion deadline.” Ultimately, said Katznelson, “the PTO cannot control or increase the number of ex parte appeals which are driven by patent applicants and thus those proceedings have no use in increasing PTAB revenues and workload.”

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