En Banc Fed. Cir.: No Heightened Evidence Requirement for D.C. Court Patent Actions

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Ruling against the Patent and Trademark Office, the en banc U.S. Court of Appeals for the Federal Circuit Nov. 8 reversed a panel and lower court decision and concluded that there is no heightened standard for introducing new evidence when PTO patent rejections are appealed under 35 U.S.C. §145 to the U.S. District Court for the District of Columbia (Hyatt v. Kappos, Fed. Cir., No. 2007-1066, 11/8/10).

Patent applicants dissatisfied with PTO decisions may--when they choose to take this challenge as an alternative to a direct appeal to the Federal Circuit--introduce evidence limited only by the Federal Rules of Evidence and the Federal Rules of Civil Procedure, the 7-2 court said.

The PTO had argued that new evidence should be admissible in a Section 145 action only if it could not reasonably have been provided to the agency in the first instance.

The court also held--with a 6-3 majority--that, when no new evidence is provided, the district court should review the record established by the PTO during patent prosecution for substantial evidence. The additional dissenting vote on that issue said there should be no judicial deference to the examiner's findings just because no new evidence is presented in court.

Argument Excluded in Section 145 Proceeding.

The appellant in the case, patent applicant Gilbert P. Hyatt, alone accounted for 17 of the 46 lawsuits brought under Section 145 in the U.S. District Court for the District of Columbia between 2003 and 2009, compared to 301 direct appeals to the Federal Circuit over that time period.

When an examiner rejected his claims for an improved computer memory architecture for lack of written description and enablement in the instant case, Hyatt filed another Section 145 action against the PTO. In response to the PTO's motion for summary judgment, Hyatt filed a declaration supporting his belief that the written description was adequate. But Judge Henry H. Kennedy Jr. excluded the declaration.

On appeal, a split panel of the Federal Circuit in August 2009 affirmed the exclusion, following “the general practice of federal courts for over eighty years in certain circumstances to exclude evidence which a party could and should have introduced before the Patent Office but did not despite an obligation to do so.” Hyatt v. Doll, 576 F.3d 1246, 91 USPQ2d 1865 (Fed. Cir. 2009) (78 PTCJ 506, 8/21/09). Judge Timothy B. Dyk joined the majority opinion, written by now retired Chief Judge Paul R. Michel. Judge Kimberly A. Moore wrote in dissent.

However, in February the court agreed to rehear the case en banc (79 PTCJ 469, 2/26/10), and invited the parties to file new briefs addressing at least the following issues:

(a) Are there any limitations on the admissibility of evidence in Section 145 proceedings? In particular--

(i) Does the Administrative Procedure Act require review on the agency record in proceedings pursuant to Section 145?

(ii) Does Section 145 provide for a de novo proceeding in the district court?

(iii) If Section 145 does not provide for a de novo proceeding in the district court, what limitations exist on the presentation of new evidence before the district court?

(b) Did the district court properly exclude the Hyatt declaration?


Backed by several amicus briefs from major intellectual property groups, Hyatt's March 31 brief argued that the trial court should have access to “all competent evidence adduced” (79 PTCJ 821, 4/30/10).

The PTO countered in a May 3 response that the district court--like an early equity court hearing a “bill of review”--should not be able to consider evidence “that the plaintiff had failed, without reasonable excuse, to present to the prior tribunal” (80 PTCJ 191, 6/11/10).

Hyatt's reply brief faulted the PTO's analogy. “A 'bill of review' was--as the government's own authorities make clear--the form of action used to obtain an equity court's reconsideration of its own ruling,” Hyatt said. “There is no authority, however, to support the notion that a bill of review (or similar bill) was the appropriate form of action for obtaining relief from adverse administrative action.”

During July 8 oral arguments, the nine current active judges of the court frequently questioned one another indirectly while asking questions of counsel for the applicant and the PTO (80 PTCJ 328, 7/16/10).

Admissibility Legislation, Jurisprudence Traced to 1836.

Moore wrote the opinion for the en banc majority, reversing the panel's decision. “The statute provides no indication that [a Section 145] action is somehow different from a customary civil action,” she began.

Indeed, she traced the history of Section 145 to the first establishment of the Patent Office in 1836 through its first appearance as a separate statute--it had previously been linked to appeals of interference decisions--in the 1952 act. Hyatt and the PTO disputed what Congress was intending in its 1952 modifications. The court concluded that Congress did not mean to modify then current practice in courts that “an applicant's failure to previously introduce the evidence before the Patent Office goes to the weight of the evidence, not to its admissibility.”

The court identified several problems with the analogy to a “bill of review,” discounting the PTO's reliance on a U.S. Supreme Court decision in Morgan v. Daniels, 153 U.S. 120 (1894). “Morgan is a case about what standard of review ought to apply when the district court decides whether an applicant is entitled to a patent on exactly the same record that was before the Patent Office,” Moore said, but it “offers no guidance on the scope of admissibility of evidence.”

Instead, Moore cited an even earlier Supreme Court case, Butterworth v. Hoe, 112 U.S. 50 (1884), which held that district court patent appeals should be conducted “according to the ordinary course of equity practice and procedure.” Today, that means “in accordance with the Federal Rules of Evidence and Civil Procedure,” she said.

Of course, the proceedings before the PTO “remain relevant in a §145 action,” the court said, relying on Fregeau v. Mossinghoff, 776 F.2d 1034, 227 USPQ 848 (Fed. Cir. 1985). The court further said that, in the absence of additional evidence on a particular finding, a “deferential standard of review applies in recognition that the fact findings were made by the Patent Office--the knowledgeable agency charged with assessing patentability.”

But, it maintained, quoting from Fregeau, “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.”

What weight to afford newly admitted evidence falls within the discretion of the district court, Moore said, and, she made clear, “The practice of giving less weight to evidence whose reliability is impacted by an applicant's failure, without explanation, to provide it to the Patent Office, is entirely proper, and this practice is fully consistent with the rule that we announce today.”

APA Deference Only if No New Evidence.

The second PTO argument was based on the deference owed to the agency under the Administrative Procedure Act, and again the court conceded “an uncontroversial proposition: … If the parties to a §145 action do not introduce any new evidence before the district court, the court reviews the case on the same record presented to the agency and the reviewing court must apply the APA's substantial evidence standard to Patent Office fact findings.”

But the APA argument does not then extend to a case where new evidence is introduced. “The presence of such new or different evidence makes a fact-finder of the district judge,” the court said, quoting Dickinson v. Zurko, 527 U.S. 150, 164, 50 USPQ2d 1930 (1999) (58 PTCJ 172, 6/10/99).

In a Section 145 action, then, as the court weighs the new evidence, “the district court … must make de novo fact findings with respect to factual issues to which the new evidence relates.”

Policy Arguments Rejected.

The court next considered and rejected policy arguments made by the PTO.

First, the PTO contended that a heightened evidence standard is necessary to ensure that patent applicants completely present all arguments during patent application prosecution at the agency, thus protecting the agency's authority and promoting judicial efficiency. Though the court sympathized, it said, “Congress--not the Federal Circuit--must decide how best to do this.”

The court further downplayed the likelihood that applicants would deliberately withhold evidence from the PTO to give it two chances for success. Section 145 requires the applicant to pay all the expenses of the proceedings, the court said, giving the applicant “every incentive to provide the Patent Office with the best evidence in its possession, to obtain a patent as quickly and inexpensively as possible.”

Finally, the court distinguished its rule that parties may not raise issues in the district court that were not raised during PTO proceedings. “However, this rule does not preclude parties from introducing additional evidence as to issues that were raised before the Patent Office,” the court said.

In the instant case, the district court used a negligence standard in determining that the content of Hyatt's declaration should have been presented to the PTO, Moore said. She thus determined that the lower court abused its discretion when it excluded Hyatt's declaration, and she vacated the unpatentability decision.

Chief Judge Randall R. Rader, together with Judges Alan D. Lourie, William C. Bryson, Richard Linn, and Sharon Prost joined the majority opinion.

Newman Would Review PTO Record De Novo.

Judge Pauline Newman concurred with the standard for allowing new evidence, but dissented as to the treatment of the PTO record in instances where no new evidence is provided.

“I have come upon no legislative or precedential hint that there should be judicial deference in the equity action to the examiner's findings for those issues upon which no new evidence is presented to the court,” Newman said.

She distinguished interference actions under Section 146, “which expressly provides for admission of the PTO record to 'have the same effect as if originally taken and produced in the suit.' ” In contrast, she noted, Section 145 contains no similar provision and instead requires review “as the facts in the case may appear.”

“Section 145 calls upon the independent judgment of the district court, whether the evidence before the court augments or simply repeats the evidence that was before the Patent Office,” Newman concluded.

Dissent Focuses on Deference to PTO Under APA.

Once in the panel majority, Dyk now dissented, joined by Judge Arthur J. Gajarsa. “In my view, today's majority decision reflects a remarkable departure from settled principles of administrative law,” Dyk said.

This dissent--at 37 pages, longer than the majority opinion--went in the opposite direction of Newman's dissent, in fact arguing that deference is owed to the PTO even as to consideration of new evidence.

Section 706 of the APA, 5 U.S.C. §706, “requires judicial review on the agency record and submission of all relevant evidence to the agency,” Dyk argued. “In general, it permits supplementation in court only when agency procedures are inadequate. SeeCitizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 414-20 (1971). Here, the agency procedures are inadequate only insofar as they do not provide for live testimony.”

He even went so far as to extend the limitations proposed by the PTO. That is, he agreed with the PTO that new evidence should be allowed in court if it could not have been submitted to the PTO. But he rejected the agency's stated additional allowance for evidence when “there was a reasonable excuse for not submitting it to the PTO in the first instance and the evidence would be conclusive.”

In the majority opinion, Moore noted that the statute at issue in Overton Park provided only for “judicial review,” while Section 145 permits a “civil action.” “Where the statute permits a 'civil action' in relation to agency actions, the Supreme Court has held that this amounts to a trial de novo,” she said, citing Chandler v. Roudebush, 425 U.S. 840 (1976).

But Dyk reviewed Chandler in detail and found “no support for reading 'civil action' language, standing alone, as requiring a trial de novo.”

As the panel majority had done, Dyk relied on circuit court decisions in and after Barrett Co. v. Koppers Co., 22 F.2d 395 (3d Cir. 1927), but prior to the formation of the Federal Circuit. “Not a single court of appeals case has interpreted section 145 as permitting the submission of any and all new evidence,” he said. “Although the cases suggest varying standards for the admission of new evidence, they all acknowledge the necessity of establishing significant limitations on the admission of new evidence, and recognize that to provide otherwise would undermine the requirement of administrative exhaustion.”

“Allowing a trial de novo in the district court denigrates the important expertise of the PTO, is contrary to established principles of administrative law, finds no support in the language of the statute, and is contrary to decisions of at least five other circuits,” Dyk concluded.

Aaron M. Panner of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C., represented Hyatt. Deputy Assistant Attorney General Beth S. Brinkmann, argued for the PTO.

By Tony Dutra