High Court to Affirm Sec. 145 New Evidence But Review Standard Open, Practitioners Say

Bloomberg BNA’s Patent Trademark & Copyright Law Daily™is the IP industry’s premier news service, offering objective, timely,and reliable daily news coverage and commentary from leading IP law...

By Tony Dutra  

The U.S. Supreme Court justices did not buy the government's arguments that evidence that could have been presented during patent prosecution should not be introduced in a district court challenge to patent denial, practitioners told Bloomberg BNA after the Jan. 9 oral arguments in Kappos v. Hyatt, No. 10-1219 (U.S., argued Jan. 9, 2012).

The Patent and Trademark Office appealed the ruling by the en banc U.S. Court of Appeals for the Federal Circuit that there is no heightened standard for introducing new evidence when a party litigates the rejection in a district court.

The commenters predicted that patent applicants seeking district court review of PTO rejections would be able to introduce new evidence, albeit with potentially lesser weight than the record created by the PTO. However, the stakeholders were not sure what standard the court might apply to prevent evidence that was knowingly withheld from the office during patent prosecution.

Denied Applicant's Court Declaration Excluded

Detail on the facts of the case and the oral arguments is available in a companion story in this journal.

In brief, patent applicant Gilbert P. Hyatt, dissatisfied with a rejection by the PTO for lack of written description support, filed a civil action under 35 U.S.C. §145 to have a district court overturn the PTO's decision, rather than appealing to the Federal Circuit. However, the judge excluded Hyatt's declaration challenging the PTO's decision as new evidence inadmissible in a Section 145 action because it could reasonably have been provided to the agency in the first instance.

A 7-2 en banc Federal Circuit court reversed. Hyatt v. Kappos, 625 F.3d 1320, 96 USPQ2d 1841 (Fed. Cir. 2010) (en banc) (215 PTD, 11/9/10). Patent applicants in Section 145 proceedings may introduce evidence limited only by the Federal Rules of Evidence and the Federal Rules of Civil Procedure, the court said.

The government petitioned for writ of certiorari and the court granted the request June 27.

Ginger D. Anders, assistant to the Solicitor General, argued on behalf of the PTO Jan. 9. Aaron M. Panner of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C., represented Hyatt.

Practitioners Previously Involved in Case

Bloomberg BNA received comments on the oral arguments from three practitioners who had involvement in the case earlier:

• Courtenay C. Brinckerhoff of Foley & Lardner, Washington, D.C., wrote the American Bar Association's case preview for the court.

• Robert M. Isackson of Orrick, Herrington & Sutcliffe, New York, authored the Intellectual Property Owners Association's amicus brief.

• Charles E. Miller of Dickstein Shapiro, New York, wrote an amicus brief supporting Hyatt's position on behalf of the New York Intellectual Property Law Association.

Each spoke in their individual capacity and not as representatives of their firms or the associations.

Was Declaration Evidence or Argument?

In general, there was a question at the Jan. 9 oral arguments as to how to characterize the Hyatt declaration at issue in the instant case, and whether the applicant deliberately withheld it from the office during patent prosecution.

Justice Sonia M. Sotomayor questioned whether Hyatt's declaration should have been treated as new evidence or as argumentation on the written description question. She relied on an amicus brief filed by Verizon Communications Inc. and other high tech firms that argued that deference was not at issue here, and thus that both the district and appeals courts erred in ruling otherwise.

“The case never would have come up if the Declaration/Affidavit at issue were treated as argument and not evidence,” Brinckerhoff said. “The district court could have considered the new arguments, but would have then reviewed the [PTO's Board of Patent Appeals and Interferences'] decision for substantial evidence.”

Miller could see no reason why the declaration was inadmissible in any case. “Fed. R. Evid. 403 prescribes the specific (and presumably the only) grounds upon which the court can exclude evidence,” he said. “Hyatt's declaration does not seem to fit into any the four categories of excludable evidence.”

But in court, Anders contended that, while a written description argument is a question of law, it “rests on subsidiary fact findings, including what the ordinary skill in the art is, what a person of ordinary skill in the art would understand when he reads the specification, and where in the specification … there is description support, for the claims that shows that Mr. Hyatt possessed the invention that he claimed.”

Brinckerhoff agreed to an extent. “At the patent office, there is sometimes a fine line between argument and evidence, especially in the context of written description,” she said. “But it could be more ‘evidence' than ‘argument' if it purports to set forth the perspective of a person of ordinary skill in the art.”

Miller, in fact, reviewed the declaration and ultimately agreed with Anders's characterization of the document. “The idea that Hyatt's declaration was really a new argument rather than additional evidence is a straw man because the premise is false,” he said. “The declaration sets forth a litany of factual statements (page and line number) of where his claim elements are supported in the specification of his patent application in response to what the examiner had asked Hyatt to supply during the prosecution stage.”

“I don't think the court will adopt Verizon's view that on the merits, the declaration was not new evidence, and the issues raised by the writ are not properly before the court, but that is a possibility,” Isackson said. “I would expect a dissent on this,” he added, though.

Application of Microsoft v. i4i

The practitioners were uniform in questioning the parties' debate over the relevance of a Supreme Court decision last June. Microsoft Corp. v. i4i L.P., 131 S. Ct. 2238, 98 USPQ2d 1857 (U.S. 2011) (112 PTD, 6/10/11).

“The Court in Microsoft held,” the government argued in its merits brief, “that a party challenging the validity of a patent in the context of an infringement suit must establish invalidity by clear and convincing evidence, even when it relies on evidence of invalidity that was not before the PTO when it granted the patent.” And there is and should be a parallel between the patent grant context and the patent denial context, the PTO said.

“I don't think Microsoft really applies,” Brinckerhoff said. “Microsoft turned on 35 U.S.C. §282—a patent is presumed valid. Yes, the presumption of validity is traced to a notion that the PTO did its job correctly, but it's the statute itself that creates the presumption and also says that the challenger bears the burden of proof.”

Bifurcated Standard of Review

Yet she and Isackson still saw a way the case may present an issue as to the government's position in Hyatt.

In a colloquy with Justice Anthony M. Kennedy in court, Anders contended that the Federal Circuit's approach created a bifurcated standard of review.

Isackson agreed. “For those facts determined by the PTO where no new evidence is presented in court, the review is based on the deferential administrative review principle of whether there is substantial evidence to support the PTO's determination, and would require a thorough conviction that the PTO was wrong to reverse,” he noted. But the appeals court also held, he said, that “where new evidence is presented, the district court review is de novo as to those issues, and [would apply a standard of] substantial evidence as to the other issues.”

Brinckerhoff agreed as well, and questioned whether the comparison to the Microsoft decision will force the court to deal with the statutory differences. “In Microsoft, the court didn't find support for such varying standards in Section 282,” she said, “but they may be forced into it for Section 145.”

Ultimately, in court, Kennedy called the Federal Circuit's standard a “middle position,” and noted to Anders that the government was asking the court to choose between the substantial evidence standard on one end a complete de novo review standard on the other.

Isackson was not sold on this middle position. “Microsoft implicates harmonizing the district court's standard of review to be a de novo review of all evidence, regardless of whether there is any new evidence,” he said. “I think it will trouble the court somewhat if it was otherwise inclined to adopt the Federal Circuit en banc holding.”

Sotomayor had said that the Microsoft court distinguished the nature of the review and “burdens that attach to proof,” and Isackson found that point the crux of the argument between the parties. “The government was trying to stretch Microsoft to support its argument on a ‘consistency' policy rationale,” he said. Conversely, “Panner pointed out that the presumption of validity led to the higher burden of proof, but did not impact whether or when to admit new evidence into the record, or how doing so might alter the deference the court must pay to the PTO's decision.”

“The government's Microsoft argument is one that the Supreme Court can accept or reject or just ignore depending on its ultimate decision,” he said, “but I don't see it as compelling support for the government.”

Is Gamesmanship at PTO a Concern?

Sotomayor and Justice Stephen G. Breyer were concerned about gamesmanship at the PTO, with patent applicants choosing which arguments to make in prosecution and which to save for litigation. But in court, Panner repeated what the Hyatt and amicus briefs had argued in unison: “the practicalities of patent prosecution practice are that no applicant would hold back evidence [from the PTO] in an effort to produce that sort of tactical advantage,” that is, for the sole purpose of wanting to make an additional argument in court.

“I don't think gamesmanship is a legitimate concern,” Brinckerhoff said as well. “Applicants want to get a patent from the patent office. They don't want to go through the costs of a district court litigation. I think Panner made some good points in his argument.”

Miller agreed with that assessment, also commending Panner for his arguments on the issue. “And remember that Hyatt prosecuted his patent application before the PTO and the BPAI pro se,” Miller noted as well. “It wasn't until he lost at the BPAI that he retained patent counsel to advise and represent him—a fact which was not touched upon at all at the oral argument.”

“I think the patent bar generally agrees it is easier and quicker and preferable and less costly to work with the PTO examiner during substantive prosecution to get patentable subject matter than to take your chances on an appeal, which takes time and has an uncertain outcome,” Isackson said in agreement with Brinckerhoff. “You only appeal when you become convinced that there is no more negotiating room and the PTO is just not getting the invention and the increased cost of appealing is worthwhile.”

Miller agreed and went further. “Section 145 contains a fee-shifting provision that requires the plaintiff-applicant to pay all the expenses in the case, including those of the PTO, thereby inhibiting gamesmanship on the part of the dissatisfied applicant,” he said.

And Isackson also noted that Hyatt's situation will be increasingly rare. His patent application claims priority back before the 1994 change in patent term—from 17 dates after issuance to 20 years from date of filing (Pub. L. No. 103-465). That is, if Hyatt is successful, he will get a patent term of 17 years, while the vast majority of patent applicants—those claiming priority after 1994—would lose patent term while the application is tied up in litigation.

Prediction: Affirm, But Deference Standard?

Brinckerhoff called it a close case, but predicted, “I think they may affirm on the evidence and come up with a more deferential standard of review.”

The only argument that seemed to cut clearly in favor of the government at the Jan. 9 oral arguments was the court's desire to avoid a “unique” standard of review for the PTO compared to all administrative agencies. Breyer, joined by Kennedy and Justice Elena Kagan, expressed concern for continued “uniformity” in adminstrative law.

“While I believe the court will find seductive the government's argument that all administrative agencies should have the same uniform judicial review process, and be tempted to adopt the government's argument of a deferential standard based on the PTO having first considered all material evidence, I don't believe the government wins here,” Isackson said.

“I think the court is likely to find that the Federal Circuit got it right on the admissibility of new evidence, meaning that the Federal Rules of Civil Procedure and Evidence apply as in any ‘civil action,' but I can't predict whether the court will either adopt some gatekeeping test for new evidence, or adopt a uniform standard of review that all issues are reviewed de novo.”

If these predictions are correct, this case will become the fourth straight decision by the high court to affirm the Federal Circuit, which may upend the conventional wisdom that certiorari is granted to overturn the appeals court's opinions.


For More Information  

Federal Circuit's en banc Hyatt opinion at http://pub.bna.com/ptcj/071066Nov8.pdf    

Transcript at http://pub.bna.com/ptcj/101219transcriptJan9.pdf    

Brinckerhoff is a member of this journal's advisory board.