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Opinion analysis: Federal Circuit bounces back in patent denial litigation

Just one day after its unanimous reversal in Caraco v. Novo Nordisk, the Federal Circuit got a unanimous affirmance Wednesday in Kappos v. Hyatt.  The case involves the procedures a district court follows in a case under Section 145 of the Patent Act, a little-used provision that allows a rejected applicant to file a new action in federal district court challenging the Patent and Trademark Office’s denial of a patent application.

Sweeping away the detailed arguments about the history of this long-standing provision as if they had never existed, the Court affirmed the Federal Circuit’s decision in a brief, matter-of-fact opinion by Justice Thomas that relied strongly on the Court’s sense of the statute’s place in the overall scheme of review.

As the Court approached it, the first question in the case was when the disappointed applicant can introduce new evidence in the district court to supplement the record before the PTO.  The government argued vehemently that traditional principles of administrative law suggested a high threshold for introducing new evidence; thus, it should be possible only in the relatively rare cases in which it would have been impossible to have introduced the evidence before the PTO.  The Court’s adoption of Administrative Procedure Act standards to govern Federal Circuit review (the 1999 holding in Dickinson v. Zurko) gave the government a strong precedent on which to build.

Still, the position sat quite poorly with the Justices at argument because of the facts of this case, in which the PTO Board ruled against issuance of the patent on entirely new grounds, not previously considered by the examiner; the applicant could not plausibly have foreseen the value of the evidence since it had no notice of the basis for denial of its patent.

On that record, it should surprise nobody that the Court saw a clear answer in the statutory mandate that the district court decide the matter “as the facts in the case may appear”: because the statute plainly authorized the admission of some new evidence, the simplest answer was the one the Federal Circuit gave, permitting the admission of evidence under ordinary rules of evidence.  The government’s contention that such a rule would encourage patent applicants to sandbag the PTO by withholding evidence until a district court proceeding was treated with appropriate ridicule by the Court: “We find that scenario unlikely.  An applicant who pursues such a strategy would be intentionally undermining his claims before the PTO on the speculative chance that he will gain some advantage in [a later] § 145 proceeding.”

Once the Court had determined that evidence is freely admissible, it still could have required the district court to give deference to the PTO’s expertise in applying the patentability standards.  But by then the Court was giving nothing to the PTO.  On the all-important standard of review, the Court simply adopted, by quotation, the Federal Circuit’s view that “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.”  The utter lack of analysis to support that back-of-the-hand dismissal of the PTO’s administrative process will strike many readers as startling.  Among other things, the Court gave no attention to the administrative law oddity of de novo review of a decision made by an expert agency, and no attention to the heavy dose of law and policy in the relevant questions.  Because the issues in these cases are rarely simple issues of historical fact, but more complex intermixtures of historical fact, policy, and legal doctrine, it is strange to erect a process that gives no deference to the PTO’s decision whenever the disappointed applicant can find a shred of new evidence to introduce.

The government has had a lot of success in backing the PTO’s efforts to push back against the Federal Circuit’s micromanagement of PTO processes.  But the government here overplayed a relatively weak hand.  By asking for a rule that would render the statute nugatory, in a case in which an applicant had been treated so shabbily, the government abandoned its chance to show the way to a balanced outcome that would give due deference to the PTO’s processes while leaving a safety valve for the review Section 145 mandates.

Recommended Citation: Ronald Mann, Opinion analysis: Federal Circuit bounces back in patent denial litigation, SCOTUSblog (Apr. 20, 2012, 10:57 AM),