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“The PTAARMIGAN brief argues that, while NHK/Fintiv is not invalid as a general statement of policy, its promulgation through PTAB decision-making limits its binding effect on PTAB panels.”
Last week, intellectual property (IP) law advocates against agency overreach became the latest to file an amicus brief with the U.S. Court of Appeals for the Federal Circuit in Apple Inc. v. Vidal, an appeal brought by Big Tech companies challenging the Patent Trial and Appeal Board’s (PTAB) NHK/Fintiv discretionary denial framework. The Patent and Trademark Attorneys, Agents, and Applicants for Restoration and Maintenance of Integrity in Government (PTAAARMIGAN) brief supports affirming the district court’s ruling, but urges the court to nonetheless “scold the PTO for its evasion of statutory rulemaking procedure.”
Unlike several other recent briefs supporting Apple’s appeal, many of which focus on the U.S. Patent and Trademark Office’s (USPTO’s) lack of notice-and-comment rulemaking, the IP law advocates argue that NHK/Fintiv is within the agency’s adjudicatory authority, but that the Federal Circuit should address the agency’s mistaken authority to promulgate rules by precedential decision-making.
PTAAARMIGAN: NHK/Fintiv Not Invalid, But Its Impacts Are Limited to Individual Cases
The brief filed by Patent and Trademark Attorneys, Agents, and Applicants for Restoration and Maintenance of Integrity in Government (PTAAARMIGAN) argues that, while NHK/Fintiv is not invalid as a general statement of policy, its promulgation through PTAB decision-making limits its binding effect on PTAB panels. Citing to Facebook v Windy City Innovations (2020), PTAAARMIGAN notes that the Federal Circuit has already outlined several statutory violations created by the PTAB’s precedential decision-making.
PTAAARMIGAN points to the U.S. Supreme Court’s 1969 decision in National Labor Relations Board v. Wyman-Gordon Co. as providing a useful template for scolding the USPTO while affirming the underlying ruling. Like the NRLB in Wyman-Gordon, the PTAB and the Precedential Opinion Panel (POP) lack authority to promulgate rules by adjudication, although it is within the agency’s statutory authority to render decisions reflecting the agency’s discretion. While Wyman-Gordon affirmed the agency’s decision, the Court rebuffed the NRLB’s position that rulemaking by adjudication complied with its obligations under the Administrative Procedures Act (APA).
While the Big Tech appellants have legitimate gripes, PTAAARMIGAN contends that their arguments that panels are misapplying NHK/Fintiv is proper for challenges to the discretionary denial framework as applied to specific adjudications, not facial challenges to the entire rule. Still, the IP advocates argue that Standard Operating Procedure 2’s (SOP2) provisions on precedential decision-making are part of an ongoing pattern at the agency of misusing sub-regulatory guidance to promulgate rulemaking, issues that may stem from the agency’s unique financial independence within the Executive Branch.
Director Vidal: Discretionary Denial Framework Doesn’t Change Standard for Institution
On October 16, USPTO Director Kathi Vidal filed the respondent’s brief in the case, arguing that notice-and-comment rulemaking procedures codified at 5 U.S.C. § 553 are not required for passing along instructions to agency personnel on applying the Director’s statutorily authorized discretion over PTAB institution decisions. Appellants are wrong to argue that NHK/Fintiv is a legislative rule subject to notice-and-comment rulemaking, Vidal contends, as the framework does not alter the legal rights of parties before the PTAB, nor does it modify any of the legal requirements of PTAB institution.
Courts applying the APA, including the Supreme Court, have found that the mere existence of public impacts created by agency rules do not automatically trigger notice-and-comment rulemaking requirements. Vidal argues that the appellants rely improperly on several appellate rulings of agency decision-making, including the Ninth Circuit’s 1987 ruling in W.C. v. Bowen, which involve agency rules impacting substantive legal standards. By contrast, NHK/Fintiv doesn’t alter the standard for inter partes review (IPR) institutions at the PTAB.
Vidal also contends that the Big Tech appellants misunderstand the nature of NHK/Fintiv, which does not have the force and effect of law simply because it is binding on agency employees. Not only does Vidal, as head of the agency, retain discretion to alter the discretionary denial factors examined under NHK/Fintiv, the framework does not direct PTAB panels to deny institution in particular circumstances. Vidal added that PTAB panels have instituted IPR trials despite several NHK/Fintiv factors on parallel district court litigation leaning toward denial of institution.
Amici Supporting Apple: Practical Impacts, Loper Bright Enterprises Require Review
An amicus brief filed by several industry groups, including the National Retail Federation and High Tech Inventors Alliance, argued that NHK/Fintiv has an outcome-determinative effect in practice that has eliminated avenues for PTAB review for many applicants. Local rules in Eastern Texas and Western Texas district courts create quick scheduling deadlines that have led to about half of all PTAB denials under NHK/Fintiv, amici argue, and expedited timelines in Hatch-Waxman litigation and U.S. International Trade Commission investigations have led to similar results. Interim guidance on compelling merits review issued in 2012 arguably confirms the nature of NHK/Fintiv as a legislative rule because it recognizes the impact of rapid trial timelines on PTAB review.
An amicus brief filed by Unified Patents and Zero Motorcycles argues that review of the lower court’s decision is necessitated by the Supreme Court’s ruling earlier this year in Loper Bright Enterprises v. Raimondo, which overruled Chevron deference for agency interpretations of its own statutory authority. The USPTO’s heightening of the threshold for PTAB institution goes well beyond the “best reading” of the America Invents Act (AIA) as required under Loper Bright Enterprises given the PTAB’s statutory mandate to invalidate bad patents, according to Unified Patents.
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Author: willeecole
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