By Kendrew H. Colton
On January 9, 2012, the U.S. Supreme Court heard oral argument in Kappos v. Hyatt. The Hyatt
case is important for those who prosecute patent applications before
the U.S. Patent and Trademark Office (USPTO), and especially for those
who must decide on whether to appeal from an adverse USPTO decision.
As earlier reported,
under the law, if a patent applicant is unsuccessful in obtaining a
patent before the USPTO, the applicant has two procedural routes to
challenge the USPTO's adverse decision in the federal courts. The
applicant either may appeal the USPTO's decision to the Court of Appeals
for the Federal Circuit or may bring a civil action against the USPTO
in the U.S. District Court for the District of Columbia. The Hyatt case concerned the latter route-the civil suit against the USPTO under §145.
In ruling for Hyatt in the Circuit Court, the Federal Circuit held
that "new evidence is admissible in a civil action" subject only to the
Federal Rules of Evidence and Federal Rules of Civil Procedure. Thus,
the Federal Circuit held that a civil suit against the USPTO is not
confined to the administrative record.
On appeal to the Supreme Court, the U.S. government argued that a
decision adverse to a patent application should not be reviewed de novo in
a civil action; that any evidence that could have been presented during
the patent examination but was not, should not be admissible; and that
the USPTO's decision and its factual findings should be entitled to
deference consistent with the lower standard of substantial evidence.
The government argued that this deferential standard of review should
apply even in a civil action in order to respect the USPTO as the
"primary decisionmaker" on whether or not to grant a patent.
Hyatt's counsel argued that the review in a civil action is de novo and that "then the question becomes what is the appropriate standard of review when there is new
evidence...." According to Hyatt, the standard of review is set forth in
the Administrative Procedure Act, where a reviewing court can "set aside
agency action, findings and conclusions found to be ... (f) unwarranted
by the facts to the extent that the facts are subject to trial de novo by
the reviewing court." Hyatt took no position on the standard of review
when an applicant seeks review in a civil action without introducing new
evidence.
Overall, the oral argument focused on three primary issues: 1)
whether an adverse USPTO decision against granting a patent is subject
to de novo review in a district court in a civil action to
obtain a patent, 2) what the scope of evidence is that can be introduced
in such a civil action, and 3) what burden of proof a reviewing court
should apply to factual determinations made by the USPTO.
Justice Sotomayor observed that the USPTO's argument "is confusing the nature of the review, which is de novo,
with the burdens that attach to the proof." As to the former, Justice
Sotomayor observed that "the legislative history is replete with the
commissioner of patents himself saying that [the law] required de novo review."
She further commented that the standard suggested by the government
"just can't be derived from the statute" and "if you admit that Congress
intended a [civil] action to permit new evidence, if it wanted to limit
the evidence to something that could not have been found with due
diligence or whatever your limitations are, why did it speak more
broadly? [T]he statutory language suggests 'as the facts in this case,'
not in the case before the USPTO. As law-'as equity might permit.'"
Justice Ginsburg appeared concerned the USPTO position would
effectively conflate a direct appeal to the Federal Circuit with a civil
action. Justice Ginsberg asked "why would Congress create two judicial
review routes, one in district court, reviewable in the Federal Circuit,
the other directly in the Federal Circuit, if there's no difference?
That is, if in both of them, it's not de novo review, it is
reviewing what the . . . agency did under the ordinary standard for
reviewing agency action." Echoing this concern, Justice Kagan expressed
skepticism of the USPTO's position, adding "So ... you have Justice
Ginsburg's problem, which is these are two channels that are [then]
exactly the same."
The justices also seemed troubled with a burden of proof that could
vary with whether or not new evidence is introduced in the civil action.
However, some justices appear to be leaning toward construing prior
precedent as requiring a reviewing court to give deference to a USPTO
determination based on its expertise, and only overturn it if the Court
is "thoroughly convinced" that they were wrong.
Chief Justice Roberts and Justice Breyer expressed concerns a patent
applicant would withhold evidence for the tactical advantage to seeking
review in a civil action. Hyatt's counsel responded with the commonsense
observation that "no applicant would hold back evidence in an effort to
... produce that sort of tactical advantage, because ... it's frankly more
straightforward and easier to try to meet those objections in the
[Patent] Office."
The Court's decision when rendered will have broad implications for
future civil actions against the USPTO. Notably, if the Court holds that
a more deferential standard of review applies even where new evidence
is offered, the Hyatt decision may have possible application to other agency actions reviewable under the Administrative Procedures Act.
A decision in the Hyatt case is expected within the next several months. For more information, please contact Fitch Even partner Kendrew H. Colton, the author of this alert.
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