High Court Hears Oral Arguments in Dispute over Evidence in Patent Appeals

WASHINGTON, D.C.  -  (Mealey's) Federal district courts deciding an adverse patentability ruling by the U.S. Patent and Trademark Office (PTO) should apply a deferential standard of review, an attorney for the U.S. government told the U.S. Supreme Court yesterday (David J. Kappos v. Gilbert P. Hyatt, No. 10-1219, U.S. Sup.; See 11/7/11, Page 29).

According to Ginger D. Anders, assistant to the solicitor general, the Federal Circuit U.S. Court of Appeals erroneously applied de novo review to respondent Gilbert P. Hyatt's challenge of the PTO's rejection of his patent application for a data compression system that stores and processes image information. 

If allowed to stand, Anders warned, the Federal Circuit ruling "would permit applicants to withhold evidence from the PTO" in "all" actions brought under 35 U.S. Code Section 145

Within Discretion

Hyatt's initial application was rejected on numerous grounds, including written description, enablement, double patenting, anticipation and obviousness.  He appealed to the Board of Patent Appeals and Interferences, which largely affirmed the examiner's rejection.  Hyatt was denied rehearing and ultimately filed the instant lawsuit in the U.S. District Court for the District of Columbia pursuant to Section 145, which allows applicants dissatisfied with a board decision to sue as an alternative to a direct appeal to the Federal Circuit.

The PTO moved for summary judgment, leading Hyatt to submit a declaration explaining that one of ordinary skill in the art would have found an adequate written description for each of the rejected claims.  The District Court ruled that Hyatt had provided no adequate explanation for failing to submit his declaration to the PTO during prosecution, that his failure was "negligent" and that the evidence would be disregarded.  The court granted summary judgment against Hyatt, and he appealed to the Federal Circuit.

On Aug. 11, 2009, a divided Federal Circuit panel affirmed, holding that the District Court was within its discretion to exclude evidence if it concludes that the evidence was not submitted to the PTO due to fraud, gross negligence, bad faith or intentional suppression.  The Federal Circuit, in Hyatt v. Doll (576 F.3d 1246, 1275 [Fed. Cir. 2009] [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law]; See 8/17/09, Page 15), said the District Court properly disregarded Hyatt's declaration because he had "willfully refused to provide evidence in his possession in response to a valid action by the examiner."

'No Indication'

A dissenting judge, however, wrote that the statute places no limits on the type of evidence that is admissible in a Section 145 action and, therefore, the standard Federal Rules of Evidence ought to govern.  Hyatt sought and won rehearing en banc and, in November 2010, the full Federal Circuit overturned the panel's decision, finding that the statute "provides no indication that this civil action is somehow different from a customary civil action."  Nothing in Section 145 provides that unique rules of evidence, separate from or supplementary to the Federal Rules of Evidence that apply to all civil actions, control to limit an applicant's ability to introduce new evidence before the district court, according to the appellate panel. 

In remanding the case on grounds that the District Court abused its discretion in excluding Hyatt's declaration, the Federal Circuit held that the legislative history of Section 145 and its predecessor "shows that Congress intended to provide for a civil action in which an applicant would be free to introduce new evidence."  Petitioner David J. Kappos, the new director of the PTO, filed a petition for writ of certiorari, which was granted in June.

Justice Ruth Bader Ginsburg singled out the dual modes of appeal as "one of the problems" with the government's argument, telling Anders "it sounds very strange to have two proceedings - one where you go directly to the Federal Circuit under 101 - 141, and then this other one where you go to the district court."

"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 is not de novo review, it is review of what the agency did under the ordinary standard for reviewing agency action?  What's different about the 145 proceeding?" Justice Ginsburg asked.

When Anders replied that a Section 145 proceeding allows an applicant to present new evidence that couldn't be presented to the PTO, like an oral account of all previously written affidavits, Justice Elena Kagan pressed the issue.  "But to the extent the substance of that testimony was something that he could have brought to the PTO, that testimony in your view would be out of bounds?" Justice Kagan inquired, leading Anders to answer in the affirmative, absent a "reasonable justification" for withholding the evidence during the application process.

 'Modern Norm'

Another category of new evidence cited by Anders as allowable in a Section 145 proceeding includes "evidence that has a temporal component," such as evidence "that develops only slowly or that might arise very late in the process."  To treat Section 145 as an entirely de novo proceeding "that allows any new evidence that the applicant failed without cause to present to the PTO" has "no evident policy justification" from Congress, however, Anders stated.

Aaron M. Panner, arguing on behalf of Hyatt, urged the High Court to uphold the Federal Circuit. 

"Section 145 does not follow the modern norm of on-the-record review.  Such review is afforded under sections 141 to 144.  And no principle of administrative law supports the government's 'no opportunity' standard in situations where Congress has authorized the trial de novo to obtain relief from adverse agency action," Panner stated.

'Ordinary Equity'

Chief Justice John G. Roberts expressed skepticism, however, noting that under Hyatt's interpretation, no applicant would proceed under Section 141.  Justice Ginsburg later asked Panner whether, in Panner's view, there are "any limits" on the new evidence that can be produced under Section 145.

"The standard . . . which we think is supported . . . is one that would permit the introduction of evidence as the Federal Circuit said consistent with the rules of evidence in civil procedure.  That's why principles of estoppel which are reflected in ordinary equity practice, not just administrative review context, would be applicable," Panner said.

Kappos is represented by Anders, of the U.S. Department of Justice in Washington.  Panner is of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington.

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