WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court today rejected a
call by the U.S. Patent and Trademark Office (PTO) for stricter evidentiary
rules and an elevated standard of review in challenges to adverse patentability
rulings (David J. Kappos v. Gilbert P. Hyatt, No. 10-1219, U.S. Sup.;
See 1/23/12, Page 4).
(Decision available. Document #16-120507-006Z.)
Justice Clarence Thomas, writing for a unanimous court, noted that
"the PTO, no matter how great its authority or expertise, cannot account for
evidence that it has never seen."
"Consequently, the district court must make its own findings de novo
and does not act as the 'reviewing court' envisioned by the APA [Administrative
Procedure Act]," Justice Thomas wrote.
Data Compression Patent
Respondent Gilbert P. Hyatt's initial application for a data
compression patent was rejected by the PTO on numerous grounds, including
written description, enablement, double patenting, anticipation and
obviousness. He appealed to the Board of Patent Appeals and Interferences
(BPAI), 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 35 U.S. Code Section 145, which allows applicants
dissatisfied with a board decision to sue as an alternative to a direct appeal
to the Federal Circuit U.S. Court of Appeals.
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 [enhanced version available to lexis.com subscribers], 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]; 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."
En Banc Rehearing
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 [enhanced version available to lexis.com subscribers] and, in
November 2010, the full Federal Circuit overturned the panel's decision [enhanced version available to lexis.com subscribers], 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. Oral arguments were held in January.
Affirming, the Supreme Court found "no limitations on a patent
applicant's ability to introduce new evidence in a 145 proceeding beyond those
already present in the Federal Rules of Evidence and the Federal Rules of Civil
Procedure." If new evidence is presented on a disputed question of fact,
the court continued, district courts must make de novo factual findings
"that take account of both the new evidence and the administrative record
before the PTO."
The language of Section 145 contradicts the petitioner's position,
according to the court, which noted that the PTO itself conceded at oral
argument that judicial review in Section 145 proceedings is not limited to the
administrative record because district courts are already free to consider new
evidence. The court consequently rejected the PTO's request for Section
145 to be read in light of traditional principles of administrative law, as
codified in the APA, thereby requiring a district court to defer to the PTO's
factual findings. When considering new evidence, a district court must
act as a fact finder pursuant to Dickinson v. Zurko (527 U.S. 150
) [enhanced version available to lexis.com subscribers], the court
wrote, adding that "it makes little sense for the district court to apply a
deferential standard of review to PTO factual findings that are contradicted by
the new evidence."
Similarly, the court found that the principles of administrative
exhaustion are inapplicable in a Section 145 proceeding by the standard set in McKart
v. United States (395 U.S. 185, 193-194 ) [enhanced version available to lexis.com subscribers], which
counsels that the primary purpose of administrative exhaustion is the avoidance
of a premature interruption of the administrative process.
"By the time a §145 proceeding occurs, the PTO's process is
complete. Section 145, moreover, does not provide for remand to the PTO
to consider new evidence, and there is no pressing need for such a procedure
because a district court, unlike a court of appeals, has the ability and the
competence to receive new evidence and to act as a fact finder. In light
of these aspects of §145 proceedings - at least in those cases in which new
evidence is presented to the district court on a disputed question of fact - we
are not persuaded by the Director's suggestion that §145 proceedings are
governed by the deferential principles of agency review," the court wrote.
District courts should exercise "broad discretion" over the weight to
be given to newly introduced evidence in a Section 145 proceeding, according to
the court, which deemed "unlikely" concerns that such a ruling will encourage
applicants to withhold evidence from the PTO. "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 the §145 proceeding by presenting new evidence to a district court
judge," the court said.
"In light of these conclusions, the Federal
Circuit was correct to vacate the judgment of the District Court, which
excluded newly presented evidence under the view that it 'need not consider
evidence negligently submitted after the end of administrative
proceedings.' The judgment is affirmed, and the case is remanded to the
Court of Appeals for further proceedings consistent with this opinion," the
Justice Sonia Sotomayor , in a concurrence joined by Justice Stephen
Breyer, observed that in the instant case, "there is no suggestion . . . that
the applicant's failure to present the evidence in question to the PTO was
anything other than the product of negligence or a lack of foresight."
For that reason, she indicated her agreement with the unanimous court that
Hyatt was entitled to present his additional evidence to the district
"But I do not understand today's decision to foreclose a district
court's authority, consistent with 'the ordinary course of equity practice and
procedure,' to exclude evidence 'deliberately suppressed' from the PTO or
otherwise withheld in bad faith," she added, citing Butterworth v. United
States (112 U.S. 50, 61 ) [enhanced version available to lexis.com subscribers].
Kappos is represented by Ginger D. Angers of the U.S. Department of
Justice in Washington. Aaron M. Panner of Kellogg, Huber, Hansen, Todd,
Evans & Figel in Washington represents Hyatt.
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