Argument Preview

The second and final case being argued next week at the Federal Circuit that attracted amicus briefs is New Vision Gaming & Development, Inc. v. SG Gaming, Inc. In this patent case, New Vision appeals two decisions by the Patent Trial and Appeal Board in covered business method reviews. New Vision contends the overall structure of post-grant review proceedings under the America Invents Act “creates impermissible incentives for the PTAB, its leadership, and the individual administrative patent judges (‘APJs’)” and that such temptation violates the Due Process Clause of the Constitution. It also argues that the PTAB “abdicated its obligation to exercise its discretionary authority in the face of [a] contractual obligation to not bring a PTAB challenge,” and that the APJs were unconstitutionally appointed. It also maintains that the PTAB erred in finding ineligibility. This is our argument preview.

In its opening brief, New Vision contends that due process requires an impartial and disinterested tribunal, but that the “inherent tie between the PTAB’s institution decisions of AIA reviews and the substantial revenue generated by those decisions . . . has created a structural bias unlike any other in the federal executive branch.” It argues “[t]he structural bias is magnified by an APJ’s lack of judicial independence.” In particular, New Vision cites an allegedly “strong institutional bias for generating revenue for the PTAB, along with the financial incentive biases imposed on APJs from bonuses and salary raises,” as “creat[ing] a perceived structural bias that exceeds any permissible arrangement under the Due Process Clause.”

New Vision also asks the court to reverse because, it argues, the “petitions should have been denied pursuant to the contractual obligation that all disputes over the agreement are to be resolved in a Nevada court.” New Vision further contends that “the PTAB decision should be vacated and
remanded in view of Arthrex,” and on the merits reversal is required because the “claimed gaming invention is innovative and thus not
abstract under a proper Alice analysis.”

In its response brief, SG Gaming asserts that the claims of the patents in question are ineligible under § 101. Further, it maintains that New Vision forfeited numerous arguments by not raising them before the Patent Trial and Appeal Board, including its due process and other constitutional claims. Finally, SG Gaming argues that, even if the court decides to reach the due process issue, New Vision’s challenge is meritless because it fails to explain exactly how the APJ incentive system produces bias.

In its corrected brief , the USPTO as an intervenor argues, as an initial matter, that “in failing to raise such objections during administrative proceedings, New Vision forfeited its claims that the post-grant review proceedings were structurally biased in violation of the Due Process Clause and that the APJs were invalidly appointed under the Appointments Clause.” If the court, however, does reach these constitutional issues, the USPTO urges the court to “defer consideration of the Appointments Clause claim until after the Supreme Court issues its decision in Arthrex, in which a writ of certiorari has been granted.” Moreover, the USPTO maintains, the court should “reject New Vision’s claim that APJs have an impermissible structural bias in favor of institution.” According to the USPTO, “[i]nstitutional interests give rise to structural due process concerns only where money paid as result of a decisionmaker’s adjudicative decision flows directly into a fund that the decisionmaker ‘directly control[s]’ in his executive role.”

New Vision, in its reply brief, asserts that its claims regarding the problematic nature of the PTAB as both adjudicator and financial executives are undisputed. Further, it argues that its due process claims are not waived because the PTAB itself has no authority to decide the due process issue. It further argues that a conclusion of non-waiver follows the relevant case law, and maintains that there is little doubt the PTAB would not have granted New Vision’s request for relief. Finally, New Vision argues the PTAB’s eligibility decision is erroneous, not supported, and follows an incorrect application of Supreme Court precedent.

US Inventor, Inc. filed an amicus brief in support of New Vision. First, in arguing that the PTAB system violates due process, it points to the “October Effect,” which it explains is when “APJs change their judging standards at the end and beginning of each evaluation period.” Second, it contends that the subjectivity of APJ evaluations could lead a reasonable person to “question whether the PTAB invalidates patents so frequently because its constituent APJs try to please their budget-minded bosses through revenue-enhancing decision making.”

Oral argument will be heard on Friday, April 9. As in both of this month’s argued cases that attracted amicus briefs, we will keep track of this case and report on any developments.