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Guest Post by Dr. Christal Sheppard

I am a patent law expert. However, a look at recent machinations in patent law, particularly in the United States Patent and Trademark Office’s (USPTO) leadership and the USPTO’s Patent Trial and Appeals Board (PTAB), reveals that many of the issues at the heart of patent law disputes stem from the Administrative Procedures Act (APA), administrative law, constitutional law, and, of course, politics, politics, politics. As a patent expert, I have found myself talking about the APA so often that I unconsciously write Administrative Patent Act by mistake. The United States Supreme Court decision in Arthrex, regarding the composition of PTAB, is the most recent foray into the intersection of administrative law and patent law.1

Before diving into Arthrex, let’s reflect on why the PTAB was created. It was created because influential members of the patent community thought there were quality problems with the output of the USPTO (presumably higher quality patents meant fewer lawsuits that ended in invalided patent claims).2 More specifically, there were accusations of rampant, abusive litigation techniques (I prefer this term instead of “trolls”) that were holding up innovation and extracting payments that could have been used for future innovations instead of court costs.3 Congress was told that the United States needed to reduce the incentives of abusive litigation and balance the costs between the rights holders and accused infringers for the sake of the United States’ stake in the global economy.4

Congress responded by expanding the adjudicative part of the USPTO.5 Pre-expansion, the USPTO was conducting patent validity reviews.6 Congress retooled and rebranded by making the process more fulsome by expanding the proceedings to make the process more akin to an adversarial court proceeding with both parties of interest present and making their cases before a panel of USPTO judges.7 This new system, when compared with federal court litigation, was meant to accomplish three goals: (1) reduce administrative burden for the courts, (2) reduce litigation costs for the parties, and (3) reduce time to resolutions.8 The point, in layperson terms, was to use the USPTO (PTAB) to screen out low quality patents (ones that never should have been granted by patent examiners) that could end up in the court system, and that this change would result in fewer meritless lawsuits.9

It has been less than ten years since full implementation of the new USPTO adjudication iteration. Many stakeholders are pushing separate agendas under the premise that the parts of the original ideals have not come to fruition and that the initial concerns about abusive patent litigation have not been resolved.10 Additionally, new problems were created that resulted in new abusive litigation techniques at the PTAB.11 Of course, no new process can be, nor should be, expected to be perfect on day one, particularly where monetary interests are often in the millions of dollars. Games have been played and interests have utilized the non-Congressional pathways extensively to resolve in their favor to the detriment of others.12 She who has the ear of the USPTO Director can accomplish desired outcomes through procedures and processes much faster and more efficiently without the complexities of seeking legislation in Congress and troublesome counterbalances.

Congress, too, is drilling down on rebalancing the legislation. Several Senators, including the influential Subcommittee Chairman Senator Leahy, have floated or introduced bills directed to this problem.13 Chairman Leahy’s bill, Restoring the America Invents Act, like others, is not just about reinstating the initial objectives, but it also attempts to respond to issues that have happened behind the scenes, out of the public’s eye.14 However, the horse is out of the barn and entrenched interests are very savvy. As a result, the nomination of a new USPTO Director has taken longer than any time in memory.15

The politicization of the USPTO Director position during this Administration is without precedent. Quite simply, the vulnerability in the system is the high rate of turnover, low institutional and governmental experience, and major stakeholder personage of the USPTO Directors over the past few decades. Consider that there is a new USPTO Director every two to four years, each with different interpretations of the law and independent assessments of the Director’s rights for oversight and degree of input in the direction and individual case decision of the PTAB. Even more so is that fact that these same Directors are chosen from entities with high patent activity with high business interests in a particular result.16 Next, consider that most of these individuals return to the same business or industry and resume the same activities after their term as USPTO Director where that individual has been directly influencing PTAB precedential decisions that could be favorable to their clients.17 Next, add that not political, but substantive patent law litmus tests for USPTO Director are at the forefront, literally openly stated in writing, of the confirmation hearings process in a 50/50 divided Senate.18 As such, it is not surprising that the functioning of this important part of the American Invents Act (AIA)19 has been a moving target from how it was first envisioned to how it functions today with examiners and PTAB judges suffering as pawns in the middle.

Of course, influencing the nomination of the next USPTO Director can only accomplish so much. Stakeholders have also looked to the courts. In the 2021 Supreme Court decision in Arthrex, the Supreme Court noted that the PTAB is an odd duck, and since PTAB walked and quacked like an adjudicative process, then it is indeed an adjudicative process.20 As such, processes currently carried out by PTAB judges, as inferior officers, cannot be performed without the oversight of the Director of the USPTO.21 Essentially, the United States Supreme Court brought their heavy judicial thumb to the scales in favor of USPTO Director discretion over PTAB decisions. While some feel that affording further discretion to the USPTO Director will only add political problems to those already present,22 in my view, the Court addressed a valid concern. The aim seems to be to create a new PTAB process, compliant with the law, without upsetting a decade of USPTO PTAB decisions.23 I do not think the solution that maintains the validity of past PTAB decisions is either good or bad; I merely see it as sunlight on a practice that was already happening at PTAB and something that we have been living with for the past few decades, whether good or bad, whether publicly known or not. The reality is that discretion commonly came in the form of suggestions/comments with the underlying threat of judges being reassigned from AIA cases and sent to the reexamination unit (i.e., the minor leagues). Now, there is an official mechanism and overt power which will hopefully avoid the arm-twisting that happened when the political parts of the organization disagreed with the three-judge panels. The political parts of the USPTO have been anointed by the Supreme Court to bring much-needed sunlight to the practice of political appointee manipulation of individual cases results. Sunlight is needed for containment and review of discretion. This change could be positive if the political appointee discretion were tailored such that a judicial wall is built between the PTAB judges and the Director and if the input of the Director is mandated to include a written opinion and judicial review.

Moreover, I credit the Supreme Court here, because in reading the Arthrex decision, the United States International Trade Commission (ITC) immediately came to mind. It has always surprised me how little the patent world knows of the ITC. The ITC (Section 337 of the Trade Act) reviews patents for validity and infringement, but does not grant monetary damages.24 ITC orders stop patent-infringing products at the border and prevent these articles from entering the United States.25 The ITC became more popular after the Supreme Court decision in eBay because the ITC was able to grant injunctions, whereas the Supreme Court severely limited the granting of injunctions for other patent litigation venues.26 At the ITC, complaints are filed and reviewed by the ITC Commissioners to determine if the case should be instituted.27 The investigation, discovery and prehearing filings, Markman-like trials, hearings, post-hearing filings, judge’s decision, and the judge’s decisions undergo Commissioners’ review.28 The ITC Office of General Counsel, reviews every decision of ITC judges with an eye toward (1) if the Commission should have a different decision than the judge and (2) public policy interests due to unacceptable harm to the public.29 The Commission writes the final decision with the underlying Judge’s decision in reference.30

The Supreme Court seemed to be invoking the ITC model for the USPTO Director. Thus, the final order is not the final order of the judges, but the final order of the Commission, which is the system that Arthrex puts forth for the USPTO.31 Additionally, if a Commission decision is appealed, it is the aggrieved party v. the ITC (similar to current USPTO practice).32

My understanding is there are people on the Hill who have long thought that using the ITC as a precedent is the best approach for structuring the PTAB in compliance with the APA without reinventing the wheel. The AIA was not expected to be the juggernaut that it is now. Since we are dealing with lawyers and lots of money, who is surprised that people found ways to make the system work for them and their clients.

I started further research into the ITC as a parallel to the Arthrex decision, but I was not able to find any direct comparison for Arthrex, the ITC, and the USPTO in the literature or articles. I assume that there must be some somewhere that I missed and most certainly there will be more commentary going forward.

As I look over the Potomac, I think that the patent system is a great thing that is constantly evolving to keep up with the cutting edge of discovery and international obligations while also comply with its 18th century directives. Congress has no desire to screw this up. The Supreme Court has no desire to screw this up. Both are reacting to how the system is being used. Congress and the courts keep trying to ride waves of turbulence in patent law as patent law keeps getting pulled off center. I personally would be more comfortable if Congress created the solution found in Arthrex, but we know that Section 101 has not yet been fixed by Congress, and after years questioning the legitimacy of PTAB, Congress did not fix that either. Perhaps the process in Arthrex is codified in the future, but until then, the USPTO can follow the bright guiding star that the Supreme Court has erected in Arthrex.

[1] United States v. Arthrex, Inc., 141 S. Ct. 1970.

[2] Joe Matal, A Guide to the Legislative History of the America Invents Act: Part II of II, 21 Fed. Cir. Bar. J. 539, 627 (2012) (quoting H.R. REP. NO. 112-98, at 54, 80–81 (2011)).

[3] Id.

[4] Id. at 600–01(quoting Patent Quality Improvement: Post-Grant Opposition: Hearing before the Subcomm. on Courts, the Internet, and Intellectual Prop. of the H. Comm. on the Judiciary, 108th Cong. (2004) (statement of Michael Kirk, Executive Director, AIPLA)).

[5] 35 U.S.C. § 6.

[6] Act of December 12, 1980 (Bayh-Dole Act), Pub. L. No. 96-517, ch. 30, § 302, 94 Stat. 3015, 3015 (codified at 35 U.S.C. § 302) (establishing ex parte reexaminations).

[7] 35 U.S.C. § 6.

[8] Gregory Dolin & Irina D. Manta, Taking Patents, 73 Wash. & Lee L. Rev. 719, 721–22 (2016) (citing Pub. L. No. 112-29, 125 Stat. 284, 284 (2011)).

[9] Id. at 723 (quoting Sarah Tran, Policy Tailors and the Patent Office, 46 U.C. Davis L. Rev. 487, 498–99 (2012)) (“[T]he PTO needed a ‘toolbox of new or fortified proceedings in which it may weed out low quality patents.’”).

[10] Gene Quinn, The PTAB Desperately Needs Reform, Not Preservation, IPWatchdog (Dec. 5, 2021), https://www.ipwatchdog.com/2021/12/05/ptab-desperately-needs-reform-not-preservation/id=140805/.

[11] See generally Yishi Yin, Avenues for Addressing the Exploitation of Inter Partes Review Process by Third Parties, 17 N.C. J.L. & Tech. On. 107 (2016).

[12] Tony Romm & Erin Mershon, Big Tech All Over D.C. Patent War, Politico (Apr. 27, 2014), https://www.politico.com/story/2014/04/big-tech-tracks-are-all-over-dc-patent-war-106076.

[13] Josh Landau, Leahy and Cornyn Introduce Bill To Restore The America Invents Act, Patent Progress (Oct. 1, 2021), https://www.patentprogress.org/2021/10/01/leahy-and-cornyn-introduce-bill-to-restore-the-america-invents-act/.

[14] Id.

[15] Angela Morris, Why The Delay in Picking a New USPTO Director Really Matters, IAM (Sept. 3, 2021), https://www.iam-media.com/copyright/uspto-director-nomination-delay-matters.

[16] Blake Brittain, Biden Nominates Winston & Strawn Partner Kathi Vidal to Lead USPTO, Reuters (Oct. 26, 2021), https://www.reuters.com/legal/transactional/biden-nominates-winston-strawn-partner-kathi-vidal-lead-uspto-2021-10-26/.

[17] Press Release, IPWatchdog, Irell Welcomes Back Former USPTO Director Andrei Iancu (Apr. 1, 2021), https://www.ipwatchdog.com/press/irell-welcomes-back-former-uspto-director-andrei-iancu/.

[18] Donald Zuhn, Sen. Tillis Sends Letter to President Regarding Next USPTO Director, JDSupra (Mar. 8, 2021), https://www.jdsupra.com/legalnews/sen-tillis-sends-letter-to-president-3160323/.

[19] Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011).

[20] United States v. Arthrex, 141 S. Ct. 1970, 1987 (2021).

[21] Id.

[22] Frank Bernstein & Raj Pai, Will Patents Become More Political? The PTO Begins to Implement Arthrex, Squire Patton Boggs: Glob. IP & Tech. L. Blog (July 18, 2021), https://www.iptechblog.com/2021/07/will-patents-become-more-political-the-pto-begins-to-implement-arthrex/.

[23] Arthrex, 141 S.Ct. at 1988 (denying Arthrex a hearing before a new panel despite the Constitutional violation).

[24] 19 C.F.R. § 210.13(b) (allowing the inclusion of invalidity assertions within responses to ITC complaints).

[25] 19 U.S.C. § 1337(d)(1).

[26] John F. Rabena & Kim E. Choate, Injunctive Relief in the ITC Post eBay, 1 Akron Intell. Prop. J. 27, 34 (2007).

[27] 19 U.S.C. § 1337(b); 19 C.F.R. §§ 210.8–210.10(a)(1). 

[28] 19 C.F.R. § 210.43(d).

[29] 19 U.S.C. § 1337(d)(1). As a small aside, not only does the Commissioner review for harm to the public, but the President of the United States has a 60-day period of review of the Commission’s public policy finding to agree or disagree with findings of unacceptable harm to the public. 19 U.S.C. § 1337(j)(2).

[30] 19 C.F.R. § 210.43(d).

[31] See id.

[32] 19 U.S.C  § 1337(c).