Last week, the Federal circuit issued its opinion in Apple Inc. v. Vidal. In this case, the Federal Circuit reviewed a determination by a district court that 35 U.S.C. § 314(d) precluded judicial review of certain factors (the so-called Fintiv factors) adopted by the Director of the Patent and Trademark Office to govern decisions whether to institute inter partes review of patents. In an opinion authored by Judge Taranto and joined by Judges Lourie and Stoll, the Federal Circuit affirmed in part, reversed in part, and remanded. This is our opinion summary.
Judge Taranto presented the facts of the case:
On August 31, 2020, Apple and three other companies filed suit in the Northern District of California, seeking to challenge the Fintiv instructions on three grounds under the APA: (1) that the Director acted contrary to the IPR provisions of the patent statute, see 5 U.S.C. § 706(2)(C); (2) that the Fintiv instructions are arbitrary and capricious, see 5 U.S.C. § 706(2)(A); and (3) that the Fintiv instructions were issued without compliance with the notice-and-comment rulemaking requirements of 5 U.S.C. § 553, as assertedly required by that APA provision and by 35 U.S.C. § 316. Apple, 2021 WL 5232241, at *3. An amended complaint added a fifth plaintiff but asserted the same challenges. The government moved to dismiss the case, arguing that plaintiffs lacked standing and, in the alternative, that APA review was unavailable both because (1) “statutes preclude judicial review” of the matters presented and (2) the challenges are to “agency action [that] is committed to agency discretion by law,” 5 U.S.C. § 701(a)(1)–(2). Briefing on that motion followed—on the same schedule as briefing on plaintiffs’ own motion for summary judgment, which the court ruled, at plaintiffs’ urging, was sufficiently “intertwined” with the dismissal motion to warrant parallel briefing.
Plaintiffs appealed on December 8, 2021, and that appeal ripened when the district court entered final judgment on December 13, 2021.
After presenting the facts of the case, Judge Taranto first addressed the Apple’s contention that the Director’s instructions violated the IPR statute and are arbitrary and capricious. He reasoned that “[t]he present case, [unlike precedent], . . . does not involve a petition-specific challenge, i.e., a challenge to a Director determination whether to institute a review requested in an individual petition,” but rather “involves a challenge to the Director’s instructions to the Board, as delegatee, regarding how to exercise the Director’s institution discretion.” He then further explained “that the IPR statute’s preclusion of review, as now settled by the Supreme Court based on statutory text, legislative history, and structure, must encompass preclusion of review of the content-focused challenges to the instructions at issue here.” Judge Taranto explained that the court would affirm the district court’s dismissal of Apple’s first two challenges under 5 U.S.C. § 701(a)(1) because, “[f]or the IPR system to function with the delegations that are inevitable and congressionally expected, the same conclusion must follow for the instructions given by the Director to the Board as delegatee.”
Next, Judge Taranto turned to Apple’s third challenge “that the Director was required, by 35 U.S.C. § 116 together with 5 U.S.C. § 553, to promulgate the institution instructions through notice-and-comment rulemaking procedures.” He explained that “the Supreme Court has held that clear and convincing evidence establishes a congressional protection from judicial review of the substance of the Director’s institution discretion,” but he explained how that holding does not protect “the Director’s choice of whether to use notice-and-comment rulemaking to announce instructions for the institution decision.” Moreover, he reasoned, “[t]he government here has not shown that anything in § 314(d) or elsewhere in the IPR statute supplies clear and convincing evidence that there was to be no judicial review of the choice of announcement procedure, a matter for which generally applicable standards exist.”
Finally, Judge Taranto turned to the issue of whether “Apple had standing to press the challenge to the Director’s instructions as invalid for want of notice-and-comment rulemaking.” He concluded that Apple does have standing because “Apple is non-speculatively threatened with harm to a legally protected interest from the challenged instructions,” the causation requirement for standing is met, and “[t]he applicable standard for redressability here is also met.”
In short, in this case the Federal Circuit held that the district court properly dismissed Apple’s “challenges to the Director’s instructions as substantively contrary to statute and as arbitrary and capricious,” but erred in dismissal “for unreviewability of plaintiffs’ challenge to the Director’s instructions as having improperly been issued without notice-and-comment rulemaking.” As a result of its analysis, the Federal Circuit affirmed in part, reversed in part, and remanded the case for consideration of Apple’s challenge to the Director’s instructions on the basis of lack of notice-and-comment rulemaking.