Argument Preview / Panel Activity

Two cases being argued this month at the Federal Circuit attracted amicus briefs. The second case is New Vision Gaming & Development, Inc. v. LNW Gaming, a patent case. In it, the Federal Circuit will review two judgments of the Patent Trial and Appeal Board in covered business method review proceedings. New Vision contends the overall structure for instituting and funding post-grant review proceedings under the America Invents Act “creates impermissible incentives for the PTAB, its leadership, and the individual administrative patent judges.” These incentives, New Vision argues, violate the Due Process Clause of the Constitution. New Vision also argues the “petitions should have been denied pursuant to the contractual obligation that all disputes over the [relevant] agreement are to be resolved in a Nevada court.” This is our argument preview.

Notably, as we previously explained, in an earlier appeal the Federal Circuit vacated and remanded this case for further proceedings, holding that New Vision had not waived its Appointments Clause challenge by raising it for the first time in its opening brief. Moreover, after the most recent briefing was filed in this case, SG Gaming changed its name to LNW Gaming. Thus, below we refer to SG Gaming given that was the name of the relevant entity when it filed its briefs.

Now, in its opening brief, New Vision contends that the proceedings do not live up to the “jealously protected” standard of due process. It argues 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 this “structural bias is magnified by” administrative patent judges’ “lack of judicial independence.” Specifically, 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.” According to New Vision, these incentives create “a perceived structural bias that exceeds any permissible arrangement under the Due Process Clause.”

New Vision also 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.” It argues the forum selection clause “squarely prohibited SG from seeking PTAB review.” New Vision argues the PTAB made an “arbitrary and capricious” decision and acted “contrary to controlling standards by imposing a bright-line test” that placed the burden on the patent owner to identify a “contractual estoppel defense.” Instead, says New Vision, the PTAB should have considered “whether the existence of the forum selection clause was a sufficient reason for the PTAB to exercise its discretion.” New Vision maintains the PTAB’s decision “authorized a private party to violate its contractual obligation.”

In its brief, the United States Patent and Trademark Office, as an intervenor, argues, as that, “in failing to raise such objections during administrative proceedings, New Vision forfeited its claims that the USPTO’s funding and compensation arrangements introduced unconstitutional bias.” The PTO also argues a PTAB decision whether to institute a CBM review is “final and non-appealable”‘ under current law. It relies upon a Supreme Court holding that the “No Appeal” provision that applies to the institution of inter partes review “bars judicial review” of the agency’s discretion in deciding “whether to institute review.” It argues the same reasoning applies to the “materially identical” provision regarding the “institution of the CBM review.” Furthermore, the PTO argues “a party wishing to assert a forum-selection clause may seek relief from the appropriate court,” and so the bar on judicial review does not make such a clause unenforceable. It argues, moreover, that “a party may not insist that the Board misapplied its discretion by declining to resolve a contractual question which the USPTO has no statutory mandate to consider.”

In its response brief, SG Gaming asserts the PTAB’s decisions should not be disturbed because any such judgment “is not appealable.” It argues the Administrative Procedure Act “does not offer an independent path to appeal where the appeal is otherwise foreclosed by the statute.” Alternatively, SG Gaming argues, if the court concludes these decisions are reviewable, it should “conclude New Vision is judicially estopped” from arguing the Nevada district court was the proper venue. SG Gaming claims New Vision already “successfully urged” the Nevada court to “stay its case” and allow the PTAB to resolve the issue. SG Gaming contends New Vision takes the “opposite position” now only in an attempt to get “a second bite at the apple.”

SG Gaming also argues the PTAB “properly instituted CBM review.” It contends New Vision failed to ask the PTAB “to deny SG Gaming’s petition on discretionary grounds” and that “forfeited the issue.” SG Gaming also contends that, regardless, the PTAB previously considered the forum selection clause and “correctly found” it “must be enforced in the first instance by a district court with jurisdiction over a contract dispute.” SG Gaming maintains the PTAB’s requirement for New Vision to prove “contractual estoppel” was correct. 

In its reply brief, New Vision makes four arguments. First, it asserts recently-acquired information confirms structural bias within the PTAB’s institution process. It argues a “GAO report confirms . . . revelations and details and extraordinary and troubling degree of interference.” New Vision argues a mixing of “administrative, financial, and judicial functions” has created a strong appearance of “pecuniary bias.” Second, New Vision asserts it did not forfeit its constitutional challenge, because it raised the issue during a director review on remand. Third, New Vision maintains the PTAB’s decision to “disregard” the forum selection clause “was a clear abuse of the PTO’s authority.” Fourth, New Vision contends the court should reject SG Gaming’s argument that it is judicially estopped, because the argument has been “forfeited”  and “lacks merit for several other reasons.” 

US Inventor, Inc. filed an amicus brief in support of the appellant and reversal. It argues “control over PTAB outcomes through unattributed and previously unknown PTAB leadership interface violates due process.” It asks the court to “provide direction to the PTAB so that it no longer forces APJs to violate” national and international norms. 

Ron D. Katznelson, Ph. D., also filed an amicus brief in support of the appellant and reversal. Katznelson argues there is significant evidence that the “APJs had, and continue to have, substantive pecuniary incentives and compelling reasons to more easily obtain . . . credits through instituting and adjudicating AIA trials rather than working many more hours on ex parts appeals.” He contends that, because these trials allow the APJ’s to work significantly fewer hours, they are manifestly subject to structural bias to institute more AIA trials.

Centripetal Networks Inc. also filed an amicus brief in support of the appellant and reversal. Its brief argues a “patentee who is denied transparency into the PTAB members who make and control decisions—and into the actual criteria for those decisions—in an IPR or post-grant review, is deprived of its right to due process.”

Oral argument will be heard on Wednesday, January 10. We will continue to keep track of this case and report on any developments.