Argument Recap

Earlier this month, the Federal Circuit heard oral argument in New Vision Gaming & Development, Inc. v. LNW Gaming, a patent case. In it, the Federal Circuit considered an appeal from two judgments of the Patent Trial and Appeal Board in covered business method review proceedings. New Vision contended 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 argued, violate the Due Process Clause of the Constitution. New Vision also argued 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.” Judges Lourie, Prost, and Reyna heard the argument This is our argument recap.

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.

Matthew J. Dowd, argued for the appellant, New Vision Gaming and Development. Dowd began by claiming LNW “never challenged that the forum selection clause [was] applicable.” In response, Judge Prost asked if it was correct that, in his argument to the Patent Trial and Appeal Board, he never claimed the PTAB did not have authority to make its decision, but instead argued New Vision might be “deprived of jurisdiction if the district court acts on this.” Dowd clarified that his argument to the PTAB was that it “should not institute because the other party was barred per the forum selection clause.” Judge Prost, in response again, asked if she was incorrect in characterizing New Vision’s argument to be that it “might be deprived of the power to hear this at some later time” if it “gets the district court to issue an injunction.” Down argued the “focus” of the argument was that the case “could have gone to the district court.” Judge Prost asked if New Vision expected the Board to “read and analyze the forum selection clause” or refuse to institute outright, to which Dowd responded “the former.”

Another judge asked why the Board should “bother with an agreement between two parties.” Dowd asserted that, according to precedent, “it should be an extraordinary circumstance where there’s some disregard for private parties agreement to litigate the case in a particular form.” The judge asked whether it was accurate that he told the district court to “leave it to the Board.” In response, Dowd argued New Vision maintained that the “proper forum should have been the district court” even after the final written decision was issued and it had requested rehearing. 

Dowd clarified that he was asking the Court to “vacate the decision and have the Board at least consider [the forum selection clause] as part of its discretionary analysis.” One judge asked Dowd whether the Federal Circuit can review the PTAB’s decision if it agreed that the forum selection clause was consistent with “the party’s intent” but ruled against New Vision anyway. He answered no, arguing the court has “the ability to review [the Board’s] decision to the extent that it’s contrary to law.” 

A judge asked whether, based on Dowd’s argument that “there’s a relationship between the forum selection clause and the statutes that govern institution by the Board,” how the Federal Circuit would have jurisdiction in this case. In response, Dowd argued “no court yet has said that the Board is entirely free to ignore a forum selection clause, and this court can’t review it.” In response, the judge proposed that it may be “because they don’t have jurisdiction to make that announcement” and that, following Dowd’s reasoning, it “would lead to that conclusion” that the court lacks jurisdiction to review this argument. 

Dowd turned the argument to why New Vision did not go to the district court, stating that “hindsight is 2020” and that “at that time the law . . .was unsettled” and there was no precedent allowing the Board not to consider a forum selection clause. Finally, he asked that the court “vacate the Board’s decision and order them to consider the forum selection clause.” 

Gene W. Lee argued for the appellee, LNW Gaming. He began by asserting that “the institution decision was tied to the institution statute” and that it was “consistent” with both “what New Vision argued at the Board, pre-institution,” and “the manner in which the Board instituted trial.” One judge asked whether Lee believed “the Board can never review a forum selection clause.” Lee responded that he was not aware of any authority that “affirmatively gives the Board the right . . . to do so.” The judge asked if, hypothetically, the Board should “ignore” a forum selection clause if the parties agree that any disputes related to validity “will not be heard by the Patent Trial and Appeal Board.” Lee responded that “the Board would be faced with a discretionary choice,” and that precedent provides that “a patent owner in that kind of situation has to seek relief from a district court.” Lee argued that the Board’s decision was not reviewable as it was a “matter of discretion.” A judge asked if was correct that it is also not reviewable as it was “tied to the institution decision.” Lee agreed that was correct. 

Lee turned the argument to New Vision’s failure to seek an injunction in district court. He argued New Vision “affirmatively embraced the PTAB” in the district court. A judge asked why New Vision’s reasoning–that its only “reasonable choice” was to go to the district court to “stay this” proceeding–was flawed. Lee reasoned that New Vision “sought a partial stay” of the patent eligibility challenge for a “strategic advantage.” He argued that New Vision wanted its “affirmative contract-related claims” in district court, but “embraced the notion of patent eligibility being challenged in the PTAB.” Also, he argued, New Vision hoped to retain the “additional advantage” of the “ability to amend claims” when litigating patent eligibility in the PTAB. 

Joshua M. Salzman argued for the PTO as an intervenor. He began his argument focusing on the forum selection clause, and he claimed “preclusion of review” of the clause under the relevant statutes. One judge pointed to LNW’s brief, which argued that review was barred “at least in matters closely tied to the application and interpretation of statutes related to the institutional decision.” She asked whether this forum selection clause issue, which the PTO briefed, was “outside the Board’s expertise” or “closely tied to the institution statutes.” Salzman responded that New Vision had conceded that point. 

A judge asked how the Board should act if a clause “absolutely conclusively” directs that parties must go to the Southern District of California to litigate an issue of validity. Salzman asserted “it is perfectly rational for the USPTO to take the position that district courts are better situated to address those concerns.” Additionally, he claimed, “we’re not ignoring them,” but that “there’s a process and a procedure available to patent holders.” The judge asked if it was the PTO’s opinion that the Board “has discretion” to either “look at it if it wishes and construe it or to not look at it.” Salzman answered that it was. The judge then asked what criteria are used when the Board chooses to look at a forum selection clause. Salzman said there is no current standard and, “candidly, the Board doesn’t want to be in this business of evaluating forum selection clauses.” 

A judge then asked if it was correct that these decisions are not reviewable by the Federal Circuit. Salzman answered they are not because “discretionary details are not subject to review.” Another judge asked what the PTO is relying on for any statutory authority to review the forum selection clause. Salzman answered that it is “bound up in the same kind of ability to just deny for discretionary reasons.” The judge questioned whether he was arguing “there’s no limit” to the PTO’s discretion. Salzman argued “there’s certainly no judicial review,” but “there are political checks in place.” The judge asked if Salzman claimed “the Board has plenary authority” and, in particular, “the authority to review anything it wants.” The judge commented that that would “fl[y] in the face” of case law and, in particular, the Supreme Court’s cases.

Salzman reiterated that, even if the PTO has the authority to review forum selection clauses, it wants people “to go to district courts” to construe them. One judge asked how this works and whether the Board would “stay its proceeding.” Salzman, in response, answered that, “if the district court concludes that the forum selection clause is applicable, then [the district court should] direct the . . . petitioners to withdraw.”

In his rebuttal, Dowd argued New Vision “strongly disagree[s] that there’s any gain in efficiency by requiring parties to go to the district court, file a preliminary injunction ,. . . and then get an order enjoining the Board from proceeding with a PTAB proceeding.” He argued the Board is “certainly capable” of doing that analysis from the beginning. Dowd pointed out the Board handles several other contractual issues, including settlement agreements, and so, he argued, there is no reason why the Board cannot do the same here. Finally, he argued, the PTO should not be able to “wholesale ignore this eminently important category of evidence,” and, he said, “there is nothing against public policy in enforcing forum selection clauses here.” 

Notably, after the oral argument, the Federal Circuit entered a Rule 36 summary affirmance.