Last month, the Federal Circuit issued its opinion in Apple Inc. v. Squires, a patent case we have been following because it attracted an amicus brief. In this case, Apple appealed a judgment of the Northern District of California, which rejected challenges to instructions issued by the Director of the U.S. Patent and Trademark Office regarding discretionary denials of petitions for inter partes review proceedings. In an opinion authored by Judge Taranto and joined by Judges Lourie and Chen, the panel affirmed the district court’s judgment. This is our summary of the opinion.
Judge Taranto began by outlining the factual background:
This case returns to us after a decision by the district court rendered on remand from our decision in Apple Inc. v. Vidal, 63 F.4th 1 (Fed. Cir. 2023) (2023 CAFC Decision). The subject of the case, brought in 2020, was a challenge by Apple Inc. and four other companies (collectively, Apple) to certain instructions that the Director of the Patent and Trademark Office (PTO or Office) had given to the Patent Trial and Appeal Board (Board) to govern how the Board, as the Director’s delegatee, would exercise the Director’s statutory, discretionary authority to decline to institute inter partes review (IPR) proceedings. . . . Apple asserted that the instructions led to too many non-institution decisions (denying too many IPR opportunities to challenge patents asserted against it in court) and were legally defective in three respects: they were contrary to 35 U.S.C. ch. 31, arbitrary and capricious, and issued without formal notice-and-comment rulemaking as defined by the APA, 5 U.S.C. § 553. After the district court held all of Apple’s challenges to be judicially unreviewable, we held in 2023 that the first two challenges were unreviewable but the third was not, and we therefore remanded for consideration of the rulemaking-process (§ 553) challenge. . . . On remand, the district court rejected the challenge, holding that the instructions did not have to be issued through notice-and-comment rulemaking. . . . Apple appeals.
After this background, Judge Taranto explained the Federal Circuit’s 2023 decision in this dispute. He noted that the court “ruled that ‘at least Apple has standing to press the challenge to the Director’s instructions as invalid for want of notice-and-comment rulemaking’ . . . [and] also ruled that the rulemaking-process challenge was reviewable.”
Reaching the merits, Judge Taranto explained that “not all rules require notice-and-comment procedures under § 553, which states such a requirement, § 553(b)–(d), while taking pains to identify exclusions.” He said”[w]hat is at issue here . . . is § 553(b)’s additional express exclusion of ‘interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice,’ unless another statute requires notice-and-comment procedures.” On this issue, he noted, the Supreme Court has distinguished substantive rules from general statements of policy, emphasizing that “‘[t]he notice-and-comment requirements apply . . . only to so-called ‘legislative’ or ‘substantive’ rules.” Thus, Judge Taranto explained, “[i]n the present case, the particular dispute is whether the instructions are a substantive/legislative rule or, instead, a ‘general statement[ ] of policy.'”
Before reaching this dispute, Judge Taranto addressed several changes the PTO announced after Apple appealed. The judge “agree[d] with the parties that the new announcements of the PTO” did not render the dispute before the court as moot.
Judge Taranto then turned to Apple’s argument that the Federal Circuit’s “2023 holding that Apple had standing to press its rulemaking-process claim must be understood to have decided that the challenged instructions constitute substantive/legislative rules.” He rejected that contention. He explained the decision regarding standing “does not answer the question whether an agency pronouncement about its own enforcement policies meets the core standard for a measure being substantive/legislative.”
Judge Taranto also rejected “Apple’s contention that the statutory provision contemplating the Director’s issuance of IPR regulations . . . compels notice-and-comment rulemaking.”
Judge Taranto finally addressed “whether the instructions are a substantive/legislative rule or, instead, are a general statement of policy.” He summarized “the governing standard for a substantive/legislative rule as follows: ‘Legislative rules alter the landscape of individual rights and obligations, binding parties with the force and effect of law[.]'” In contrast, he explained, “general statements of policy are pronouncements that ‘do not have the force and effect of law’ . . . and are merely ‘statements issued by an agency to advise the public prospectively of the manner in which the agency proposes to exercise a discretionary power.'”
With respect to whether the instructions had a binding effect on the agency, Judge Taranto explained that the “instructions challenged by Apple do not even purport to bind the Director.” He noted the “Director, who is the statutory decisionmaker on the matter, always could make the non-institution (or institution) decision personally, whether or not the Board has made an initial decision.” He explained that “[t]he challenged instructions . . . simply inform the Board how, as delegatee, it should ‘exercise [the Director’s] discretionary power in specific cases.'”
Judge Taranto emphasized that “the ‘touchstone for distinguishing’ substantive rules from general statements of policy is that the former must have the ‘force and effect of law’ and do so with respect to ‘individual rights and obligations.'” On this point, he noted, a “non-institution decision has no legal effect on the underlying patent rights and obligations.”
Finally, Judge Taranto observed, the “§ 553 distinction at issue here involves terms and concepts having a good deal of imprecision to them, so the case-specific facts involved in cited judicial opinions . . . matter in analyzing the present case against the background of pertinent case law.” On this point, he continued, the cases cited by Apple “involved issues or circumstances that differed materially from those present in this case . . . [and] therefore do not alter our conclusion here.”
As a result of his analysis, the panel affirmed the district court’s judgment.