The State Of Judicial Deference To The USPTO

Posted on Nov 16, 2016 in Articles

This article appeared in Law360 on November 15, 2016.

Perhaps no doctrine is more significant to our form of government than separation of powers. In the first draft of the Bill of Rights, James Madison wanted to explicitly state that our three branches of government — legislative, executive and judicial — “shall never exercise the power” of each other. His proposal was struck down as being redundant with language articulated by the U.S. Constitution. Separation of powers, it was argued, was already implicit. Yet here we are today, with accusations that the separation of powers doctrine has been eroded. The culprit, many commentators argue, is judicial deference to administrative agencies and their interpretation of statutes and rules. Even the U.S. Patent and Trademark Office has treaded on this thorny issue.

This story begins with the landmark U.S. Supreme Court decision Chevron[1] and the establishment of the doctrine of Chevron deference. In short, the doctrine requires that a court give deference to the manner in which an administrative agency interprets a statute it is tasked to enforce. More specifically, Chevron established the following two-part test:

First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute…Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.

Most attorneys that work with administrative law (whether it be statutes administered by the U.S. Environmental Protection Agency, the U.S. Securities and Exchange Commission or some other agency) are well experienced with Chevron deference, for they see the doctrine frequently relied on by the courts. Not so in the area of patent law. The doctrine appears from time to time, but truly less often than in other legal specialties.

There are reasons for the infrequency. Unlike most other federal administrative agencies, the PTO was never given the power to create substantive rules. 35 U.S.C. §2(b)(2)(A) states that the PTO “may establish regulations, not inconsistent with law, which … shall govern the conduct of proceedings in the Office.” For example, creating procedures for filing patent applications are within the PTO’s authority while defining subject matter eligibility for patent protection is not. Furthermore, there is the Federal Circuit. That court was created, in part, so that there would be a court that was “expert” in matters pertaining to patents. As a result, the Federal Circuit has created a wide body of case law in their area of expertise. Compared with other areas of administrative law, patent law is unusual in that a specialized court addresses substantive issues.

The Federal Circuit has directly addressed how the PTO’s lack of authority limits the application of Chevron deference to substantive patent law:

Under Chevron, where Congress has authorized an agency to promulgate substantive rules under a statute it is charged with administering, we must uphold the agency’s interpretation of an ambiguity or omission in that statute if the interpretation is a reasonable one. … As we have previously held, the broadest of the PTO’s rulemaking powers … authorizes the Commissioner to promulgate regulations directed only to “the conduct of proceedings in the [PTO]”, it does NOT grant the Commissioner the authority to issue substantive rules.[2]

A good example of the PTO arguing their position based on Chevron deference, and losing, is Tafas v. Doll.[3] Experienced patent practitioners may (painfully) remember when the USPTO issued rules limiting applicants to filing only three continuation applications for each patent family. Patent inventor Triantafyllos Tafas (who was later joined by GlaxoSmithKline) filed suit against the USPTO, arguing that the agency had exceeded its rulemaking authority. The district court found in favor of the plaintiffs and the PTO appealed. Using the guidelines articulated in Chevron, the Federal Circuit concluded that because the statute that pertains to continuation applications was clear, the PTO was not entitled to the benefit of Chevron deference: “Because the statute is clear and unambiguous with respect to this issue, the USPTO’s reliance on Chevron … is unavailing.” The rules were struck down by the Federal Circuit.

Fast forward to 2016. On June 20 the U.S. Supreme Court rendered its decision in Cuozzo v. Lee,[4] and relied upon Chevron deference to rule in favor of the PTO.

In Cuozzo, the U.S. Supreme Court considered inter partes review — a procedure whereby the PTO is asked to “reexamine — and perhaps cancel — a patent claim that it had previously allowed.” The PTO had issued a regulation permitting it to conduct the proceeding by giving a patent claim “its broadest reasonable construction in light of the specification of the patent in which it appears.” Cuozzo argued that the PTO should instead “like the courts, give claims their ‘ordinary meaning … as understood by a person of skill in the art.’” The court evaluated a statute giving the PTO the authority to issue “regulations … establishing and governing inter partes review” and determined that the PTO was entitled to Chevron deference:

Where a statute is clear, the agency must follow the statute … But where a statute leaves a “gap” or is “ambigu[ous],” we typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute …The statute contains such a gap: No statutory provision unambiguously directs the agency to use one standard or the other.

The court then turned to the question of “whether the PTO’s regulation is a reasonable exercise of it’s rulemaking authority.” Finding that it was, the lower court’s decision ruling against Cuozzo was affirmed. The U.S. Supreme Court thus sided with the PTO by applying Chevron deference.

The PTO’s Chevron victory may be short-lived. Rep. John Ratcliffe, R-Texas, has introduced a bill entitled the Separation of Powers Restoration Act of 2016 (H.R. 4768) that would statutorily overrule Chevron. The bill has been passed in the House. Sen. Orrin Hatch, R-Utah, has introduced a similar bill in the Senate.

Criticism of the Chevron deference doctrine is in abundance. The landmark U.S. Supreme Court case Marbury v. Madison,[5] one of the cornerstones of American jurisprudence, articulated that it is “emphatically the province and duty of the judicial department to say what the law is.” Yet some commentators have argued that the executive office has assumed a role that is reserved for the courts. In particular, because the executive office overseas administrative agencies and selects agency leaders, it has been argued that Chevron deference has given the executive office the ability to influence interpretation of the law. Other commentators have argued that Chevron deference effectively creates four branches of government — executive, judicial, legislative, administrative — while the U.S. constitution only permits three branches. Justice Antonin Scalia once said, “Too many important decisions of the Federal Government are made nowadays by unelected agency officials exercising broad lawmaking authority, rather than by the people’s representatives in Congress.” (Dissenting in EPA v. EME Homer City Generation, 572 U.S. _____(2014)).

As can be seen, criticism of Chevron deference has come from multiple sources.

Judicial deference to administrative agency statutory interpretation has been and continues to be a controversial issue. Only time will answer the question that still remains: Will Chevron deference continue to apply to administrative agencies (including the PTO), or is the doctrine on borrowed time?

– By Lawrence E. Ashery

[1] Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984)

[2] Merck & Co. Inc. v. Kessler, 80 F. 3d 1543, 1549-50 (Fed. Cir. 1996)

[3] Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009) vacated 328 Fed. Appx. 658 (Fed. Cir. 2009). The holding in Tafas was subsequently permitted to stand – Tafas v. Kappos, 586. F.3d 1369 (Fed. Cir. 2009)

[4] Cuozzo v. Lee, 136 S. Ct. 890 (2016)

[5] Marbury v. Madison, 5 U.S. 137 (1803)