Kappos v. Hyatt (10-1219)

Oral argument: Jan. 9, 2012

Appealed from: United States Court of Appeals for the Federal Circuit (Nov. 8, 2010)

PATENT, PATENT AND TRADEMARK OFFICE, NEW EVIDENCE, JUDICIAL REVIEW, DEFERENCE

Petitioner Gilbert Hyatt initiated a civil action under 35 U.S.C. § 145 against Respondent David Kappos, Director of the Patent and Trademark Office, after the PTO's Board of Patent Appeals and Interferences sustained rejections for seventy-nine of Hyatt’s patent claims. The district court disregarded new evidence presented by Hyatt, because he failed to present such evidence before the PTO when it was available, and granted Kappos summary judgment. The Federal Circuit initially affirmed, but later reversed the district court's ruling. Kappos argues that § 145 only affords Hyatt a review that is deferential to PTO determinations, and that new evidence can only be introduced if such evidence becomes available after the PTO proceedings. Hyatt counters that § 145 authorizes the district court to decide patent application de novo, and generally allows introduction of new evidence. The Supreme Court’s decision will clarify the procedure for judicial review of the patent application process.

Questions presented

When the United States Patent and Trademark Office ("PTO") denies an application for a patent, the applicant may seek judicial review of the agency's final action through either of two avenues. The applicant may obtain direct review of the agency's determination in the Federal Circuit under 35 U.S.C. 141. Alternatively, the applicant may commence a civil action against the Director of the PTO in federal district court under 35 U.S.C. § 145. In a § 145 action, the applicant may in certain circumstances introduce evidence of patentability that was not presented to the agency.

The questions presented are as follows:

1. Whether the plaintiff in a § 145 action may introduce new evidence that could have been presented to the agency in the first instance.

2. Whether, when new evidence is introduced under § 145, the district court may decide de novo the factual questions to which the evidence pertains, without giving deference to the prior decision of the PTO.

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Issue

Whether a plaintiff whose patent has been denied by the United States Patent and Trademark Office ("PTO") may present new evidence to the district court reviewing this denial, and whether the court must give deference to the PTO’s prior decision. 

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Facts

Petitioner Gilbert P. Hyatt applied to the United States Patent and Trademark Office (“PTO”) in 1995 to patent his invention of a “computerized display system for processing image information.” See Hyatt v. Kappos, 625 F.3d 1320, 1323 (Fed. Cir. 2010). Hyatt claimed his patent was based on a related 1975 application for an earlier version of this invention. See id. The PTO examiner, however, determined that the original application did not support the 117 new patent claims, and that Hyatt had consequently not satisfied for any claim the written-description requirement of “full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains … to make and use” the invention. See id. The PTO examiner asked Hyatt to include the specific location of detailed support in his application for the novelty of each new application claim. See id. In response, Hyatt submitted amendments to his application and provided a list of page numbers where support for his new claims could allegedly be found. See id. The PTO examiner found this supplementary evidence inadequate and rejected all of Hyatt’s claims for failure to provide enough detail, for obviousness, and for several other reasons. See id.

Hyatt appealed this decision to the Board of Patent Appeals and Interferences (“Board”) in a 129-page brief, specifically answering the examiner’s criticisms. See Hyatt, 625 F.3d at 1323–24. The Board found this additional explanation inadequate, but conducted a three-week review of its own and accepted 38 of the 117 claims. See id. at 1324. The Board rejected 79 of the 117 claims for lack of written-description support. See id. The Board denied Hyatt’s request for rehearing, claiming Hyatt’s “claim-by-claim responses to the examiner’s written-description rejections” were forfeited because they should have been presented on appeal. See Brief for Petitioner, David Kappos at 8.

Hyatt then filed a 35 U.S.C. § 145 civil action to obtain a patent against Respondent David J. Kappos, the Director of the PTO. See Hyatt, 625 F.3d at 1324. Kappos moved for summary judgment, arguing that the United States District Court for the District of Columbia could not properly consider evidence that Hyatt had failed to submit previously. See id. This new evidence consisted of a written declaration from Kappos, identifying “portions of the specification that one of skill in the art would understand.” See id. The District Court granted summary judgment in favor of Kappos, and a divided panel of the United States Court of Appeals for the Federal Circuit affirmed, holding that Hyatt had willfully and unreasonably withheld information from the PTO examiner. See id. at 1325.

The Federal Circuit reheard the case en banc, and found that the Federal Rules of Civil Procedure and the Federal Rules of Evidence should have provided the only limitations on the introduction of evidence. See Hyatt, 625 F.3d at 1325–26. The Federal Circuit decided that Hyatt’s new evidence was admissible and that the district court had abused its discretion in rejecting that evidence. See id. at 1326. Although the Federal Circuit considered the PTO’s findings, it did not defer to those determinations where new evidence was concerned, but considered the facts de novo. See id. at 1326–27.

The Supreme Court granted certiorari to determine whether, in the review of a denied patent application under § 145, the federal district court may hear new evidence that was previously withheld, and whether the district court must defer to the previous findings of the PTO. See Question Presented.

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Discussion

The Supreme Court’s decision in this case will determine whether rejected patent applicants can successfully raise new evidence in a 35 U.S.C. § 145 civil action, and whether a district court must defer to the findings of the United States Patent and Trademark Office (“PTO”). See Question Presented. Petitioner Kappos claims that allowing the district court to review all evidence without deference to the PTO encourages patent applicants to withhold evidence from the PTO, undermining quick and accurate rulings on applications. See Reply Brief for Petitioner David Kappos at 5. Respondent Hyatt argues that allowing the courts to conduct a de novo review relieves unfair burdens on both patent applicants and backlogged PTO examiners, and allows for more informed decisions. See Brief for Respondent Gilbert Hyatt at 37, 39.

Impact on the Patent Application Process

Kappos asserts that it is important for the PTO to have all relevant facts so that it can apply its expertise based on a complete record, and revise its decisions if new facts come to light. See Brief for Petitioner David Kappos at 21–22. Intel Corp. and other technology companies (“Intel”) claim that allowing the district court to consider new evidence and review claims de novo slows down the application process and prevents courts from benefitting from the PTO’s expertise. See Brief of Amici Curiae Intel Corp. et al. in Support of Petitioner at 14, 16–17. Intel argues that judicial resources should not be wasted reviewing issues that previously could have been resolved before the PTO. See Brief of Amici Curiae Intel Corp. et al. in Support of Petitioner at 7. Intel also points out that the precious resources of the PTO should not be diverted from reviewing the more than one million backlogged patent applications to address decisions it previously made with the information provided. See id. at 7–8. Intel contends that disappointed applicants should not be allowed to circumvent the standards of experts at the PTO merely by switching venue and requesting a new review. See id. at 5–6. Additionally, Intel posits that allowing inventors intentionally to withhold available evidence may lead the PTO to make inaccurate and, consequently, wasteful decisions. See id. at 14.

The American Intellectual Property Law Association (“AIPLA”) counters that courts should allow patent applicants to present new evidence in a § 145 action, without deference to decision of the PTO's Board of Patent Appeals and Interferences (“Board”), in order to improve the patent application process. See Brief of Amicus Curiae AIPLA in Support of Respondent at 6–7. AIPLA contends it is the district judge’s responsibility to review the merits of the case anew to determine if a just result has been reached in a prior administrative action. See id. at 7. AIPLA argues it is essential for the district court to consider evidence that was not before the PTO, such as live witness testimony that may become necessary only if a dispute arises. See id. at 21–22. Additionally, IEEE-USA suggests that allowing the district court to consider new evidence would actually encourage the PTO to evaluate patent applications more thoroughly to quickly identify potential problems. See Brief of Amicus Curiae IEEE-USA in Support of Neither Party at 21–22. Furthermore, the AIPLA objects to the proposed “reasonable opportunity” standard as being ineffectively vague and impossible to adjudicate. See Brief of AIPLA at 12–14. The IEEE-USA agrees that such a standard would unreasonably drain inventor and reviewer resources by requiring applicants to present all conceivable evidence before the PTO, even if their application ended up being approved upon first review. See Brief of IEEE-USA at 22.

Impact on Patent Applicants

Intel argues that providing a plaintiff with a second chance to present evidence rewards disappointed patent applicants who intentionally withhold information from the PTO. See Brief of Intel Corp. et al. at 10. A patent applicant, Intel claims, should have no trouble presenting “reasonably available” evidence, and has numerous chances to introduce any relevant evidence at the PTO stage. See id. at 18–19. Intel also contends that members of the public benefit from knowing with finality which technology is available for their use, and that the withholding of evidence extends this uncertainty for years. See id. at 8, 16–17.

However, the Intellectual Property Owners Association (“IPO”) claims that the Court should not disturb established inventor expectations by suddenly barring relevant evidence from the district court, making it more procedurally difficult for inventors to receive patents. See Brief of Amicus Curiae IPO in Support of Neither Party at 11. IEEE-USA notes that inventors must contend with the PTO’s shifting positions on patent applications, and may have no notice of perceived problems with their application until after it has been denied. See Brief of IEEE-USA at 11. IEEE-USA asserts that permitting patent applicants to introduce evidence at a later stage in front of a court will minimize the impact of this uncertainty. See id.

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Analysis

A patent applicant whose application has been denied by the Patent and Trademark Office ("PTO") can initiate a civil action against the Director of the PTO in a federal district court pursuant to 35 U.S.C. § 145, as an alternative to directly appealing the PTO’s determination in the Federal Circuit under 35 U.S.C. § 141. See Questions Presented. Petitioner David Kappos, in his capacity as the Director of the PTO, contends that § 145 only authorizes the district court to review the PTO’s decision under traditional (deferential) administrative-law principles, and that the introduction of new evidence is permitted only if that evidence was not available during PTO proceedings. See Brief for Petitioner, David Kappos at 18, 21. In contrast, Respondent Gilbert Hyatt argues that the plain language and judicial history of § 145 require the district court to make a de novo determination without limiting itself to deferential review of the PTO’s record, and without constraining the introduction of new evidence. See Brief for Respondent, Gilbert Hyatt at 16, 24.

Judicial Review or de novo Determination

Kappos argues that a § 145 proceeding allows the court to review the PTO’s denials of a patent application, but does not authorizes the court to conduct a de novo determination. See Brief for Petitioner at 14–15. Kappos contends that the PTO has exclusive authority to approve patent applications, and that the district court entertaining civil actions under § 145 does not have authority to issue (or direct the PTO to issue) any patent. See Brief for Petitioner at 15. The only available remedy to disappointed applicants under § 145, Kappos argues, is to remand erroneous decisions back to the PTO and have the PTO to adjudicate them, similar in effect to a direct appeal under § 141. See id. at 15–16. However, the similar results under § 141 and § 145, as Kappos explains, do not make § 145 superfluous: unlike § 141, § 145 allows applicants to introduce new evidence, to the extent that they did not have a reasonable opportunity to present such evidence to the PTO. See id. at 19.

In contrast, Hyatt argues that the plain language of § 145 - which allows the district court in a “civil action” to “adjudge” the merit of an applicant’s entitlement to a patent “as the facts in the case may appear” - authorizes the district court to conduct de novo adjudication of the application, without limiting the court to evaluation and review of the PTO’s record. See Brief for Respondent at 16–18. In addition, Hyatt argues that the language of § 145 requires the PTO to issue a patent if the court finds for the applicant, and directs the PTO to do so, while allowing the PTO to further determine issues surrounding the application that are not raised in the court proceedings. See id. at 20. Moreover, Hyatt contends that principles of statutory construction forbid reading § 145 as providing identical relief as § 141. See id. at 21. Hyatt notes that, textually, the two closely-related statutory provisions use substantially different language. See id. Hyatt asserts that § 145 should provide disappointed applicants a meaningful alternative channel to § 141, to avoid rendering § 145 superfluous. See id. at 22–23.

Introduction of New Evidence

Kappos contends that prevailing judicial practice and the legislative history of § 145 dictate that introduction of new evidence should only be allowed if applicants have had no reasonable opportunity to present such evidence before the PTO. See Brief for Petitioner at 23, 30. Kappos reasons that the traditional principle of administrative exhaustion requires applicants to present all evidence to the PTO so that the PTO has an opportunity to fully apply its expertise and correct its mistakes. See id. at 22–23. Kappos maintains that the court in Morgan v. Daniels, 153 U.S. 120, 124 (1894), established that a suit brought under Revised Statutes § 4915, § 145’s predecessor, is intended to “set aside a judgment”. See id. at 31–32. Kappos asserts that, under historical principles of equity practice, these actions were brought under a bill of review, and the court was not permitted to admit evidence that could have been introduced in prior proceedings. See id. Kappos argues that when Congress reenacted § 4915 as § 145 without material changes, it adopted the prevalent view that encourages full disclosure to the PTO and only admits new evidence that could not have been produced before the PTO. See id. at 34–35, 38–39.

In contrast, Hyatt asserts that § 145 does not restrict introduction of evidence to that which could not have been offered to the PTO. See Brief for Respondent at 24, 37. First, from a practical perspective, Hyatt argues that non-expert judges need additional information that PTO examiners already possess. See id. at 37–38. He contends that, should Kappos' interpretation prevail, applicants will have to supply all available evidence to the PTO in order to avoid later evidence exclusion, overwhelming the agency. See id. Second, Hyatt argues that, because a court under § 4915 had original equity jurisdiction, it had the authority to hear all competent evidence and make a decision based on the whole merits of the claim; any constraint on such a court’s ability to consider any evidence would be unprecedented. See id. at 24–25. Third, Hyatt states that Morgan does not control the introduction of new evidence in this context, because Morgan was not a case about a denial of a patent by the PTO, and it involved no issue of additional evidence. See id. at 29. In addition, Hyatt argues that, when Congress enacted § 145 in 1952, it did not adopt any different approaches to the court’s equity jurisprudence that would restrict evidence admissibility, and there existed no cases applying any different standards. See id. at 33–34.

Standard of Review for New Evidence

Kappos argues that, when applicants seek to introduce new evidence pursuant to § 145, the district court should apply different standards for admitting evidence based on character of that evidence. See Brief for Petitioner at 43. Kappos explains that, if the evidence is within the PTO’s authority and competency to consider, the district court should remand the application to the PTO and allow it to consider the evidence. See id. at 43–44. Kappos maintains that, if the evidence falls outside the PTO’s authority to consider (e.g. oral testimony), the district court should evaluate the evidence itself, overturning the PTO’s determination only when such evidence indicates a “thorough conviction” of error. See id. at 44 (quoting Morgan, 153 U.S. at 125). Kappos contends that such a deferential standard of review is consistent with the respect due to the specialized experience and expertise of administrative agencies. See id. at 25. He further contends that the “thorough conviction” standard is in conformity with the standard applied to review of a patent grant, which can only be invalidated upon a showing of “clear and convincing evidence”. See id. at 44–45.

On the contrary, Hyatt states that new factual claims in the district court should be governed by a preponderance-of-the-evidence standard without deference to the PTO. See Brief for Respondent at 42. Hyatt argues that § 145 entitles plaintiffs to a de novo determination of their applications considering all the facts presented; he argues that when new evidence is introduced the district court need not defer to the PTO’s prior decision. See id. at 42, 44. Hyatt further reasons that, absent authoritative precedent or a clear congressional indication of a heightened standard in the provision, § 145 suits place on plaintiffs the same burden of proof as in any other civil action—the ordinary preponderance-of-the-evidence standard. See id. at 43–44. Hyatt maintains that the “thorough conviction” language developed in Morgan has no bearing on the present case because that case involved no new evidence or principle of deferential review. See id. at 46, 48. Similarly, Hyatt argues that the “clear and convincing” language was rooted in the longstanding statutory presumption of the validity of issued patents, which are not at issue in this case. See id. at 45.

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Conclusion

This case centers on the judicial interpretation of 35 U.S.C. § 145, pursuant to which a disappointed patent applicant can initiate a civil action in federal district court against the Director of the PTO. Petitioner David Kappos argues that § 145 only affords a deferential review of the PTO findings, and that new evidence can be introduced only if there was no reasonable opportunity to present it to the PTO. In contrast, Respondent Gilbert Hyatt contends that § 145 authorizes the district court to decide on the patent application de novo, and allows introduction of new evidence regardless of whether it could have been produced earlier to the PTO. The Supreme Court’s decision will elucidate the meaning and scope of § 145, thus providing guidance to lower courts and future patent applicants pursuing judicial redress.

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Authors

Prepared by: Amanda Hellenthal and Chuan Liu

Edited by: Eric Schulman

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Additional Sources

Orin Kerr, The Volokh Conspiracy: Standards of Review in Patent Law: A Comment on Kappos v. Hyatt (December 20, 2011)

Gene Quinn, IP Watchdog: Jump the Shark Patent Style: The Supremes Take Kappos v. Hyatt (June 30, 2011)

Patent and Trademark Office: Board of Patent Appeals and Interferences

Patent and Trademark Office: How to Get a Patent

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