No Special Limits on New Evidence in Section 145 Patent Proceedings: Supreme Court

Practical Law Legal Update 4-517-4842 (Approx. 5 pages)

No Special Limits on New Evidence in Section 145 Patent Proceedings: Supreme Court

by PLC Intellectual Property & Technology

Key Litigated Issues

The key litigated issues decided by the US Supreme Court in Kappos v. Hyatt are the extent, if any of:

The limitations on a patent applicant's right to introduce evidence in a civil action against the USPTO Director under Section 145 of the Patent Act (35 U.S.C. § 145), challenging the denial by the Board of Patent Appeals and Interferences (the BPAI, now the Patent Trial and Appeal Board (PTAB)) of a patent because of the applicant's failure to offer this evidence in the PTAB proceedings.
The deference the district court must give the BPAI's factual findings under the Administrative Procedure Act in applying the appropriate standard of review.

Background

Gilbert Hyatt is the sole named inventor of US Patent Application No. 08/471,702 claiming a computerized display system for processing image information. The USPTO examiner rejected all of the pending claims on a variety of grounds. In his response, Hyatt cancelled various claims, amended the claims and added new claims. The USPTO issued a final office action:

Identifying particular categories of claimed subject matter that it determined to lack support in the specification.
Rejecting all of the claims under Section 112 of the Patent Act (35 U.S.C. § 112), for lack of an adequate written description of the claimed invention and the manner and process of making and using it.
Rejecting all of the claims for other reasons.

Hyatt appealed to the BPAI and included a table that identified portions of the specification that he contended supported the claims. The BPAI reversed the examiner on many of the rejections under Section 112 but affirmed some of the examiner's written description and enablement rejections.

Hyatt later filed a civil action in the US District Court for the District of Columbia against the Director of the USPTO under Section 145. The Director moved for summary judgment that the pending claims were invalid for failure to comply with the written description requirement under Section 112. Hyatt opposed the motion and submitted, for the first time in the district court, a written declaration identifying portions of the specification that, he asserted, satisfied Section 112's requirements by providing a written description from which a person of ordinary skill in the art could understand, make and use the claimed invention. The district court, determining that it could not consider Hyatt's declaration because of his unexcused failure to offer it into evidence in the BPAI proceedings, granted summary judgment to the Director on the administrative record.

Hyatt appealed this decision to the Federal Circuit, which affirmed the district court. The Federal Circuit later agreed to rehear the case en banc and vacated the judgment of the original panel.

The Federal Circuit, sitting en banc, this time held that:

In view of the language of the statute and its legislative history, the only limitations on the admissibility of evidence applicable to a Section 145 proceeding are those imposed by the Federal Rules of Evidence and the Federal Rules of Civil Procedure.
The district court may:
- consider the BPAI proceedings and findings in deciding what weight to give newly submitted evidence; and
- give less weight to evidence whose reliability is impacted by an applicant's failure, without explanation, to offer it in the BPAI proceedings.
This rule does not allow parties to raise in district court issues, as distinguished from evidence, not previously raised before the USPTO.

(Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010).)

The Federal Circuit also ruled that where the applicant relies on the same evidence that was before the USPTO, the BPAI's ruling is reviewed with deference, under the substantial evidence standard, under the Administrative Procedure Act. In Judge Newman's dissent on this issue, she argued that Section 145 actions have always been reviewed de novo regardless of whether the same evidence is presented to the district court.

Judges Dyk and Gajarsa also dissented, arguing that the Federal Circuit's en banc decision:

Allows applicants to deliberately withhold evidence from the USPTO in favor of a more hospitable district court.
Reflects a misguided effort to craft special rules for patent cases that have been held impermissible by the US Supreme Court.
Inappropriately treats the USPTO differently from other administrative agencies by failing to apply the same general administrative law principles to USPTO patent proceedings under the Administrative Procedures Act.
Does all of the above without a clear statutory mandate from Section 145.

Holding that the district court abused its discretion by excluding Hyatt's declaration under a wrong legal standard, the en banc Federal Circuit vacated the decision and remanded the case to the district court. The Director filed for a writ of certiorari, which was granted by the Supreme Court.

Outcome

In a unanimous decision, the Supreme Court affirmed the Federal Circuit, finding that:

There are no limitations on a patent applicant's ability to introduce new evidence in a Section 145 proceeding beyond the Federal Rules of Evidence and the Federal Rules of Civil Procedure.
If new evidence is presented on a disputed question of fact, the district court must make de novo factual findings that take into account both:
- the new evidence; and
- the administrative record before the USPTO.

The Supreme Court reasoned that neither the text of Section 145 nor background principles of administrative law support an evidentiary limit or heightened standard of review for factual findings in Section 145 proceedings.

The court also looked to its prior decision in Butterworth v. United States ex rel. Hoe, a case where a patent applicant attempted to introduce new evidence when challenging the Patent Office's denial of his application (112 U.S. 50 (1884)). In Butterworth, the Supreme Court ruled that district court proceedings under the immediate statutory predecessor to Section 145, R.S. 4915, should be:

Conducted according to the ordinary course of equity practice and procedure.
Prepared and heard on all competent evidence presented and the whole merits.

The Court ruled that the same reasoning applies to Section 145 proceedings, in which the district court:

Must consider all evidence, whether or not it was, or could have been, presented to the USPTO, subject only to the Federal Rules of Evidence and Federal Rules of Civil Procedure.
Must make de novo findings on new evidence presented on disputed issues of fact together with evidence in the BPAI administrative record.
Has broad discretion regarding the weight to be given evidence the applicant presents to the court but did not offer up in the USPTO administrative proceedings.

On this reasoning, the Supreme Court affirmed the Court of Appeal's en banc judgment and remanded the case to the Federal Circuit for further proceedings.

Practical Implications

The Supreme Court's decision in Kappos v. Hyatt clarifies that the Administrative Procedure Act imposes no deferential restrictions on the disappointed patent applicant's ability to present, or the district court's ability to hear, evidence in a district court Section 145 action to overturn the USPTO's rejection of the applicant's patent claims. By ruling that the district courts may not preclude the admission of evidence directed to disputed factual issues on the grounds that the applicant failed to present such evidence in prior USPTO proceedings, the Court both:

Enhanced patent applicants' opportunity to successfully challenge the rejection of their pending patent claims.
Clarified the district court's obligation to conduct a full de novo review of such evidence and the administrative record.

No Special Limits on New Evidence in Section 145 Patent Proceedings: Supreme Court | Practical Law