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Nothing Private about Relator’s Qui Tam Action Info

by Paul Devinsky | Sep 22, 2022 | Patents

The US Court of Appeals for the Ninth Circuit reversed a district court’s order denying the defendants’ motion to dismiss a qui tam action under the False Claims Act (FCA) and remanded for further proceedings. U.S. ex rel Silbersher v. Allergan, Inc., Case No. 21-15420 (9th Cir. Aug. 25, 2022) (Gould, Bennett, Nelson, JJ)

Relator Silbersher, a patent lawyer, brought his action against the defendants under the FCA. (31 U.S.C. § 3730(b)). Silbersher alleged that the defendants unlawfully obtained several patents related to two drugs used to treat Alzheimer’s disease. He asserted that by fraudulently obtaining these patents, the defendants prevented generic drug competitors from entering the market. As a result, Medicare paid inflated prices for the two drugs in violation of the FCA.

The US Department of Justice, all of the states that have analogues to the federal qui tam provision and the District of Columbia declined to intervene in Silbersher’s action. Additionally, the key factual information in Silbersher’s complaint was all disclosed publicly and much of it could be found on the US Patent & Trademark Office’s (PTO) website as well as on other government websites. The district court denied the defendants’ motion to dismiss, holding that the public disclosure bar did not apply to Silbersher’s claims. The defendants appealed.

The Ninth Circuit reversed and remanded, noting that the “FCA creates civil liability for ‘any person who (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; [or] (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.’ 31 U.S.C. § 3729(a)(1).” The FCA limits who can bring a qui tam action and the sources of information upon which they can base their suit. The public disclosure bar seeks to strike a balance between encouraging suits by whistleblowers with genuinely valuable information and discouraging plaintiffs who have no significant information of their own to contribute. The Court, citing its 2018 case United States ex rel. Solis v. Millennium Pharms., reaffirmed the elements of the test for triggering the bar:

“(1) the disclosure at issue occurred through one of the channels specified in the statute;

(2) the disclosure was public; and

(3) the relator’s action is substantially the same as the allegation or transaction publicly disclosed.”

The Ninth Circuit determined that only the first element was at issue in this case and that “[i]t is salient and potentially controlling that the key factual information underlying Silbersher’s complaint was all publicly disclosed, and much could be found in websites maintained by the PTO and other government agencies.” Under the public disclosure bar, a court shall dismiss an action or claim if substantially the same allegations or transactions as alleged were publicly disclosed (1) in a federal criminal, civil or administrative hearing in which the government was a party; (2) in a congressional, Government Accountability Office, or other federal report, hearing, audit or investigation or (3) from the news [...]

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Claim at Issue Must Be Substantively Allowable to Qualify for PTA

by Samoneh (Sammy) Schickel | Sep 22, 2022 | Patents

The US Court of Appeals for the Federal Circuit affirmed two district court decisions, finding that a patent owner who only partially prevailed in one of two appeals was not entitled to any additional patent term adjustments (PTAs) from the US Patent & Trademark Office (PTO) under 35 U.S.C. § 154(b)(1)(C) during the pendency of their district court appeals. SawStop Holding LLC v. Vidal, Case No. 2021-1537 (Fed. Cir. Sept. 14, 2022) (Newman, Linn, and Chen, JJ.)

SawStop owns two patents directed to saws with a safety feature that stops a power-saw blade upon contact with flesh. During prosecution of the application for one of the patents, SawStop appealed an obviousness rejection to the Patent Trial & Appeal Board (Board). The Board affirmed the obviousness rejection but on new grounds. The patent ultimately issued after SawStop amended the claim at issue to overcome the obviousness rejection.

Similarly, during prosecution of the application for the second patent, independent claim 1 was rejected as being anticipated and for obviousness-type double patenting while dependent claim 2 was rejected as anticipated. SawStop appealed the rejections. The Board affirmed both rejections of claim 1 but reversed the rejection of claim 2. SawStop subsequently challenged the Board’s anticipation rejection of claim 1 before the US District Court for the District of Columbia, which reversed the anticipation rejection. SawStop did not challenge the obviousness-type double patenting rejection. On remand to the Board, SawStop cancelled claim 1 and rewrote claim 2 as an independent claim. A patent subsequently issued.

Since issuance of both patents was delayed by appeals before allowance, SawStop requested PTAs under Section 154(b)(1)(C):

Subject to the limitations under paragraph (2), if the issue of an original patent is delayed due to … (iii) appellate review by the Patent Trial and Appeal Board or by a Federal Court in a case in which the patent was issued under a decision in the review reversing an adverse determination of patentability, the term of the patent shall be extended 1 day for each day of the pendency of the proceeding, order, or review, as the case may be.

The Board granted PTA “for the delay incurred in the successful reversal of the rejection of claim 2” of the second patent but denied additional PTA for both patents resulting from the appeals. SawStop filed suits in the US District Court for the Eastern District of Virginia, challenging the Board’s decision. The court granted summary judgment in favor of the PTO in both suits. SawStop then appealed to the Federal Circuit.

The Federal Circuit affirmed, finding that SawStop was interpreting Section 154(b)(1)(C) too broadly. SawStop argued in part that any examiner rejection overturned on appeal qualified as “a reversal of a determination of patentability.” The Court rejected this argument, explaining that the Board’s adverse determination of unpatentability remained before and after the appeal to the Board. That is, “the reversal of a ‘determination of patentability’ requires a determination that the claim in question is substantively allowable, not just free of [...]

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Sometimes Inactions Speak Louder Than Words

by Sarah J. Fischer | Sep 22, 2022 | Patents

The US Court of Appeals for the Federal Circuit affirmed a decision granting summary judgment in favor of the US Patent & Trademark Office (PTO) regarding the propriety of imposing a restriction requirement on a pre-General Agreement on Tariffs and Trade (GATT) patent. Hyatt v. PTO, Case No. 2021-2324 (Fed. Cir. Sept. 8, 2022) (Moore, Prost, and Hughes, JJ.)

This action arose from the prosecution of a pre-GATT application that claimed priority to applications filed as early as 1983. The issue stems from changes to US patent law limiting patent terms to 20 years from their filing date. The old law provided a grant that lasted 17 years from a patent issuance. As the Federal Circuit noted in early litigation involving Gilbert Hyatt, tying patent term to the grant date “incentivized certain patentees to delay prosecuting their patents by abandoning applications and filing continuing applications in their place.” But the change in law left a gap for so-called transitional applications—those filed but not yet granted before the new law took effect. This “‘triggered a patent application gold rush in the spring of 1995’ by applicants who wanted their patent claims to be governed under the [old law] … This gold rush is ‘often referred to as the ‘GATT Bubble.’’”

Hyatt, a prolific inventor, is named in a series of pre-GATT applications filed in 1995 during the GATT bubble. Since then, he has continued to prosecute these applications. As a result of various litigations, the PTO stayed the prosecution of many of these applications between 2003 and 2012. In 2013, over Hyatt’s objections, the PTO required him to select eight claims from an application containing 200 for prosecution. In 2015, the PTO issued a non-final rejection on said claims. Hyatt responded by essentially rewriting the claims in their entirety. The examiner then issued a restriction requirement between the original and amended claims, which would require Hyatt to submit a new application with the new claims, which would be subject to the new law. The restriction requirement was based on the “applicant-action exception,” which allowed the PTO to issue a restriction requirement when the examiner could not have previously made one because of the actions of the applicant. The authority for the PTO action was rooted in Rule 129 (b)(1) (ii), which in relevant part provides:

(1) In an application … that has been pending for

at least three years as of June 8, 1995 … no requirement

for restriction . . . shall be made or maintained

in the application after June 8, 1995, except where:

…

(ii) The examiner has not made a requirement for

restriction in the present or parent application

prior to April 8, 1995, due to actions by the applicant

…

After the PTO issued a restriction requirement, Hyatt filed an action in the US District Court for the Eastern District of Virginia, alleging that the PTO violated the Administrative Procedure Act because the restriction requirement was arbitrary, capricious, an abuse of discretion or otherwise not in [...]

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PTO Director Lays Out Limits on “Roadmapping” as Factor for Discretionary IPR Denials

by Brennen Baylor | Sep 15, 2022 | Patents

Exercising its discretion under 35 U.S.C. § 314(a), the Patent Trial & Appeal Board (Board) denied institution of two inter partes reviews (IPRs) based on its understanding of its own precedential 2017 decision in Gen. Plastic Indus. Co. v. Canon Kabushiki Kaisha. US Patent & Trademark Office Director Kathi Vidal subsequently reversed the Board’s ruling in a precedential sua sponte decision clarifying how to apply the seven factors set forth in General Plastic. Code200, UAB v. Bright Data, Ltd., IPR2022-00861; -00862, Paper 18 (PTAB Aug. 23, 2022) (Vidal, Dir. of PTO).

In General Plastic, the Board addressed the practice of filing seriatim petitions attacking the same patent, where each petition raises a new ground for invalidity. The Board considers the General Plastic factors when determining whether to deny IPR institution to ensure efficient post-grant review procedures and prevent inequity. The seven factors are as follows:

Whether the same petitioner previously filed a petition directed to the same claims of the same patent
Whether at the time of filing of the first petition the petitioner knew of the prior art asserted in the second petition or should have known of it
Whether at the time of filing of the second petition the petitioner had already received the patent owner’s preliminary response to the first petition or had received the Board’s decision on whether to institute review in the first petition
The length of time that elapsed between the time the petitioner learned of the prior art asserted in the second petition and the filing of the second petition
Whether the petitioner provided adequate explanation for the time elapsed between the filings of multiple petitions directed to the same claims of the same patent
The finite resources of the Board
The requirement under 35 U.S.C. § 316(a)(11) to issue a final determination no later than one year after the date on which the PTO Director notices institution of review.

In denying institution in this case, the Board explained that the petitioner’s failure to stipulate that it would not pursue the same grounds in district court “weigh[ed] strongly in favor of exercising discretion to deny institution and outweigh[ed] the fact that the Board did not substantively address the merits of the prior petition.” Director Vidal disagreed, reasoning that when a first petition is not decided on its merits, a follow-on petition affords a petitioner the opportunity to receive substantive consideration. Director Vidal further explained that factor 1 “must be read in conjunction with factors 2 and 3.” Application of factor 1 in a vacuum strips context from a petitioner’s challenges and creates an inappropriate bright-line rule for denying institution.

Proper application of the General Plastic factors requires consideration of the potential for abuse by a petitioner. Director Vidal noted the problem of “roadmapping” raised in General Plastic (i.e., using one or more Board decisions to create a roadmap for follow-on filings until the petitioner finds a ground that results in institution). A denial decision based solely on the [...]

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If You Come for the Prince, You Best Not Miss

by Tim Dunker | Sep 15, 2022 | Trademarks

In a precedential decision, the Trademark Trial & Appeal Board (Board) granted two opposers’ motions for partial judgment on their claim of false suggestion of a connection under Section 2(a) of the Trademark Act based on a trademark application to register the mark PURPLE RAIN. NPG Records, LLC, and Paisley Park Enterprises, LLC v. JHO Intellectual Property Holdings LLC, Opp. No. 91269739 (TTAB Aug. 23, 2022) (Kuczma, Adlin, Johnson, Administrative Trademark Judges) (per curiam).

JHO Intellectual Property Holdings sought to register the mark PURPLE RAIN on the Principal Register in standard characters for several dietary and supplemental energy drinks and for “Energy drinks; Isotonic drinks; Non-alcoholic drinks, namely, energy shots, Sports drinks.” Paisley Park opposed, claiming to own rights in the name, image and likeness of famed musical artist Prince. NPG also opposed, claiming to own registered and common law rights in the trademark PURPLE RAIN. Paisley Park and NPG moved for summary judgment based on an assertion of false suggestion of a connection with Prince under Trademark Act Section 2(a). JHO admitted that its proposed mark was identical to Paisley Park and NPG’s marks and that its use of such mark was without consent or permission.

“Purple Rain” is associated (and often synonymous) with Prince. Paisley Park and NPG presented as evidence, for example, that PURPLE RAIN is a certified “13x Platinum” album selling millions worldwide, the 143rd Greatest Song of All Time according to Rolling Stone magazine, and the title of an Academy-Award-winning motion picture scored by and starring Prince. Paisley Park and NPG showed that unauthorized use of PURPLE RAIN is far from unusual, citing 17 unauthorized uses in December 2021. Paisley Park and NPG also had expert surveys conducted that established the connection between Prince and “Purple Rain.” JHO’s rebuttal included conclusory statements that the surveys conducted by Paisley Park and NPG’s expert did not ask respondents about the association of “Purple Rain” with energy drinks or supplements. JHO also pointed to a list from the US Patent & Trademark Office’s databases of third-party applications and registrations that includes PURPLE RAIN or its homophone PURPLE REIGN.

In view of Paisley Park and NPG’s evidence, the Board first found that there was no genuine dispute that the opposition was within reach of the Paisley Park and NPG’s zone of interests, and they were thus entitled to oppose registration of the mark.

Turning to the merits, the Board explained that in order to prevail on their motion under Section 2(a), Paisley Park and NPG were required to establish there was no genuine dispute that:

JHO’s mark is the same or a close approximation of Prince’s name or identity.
The mark is uniquely and unmistakably pointed to Prince.
Paisley Park and NPG are not connected with JHO’s goods or activities related to the mark.
“Purple Rain” is sufficiently famous to establish a presumed connection with Prince.

On the first factor, the Board explained that the approximation must be “more than merely intended to refer or intended to [...]

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Thee I Dismiss: No Love for Failure to Add Necessary Party

by Paul Devinsky | Sep 8, 2022 | Trademarks

After concluding that a trademark owner’s case for failure to add a necessary party was untenable, the US Court of Appeals for the Fifth Circuit affirmed a district court’s dismissal of the case because the necessary party enjoyed sovereign immunity and could not be added. Lee et al. v. Anthony Lawrence Collection, L.L.C. et al., Case No. 20-30769 (5th Cir. Aug. 24, 2022) (Jolly, Elrod, Oldham. JJ.)

Curtis Bordenave and Paige Lee are in the business of owning trademarks. They petitioned the US Patent & Trademark Office (PTO) for a federal registration of the mark THEEILOVE. The phrase “Thee I Love” comes from Jackson State University, which has used the phrase for roughly 80 years. Collegiate Licensing Company is a licensing agent that handles the licensing of Jackson State’s trademarks to manufacturers that make and sell Jackson State merchandise.

Despite Jackson State’s decades-long use of the phrase, it never applied for a federal mark until after Bordenave and Lee had already done so. Jackson State did register a mark under Mississippi law in 2015 for use on vanity plates and in 2019 for use on other merchandise. It also claimed to have common-law rights to the mark under the Lanham Act.

Bordenave and Lee sued Collegiate Licensing Company and a few of the licensees in charge of producing and selling Jackson State’s merchandise for various claims related to their licensing, manufacturing and selling of “Thee I Love” merchandise, including trademark infringement and unfair competition under the Lanham Act. Bordenave and Lee sought damages, a permanent injunction barring the defendants from producing or selling any more “infringing” merchandise, and a declaration that defendants infringed Bordenave and Lee’s registered marks. The defendants moved to dismiss under Fed. R. Civ. Pro.12(b)(1) and (7), arguing that Jackson State was a required party, and because Jackson State enjoys sovereign immunity, Bordenave and Lee’s case should be dismissed. The district court dismissed the case without prejudice under Rule 12(b)(7). Bordenave and Lee appealed.

The Fifth Circuit affirmed the district court’s ruling. First, the Court determined that Jackson State was a required party, stating that Jackson State had an interest in the action that would be impaired or impeded if Jackson State was not joined in the suit. The Court reasoned that even if Jackson State remained free to challenge Bordenave and Lee’s ownership of THEEILOVE elsewhere, it could still face challenges protecting its interest if it was not joined in this action.

Next, because Jackson State has sovereign immunity, the Fifth Circuit considered whether the district court abused its discretion in dismissing the case rather than proceeding without Jackson State. Jackson State enjoys sovereign immunity as an arm of the State of Mississippi. Because Jackson State had a non-frivolous claim here, the Court found that dismissal was required because of the potential injury to Jackson State’s interest as an absent sovereign.

Finally, the Fifth Circuit considered the four factors under Rule 19(b) that determine whether an action should continue without the absent party or be dismissed. [...]

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Bayou Jambalaya: Sanction Motions, Motions to Vacate and Trade Dress Injunctions

by Alexander Piala, PhD | Sep 8, 2022 | Trademarks

The US Court of Appeals for the Fifth Circuit issued a three-part ruling that affirmed the district court’s denial of a motion to vacate as void the judgment based on Rooker-Feldman doctrine because the earlier state and district court decisions were not “inextricably intertwined,” affirmed the district court’s permanent injunction because the district court based it on the Fifth Circuit’s prior decision, and affirmed the denial of a motion for Rule 11 sanctions because the filed motion was different from the Rule-11-mandated notice that was originally served. Uptown Grill, L.L.C. v. Camellia Grill Holdings, Inc., Case No. 21-30639 (5th Cir. Aug. 23, 2022) (Higginbotham, Higginson, Oldham, JJ.)

This dispute arises from three agreements between Uptown Grill and Camellia Grill: the “Cash Sale, the Bill of Sale and the License Agreement. The Cash Sale and Bill of Sale transferred property from Camellia Grill to Uptown Grill. The License Agreement granted a license to Uptown Grill to use certain trademarks and trade dress. In 2011, Camellia Grill sued Uptown Grill for breach of the License Agreement in state court. The state court found that the appellee breached the license and restored to the appellant all rights to the marks. The court did not, however, construe the Bill of Sale.

While the state court litigation was on appeal, Camellia Grill sued Uptown Grill in federal court for trademark infringement. The district court found that the Bill of Sale transferred the trademarks to Uptown Grill before execution of the License Agreement, and therefore found that Camellia Grill’s infringement claim failed. However, the district court also found that the License Agreement limited Uptown Grill’s use of the trade dress to a single restaurant, and the court issued an injunction to that effect. The Fifth Circuit affirmed these findings in a 2019 decision in Uptown Grill, LLC v. Camellia Grill Holdings, Inc., but remanded the issue of whether Uptown Grill’s use of the Camellia grill trade dress at the new restaurant location constituted a breach of the License Agreement.

On remand, Camellia Grill moved for summary judgment that Uptown Grill breached the License Agreement by using the Camellia Grill trade dress after the termination of the License Agreement. Uptown Grill moved for partial summary judgment on the trade dress injunctions, arguing that Camellia Grill lacked standing since Uptown Grill was not using any trade dress at any new locations. Camellia Grill also filed a motion to dismiss for lack of jurisdiction under the Rooker-Feldman doctrine, under which “inferior federal courts do not have the power to modify or reverse state court judgments’ except when authorized by Congress.” Finally, Uptown Grill moved for sanctions against Camellia Grill for “abusive and harassing conduct.” The district court denied both Camellia Grill’s motion to dismiss for lack of jurisdiction and Uptown Grill’s motion for sanctions. The district court determined that Uptown Grill had breached the License Agreement’s post-termination provisions. The court also decided that the trade dress elements should be limited to that which is protectable under [...]

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Yes, and It Counts! Single Purchase in Forum Establishes Personal Jurisdiction over Infringer

by Tessa Kroll | Sep 1, 2022 | Trademarks

The US Court of Appeals for the Seventh Circuit affirmed exercise of personal jurisdiction over a foreign online retailer for a trademark infringement claim where the trademark owner purchased the only allegedly infringing article sold in the forum. NBA Properties, Inc. v. HANWJH, Case No. 21-2909 (7th Cir. Aug. 16, 2022) (Ripple, Scudder, JJ.)

NBA Properties owns the trademarks for the National Basketball Association (NBA) and NBA teams. HANWJH is a China-based online retailer that sells allegedly infringing NBA branded products on a well-known e-commerce site. HANWJH offered 205 allegedly infringing products that were available for purchase in Illinois, the forum state. HANWJH’s only online order in Illinois was made by an investigator for NBA Properties who purchased a pair of basketball shorts for delivery to an Illinois address. The shorts were delivered to the Illinois address before NBA Properties filed suit against HANWJH.

NBA Properties sued HANWJH for trademark infringement and counterfeiting under 15 U.S.C. § 1114 and false designation of origin under 15 U.S.C. § 1125(a) in the Northern District of Illinois. NBA Properties sought and received a temporary restraining order and preliminary injunction, including a temporary asset restraint on HANWJH’s bank account. After HANWJH failed to timely answer the complaint, NBA Properties moved for default judgment. HANWJH moved to dismiss the case for lack of personal jurisdiction, arguing the following:

Operating a website is not sufficient on its own to establish personal jurisdiction.
A single transaction by the plaintiff cannot support the exercise of personal jurisdiction.
Even if the exercise of personal jurisdiction were otherwise appropriate, such exercise would offend the traditional notions of fair play and substantial justice.

The district court denied HANWJH’s motion to dismiss and entered a default. HANWJH failed to object to the motion for default judgment, and the district court entered a final judgment. HANWJH appealed.

The Seventh Circuit reviewed the “minimum contacts” International Shoe criterion before turning to a more recent line of cases applying this standard to online retailers. Citing its 2020 decision in Curry v. Revolution Laboratories, the Court noted that the minimum contacts requirement is satisfied if “the defendant reasonably could foresee that its product would be sold in the forum.” The Court reasoned that allowing customers to order products from a website to the forum and then fulfilling an order to the forum can form the basis of personal jurisdiction—even when the only orders to the forum were made by the plaintiff, as long as the orders were made before filing suit. Applying these principles, the Court found that HANWJH had purposefully directed conduct at Illinois by establishing an online store, demonstrating a willingness and capacity to ship goods to Illinois and intentionally shipping an infringing product to an Illinois address. The Court explained that it was irrelevant that only a single allegedly infringing article was sold in Illinois and that it was purchased by the plaintiff, because the proper focus of the analysis was on HANWJH’s purposeful conduct. The Court also concluded that HANWJH’s [...]

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Claim Cancelation Limits but Doesn’t Prohibit Assignor Estoppel Defense

by Cecilia Choy, PhD | Aug 25, 2022 | Patents

On remand from the Supreme Court, the US Court of Appeals for the Federal Circuit reconsidered the boundaries of the doctrine of assignor estoppel. The Federal Circuit found that the patent assignor was estopped from challenging the validity of an asserted patent because the asserted claim was not materially broader than the specific claims assigned to the patent owner. Hologic, Inc. v. Minerva Surgical, Inc., Case Nos. 2019-2054; -2081 (Fed. Cir. Aug. 11, 2022) (Stoll, Clevenger, Wallach, JJ.)

Csaba Truckai filed a patent application for a device that was designed with a moisture-permeable head to treat abnormal uterine bleeding while avoiding unintended burning or ablation. Truckai assigned the pending patent application to his company, Novacept, which was later acquired by Hologic. Truckai then founded a new company, Minerva Surgical, and developed a new device that used moisture impermeability to avoid the unwanted ablation. Hologic subsequently filed a continuation application to expand the scope of its claims to encompass applicator heads in general, regardless of moisture permeability. The US Patent & Trademark Office issued a patent on the expanded claims in 2015, and Hologic subsequently sued Minerva for patent infringement.

Hologic argued that doctrine of assignor estoppel barred Minerva from challenging the validity of the patent claims. The district court agreed and granted summary judgment of infringement. On appeal, the Federal Circuit affirmed the summary judgment of no invalidity. The Supreme Court granted certiorari and declined Minerva’s request to discard the doctrine of assignor estoppel but clarified that it comes with limits, holding that “assignor estoppel applies only when an inventor says one thing (explicitly or implicitly) in assigning a patent and the opposite in litigation against the patent’s owner.” The Supreme Court remanded to the Federal Circuit to address whether Hologic’s claim was materially broader than the one Truckai assigned. The Supreme Court explained that if the asserted claim was materially broader than the assigned claim, “then Truckai could not have warranted its validity in making the assignment and without such a prior inconsistent representation, there is no basis for estoppel.”

On remand, the Federal Circuit considered whether Truckai warranted the assigned claim’s validity at the time of assignment and whether the assigned claim was materially broader than the asserted claim.

The Federal Circuit concluded that Truckai had represented that the assigned claim was valid. The Court explained that the assigned claim was initially rejected as being anticipated, but Truckai successfully argued for its allowance. The claim was then canceled in response to a restriction requirement, but such cancellation did not speak to the claim’s patentability because an assignee would understand that it could later prosecute the claim’s subject matter under standard patent practice. Therefore, cancelation did not nullify the claim, and it “remained viable for further prosecution.” Additionally, the assignment was not just to the rights to the application, but to the rights to any continuation, continuation-in-part or divisional patent applications not yet filed. When presenting the application, Truckai signed [...]

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Not “Use It or Lose It”: Even if Unexercised, Director’s Authority over Institution Decisions Remains

by Christopher M. Bruno | Aug 25, 2022 | Patents

The US Court of Appeals for the Federal Circuit denied mandamus relief, finding that a party is not entitled to petition the director for review of a Patent Trial & Appeal Board (Board) decision denying institution of an inter partes review (IPR) or post-grant review (PGR) proceeding. This ruling reflects the Court’s ongoing consideration of the Supreme Court’s decision in United States v. Arthrex, Inc., which held that Board judges cannot constitutionally render final decisions in IPRs without US Patent & Trademark Office (PTO) Director oversight. Click here for our discussion of the case on remand, for which the Federal Circuit just denied en banc rehearing. In re Palo Alto Networks, Inc., Case No. 22-145 (Fed. Cir. Aug. 16, 2022) (Dyk, Chen, JJ.) (Reyna, J., concurring).

After being sued by Centripetal Systems for patent infringement, Palo Alto Networks filed petitions for IPR and PGR of some of the asserted patents. The Board denied institution, and Palo Alto Networks filed requests for Director rehearing. Although the PTO acknowledged receipt of the request, it informed Palo Alto Networks that the Director was not considering requests for rehearing of institution decisions “at this time.” Thereafter, Palo Alto Networks sought a writ of mandamus from the Federal Circuit. Between the request for mandamus and the Court’s decision, the PTO issued guidance explaining that although the PTO was not considering requests for rehearing, “the Director has always retained and continues to retain the authority to review such decisions sua sponte after issuance (at the Director’s discretion),” and indeed, exercised its authority to initiate sua sponte review since.

The Federal Circuit rejected Palo Alto Networks’ claim that the Director’s refusal to consider petitions for rehearing of institution decisions amounted to an abdication of authority prohibited by the Appointments Clause. Even assuming that institution decisions were “final decisions on how to exercise executive power” implicating the Appointments Clause, the Court found that the Director maintains statutory and regulatory authority to review institution decisions (unlike in Arthrex), and that the Board renders such decisions only based on the Director’s delegation of authority (also unlike Arthrex). Accordingly, the structural authority maintained by the Director is sufficient, even if such authority goes unexercised, according to the Court.

Writing separately, Judge Reyna agreed that no Appointments Clause violation had occurred but on different grounds. Although Judge Reyna noted that a categorical rejection of requests for rehearing by the Director might raise constitutional concerns, he concluded that mandamus was inappropriate for several reasons. First, the Director’s caveat that she refused to accept requests “at this time” did not constitute a categorical refusal but rather an exercise of discretion. Second, the Director’s invocation of her sua sponte authority to review belied a lack of exercise of discretion. The Director did in fact exercise sua sponte authority to consider Palo Alto Networks’ request, even though briefing in the Federal Circuit was pending, and thus a writ of mandamus was inappropriate.

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