By: Joseph R. Carnicella, intellectual property and commercial litigation attorney at Picadio Sneath Miller & Norton, P.C.
In Kappos v. Hyatt, 566 U.S. ___ (2012), decided on April 18, 2012, a unanimous Supreme Court affirmed a Federal Circuit decision that (a) a patent applicant faces no limitations on their ability to introduce new evidence in a Section 145 (35 U.S.C. § 145) proceeding beyond those already in place in the Federal Rules of Evidence and the Federal Rules of Civil Procedure, (b) the district court must take de novo factual findings of both new evidence presented on a disputed question of fact and the administrative record before the PTO, and (c) the district court may consider what weight to afford any new evidence taking into account whether the applicant had an opportunity to present the new evidence before the PTO.
In this case, Gilbert Hyatt (Respondent) filed a patent application that included 117 claims. The PTO’s patent examiner denied each of the claims for lack of an adequate written description pursuant to 35 U.S.C. § 112. Hyatt appealed the decision to the Board of Patent Appeals and Inferences (Board), and after receiving approval of 38 claims, Hyatt filed a Section 145 action in federal district court against the Director of the PTO (Petitioner). In support of his position that the patent application included an adequate written description, Hyatt included a written declaration with his submission to the district court setting forth the portions of the patent specification that, in his opinion, supported the claims that were deemed unpatentable by the Board. The district court refused to consider the declaration on the grounds that applicants are precluded from presenting new issues, at least in the absence of some reason of justice put forward for failure to present the issue to the PTO. The district court then applied a deferential substantial evidence standard under the Administrative Procedure Act (APA) in reviewing only the PTO’s administrative record and subsequently granted summary judgment to the Director.
Hyatt appealed to the Federal Circuit, and a divided panel affirmed the district court’s decision that the APA imposed restrictions on the admission of new evidence in a Section 145 proceeding and that the district court’s review is not wholly de novo. The Federal Circuit granted rehearing en banc and vacated the grant of summary judgment. The Supreme Court granted certiorari following the ruling from the en banc court. The Director argued before the Supreme Court that a district court should admit new evidence in a Section 145 action only if the proponent of the evidence had no reasonable opportunity to present the evidence to the PTO in the first instance. Also, the Director argued that, when new evidence is introduced, the district court should overturn the PTO’s factual findings only if the new evidence clearly establishes that the agency committed error in its findings.
The Supreme Court began its analysis of the Director’s arguments by first reviewing the text of Section 145: “An applicant dissatisfied with the decision of the Board of Patent Appeals and Interferences in an appeal under section 134(a) may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director . . . . The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims involved in the decision of the Board, as the facts in the case may appear, and such adjudication shall authorize the Director to issue such patent on compliance with the requirements of law.” The Supreme Court concluded that the plain text neither imposes unique evidentiary limits in district court proceedings nor establishes a heightened standard of review for factual findings by the PTO.
The Supreme Court next considered the Director’s argument that the statute should be read in light of traditional principles of administrative law under the APA. The Director argued that (a) the district court should defer to the PTO’s factual findings and (b) in line with the traditional rule that a party first must exhaust administrative remedies, the district court should consider new evidence only if the party did not have an opportunity to present the evidence to the PTO. The Supreme Court disagreed with the Director’s positions. First, the Director conceded that Section 145 proceedings are not limited in the same manner as judicial review of an agency decision under the APA, which is typically limited to the administrative record. The Supreme Court noted that the PTO cannot account for evidence that was not presented, and as a result, the district court must make its own findings de novo. Also, the Supreme Court determined that administrative exhaustion does not apply to Section 145 because, while administrative exhaustion avoids premature interruption of the administrative process, the PTO’s process is complete by the time a Section 145 proceeding occurs.
The Supreme Court then analyzed the evidentiary and procedural rules in effect at the time when Congress enacted Section 145 in 1952. The Supreme Court traced the history of Section 145 back to the 1836 Act, which established the Patent Office, and noted that the specific language in Section 145 originated in the 1870 Act. According to the Supreme Court, in 1878, the relevant provision of the 1870 Act was codified by Congress as Revised Statute § 4915 (R.S. 4915), which served as the immediate predecessor to Section 145. The parties agreed that R.S. 4915 and judicial interpretations of that statute provided the foundation for the understanding of Section 145. The Supreme Court analyzed the two primary cases describing the nature of R.S. 4915, and concluded that Congress intended that applicants would be free to introduce new evidence in Section 145 proceedings subject to the rules applicable to all civil actions and that, where new evidence is presented to the district court, a de novo finding would be necessary.
Finally, in agreeing with the Federal Circuit that the district court may decide what weight to afford an applicant’s newly admitted evidence, the Supreme Court noted that the proper means for the district court to accord respect to decisions of the PTO would be through the court’s broad discretion over the weight to be given to such new evidence in Section 145 proceedings.