In re Staats (Fed. Cir. 2012)

Federal Circuit Overrules PTO on Statutory Construction

By Kevin E. Noonan --

The interplay between the U.S. Patent and Trademark Office and its supervisory appellate court (whether the Court of Customs and Patent Appeals or, after 1982, the Federal Circuit) is of long vintage.  Examples include the dispute between the CCPA (particularly Judge Rich) and the Office in the In re Bergy / In re Chakrabarty cases (dealing with the patent-eligibility of living things), only finally resolved by the Supreme Court's decision contrary to the Office's position in Diamond v. Chakrabarty, and the decade-long tussle over whether claims to isolated DNA molecules were obvious exemplified by In re Bell and In re Deuel, again only resolved (this time in the Office's favor albeit in a decision of limited scope in In re Kubin) by the Supreme Court's decision in KSR Int'l Co. v. Teleflex Inc.  The Office also scored a significant victory in its goal towards removing the shackles of Federal Circuit authority in Dickinson v. Zurko, when the Supreme Court found the Federal Circuit to be bound by the provisions of the Administrative Procedure Act and thus compelled to credit the Office's factual determinations if they were supported by substantial evidence.  The one area where the appellate court's decisions remain supreme (at least over the Patent Office) is in questions of law, including as is relevant here, statutory interpretation.

The Federal Circuit exercised its plenary power over statutory construction issues in reversing the Board's decision against the patent applicant in In re Staats.  The case involved the last of a series of broadening reissue applications filed by a patentee.  The original patent contained claims to a method for improving isochronous ("at the same time") data transfers in a computer's central processing unit (CPU).  Prior art methods consumed too much CPU time "servicing the isochronous data transmissions even . . . when no isochronous data was being transferred," according to the specification of U.S. Patent No. 5,940,600.  The '600 patent disclosed two embodiments of methods for overcoming this deficiency:  first, by using a "linked list of buffers" that permitted the CPU to perform other tasks while no isochronous data transfers were occurring; and second, by bypassing the CPU altogether using a "direct" isochronous data channel between a sender node and a receiver node.  Upon issue, the claims of the '600 patent were directed exclusively to embodiments of the first disclosed invention and not to the second disclosed invention.

The patentee timely filed a broadening reissue application directed at claims reciting a "linked list of buffers," i.e., claims to the first disclosed invention.  During pendency of this first reissue application (which was reissued as RE38,641 E) the patentee filed another reissue application "as a continuation of the first broadening reissue application" that was also addressed to broadened claims reciting embodiments of the first disclosed invention.  During pendency of this reissue application (RE39,763 E) the patentee filed yet another reissue application as a continuation of the second reissue application.  However, in this application, the (admittedly broadening) claims were directed to the second disclosed invention.  As noted in the Court's opinion, these claims were presented "almost eight years after the original grant of the '600 patent."  The Examiner and the Board, despite recognizing contrary appellate precedent (In re Doll, 419 F.2d 925 (CCPA 1970)) rejected these claims as being beyond the two-year limit on filing broadening reissue application under 35 U.S.C. § 251.

The Federal Circuit opinion reversing the Office was written by Judge Dyk and joined by Judges O'Malley and Reyna, with Judge O'Malley writing a strongly worded concurring opinion.  The majority relied almost exclusively upon In re Doll, saying that the panel was bound by this CCPA precedent and that the Court sitting en banc was required to overturn it.  The majority specifically rejected the Office's attempt to distinguish Doll based on the circumstances in this case:  in Doll, broadening reissue claims in a continuation application that were rejected by the Board (a rejection overturned by the CCPA) were directed to the "same" invention as the claims in the first reissue application.  Here, according to the Board, the difference was that the rejected claims in the third reissue application were to an "independent and distinct" second invention that had not been patented in either the original patent or either of the two previous reissue applications, and that to permit pursuit of these claims would frustrate the "public notice function" of the reissue statute.  (Presumably, the estoppel provisions of the recapture rule did not apply to these claims.)  The Federal Circuit found no basis in Supreme Court precedent, the 1952 statutory language, CCPA precedent, or its own precedent that supported this distinction.  Specifically, the majority did not find the distinction urged by the Office in the Doll opinion itself, and also failed to find this distinction in Federal Circuit cases (In re Graff and In re Fotland) that followed the Doll precedent.  But ultimately it came down to the precedential weight of the Doll opinion:

In short, this panel is bound by Doll.  See S. Corp. v. United States, 690 F.2d 1368, 1370 (Fed. Cir. 1982) (en banc) (adopting the decisions of the CCPA as binding precedent); In re Am. Fertility Soc'y, 188 F.3d 1341, 1347 (Fed. Cir. 1999) (holding that an earlier precedential decision is binding precedent on later panels).  If the PTO believes we should overrule Doll, that is a matter that must be presented to the en banc court.

In her concurring opinion Judge O'Malley took a much stronger stand.  Calling the majority opinion "inadequate" insofar as it merely relied upon Doll and "wrong" ("[i]ndeed, . . . wrong on multiple levels") insofar as it was "an invitation to reconsider [the Doll] decision," the concurrence cited "[t]he plain language of 35 U.S.C. § 251, coupled with the legislative history, long-standing unambiguous regulations implementing the statute, all relevant case law, and common sense" to "all compel reversal in this case."  Her opinion then walks through the statutory language, the legislative history, "all PTO governing rules and regulations" and "all relevant case law" to support her position in favor of reversing the Board's decision.  In view of her explication of these varied sources for construing the statute, Judge O'Malley concludes that "the PTO's efforts to distinguish those cases so as to avoid the need to comply with their holdings stretch credulity" and:

[i]n the end, the PTO ignores every step in a proper statutory construction analysis and falls back on policy concerns it claims allow it to ignore the face of § 251 and to disregard both its own and this court's pronouncements regarding the proper operation of that governing provision.  Given the limited life of additional claims which can be sought through the type of continuing reissue practice at issue here, the protections afforded by the intervening rights provisions in 35 U.S.C. § 252, and the countervailing implementation concerns the PTO's new standard creates, however, the PTO's policy arguments are overstated -- substantially so.  Even if those policy statements were not overstated, they would be an insufficient reed upon which to rest such a sweeping change in the law.

There is an irony here for anyone who has observed the Federal Circuit's jurisprudence over the course of its history.  That history is replete with "bright-line rules" (involving obviousness, the doctrine of equivalents, the written description requirement and others) aimed at providing a modicum of legal certainty in accordance with the Court's Congressional mandate to harmonize U.S. patent law.  In doing so, the Federal Circuit frequently "quietly walked away from" precedent, even Supreme Court precedent, that was contrary to this goal.  In this case, it is the PTO rather than the Federal Circuit that is urging certainty, taking the position that certainty is fostered by preventing a patentee from drawing out reissue prosecution to include previously unclaimed subject matter (that in another context was considered by the Federal Circuit to be "dedicated to the public"; Johnson & Johnston v. R.E. Service, 285 F.3d 1046 (Fed. Cir. 2002) (en banc)) more than two years after the original patent is granted.  Perhaps the doctrines of intervening rights or prosecution laches are available to provide some counterbalance to the Court's decision, which (it is evident) is available in the service of possible shenanigans by patentees.  But in its decision here, the Federal Circuit takes a significantly different philosophical step than has been its wont (at least before a decade of contrary treatment by the Supreme Court), which in itself makes this case remarkable.

In re Staats (Fed. Cir. 2012)
Panel: Circuit Judges Dyk, O'Malley, and Reyna
Opinion by Circuit Judge Dyk; concurring opinion by Circuit Judge O'Malley