Guest Post -- A Cautionary Note to the PTAB

By David Boundy* --

Last week, the U.S. Patent and Trademark Office's Patent Trial and Appeal Board issued a request for briefing in Proppant Express Investments, LLC v. Oren Technologies, LLC, IPR2018-00914, paper no. 24 (PTAB Dec. 3, 2018) (see Revised Order).  Proppant initiates a rulemaking to formulate new rules on joinder of parties and claims in PTAB inter partes review proceedings.  However, Proppant purports to substitute a "request for briefing" for the statutorily-required Notice of Proposed Rulemaking.  Proppant requests briefing on the following three questions, relating to joinder of new issues and new parties into a PTAB IPR trial proceeding:

1.  Under 35 U.S.C. § 315(c) may a petitioner be joined to a proceeding in which it is already a party?
2.  Does 35 U.S.C. § 315(c) permit joinder of new issues into an existing proceeding?
3.  Does the existence of a time bar under 35 U.S.C. § 315(b), or any other relevant facts, have any impact on the first two questions?

I have written an article entitled "A Cautionary Note to the PTAB: Proppant, Joinder, and PTAB's Rulemaking-by-Adjudication—How to Avoid Brazen Defiance of the APA and a Rerun of Aqua Products."  Proppant sets the PTAB down a path almost identical to that at issue in last year's decision by the Federal Circuit, Aqua Products, Inc. v. Matal, 872 F.3d 1290, 124 USPQ2d 1257 (Fed. Cir. 2017).  Recall that in Aqua Products, the en banc Federal Circuit set aside a rule that the PTAB had promulgated by precedential decision, with none of the incidents for statutory rulemaking.  Of the nine Federal Circuit judges that reached the issue, seven agreed on a simple principle:  "[t]he Patent Office cannot effect an end-run around [the APA] by conducting rulemaking through adjudication."

My article notes several remarkable features of Proppant:

* Proppant seems to be setting up near-identical facts, perhaps with an eye to setting up a challenge or rematch on the Federal Circuit's Aqua decision.  The rationale for the PTAB to retest the law, and distinctions from Aqua, are unclear.  The article considers several possible theories, and shows how each reflects a misunderstanding of law.

* The PTAB gave no notice of Proppant, other than a "nothing special" order in PTABE2E—no notice in the Federal Register (as required by statute), no notice via email to those that had signed up for notice via the PTAB's email list, no mention on the PTAB's "precedential and informative decisions" page, no mention on the "Patent Trial and Appeal Board Alerts" widget on the MyUSPTO web page.  The only mechanism by which the public gained any notice was the Patently-O blog.  A blog is not a substitute for a statutory requirement.  Again, it's not clear what the PTAB's goal might be in neglecting to give statutorily-required notice.

* Proppant gives the public only 25 days to comment.  The amicus brief processes at ABA, AIPLA, IPO, etc run well over 30 days.  The implausibility of the 25-day briefing period is further exacerbated because it runs December 3 to 28, which means several days are carved out for Christmas, and everyone has gotten a late start because of the PTO's failure to provide meaningful notice.  Executive Order 12,866 suggests that 60 days should be the norm.  Perhaps a rule that arises from Proppant will be covered by the Paperwork Reduction Act, in which case 60 days for public comment is required.  It's not clear whether Proppant is designed to obtain public input, or to shut it down.

* By sidestepping the statutorily-required Notice of Proposed Rulemaking in the Federal Register, the PTO sidesteps the Administrative Procedure Act, the Paperwork Reduction Act, the Regulatory Flexibility Act, and a number of executive orders that are designed to help agencies consider and act in the public interest.

* The PTAB's procedural lapses could have been prevented had the PTO implemented suggestions it received in past notice-and-comment periods.  Notice-and-comment letters that could have improved the PTO's regulatory process have selectively "disappeared" from the PTO's web site.

My article shows that lapses of administrative law are not confined to Gil Hyatt (a petition for rehearing of Hyatt v. PTO is currently pending, as discussed on Patently-O (see "Agency Bad Guidance Practices at the Patent and Trademark Office: a Billion Dollar Problem"), nor are lapses confined to individual examiners.

The article offers suggestions for parties appearing before the PTAB, when they face an adverse ruling based on an invalidly-promulgated rule, and for the PTAB to adjust its rulemaking processes to avoid another Aqua Products loss.

Other articles that might interest the reader include:

* David Boundy, The PTAB is Not an Article III Court, Part 1: A Primer on Federal Agency Rule Making, ABA Landslide 10:2, pp. 9-13, 51-57 (Nov-Dec. 2017) (avaiable here or here) gives an overview of the law of rulemaking, including a taxonomy of various terms like "substantive," "procedural," "interpretative," and "legislative."  At the March 2018 Federal Circuit Judicial Conference, Judge Plager recommended this article to the entire patent bar.

* David Boundy and Andrew B. Freistein, The PTAB Is Not an Article III Court, Part 2: Aqua Products v. Matal as a Case Study in Administrative Law, ABA Landslide 10:5, pp. 44-51, 64 (May-Jun. 2018) (available here).  As the title suggests, this article takes an in-depth look at the failures of rulemaking law that underlay Aqua.  Proppant seems to be headed down almost exactly the same path as in Aqua, so this article might help the PTAB avoid a similar outcome.

* David Boundy, The PTAB is Not an Article III Court, Part 3: Precedential and Informative Decisions, forthcoming in AIPLA Quarterly Journal (available here) explains exactly what the PTAB can do and can't by precedential or informative decision, and gives some examples of proper and improper "precedential" and "informative" designations.  Again, the general principles in this article may be helpful to the Proppant panel.

* David Boundy is a partner at Cambridge Technology Law. He may be reached at [email protected].

Comments

[Skeptical]

Thank you Mr. Boundy for your continued stewardship on important administrative law matters.

[Greg DeLassus]

I read Mr. Boundy's well-argued paper, and I find it 90% convincing. Everything that he says about the policy infirmities of setting this sort of rule without Federal Register notice, and with only so very short a window for amici to make comment, makes fine sense.

My remaining 10% hang-up, however, concerns the paper's failure to engage with SEC v. Chenery Corp., 332 U.S. 194, 203 (1947) (Chenery II), which explains that "the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency." If Mr. Boundy is reading these comments, I would be obliged if he might offer comment as to what he takes Chenery II to be saying here. I would also be obliged for explanation as to why the Court committing the choice between rule-making and adjudication to the agency's discretion does not tell against the paper's critique of the PTAB.

[EG]

Hey David,

Excellent post, as always. Yeah, PTAB tries to "end run" proper rule making, as well as any other aspect of the APA, including "panel stacking" and "conflict of interest" issues. As you know well, the USPTO's "end running" of rule making goes back to the days of GSK/Tafas and even before that.

[David Boundy]

Greg --

Good question. As the Prego commercials say, "It's in there." Instead of Chenery, I used NLRB v Wyman-Gordon from 1969 for the same point.

Of course the PTAB has the authority to issue individual joinder decisions in the course of individual adjudications, and in the case of joinder, that authority is unusually broad. That's at § IV(B).

If this were an interpretation of an "active" ambiguity (my term) in a regulation, such as to resolve an ambiguous term, or resolve a clash, then the PTAB could issue a precedential decision eligible for Auer deference. But there is no such regulation.

There are a number of differences from Chenery II. For example, the SEC (and NLRB) has unified adjudicatory and rulemaking authority. The PTAB (even with the Director on the panel) doesn't. Those differences are all captured in the article at §§ III and IV.

A (much) longer discussion of when the PTAB can act by precedential decision, and when it can't, is in the Part 3 paper, at http://ssrn.com/abstract_id=3258694 Greg, I'd appreciate any comments on that paper -- it's in final edit phase, but I'd rather catch errors now than after it's in paper, immutable print.

Thanks for a good thoughtful question.