The Federal Circuit will not change the standard of review for appeals from the Patent Trial and Appeal Board (“PTAB”) in Inter Partes Review (“IPR”) proceedings—leaving PTAB findings of fact with greater finality than findings of fact made by a district court.1 The effect is realized on appeal, where invalidity determinations in IPR proceedings are stronger and less likely to be reversed or vacated. Thus, the PTAB may be a more attractive venue for challenging validity of a patent because a decision by the PTAB will likely carry more weight on appeal to the Federal Circuit than one made by the district court. After a primer on fact finding at the PTAB, a recent decision and its rationale are discussed, followed by some practical implications.
By way of introduction to the topic, the Leahy-Smith America Invents Act (“AIA”) created a new tribunal in the USPTO to hear several types of post-grant proceedings or challenges.2 Inter Partes Review (“IPR”), Post-Grant Review (“PGR”), and Covered Business Method Review (“CBM”) are the big three patentability challenges that can be made before the PTAB. During some of these proceedings, the PTAB will conduct a proceeding “similar to trial in the district courts, with discovery, evidence, testimony, briefs, hearings, and a written decision,” all of which creates a record.3 Using IPR as an example, the PTAB will make findings of fact as to the subject matter disclosed in and taught by the prior art to support its decision of whether the challenged patent is invalid as anticipated or obvious.4 Those findings of fact become part of the record. When the PTAB makes its final written decision, either or both parties may appeal that decision on the record to the Federal Circuit, bypassing the district court entirely, if the party believes that the PTAB’s decision was made in error.5 The Federal Circuit’s review is limited to the record generated at the PTAB.6 The applicable standard of review dictates how much scrutiny or deference the Federal Circuit gives to the lower tribunal’s findings of fact on the record.
The Federal Circuit generally reviews the PTAB’s (court reviewing agency) findings of fact under the less-exacting “substantial evidence” standard of review.7 Under “substantial evidence,” the PTAB’s findings of fact cannot be overturned as long as “’a reasonable mind might accept’” a particular evidentiary record as “adequate to support a conclusion.”8 This is a relaxed standard.9 Appellate courts such as the Federal Circuit generally review a district court’s (court reviewing court) findings of fact under a “clear error” or “clearly erroneous” standard.10 That is, the Federal Circuit will reverse or vacate a district court finding of fact if the reviewing judges have a “definite and firm conviction” that an error has been committed.11 The “clearly erroneous standard has traditionally been considered somewhat stricter (i.e., allowing somewhat closer judicial review) than” the substantial evidence standard.12
Why does the standard of review for findings of fact of a lower tribunal differ depending on whether the lower tribunal is a district court or an agency such as the PTAB? The Supreme Court long ago explained that appealing the decision of an agency like the USPTO/PTAB is different than appealing a district court’s decision because it is, at a higher level, “more than a mere appeal,” it is the judiciary reviewing the executive, “it is an application to the court to set aside the action of the executive departments of the government.”13 In general, that difference warrants the application of different standards of review.
Recently, the Federal Circuit denied a petition for rehearing en banc the issue of whether the less-deferential, clear error standard should be applied for appeals from IPR proceedings in particular.14 Both the majority and dissent agreed that the policy and intent behind the AIA supports aligning the “court reviewing agency” standard of review (substantial evidence) with the “court reviewing court” standard of review (clear error).15 The court was clear “that application of the substantial evidence standard of review is seemingly inconsistent with the purpose and content of the AIA,” yet it did not change it.16 The general policy argument for aligning the standards is as follows: the AIA intended the IPR proceeding to be a “cost-efficient substitute“for district court litigation and designed the proceeding to resemble that of a district court trial;17 it follows then that to the extent IPRs were intended to replace litigation in the district courts, IPR fact finding should be reviewed under the same standard as district court fact finding.18 The majority’s and dissent’s holdings are in accord that policy dictates changing the standard of review, but differ as to how that change can be brought about.19
The majority and dissent differ in that the majority reasons that even though the standards should be aligned from a policy perspective and failure to do so in the legislation “may have been an oversight, it is not an inconsistency or oversight I believe we can correct.”20 The majority explained that it cannot align the standards of review in this situation because the Supreme Court has spoken on the issue, and the controlling legislation proscribes the Federal Circuit’s desired course of action.21
The rationale behind that explanation stems from the Supreme Court decision in Dickinson v. Zurko, which held that the Administrative Procedure Act (“APA”) standards controlling judicial review of agency fact finding apply when the Federal Circuit reviews findings of fact made by the USPTO/PTAB.22 The APA is designed to provide greater uniformity to an agency’s use of the power delegated to it by the executive, and it controls and provides procedures for agency rulemaking and adjudication.23 The provision of the APA that stymied the Federal Circuit from even considering aligning the standards of review recites that “’[n]o subsequent legislation shall be held to supersede or modify the provisions of this Act except to the extent that such legislation shall do so expressly.’”24 There is no express provision in the AIA that would supersede the application of the APA provision regarding judicial review by coming with the APA’s exception.25 So even though the purpose of the AIA, and IPR proceedings in particular, appear to conflict with the lower standard of review, the Federal Circuit cannot rule that the AIA supersedes or modifies the APA because the AIA does not do so expressly.26 “The fact that it might have made sense for Congress to change our standard of review for IPRs does not mean it did so.”27 In concluding that it does not have the power to change the standard, and thus that it will not even hear the issue en banc, the Federal Circuit teed up the issue for the higher powers—”[u]nless and until Congress or the Supreme Court sees fit to change our standard of review expressly, we must continue to review factual findings of the Board for substantial evidence.”28
Therefore, unless and until Congress or the Supreme Court aligns the “court reviewing court” and “court reviewing agency” appellate standards of review with respect to IPR proceedings, findings of fact on the record during IPR are afforded greater finality than those on the record of district court litigation. Thus, when deciding between the PTAB and district court, a challenger should consider the relative weight to be afforded by the Federal Circuit on appeal..