Reversing its earlier 2-1 panel decision in Hyatt v. Doll, 576 F.3d 1246 (Fed. Cir. 2009), the Federal Circuit, sitting en banc, held that a patent applicant who elects to challenge the PTO’s refusal to issue a patent through a civil action against the Director pursuant to 35 U.S.C. § 145 (“section 145 action”) may rely on new evidence and is not limited to evidence that was presented to the PTO during the prosecution of the patent application. The en banc court declined to impose any limits on the evidence that may be presented in a section 145 action beyond those already set forth in the Federal Rules of Civil Procedure and the Federal Rules of Evidence. Hyatt v. Kappos, Appeal No. 2007- 1066 (Fed. Cir. Nov. 8, 2010) (en banc).
35 U.S.C. § 145, in pertinent part, permits a patent applicant, if dissatisfied with the decision of the Board of Patent Appeals and Interferences (“BPAI”) in a patentability appeal, to “have remedy by civil action against the Director [of the PTO] in the United States District Court for the District of Columbia . . . . 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 [BPAI], 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. All the expenses of the proceedings shall be paid by the applicant.” The civil action under section 145 is available only to applicants who do not elect the alternative procedure for review of adverse BPAI decisions, a direct appeal to the Federal Circuit under 35 U.S.C. § 141.
Inventor Gilbert P. Hyatt has been a registered patent agent since 1975. He has applied for a large number of patents and has been a frequent litigant on issues relating to patentability. Hyatt drafted and prosecuted the patent application at issue in this case, U.S. Patent. App. No. 08/471,702 (“the ’702 application”), on his own, and also represented himself in his appeal to the BPAI.
The ’702 application relates to software memory architecture, and is the latest in a large patent family, originally claiming priority to 1984, but subsequently amended to claim priority to 1985. As originally filed, the ’702 application had 15 claims, 40 pages of drawings, a 238-page specification, and a substantial amount of material incorporated by reference.
During prosecution, Hyatt cancelled all 15 original claims and added 117 new claims. A subsequent office action described Hyatt’s final amendment as incomplete for failing to point out support for the new claims and amendments in the disclosure. Hyatt’s response identified support for the claims with varying degrees of specificity, with some claims allegedly supported by as few as 4 lines of the specification and others by as much as 8 pages.
Hyatt’s response was unavailing, as the examiner ultimately issued a final office action rejecting all 117 claims for, among other reasons, inadequate written description, lack of enablement, double-patenting, anticipation, or obviousness.
Hyatt appealed, pro se, to the BPAI. Hyatt’s brief included 36 pages of general argument and what purported to be a table identifying support for particular claim terminology. However, the table failed to specify where the cited support for the claim language could be found in the specification. The BPAI reversed 38 of the 117 § 112 ¶ 1 rejections, finding that those claims were adequately supported and enabled, but upheld the rejections of the remaining 79 for lack of written description support. Hyatt requested rehearing, providing extensive new arguments and citations to the specification, but the BPAI denied that request for rehearing on the ground that Hyatt should have presented those new arguments and citations in the original appeal briefing.
Hyatt, through counsel, then filed a section 145 action in D.C. District court. The Director of the PTO (at the time, John Doll), moved for summary judgment on the ground that the BPAI’s rejection of the remaining 79 claims was based on substantial evidence, implicitly relying on Administrative Procedure Act (“APA”) standards. In opposition to the Director’s summary judgment motion, Hyatt submitted his own declaration and the same briefing and citations rejected as untimely in his unsuccessful request for rehearing. In his reply, the Director objected to Hyatt’s opposition on the ground that Hyatt failed to timely submit the revised briefing and declaration to the BPAI. The district court agreed with the Director, and excluded Hyatt’s declaration and revised briefing on the ground that Hyatt “negligently” failed to submit that material during the examination of the patent or in a timely manner before the BPAI. The district court granted summary judgment, finding no genuine issue of material fact that the BPAI had substantial evidence to reject the 79 remaining claims.
The Federal Circuit Panel Affirms the District Court 2-1
On appeal, a split panel affirmed the district court, in an opinion by then-Chief Judge Michel and joined by Judge Dyk, with Judge Moore dissenting. The panel majority focused on the history of the creation of section 145, along with its “parallel provision” in section 146 (focusing on judicial review of BPAI decisions in patent interferences), both of which derived from the old Revised Statutes § 4915. The panel majority recognized that the “parallel provision” in section 146 still has the last 2 sentences of § 4915, allowing “further cross-examination of the witnesses” and specifying the parties’ right to take “further testimony.” The panel majority emphasized that these provisions illustrated that the “civil action” is not de novo, but rather that the evidence admitted therein must have some basis in the PTO record. Accordingly, the panel majority read in the limitations of section 146 into section 145, concluding that “[t]he absence of similar language in § 145 does not suggest that the PTO record should be given less weight in a § 145 action.”
The panel majority found inapposite older cases that preceded the APA. Instead, according to the panel majority, older cases involving Revised Statutes § 4915 and old patent cases from the regional circuits supported that the section 145 action cannot jettison the PTO record. The panel majority explained that the effect of the APA was to require that judicial review of agency action must be based on the record and defer to agency fact-finding. Thus, in section 145 actions, “the district court must defer to the PTO’s fact-finding except where appropriately- admitted new evidence conflicts with a fact found by the PTO or presents a new factual issue that the PTO did not consider.” The panel majority opined that “it is unreasonable . . . to allow a patent applicant in a § 145 action to introduce new evidence with no regard whatsoever as to his conduct before the PTO” and further, that Congress did not intend that “evidence owed, requested, and willfully withheld from the PTO must nevertheless be admitted” in a section 145 action.
The majority declined to announce a governing standard for review of the PTO record, concluding instead that the district court “will always exclude evidence that was not presented to the PTO due to bad faith or gross negligence and sometimes [even] if the failure to present it was [merely] negligent.” Emphasizing the “longstanding practice” of excluding evidence not submitted to the PTO, especially when not submitted “at least due to fraud, gross negligence, bad faith, or intentional suppression,” the panel majority concluded that Hyatt’s “willful refusal” to provide the evidence in his possession earlier, in response to a valid rejection, was proper grounds for excluding such evidence from the section 145 action. Because it remains the applicant’s burden to identify support in the specification for claim language that has been rejected for lack of written description, the panel majority explained that “[i]f the BPAI was wrong, it was because Hyatt purposefully kept it in the dark by not presenting evidence within his possession to overcome the examiner’s rejections for lack of written description.”
The panel majority essentially saw a section 145 action as a quasi-APA review of PTO decision-making, and refused to apply a de novo standard in a section 145 action because section 145 did not specifically provide for de novo review.
In dissent, Judge Moore criticized the panel majority for its reading of the district court opinion and its reading of the text of section 145, which is a “bill in equity” distinct from a direct appeal to the Federal Circuit. Judge Moore also stated that the legislative history of section 145 implies that Congress did not intend to restrict the admission of new evidence. Because the district court made no findings about willful withholding, intentional suppression, or even gross negligence, the only possible basis for negligence was the panel majority’s conclusion that Hyatt “could have” produced his brief earlier. According to Judge Moore, the panel majority was either appellate fact-finding or, sub rosa holding that a failure to respond to a rejection with every piece of evidence and argument that an applicant possesses is per se willful withholding. According to Judge Moore, the majority’s holding essentially applied an inequitable conduct standard to Hyatt, only without considering the “intent” factor subsumed within any analysis of “willfulness.” However, not only was there no evidence of willfulness or intentional withholding, but the PTO did not advance such an argument either before the panel or in the section 145 action.
Judge Moore instead explained that Hyatt’s failure to overcome the examiner’s rejections and convince the BPAI was a failure of his burden of persuasion, not a failure of his burden of production of the sort that would breach his obligation or affirmative duty to provide information to the PTO. Judge Moore also emphasized that Hyatt never even argued for a full de novo standard, just that he should be allowed to submit new evidence despite the deference accorded to the PTO record. Cautioning that the majority’s new rule was not limited to written description, Judge Moore warned that this newlyannounced “affirmative duty” would apply to any prima facie rejection.
The En Banc Federal Circuit Reverses The Panel In An Opinion Joined by 9 Judges
When the Federal Circuit vacated the panel opinion, reheard the case en banc and issued a new opinion, Judge Moore’s analysis won the support of 8 additional judges. The en banc court, like Judge Moore’s panel dissent, focused on the notion that a section 145 action is neither an appeal nor an APAstyle review of agency decision-making, but is instead a new lawsuit filed to force the PTO to act. The court traced the history of the right to a “civil action,” and its predecessor, a “bill in equity,” and concluded that new evidence has always been a part of such suits. Contrary to the panel majority, the en banc court’s view of the legislative history led to the conclusion that even the old Revised Statutes § 4915 permitted the introduction of new evidence, as that provision’s supporters and opponents recognized when Congress considered amending or eliminating § 4915 in 1926-27. Rather, the court held that the applicant’s failure to previously introduce the evidence before the PTO goes to the weight of that evidence, not its admissibility, and that it is within the district court’s discretion to give less weight to such evidence. Nor is the evidence in a section 145 action limited to evidence that could not have been presented to the PTO in the first instance.
The court explained that the old regional circuit cases recognized that in a Revised Statutes § 4915 action, evidence “was ‘competent’ for admissibility purposes so long as it complied with the ‘rules and practices of a court of equity.’” Even more importantly, the Supreme Court had repeatedly recognized that new evidence was admissible in a Revised Statutes § 4915 action, including in Gandy v. Marble, 122 U.S. 432, 439 (1887) (explaining that the Revised Statutes § 4915 “suit in equity” was “no[t] confined to the case as made in the record on that office”). Accordingly, this sort of bill in equity set forth in Revised Statutes § 4915 was an “original bill,” which, like the language in section 145, authorizes the district court to “adjudge that such applicant is entitled to receive a patent for his invention . . . as the facts of the case may appear.” To be sure, the court emphasized that deference was due to PTO fact finding, but de novo fact-finding would be necessary to evaluate new evidence. In other words, the district court in a section 145 action “must make de novo fact findings with respect to factual issues to which the new evidence relates,” but where the applicant has not introduced new evidence, “the court reviews the case on the same record presented to the agency and . . . must apply the APA’s substantial evidence standard to the Patent Office finding.”
To address concerns that applicants may deliberately withhold evidence from the PTO to avoid generating adverse prosecution history, the court emphasized the payment provision in section 145, which requires the applicant to pay “[a]ll the expenses of the proceedings,” regardless of the outcome. The court reasoned that this large expense would supply “every incentive” to provide the PTO with the applicant’s best evidence, rather than waiting for a section 145 action. In addition, the majority also clarified that new issues may not be raised in a section 145 action, even though the applicant may introduce new evidence relating to issues that were raised before the PTO.
Judge Newman concurred in-part. She agreed that new evidence should be admissible in section 145 actions. However, she disagreed with the court’s holding that “when no new evidence is provided, the findings and rulings of the PTO receive the same deferential treatment in the district court as would apply if the cause were not a civil action under section 145, but instead were an Administrative Procedure Act direct appeal to the Federal Circuit under 35 U.S.C. § 141.” This means, according to Judge Newman, that in those cases where the applicant does not introduce new evidence, section 145 simply adds an intermediate level of review in which the district court makes precisely the same analysis the Federal Circuit will make if the applicant appeals the district court’s decision – and this analysis is identical to the analysis the Federal Circuit would have make if the applicant had filed a direct appeal under section 141. Judge Newman pointed out that “No party presented or even contemplated such a redundant procedure, and no amicus discussed it. It is contrary to statute, to precedent, and to almost two centuries of legislative policy.” Rather, Judge Newman expressed the view that the district court should review the evidence de novo, without deference to the PTO, regardless of whether new evidence is adduced in the district court. Judge Dyk filed a lengthy dissent, joined by Judge Gajarsa, in which he argued that although the court was correct that new evidence should be admissible in a section 145 action, it does not follow, as the court concluded, that there should be no limits on what evidence the applicant can introduce, nor that the scope of evidence has no relation to the applicant’s conduct at the PTO.
The Supreme Court Has Granted Certiorari
The Federal Circuit’s en banc opinion will not be the final word on this issue. The Supreme Court granted certiorari on the Government’s petition, agreeing to decide two questions: (1) Whether the plaintiff in a section 145 action may introduce new evidence that could have been presented to the agency in the first instance; and (2) Whether, when new evidence is introduced under section 145, the district court may decide de novo the factual questions to which the evidence pertains, without giving deference to the prior decision of the PTO.