In Streck, Inc. v. Research & Diagnostic Systems, Inc., the Federal Circuit confirmed that a district court is to undertake de novo review when new evidence is introduced in an interference action under 35 USC § 146.
The Procedural Background
The § 146 action in Streck was preceded by two other proceedings: a district court patent infringement litigation and an interference proceeding before the USPTO Board of Patent Appeals and Interferences.
District Court Patent Infringement Litigiation
Streck sued Research & Diagnostic Systems (R&D) for infringing three patents: U.S. Patent 6,200,500; U.S. Patent 6,221,668; and U.S. Patent 6,399,388. R&D asserted that the patents were invalid because an R&D employee (Johnson) was the first inventor.
At trial, "the live testimony of seventeen witnesses and nearly 200 exhibits" was adduced on the issue of priority of invention. The jury returned the following verdict
Has R&D proven by clear and convincing evidence that Dr. Johnson was the first to invent [the specific claim] and did not abandon, suppress or conceal that invention?
USPTO Interference Proceeding
While the district court patent infringement litigation was pending, an interference was declared at the USPTO that involved five patents, including the three patents involved in the infringement litigation.
A few days after the jury verdict was rendered in the infringement litigation, the USPTO Board issued a decision in the interference, but the Board awarded priority to Johnson.
The § 146 Action
Streck brought the §146 action to challenge the USPTO Board decision, and the case was assigned to the same district court judge who had presided over the patent infringement litigation.
As summarized by the Federal Circuit, "the parties and the district court agreed that the issue of priority would be decided on the evidentiary record relevant to priority as adduced in the infringement trial, together with the record in the PTO interference proceeding." As noted by the district court, the record included "live testimony, evidence that was not presented to the Board, and evidence that conflicts with that provided to the Board. Over fifty exhibits were admitted in the infringement trial that were not considered by the Board in the Interference Action."
The court awarded priority to the Streck inventors, and R&D appealed to the Federal Circuit.
The Federal Circuit Decision
The main issue in the Federal Circuit appeal was the standard of review the district court should have applied to the USPTO Board decision. The district stated that "its obligation was to find the facts of priority de novo, on the entirety of the evidence at trial and in the PTO record." In contrast, R&D argued that the court should have reviewed the Board's findings for substantial evidence, based only on the record before the Board.
In an opinion authored by Judge Newman, the Federal Circuit confirmed that de novo review was appropriate.
The circumstances of this case highlight the importance of interpreting §146 as we have to date and continue to do here. The Board premised its factual findings on the sworn statements and documents submitted to it. The statements did not allow for live credibility assessments, however, and the documents submitted to the Board were highly redacted. As discussed below, the district court expressly found, upon examination of the unredacted documents and with the benefit of live testimony from the declarants, that many of the representations upon which the Board relied were not accurate or credible. In other words, the nature of the administrative proceeding limited the scope of the Board’s inquiry and potentially the accuracy of its fact finding.
The court noted consistent precedent and policy reasons behind this rule:
Section 146 recognizes that, while the Board is fully capable of assessing all matters presented to it, there are inherent limits to its fact finding function that arise from the sterile nature of a proceeding that is limited to documentary and declaration or deposition evidence.
The court concluded:
In accordance with statute and precedent, the district court appropriately considered additional evidence and conducted a de novo determination of the issue of priority under §146.
While this case relates to § 146 interference actions, the Federal Circuit considered a similar issue in the context of § 145 ("Civil Action to Obtain a Patent") in Hyatt v. Kappos. In an en banc decision, the court held that when an applicant introduces new evidence in a §145 action, the district court "must make de novo fact findings with respect to factual issues to which the new evidence relates."
The USPTO petitioned for certiorari in Hyatt on two issues:
- Whether the plaintiff in a Section 145 action may introduce new evidence that could have been presented to the agency in the first instance.
- 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.
(The Supreme Court granted certiorari, but oral argument has not yet been scheduled.)
The main focus of the Hyatt case was the first issue—whether there are any limitations on an applicant’s right to introduce new evidence in a § 145 action. The en banc court answered the second issue quite emphatically ("the district court must make de novo fact findings), and the decision in this case similarly holds that a district court should apply de novo review when the record includes additional evidence. Of course, the Supreme Court is not bound by the Federal Circuit's analysis, but this decision leaves no doubt as to where the Federal Circuit stands on at least the second issue up for review in Hyatt.