The Court of Appeals for the Federal Circuit, sitting en banc, has now ruled in Hyatt v. Kappos,[i] delineating the standards for admissibility of evidence in a civil action seeking reversal of a final rejection of a patent application under 35 U.S.C. §145. The en banc decision reverses the earlier panel decision, holding that §145 does not impose additional limitations on an applicant’s right to introduce new evidence before the District Court. The Court further held that issues to which any new evidence relates must be considered de novo.
Appeal Under Section 145
There are several avenues open to an unsuccessful applicant for a patent to seek redress even after the applicant fails to persuade the United States Patent and Trademark Office (USPTO) Board of Patent Appeals and Interferences (the Board) to direct the USPTO to issue a patent. One option is to appeal directly to the Federal Circuit under 35 U.S.C. §141. Another option, but one not as frequently employed, but which was the one at issue in Hyatt, is to institute an action against the USPTO Director in the United States District Court for the District of Columbia (D.C. District Court) under 35 U.S.C. §145.[ii] That statute authorizes such suit to set aside the determination of the Board. An action under §145 invokes the original jurisdiction of the District Court, and, although seeking the reversal of adjudications in the USPTO, it is not a traditional appeal. Here, the District Judge acts as both fact-finder and the explicator of the law. A successful applicant in a §145 proceeding obtains a judgment directing issuance of the patent.[iii] Hyatt addresses the important question whether, and to what extent, patent applicants seeking relief under §145 may proffer new evidence supporting the right to a patent, i.e., evidence not previously adduced.
Holdings of En Banc Case
Judge Moore (who filed the dissenting opinion in the Federal Circuit panel case) wrote for the en banc majority, holding that “the only limitations on the admissibility of evidence applicable to a §145 proceeding are the limitations imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure.”[iv] Further, the Court observed: “[W]e agree with Mr. Hyatt that Congress intended that applicants would be free to introduce new evidence in §145 proceedings….”[v] The Court did recognize, however, that the proceedings before the USPTO “remain relevant” and that “the District Court may consider the proceedings before and findings of the Patent Office in deciding what weight to afford an applicant’s newly-admitted evidence.”[vi]
Whether review is limited to the agency record according to the APA was also a question before the Court, which the Court discussed in the context of apparently dual standards of review. The Court acknowledged the well-settled proposition that a reviewing court must apply the APA standard of review when no new evidence is admitted, but found that “when a party to a §145 action does introduce new evidence, the Court’s review is no longer limited to the administrative record.”[vii] When new evidence is introduced, the Court acts as a factfinder with respect to that new evidence and makes de novo fact findings.[viii]
Because the en banc court found that the district court abused its discretion in excluding Hyatt’s declaration, the prior judgment was vacated and remanded for further proceedings, consistent with the new holding.
History of the Case
In 1995, Hyatt filed a patent application directed to a data compression system for storing and processing image information. During prosecution of his 238-page application, Hyatt cancelled his original 15 claims and presented 117 new claims. The claims were rejected as lacking written description and enablement, and the examiner instructed Hyatt to identify support in the patent specification for the new claims. Hyatt provided only a general statement describing broad page ranges where certain concepts and various claim terms were discussed, but the examiner maintained the rejection. Hyatt appealed the rejection to the Board. On appeal, Hyatt introduced “Table-1,” which listed “representative terminology” (essentially a listing of the single words in the claim limitations in question), the number of occurrences that each term appeared in the specification, and “representative cites” to the specification. The Board rejected Table-1 as “unhelpful” in identifying written description support.[ix]
In a request for reconsideration, Hyatt offered further detailed written description arguments for specific claim limitations. The Board denied reconsideration, reasoning that because the claim limitations without written description support were identified in the final rejection of the patent application, the arguments could and should have been presented during the original briefing to the Board.[x]
District Court Decision
Hyatt then filed his §145 action in District Court against the USPTO Director. The Director moved for summary judgment, and Hyatt responded by seeking to introduce a declaration that provided claim-by-claim responses to the Board’s conclusions, including cites to portions of the specification. The Court excluded the declaration, finding that Hyatt had been negligent in failing to submit the evidence to the USPTO during examination or to the Board in a timely manner during the appeal. The Director was awarded summary judgment, and Hyatt appealed to the Federal Circuit.[xi]
Federal Circuit Panel Decision
A divided panel affirmed the decision to exclude the declaration, reasoning that the declaration could and should have been introduced before the USPTO. Precisely because the applicant did not make that showing to the USPTO, despite an obligation to do so, Hyatt was precluded from making the showing in the Federal Circuit. Another way to look at this, of course, is that Hyatt could not claim “error” as a result of arguing information not before the USPTO. Although not accepting the negligence finding, the Court reasoned that despite Hyatt’s obligation to respond to the examiner’s request for written description support, he “willfully refused to provide evidence in his possession in response to a valid action by the examiner.”[xii] The majority explained that Congress could not have intended “to allow a patent applicant in a §145 action to introduce new evidence with no regard whatsoever as to his conduct before the USPTO.”[xiii] This rationale rests on traditional appellate foundations: reviewing courts review what was actually before the adjudicatory tribunal and do not consider exogenous bases for determining error.
Judge Moore’s dissenting opinion criticized the majority as making a §145 action more akin to an appeal under §141 than the separate civil action intended by Congress, thereby blurring the line between the two. She observed that “[t]he admissibility of new evidence is exactly what distinguishes §145 from §141,” and that the majority opinion takes away this fundamental right.[xiv] Addressing the majority’s suggestion that Hyatt had an affirmative duty to provide the detailed evidence earlier, the dissent suggests that, although in hindsight, Hyatt should perhaps have submitted his declaration to the USPTO, it would be unreasonable to require patent applicants to put massive declarations or include all evidence in the record at an early stage of prosecution—particularly when the costs of preparing and reviewing such evidence are weighed. “Congress foresaw exactly this problem and ameliorated it with §145 by providing applicants a way to initiate a civil action and introduce new evidence after Board proceedings when the issues are much more succinct and consolidated.”[xv]
The majority and dissenting opinions from the panel opinion thus framed the issue: is a §145 action more or less like a traditional appeal, given the silence of the statute or its legislative history as to what Congress intended, if anything, in this regard.
En Banc Rehearing
Hyatt successfully petitioned for a rehearing en banc. The issues addressed by the parties on rehearing were: (a) Are there limitations on the admissibility of evidence in §145 proceedings? In particular, (i) Does the Administrative Procedure Act require review limited to the agency record in proceedings pursuant to §145? (ii) Or does §145 provide for a de novo proceeding in the District Court? (iii) But if §145 does not provide for a de novo proceeding in the district court, what other limitations exist with respect to the presentation of new evidence before the District Court? And, finally: (b) Did the District Court properly exclude the Hyatt declaration, applying the proper standard?
Hyatt argued that the majority’s opinion neuters §145 as an alternative to the on-the-record appeal provided under §141, arguing that courts have construed the predecessor statute to §145 as requiring “a trial court to adjudicate a patent applicant’s rights based on ‘all competent evidence adduced, and upon the whole merits,’ and ‘according to the ordinary course of equity practice and procedure.’”[xvi]
Four major intellectual property associations appeared as amici curiae supporting de novo evidence review in §145 actions.[xvii] Their briefs argued that the Supreme Court in Dickinson v. Zurko held that §145 “permits the disappointed applicant to present to the Court evidence that the applicant did not present to the USPTO.”[xviii] These briefs also pointed out that making a §145 proceeding de novo, with the introduction of “new” evidence, that is, evidence not introduced earlier in the proceedings, would be consistent with the Federal Circuit’s interpretation of §146 for interference proceedings and with the interpretation of the corresponding trademark statute by other circuit courts.[xix] Three of the amici stated the concern that “applicants concerned about being foreclosed from supplementing the record in district court will burden themselves and the USPTO with potentially unnecessary factual and evidentiary submissions” so as to preserve the ability to use such evidence on appeal, thereby disturbing practice before the already overburdened USPTO.[xx]
The USPTO countered that under principles of equity the District Court should not be able to consider evidence “that the plaintiff had failed, without reasonable excuse, to present to the prior tribunal.”[xxi] The question of admissibility would thus turn on an appraisal of the applicant’s conduct and actions regarding this evidence earlier. The USPTO also argued that the district court should review a decision of the Board “based on the administrative record and subject to the Administrative Procedure Act, except to the extent the applicant submits new evidence that could not reasonably have been provided to the agency in the first instance.”[xxii] While the USPTO allowed that the District Court could consider compelling evidence not available at the time of USPTO proceedings, not all evidence should be admissible merely on the applicant’s motion, reasoning that “applicants would be free to withhold arguments and evidence from the USPTO during prosecution in order to minimize the risk of generating adverse prosecution history and simply start over in District Court if that strategy failed.”[xxiii]
The Public Patent Foundation supported the USPTO’s position, observing that allowing introduction of new evidence in a §145 action would increase gamesmanship, for patent applicants might “strategically withhold evidence from the USPTO,” in order to advantage themselves on appeal, resulting in a decrease in the quality of patent examination and waste public resources.[xxiv] One amicus supported the USPTO’s position by emphasizing the importance to technology companies that patentability decisions be finally determined in a timely manner to facilitate certainty in business decisions.[xxv]
Ultimately, the en banc Federal Circuit held that “the only limitations on the admissibility of evidence applicable to a §145 proceeding are the limitations imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure.”[xxvi] That is, §145 does not impose additional limitations on an applicant’s right to introduce new evidence before the District Court. The Court also held that issues to which any new evidence relates must be considered de novo.
Implications for Practice
There continue to be two separate paths for seeking relief from the denial of a patent by the USPTO Board – under §§141 and 145. In Hyatt, the Federal Circuit clarified the standard for admissibility of evidence in a §145 proceeding as that set forth by the Federal Rules of Evidence and the Federal Rules of Civil Procedure with de novo review of issues implicated by newly-admitted evidence. Some examples of the kinds of evidence that may be introduced in a §145 proceeding include later-discovered prior art, testimony of an expert on the person of ordinary skill in the art, and/or experimental tests that could have been run while the application was before the USPTO but was foregone in the hope that the test expense could be avoided. As a result, patent applicants may now have more confidence in proffering such evidence in a §145 proceeding. Nevertheless, the more prudent strategy may be for patent applicants to provide all information specifically requested by an examiner during prosecution and to introduce at that level everything that the applicant feels strengthens its argument for gaining the grant of patent protection. That course elides the need to argue the finer points of procedural law that Hyatt articulates.