Reversing a prior panel decision, the Federal Circuit recently held that the only limitations on the admissibility of new evidence in a §145 proceeding are those imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure, but confirmed that new issues not raised during Patent Office proceedings may not be raised in a §145 proceeding.

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On November 8, 2010, the U.S. Court of Appeals for the Federal Circuit, in a 6-2-1 en banc ruling, held that 35 U.S.C. §145 imposes no special limitation on a patent applicant’s right to introduce new evidence in a civil action against the U.S. Patent and Trademark Office (PTO). The Federal Circuit thus reversed the district court, concluding it applied the wrong legal standard for the admissibility of new evidence under §145 and abused its discretion in excluding a declaration submitted by the applicant. Hyatt v. Kappos, Case No. 07-1066 (Fed. Cir., Nov. 8, 2010) (Moore, J.); (Newman, J., concurring-in-part, dissenting-in-part); (Dyk, J.; dissenting). As a result of this ruling, applicants disappointed by rulings of the PTO, rather than appeal directly to the Federal Circuit (under 35 U.S.C. §141), may consider filing a civil action with the opportunity to supplement the administrative record on any issue that had been raised at the PTO.

Summary

The Federal Circuit, reversing a prior panel decision, held that the only limitations on the admissibility of new evidence in a §145 proceeding are those imposed by the Federal Rules of Evidence and Federal Rules of Civil Procedure. However, the court also confirmed that new issues (and evidence relating to new issues) that are not raised during PTO proceedings may not be raised in a §145 proceeding and that, in the absence of additional evidence, the district court must apply the APA (Administrative Procedures Act) standard of review given the PTO’s particularized expertise assessing patentability.

Procedural Background

The case stems from a patent application filed by Gilbert P. Hyatt, the sole inventor named on U.S. Application Ser. No. 08/471,702 (the ‘702 application). The 238-page, 40-drawing ‘702 application was filed by Hyatt in 1995 and, through a series of intervening applications, claims priority to a 1975 application. After a non-final office action, Hyatt filed a response in which he included amended and new claims.

The examiner deemed the response incomplete, arguing, among other things, that Hyatt failed to identify support in the specification for his new and amended claims. In response, Hyatt listed pages of the specification that contained representative support for the claims. The examiner issued a final office action rejecting all pending claims, arguing, in part, that particular categories of claimed subject matter lacked support in the specification, and failed to comply with the written description and enablement requirements of 35 U.S.C. §112.

Hyatt appealed to the U.S. Board of Patent Appeals and Interferences (the Board). The Board, in relevant part, reversed most of the examiner’s written description rejections, but upheld some. Hyatt filed a request for rehearing on the rejected claims, which the Board dismissed on the basis that it raised new issues that could have been raised to either the examiner or the Board. Hyatt responded by filing a civil action at the District Court for the District of Columbia under §145.

In response to the PTO’s summary judgment motion, Hyatt submitted a declaration identifying portions of the specification that he asserted one of skill on the art would appreciate supported his new and amended claims. The PTO objected to the declaration, arguing that the district court should not consider the new evidence because Hyatt did not introduce it to either the Board or the examiner, despite his obvious ability to have done so.

The district court agreed with the PTO, ruling that Hyatt’s failure to present the evidence to the PTO constituted a negligent act. With no new evidence submitted, the district court reviewed the Board’s fact findings for substantial evidence and granted the PTO’s summary judgment motion. Hyatt appealed.

In its earlier ruling (IP Update, Vol. 12, No. 8), the Federal Circuit panel affirmed the lower court’s ruling. The panel majority, while acknowledging that new evidence can be submitted in §145 proceedings under certain circumstances, concluded that new evidence should not be permitted if it could and should have been introduced at the PTO but was not. The panel also held that the APA imposed limitations on the introduction of new evidence in §145 actions.

The Federal Circuit later agreed to hear the appeal en banc, requesting that the parties’ briefing address the issues of whether there are limitations on the admissibility of new evidence in §145 proceedings (IP Update, Vol. 13, No. 3).

The En Banc Ruling

In its en banc ruling, the Federal Circuit initially focused on the language of the statute, noting that the statute itself provided no indication that a civil action under §145 is different from any other civil action. The court also pointed out that §145 clearly distinguishes the civil action provided for therein as an alternative to a direct appeal to the Federal Circuit under §141 (where the applicant is limited to the administrative record). Relying on the portion of §145 that states the district court may “adjudge that such applicant is entitled to receive a patent for his invention … as the facts in the case may appear,” the court vacated the district court decision and remanded the case.

In its analysis of §145, the court looked to the legislative history, noting that as far back as the Patent Act of 1870, the U.S. Congress indicated that applicants seeking review of an adverse finding of patentability at the PTO can introduce new evidence. The court found nothing changed in the Patent Laws in this respect in the subsequent 140 years.

The Federal Circuit rejected the PTO’s argument that Congress intended that only evidence that could not have reasonably been presented to the Patent Office should be admissible in §145 proceedings, distinguishing the 1894 Supreme Court case Morgan v. Daniels, on the basis that Morgan does not relate to the admissibility of new evidence at all because no party in that case was seeking to introduce any. Rather, the court viewed Morgan as going to the deferential agency standard of review when no new evidence is introduced and fact finding is done based on the administrative record. Citing two Supreme Court cases going to the admissibility of evidence, Butterworth v. Hoe (1884) and Dickinson v. Zurko (1999), as well as several prior circuit court cases discussing §145 its predecessor, the majority concluded §145 permits the introduction of new evidence:

We hold that 35 U.S.C. §145 imposes no limitation on an applicant’s right to introduce new evidence before the district court, apart from the evidentiary limitations applicable to all civil actions. … In doing so, we reject the [PTO’s] proposal that only “new evidence that could not reasonably been provided to the agency in the first instance” is admissible in a §145 action.

The court was quick to note that the underlying PTO proceedings remain relevant, stating that the district court must apply the APA standard of review to fact findings for which no new evidence was introduced. The court reasoned that such a deferential standard is appropriate given the PTO’s expertise in assessing patentability. The Federal Circuit also noted the district court may consider the underlying PTO proceedings in determining what weight to give new evidence in §145 action. Finally, the court agreed with the PTO that encouraging full disclosure to the PTO is sound policy, but concluded that policy does not override the language of §145.

Concurring and Dissenting Opinions

Judge Newman issued an opinion concurring with the majority’s holding that new evidence may be introduced, in a §145 action, but dissented from the holding that when no new evidence is submitted, the APA standard of review applies as contrary to “the statutory plan.” In Judge Newman’s view, the statutory plan does not contemplate a “duplicative procedure [to §141]” even where an applicant relies on the same evidence.

In a 37-page dissent, Judge Dyk, joined by Judge Gajarsa, argued that the majority made an error in finding that §145 imposes no limitation on an applicant’s right to submit new evidence to the district court. Judge Dyk argued that permitting de novo trials at the district court improperly serves to minimize the expertise of the PTO and promotes situations in which applicants intentionally withhold evidence from the highly specialized PTO in favor of what an applicant might regard as a more favorable forum, i.e., a district court that lacks the PTO’s knowledge of patentability.

Practice Note

The burden on applicants to submit essentially all possible evidence to the Board is now somewhat alleviated. However, the majority’s decision should not be read too broadly, as the court did confirm that issues (and evidence in support of new issues) never raised at the PTO cannot be raised in §145 proceeding. Also, because, in cases where no new evidence is introduced in a §145 procedure, the standard of review will be the same as that which applies in a §141 appeal, there is now no reason to file a §145 appeal unless the introduction of new evidence is contemplated.

Given the similarity between 35 U.S.C. §145 and its Lanham Act counterpart, 15 U.S.C. §1071(b), the standards set forth in the Hyatt v. Kappos decision are likely to apply to proceedings challenging decisions the Trademark Trial and Appeal Board.