In Align Technology, Inc. v. International Trade Commission, the Federal Circuit held that ITC action that violated ITC’s own regulations warranted vacatur under the Administrative Procedures Act. While the case addresses specific ITC regulations, the same principles apply to other agencies, including the USPTO. Thus, the USPTO should take note of this decision, and take care to follow its own regulations, including those relating to the new patent trial proceedings conducted by the Patent Trial and Appeal Board.

The ITC Proceedings

The underlying ITC proceedings related to Align’s patented Invisalign System for “adjusting the position of a patient’s teeth.” The original ITC investigation was settled in 2006 with a consent order. Align brought an enforcement proceeding alleging violations of the consent order, and it is the ITC’s handling of the enforcement proceeding that was at issue before the Federal Circuit.

After the enforcement proceeding was instituted, the Intervenors filed a motion to terminate on the ground that the conduct at issue did not fall within the scope of the consent order. The ALJ issued an order (Order No. 57) determining that the conduct did fall under the consent order, and ordering a trial. The Intervenor’s sought immediate review of the ALJ’s order.

The ITC reviewed and reversed the ALJ’s determination, finding that the conduct at issue did not come under the consent order.

In its appeal to the Federal Circuit, Align challenged the ITC’s authority to review the ALJ’s order.

The Federal Circuit Decision

The Federal Circuit decision was authored by Judge Chen and joined by Chief Judge Prost. (Judge Rader did not participate in the decision in view of his retirement on June 30, 2014).

The opening paragraph of the Federal Circuit decision frames the issue as follows:

The International Trade Commission’s regulations authorize the Commission to review a decision of an administrative law judge (ALJ) when that decision is designated as an “initial determination.” Other ALJ decisions, such as an “order,” are not reviewable. Here, the ALJ denied a motion via an order. This case requires us to consider whether the Commission’s review of that order was procedurally sound. For the reasons set forth below, we hold that it was not.

The opinion includes this succinct summary of the court’s decision

The Commission has broad authority to issue rules and regulations governing administration of its cases, but “[i]t is a familiar rule of administrative law that an agency must abide by its own regulations.” …. Because the Commission circumvented its own rules without waiving, suspending, or amending them, we find that its review of Order No. 57 was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”

In this regard, the court noted that ITC regulations distinguish an ALJ’s “initial determinations,” which are immediately reviewable, from an ALJ’s “orders,” which are not, “unless the requirements for interlocutory review are satisfied.” The court also noted that ITC regulations hold that motions to terminate “shall [be] den[ied]” by issuing an order.” Thus, the court determined that the ALJ’s determination properly was issued as an order and, as such, was not immediately reviewable.

The court rejected the ITC’s arguments as to why it had the authority to treat Order No. 57 as an initial determination, or otherwise had the authority to immediately review it. For example, the court noted while the ITC had broad authority to designate which types of ALJ decisions are immediately reviewable and which are not, once the ITC issues regulations on point, it generally must abide by them.

If it desires to do so, Rule 201.4(b) gives [the ITC] broad authority to waive, suspend, or even amend its rules, none of which happened here. Until it does, its rules are binding and the Commission must follow them.

Lying in the Bed You Made

The general holding of this decision appears to be that once an agency makes its bed of regulations, it must lie in it. The USPTO and stakeholders should keep this in mind as the number of patent trial proceedings conducted by the Patent Trial and Appeal Board continues to grow. The contours of the statutes and regulations governing those proceedings are still being determined, and each new case has the potential to create new law. Under this case, the USPTO must at least follow its regulations, and should strive for consistency and predictability in interpreting and applying those rules on a case-by-case basis.