PTAB Actions, and Deference Thereto Arti K. Rai Elvin R. Latty Professor Faculty Director, The Center for Innovation Policy Duke Law School Could talk for hours about deference. In the patent area, deference issues have gotten particularly interesting since the creation of the Patent Trial and Appeals Board in the America Invents Act. Even before the America Invents Act, I think it’s fair to say that the view of patents as “private” rights that lie outside the administrative state was not really tenable. That’s why I see the AIA as a continuation of a trend that clearly started many decades before. But as I argued back in 2007, in an article discussing what would happen if and when Congress enacted a robust system of post-grant evaluation of patents, the public, administrative piece of the puzzle has only grown since then. Start by elaborating very briefly on what the prior panel talked out regarding the motivation for the PTAB.  

Graph of “patents in force Graph of “patents in force.” Starting in the year 2000, something very interesting began to happen.   Prior to that time, for at least 25 years, the number of U.S. patents in force – that is, the number of patents that could be asserted against potential defendants -- had hovered around 1 to 1.2 million. Since 2000, we have seen an enormous increase in the number, to the point where by 2016 we were at 2,776,820 million. That’s an approximately 270% increase. (Bit of blip b/c of Alice). Large proportion of this international patent holders. During this period, the number of district court judges has grown by precisely 12, from 651 to 663. That’s less than 2%.     The scale, and internationalization, of the patent system relative to the courts is another part of the reason I think the property and contract constructs used by some scholars to describe patents break down. (Not to mention the extent to which patents as part of national innovation policy, as Howard Shelanski discussed yesterday.) ONTO DEFERENCE Sources: Historical Patent Data Files, Patent Examination Research Dataset

Deference: Rulemaking Pre-AIA Section 2(b)(2)(a): “may establish regulations, not inconsistent with law, which . . . shall govern the conduct of proceedings in the Office” Post-AIA: fee-setting (Stuart Graham yesterday) (very) broad rulemaking authority regarding PTAB Cuozzo v. Lee, 136 S.Ct. 2131 (2016) Case BRI reasonable under Chevron step 2. BRI policy challenged as “substantive”; Court says that it doesn’t see grant of rulemaking authority as limited to “procedural” matters. Now as it happens I don’t think BRI is good idea as a policy matter. If part of the reason for having PTAB is to provide a better, cheaper alternative to litigation, BRI not a great idea. But Cuozzo allows agency to change its mind.

Deference: Adjudication Pre-AIA, no adjudication sufficiently “formal” under Mead to merit Chevron PTAB proceedings not APA “formal adjudications” (cf. CAFC position); but still have lots of formal, trial-type aspects; certain proceedings probably qualify under Mead Aqua Products v. Matal (2017): review of PTO policy, (arguably) enunciated in adjudication, that patent owner bears burden of proving patentability of amendments Hugely fractured decision. But fractured in very interesting ways from an administrative law standpoint. (Since 6 of the 11 judges thought the statute was ambiguous on the point) Also interesting because the briefing mostly accepted the Chevron framework, and the Court took it upon itself to object. PTO made a bunch of different arguments regarding why it should get deference: 1) Regulation (though if reg didn’t address issue directly, Chevron and then Auer deference). Chevron deference to PTAB decisions, including precedential opinion (Master Image). Precedential opinions requires agreement of the whole judge corps, including Director, and are binding on the agency. 5 judges (O’Malley, Newman, Wallach, Lourie, Moore): Chevron doesn’t apply unless policy enunciated in rulemaking. PTAB decisions (Idle Free and Master Image). “Such musings are not sufficient to command Chevron or Auer deference of any sort” – odd throwaway line given separate Moore opinion. Moore writes separately (with O’Malley and Newman) to acknowledge that Mead talked about adjudication with certain types of formality being able to get Chevron deference. But she’s not sure precedential opinions are enough, since the organic statute doesn’t talk about precedential opinions . More importantly, in her view since the statute specifies regulations, Director has to act through regulation to get Chevron deference, at least where statute has delegated authority to act through regulation. Also clearly attuned to the much larger debate about Chevron (cites Philip Hamburger) Judges Reyna and Dyk also seem to think the agency has to act through full notice and comment rulemaking. Taranto and Prost don’t really address the issue, as they think (along with Hughes, Chen) that the N&C rule addresses the issue. Hughes and Chen squarely take on the idea that to get Chevron the agency must act through rulemaking (SEC v. Chenery)

Concluding Thoughts Sections 101,102,103,112: PTO has not even argued for Chevron (Benjamin & Rai, Administrative Power in the Era of Patent Stare Decisis (2016)) But fact-finding key for many of those requirements (Dickinson v. Zurko) Assuming PTAB constitutional, deference on fact-finding plus strong estoppel give it a lot of power Maybe enough to address “scaling” problem What’s the future of Chevron?