Sunday, February 14, 2016

Orin Kerr in Volokh Conspiracy talks of the USPTO and Chevron deference

The Volokh Conspiracy has a post titled --The case for patent law and criminal law exceptionalism in the administrative state -- which includes the text:

Why don’t courts apply the usual doctrines of administrative law in these areas? After all, in patent law, the Patent and Trademark Office (PTO) administers the patent laws. And in criminal law, the Department of Justice (DOJ) administers the criminal laws. But courts don’t treat these executive agencies like other agencies. The decisions of other agencies get deferential standards of review, such as Chevron deference. But courts generally reject those deferential standards when it comes to reviewing the decisions of the PTO and the DOJ.


The PTO and DOJ are agencies, so they should get the same deference that other agencies get. Deferring to agencies would allow smarter decision-making by expert executive agencies instead of by poorly informed courts. (For an example of this argument in patent law, see Jonathan Masur’s Supreme Court Review article, “Regulating Patents”;


As I see it, courts generally don’t apply administrative law doctrines when reviewing the decisions of the PTO and DOJ for a good reason: Patent law and criminal law predate the regulatory state, and they work using different mechanisms. The deferential doctrines of administrative law, such as Chevron, were designed to review delegations of lawmaking authority by Congress to regulatory agencies. Deference is necessary to ensure that the power can be delegated. But patent law and criminal law do not rely on delegations of lawmaking authority. As a result, I think it would be a bad idea to apply deferential standards in patent law or criminal law.


Deference created a zone in which the agency would regulate. Deference was necessary not because agencies were experts, but because it was necessary step to give agencies the substantive rulemaking powers they were supposed to exercise.
Courts generally haven’t applied administrative law doctrines within patent law and criminal law because those fields do not rely on delegations of power. Both systems predate the late 19th century regulatory agency model, and both have retained their earlier mechanisms that work in a pre-regulatory-state way. In the case of criminal law, Congress doesn’t delegate to DOJ the power to say what the criminal laws mean. DOJ can execute the law by bringing a prosecution, based on the state of the law as established by the courts, but the power to say what the law is belongs solely to the courts. Similarly, Congress doesn’t delegate to the PTO the power to say what the patent laws mean. The PTO reviews patent applications, based on the state of the law as established by the courts, but the power to say what the law is belongs solely to the courts.

First, IPBiz notes that the USPTO has not been delegated substantive rulemaking authority. This is distinct from some other agencies. From footnote 168 of 54 Wm. & Mary L. Rev. 1959 : --Both the NLRB and the Federal Trade Commission (FTC) are known for heavily relying on formal adjudication to make policy. For the NLRB, see, for example, Mark H. Grunewald, The NLRB's First Rulemaking: An Exercise in Pragmatism, 41 Duke L.J. 274, 274 (1991) ("Despite having been granted both rulemaking and adjudicatory power in its statutory charter more than half a century ago, the [NLRB] has chosen to formulate policy almost exclusively through the process of adjudication." (footnotes omitted)). For the FTC, see, for example, Paul R. Verkuil, The Purposes and Limits of Independent Agencies, 1988 Duke L.J. 257, 263 ("Adjudication was the primary function of ... the Interstate Commerce Commission (ICC), and it was a substantial part of the business of the [FTC] as well."). --

Note also footnote 179: David J. Barron & Elena Kagan, Chevron's Nondelegation Doctrine, 2001 Sup. Ct. Rev. 201, 204 (discussing the costs of focusing too much on APA procedures in determining whether Chevron deference applies). The Barron/Kagan article includes the text:

The alternative approach offered in this article, which is within reach of the Court, makes the institutional choice question of Chevron dependent on a key aspect of agency organization--the level in the administrative hierarchy at which final decision making takes place. The congressional nondelegation doctrine, which aims to promote (as most of administrative law aims to promote) similar values as Chevron and Mead, suggests and informs this approach. An internal agency nondelegation doctrine, like the congressional analogue, would recognize the comparative responsiveness and visibility of certain officials (here, high-level administrators) to the public. And an agency nondelegation doctrine, once again like the congressional analogue, would acknowledge the ability of certain officials to discipline decision making throughout a large and unwieldy bureaucracy. This doctrine, implemented through Chevron, would avoid the well-known pitfalls of its congressional cousin. Given the likely interaction between legal incentives and political and institutional pressures in the administrative sphere, often over-looked in discussions of judicial review, the doctrine neither would lead to overcentralization of decision making nor prove incapable of principled enforcement.

Second, Chevron does arise in patent cases

To define the Chevron doctrine, from McMaster v. United States , 731 F.3d 881 : -- Under Chevron, we conduct a two-step inquiry to determine whether an agency interpretation warrants deference. At step one, we ask "whether Congress has directly spoken to the precise question at issue." Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). "If the intent of Congress is clear, that is the end of the matter; [and we] . . . must give effect to the unambiguously [**21] expressed intent of Congress." Id. at 842-43. If, however, "the statute is silent or ambiguous," id. at 843, prior to step two, "we must decide how much weight to accord an agency's interpretation," Tualatin Valley Builders Supply, Inc. v. United States, 522 F.3d 937, 940 (9th Cir. 2008); see United States v. Mead Corp., 533 U.S. 218, 227-28, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001); N. Cal. River Watch v. Wilcox, 633 F.3d 766, 772-73 (9th Cir. 2010). If we determine that Chevron deference applies, then we move to step two, where we will defer to the agency's interpretation if it is "based on a permissible construction of the statute." Chevron, 467 U.S. at 843.
First, we hold thatin the case.the meaning of "valid existing rights" in § 1133(d)(3) is ambiguous under Chevron step one. Section 1133(d)(3) clearly excepts "valid existing rights" from its mandate that patents should be issued to only the mineral estate; [*890] but what constitutes a "valid existing right[]" is not clear from the text; the term is undefined. See Chevron, 467 U.S. at 842-43. -

**from Sightsound v. Apple, 2015 U.S. App. LEXIS 21640 : -- We need not decide whether Chevron deference applies because the only legal questions regarding application of AIA § 18 to the patents-at-issue were decided by Versata II. SightSound primarily contends that its patents are not CBM patents because to "relate to a financial product or service the invention as a whole must be directed to the management of money, banking, or investment or credit." [*13] Appellant's Br. 30. Versata II foreclosed this interpretation: HN10Go to this Headnote in the case."as a matter of statutory construction, the definition of 'covered business method patent' is not limited to products and services of only the financial industry, or to patents owned by or directly affecting activities of financial institutions." 793 F. 3d at 1325. We explained that the interpretation proposed by SightSound would "require reading limitations into the statute that are not there." Id. Here, the Board concluded that a "financial activity" not directed to money management or banking can constitute a "financial product or service" within the meaning of the statute. J.A. 988; accord J.A. 556. Versata II directly supports this conclusion. --

** from COOPER TECHNOLOGIES COMPANY v. Dudas, 536 F.3d 1330 :

--In this case, the Patent Office has argued that its interpretation of section 4608 in the MPEP and Official Gazette are entitled at least to Skidmore deference, and carry additional weight because they are "longstanding." See Br. for Appellee Jon W. Dudas at 14 (citing Fed. Express Corp. v. Holowecki, 552 U.S. 389, 128 S. Ct. 1147, 1156, 170 L. Ed. 2d 10 (2008); Saxbe v. Bustos, 419 U.S. 65, 74, 95 S. Ct. 272, 42 L. Ed. 2d 231 (1974)) ("Patent Office Br."); see generally Skidmore v. Swift & Co., 323 U.S. 134, 65 S. Ct. 161, 89 L. Ed. 124 (1944). Though the Patent Office does not expressly argue that Chevron applies in this case, it has in other cases claimed that it is entitled to Chevron deference when interpreting statutory provisions relating to the conduct of proceedings in the Patent Office. See Br. for the Appellants at 21, Tafas v. Dudas, No. 2008-1352 (Fed. Cir. July 18, 2008) ("[T]he USPTO is entitled to Chevron deference where, as here, it is engaged in interpreting the scope of its power under Section 2(b)(2) and its other sources of rulemaking authority."); Br. for Amicus Curiae Director of the U.S. Patent & Trademark Office at 22-31, Aristocrat Techs. Austl. PTY Ltd. v. Int'l Game Tech., No. 2008-1016, (Fed. Cir. Dec. 13, 2007) (arguing that Patent Office is entitled to Chevron deference as agency charged with administering statutes in Title 35 concerning revival). Accordingly, we first address whether Chevron deference applies. Cf. Rogers v. Office of Pers. Mgmt., 87 F.3d 471, 475 (Fed. Cir. 1996) ("We are not bound by concessions of law.").

Under 35 U.S.C. § 2, the Patent Office has authority to establish regulations to "govern the conduct of proceedings in the Office." 35 U.S.C. § 2(b)(2)(A); see also Animal Legal Def. Fund v. Quigg, 932 F.2d 920, 930 (Fed. Cir. 1991). This is "the broadest of the Office's rulemaking powers" and, "[b]y this grant of power we understand Congress to have 'delegated plenary authority over PTO practice . . .' to the Office." Stevens v. Tamai, 366 F.3d 1325, 1333 (Fed. Cir. 2004) (quoting Gerritsen v. Shirai, 979 F.2d 1524, 1527 n.3 (Fed. Cir. 1992)); see also Lacavera v. Dudas, 441 F.3d 1380, 1383 (Fed. Cir. 2006) ("Under 35 U.S.C. § 2(b)(2), the PTO has broad authority to govern the conduct of proceedings before it . . . ."). To comply with section 2(b)(2)(A), a Patent Office rule must be "procedural"--i.e., it must "govern the conduct of proceedings in the Office." [*1336] In this case, HN8Go to this Headnote in the case.the Patent Office has interpreted a statutory provision--the portion of the AIPA expressly entitled the "Optional Inter Partes Reexamination Procedure Act of 1999"--that created inter partes reexamination and established rules for inter partes reexamination proceedings before the Patent Office. See Pub. L. No. 106-113, § 4601, 113 Stat. at 1501A-567 (emphasis added). The Patent Office's interpretation of section 4608 thus plainly "govern[s] the conduct of proceedings in the Office" within the meaning of § 2(b)(2)(A).
We have also previously held that 35 U.S.C. § 2(b)(2) does not authorize the Patent Office to issue "substantive" rules. See Merck & Co. v. Kessler, 80 F.3d 1543, 1549-50 (Fed. Cir. 1996). "A rule is 'substantive' when it 'effects a change in existing law or policy' which 'affect[s] individual rights and obligations.'" Animal Legal Def. Fund, 932 F.2d at 927 (quoting Cubanski v. Heckler, 781 F.2d 1421, 1426 (9th Cir.1986), vacated as moot [***1710] sub nom., Bowen v. Kizer, 485 U.S. 386, 108 S. Ct. 1200, 99 L. Ed. 2d 402 (1988)). "In contrast, a rule which merely clarifies or explains existing law or regulations is 'interpretative." Id. In the case.the Patent Office's interpretation of "original application" does not effect any change in existing law or policy; rather, it is a prospective clarification of ambiguous statutory language regarding a matter of procedure. It is therefore "interpretive"--rather than "substantive"--under the definitions put forward in Animal Legal Defense Fund. We conclude that the Patent Office had the authority under 35 U.S.C. § 2 to interpret section 4608, because that interpretation both governs the conduct of proceedings in the Patent Office, not matters of substantive patent law, and is a prospective clarification of ambiguous statutory language. --

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