Federal Circuit Giving Away the Farm

The Federal Circuit today issued a shockingly broad decision in Synopsys, Inc. v. Mentor Graphics Corporation that affects the scope of power that the US Patent and Trademark Office can employ when deciding the critical question of patent validity in Post-Grant proceedings. The decision, written by Judge Dyk, considers not only the scope of the USPTO's authority, but also the ability for judicial review. Judge Newman writes a detailed dissent, raising significant questions about the decision. Given the Supreme Court's recent decision to review the Cuozzo Speed Technologies case, this decision seems to call out with another reason for the Supreme Court to reign in the Federal Circuit.

In Synopsys, several key questions were raised regarding whether the USPTO (via the Patent Trial and Appeal Board, PTAB) can "pick and chose" which claims to evaluate in a post grant review proceeding (Inter Partes Review, IPR). The statute (35 U.S.C. § 318(a)), which the USPTO has no authority to disregard according to the well-established precedent following the Administrative Procedure Act (APA), states that the PTAB shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner. The panel majority nonetheless found a way to apply Chevron deference and allow the USPTO to, contrary to the statute, pick and chose what claims it would evaluate.  The main argument was that there was a purposeful distinction by congress when it used different sets of words to describe the claims initially challenged and those upon which the review was actually instituted.  The majority points to the difference between "claims challenged in the petition" and any “claim challenged by the petitioner.” While there are a few letters different, it is hard to see that this is more than a distinction without a difference.

The other important aspect of this case is that the majority essentially insulates even jurisdictional issues on institution from any judicial review, in a way that seems to run afoul of the Administrative Procedure Act. Judge Newman explains:

The non-appealability of the institution determination should not mean that substantive rulings material to the final decision or to the propriety of the entire proceeding are immunized on review of the final decision, if such aspects arose at the institution phase. However, the court holds otherwise, and removes from judicial review any decision during the institution phase—here the question of whether certain prior patent litigation is a statutory or jurisdictional bar. These issues are raised on this appeal, for the court has converted the threshold phase into a source of unappealable substantive rulings, subverting the purpose of the adjudicatory design.

Most surprising is the majority's desire to cling to an approach that has recently been challenged at the Supreme Court.  In Cuozzo, the Supreme Court recently agreed to hear an appeal challenging not only the PTAB's use of the broadest reasonable interpretation of claim scope, but also the Federal Circuit's determination that the PTAB’s decision whether to institute an IPR proceeding is judicially unreviewable even if the Board exceeds its statutory authority in instituting an IPR proceeding.  As the Supreme Court has a history of mostly accepting appeals from the Federal Circuit in order to overturn them, it seems that there is considerable uncertainty that the approach in Synopsys will hold up over time