Some Thoughts on Chevron and Patent Exceptionalism from Today’s Supreme Court Decision in Cuozzo

by Chris Walker — Monday, June 20, 2016@chris_j_walker

Today the Supreme Court decided Cuozzo Speed Technologies v. Lee, a case concerning the scope of inter partes review by the Patent Trial and Appeal Board—a review procedure created by the Leahy-Smith America Invents Act of 2012 (AIA). The Court ruled in favor of the Patent and Trademark Office (PTO) on two separate issues: (1) that the statute does not permit judicial review of the PTO’s decision to institute inter partes review; and (2) that the PTO had reasonably interpreted the Patent Act by regulation to construe a patent claim according to its “broadest reasonable construction.”

I’ll leave the patent-related aspects of the case to the patent experts (which I am definitely not). But I did want to discuss briefly the Chevron deference determination as to the second holding. As I note (155-156) in my online contribution— Chevron Deference and Patent Exceptionalism —to the Duke Law Journal symposium this year on patent exceptionalism, the parties disputed whether the PTO’s rulemaking authority extended beyond procedural areas to substantive patent law. In its merits brief, the PTO argued forcefully: “Within the four corners of the AIA itself, petitioner identifies no indication that the PTO’s rulemaking authority is limited to procedural matters.”

In Part III of the opinion, the Supreme Court unanimously agrees with the PTO and rejects the procedural/substantive distinction, holding (at 13) that “the statute allows the Patent Office to issue rules ‘governing inter partes review,’ §316(a)(4), and the broadest reasonable construction regulation is a rule that governs inter partes review” and rejects (at 13-14) the argument that such rulemaking authority is “limited to procedural rules.”

The Court then goes on to reject Petitioner’s argument that Congress intended the legal standard for claim construction to be the same in a judicial and agency proceeding, finding that the agency inter partes review proceeding is separate and distinct so as to allow a difference in standards. For adlaw geeks, this discussion is particularly interesting because the Court grapples with the legislative history and purpose arguments at Chevron Step One in ways that would not have made Justice Scalia too happy. For instance, Justice Scalia certainly would not have endorsed this Step One conclusion (at 16) that “neither the statutory language, its purpose, or its history suggest that Congress considered what standard the agency should apply when reviewing a patent claim in inter partes review.” Indeed, it may be safe to conclude that John Manning’s call to get rid of legislative history in the Chevron analysis seems unlikely to receive much support from the current Court, especially since Justice Scalia’s passing.

It is perhaps curious that even Justice Thomas, who expressed concerns about the constitutionality ofChevron deference last Term in Michigan v. EPA, joins this holding. Justice Thomas notes in his concurrence (at 2) that “[t]he Court avoids those constitutional concerns today because the provision of the America Invents Act at issue contains an express and clear conferral of authority to the Patent Office to promulgate rules governing its own proceedings.” Fascinating. Apparently for Justice Thomas the constitutional concerns about transferring judicial power from Article III courts to Article II agencies can be eliminated by express Article I statutory delegation of rulemaking authority to a federal agency. It will be interesting to see how Justice Thomas further develops his constitutional attack on Chevron deference.

So what does Cuozzo mean for the future of patent exceptionalism in administrative law? As I have blogged about before (here and here), one of the central debates at the Duke Law Journal Symposium (video here) was whether the newly created Patent and Trial Appeal Board (PTAB) could receiveChevron deference for its interpretations of substantive patent law.

John Golden argued that it could not because its adjudicatory procedures are not sufficiently formal under the Mead doctrine. Stuart Benjamin and Arti Rai, by contrast, argued that the procedures are sufficiently formal—especially where the PTO Director has exercised her authority to make the decision precedential and/or conduct rehearing. I agreed with Benjamin and Rai, but further argued that the PTO should seek Chevron deference at the Supreme Court—something that Benjamin and Rai were less convinced would be worth it.

I view Cuozzo as a little more evidence that the Supreme Court may be interested in recognizingChevron deference for PTAB interpretations of substantive patent law, perhaps as a means of reining in the Federal Circuit’s approach to substantive patent law. To be sure, just because the Court agreed with the PTO that the PTO has Chevron-eligible rulemaking authority over both procedural and substantive patent law (at least in the inter partes review context) does not mean that the PTAB has the same authority for interpretations adopted in its adjudicatory proceedings. The Mead formality inquiry would still need to be addressed. Nor is it necessarily the case that the Court’s ruling that the PTO has substantive interpretive authority over things like the “broadest reasonable construction” extend to core substantive questions of patent law, such as the requirements for patentability.

But Cuozzo seems to signal that the Court is receptive to more aggressive arguments from the PTO forChevron deference of substantive patent law, especially after the enactment of the America Invents Act. Perhaps Cuozzo is one of the first chapters chronicling the demise of patent exceptionalism.

@chris_j_walker

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About Chris Walker

Christopher Walker is a law professor at The Ohio State University Moritz College of Law. Prior to joining the law faculty, Professor Walker clerked for Justice Anthony Kennedy of the U.S. Supreme Court and worked on the Civil Appellate Staff at the U.S. Department of Justice. His publications have appeared in the Michigan Law Review, Minnesota Law Review, Stanford Law Review, and University of Pennsylvania Law Review, among others. Outside the law school, he serves as one of forty Public Members of the Administrative Conference of the United States and on the Governing Council for the American Bar Association’s Section on Administrative Law and Regulatory Practice. He blogs regularly at the Yale Journal on Regulation.

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