Due Process Implications of Panel Stacking at the USPTO.

Author:Martzahn, Olivia
Position:US Patent and Trademark Office
  1. INTRODUCTION II. BACKGROUND A. Trial Level Adjudication of Patent Law Claims 1. Adjudication Procedures at the USPTO 2. Empirical Outcomes of Adjudication at the USPTO 3. Patent Proceedings in District Court B. Appellate Procedures in Federal Court 1. Appellate Review of District Court Proceedings 2. Appellate Review of PTAB Proceedings C. The Differences Between Inter Partes Review and District Court Litigation That Make Due Process So Important III. ANALYSIS A. Due Process Rights in Patent Protection 1. How Due Process Concerns Arise in PTAB Proceedings 2. The Current State of Due Process Concerns in the Federal Circuit 3. Litigant Arguments the Federal Circuit Chooses to Ignore a. Comparing USPTO Panel Stacking to Other Contexts b. The Board Should Be Considered an Alter Ego of the Director 4. Foundational Beliefs in an Unbiased Adjudication B. Potential Effect on Substantive Patent Law C. Why Arguments for Allowing Panel Stacking Don't Stack Up IV. RECOMMENDATION V. CONCLUSION I. INTRODUCTION

    Due process of law is one of the basic guarantees provided by the Constitution. (1) Americans feel strongly about their due process rights and expect them to be upheld in all contexts, including administrative hearings. As discussed by Judge Friendly, one of the elements of a fair administrative hearing is an unbiased tribunal. (2)

    Because of the strong tradition of due process guarantees, the revelation that the United States Patent and Trademark Office (USPTO) allows the director to control the outcome of a case through review panel selection (3) is extremely troubling. Although the Director cannot adjudicate an issue after a panel has been selected, (4) the USPTO asserts that the Director has the power to intentionally select judges that will decide as the Director sees fit. (5) This assertion, made in 2015, was followed up by a similar comment during oral arguments in Nidec Motor Corp. in 2017. (6) Judge Dyk, in a concurring opinion in Nidec, expressed concern with USPTO practices: "While we recognize the importance of achieving uniformity in PTO decisions, we question whether the practice of expanding panels where the PTO is dissatisfied with a panel's earlier decision is the appropriate mechanism of achieving the desired uniformity." (7) However, he stated the issue need not be decided in the particular case at bar. (8)

    The idea that the Director of the USPTO can dictate who is on the review panel to advance his or her opinion ("stack" the panel) creates serious due process concerns. Further, with the passage of the America Invents Act in 2011, the USPTO is deciding a large number of cases that determine property rights. (9) With so many cases being decided, the courts may need to take a more active role in dictating acceptable USPTO practices.

    This Note recommends that the panel stacking scheme at the USPTO be declared unconstitutional for due process violations. It first discusses the procedures at the USPTO and how panels can be stacked. Then it discusses how patent proceedings are conducted in district courts. Next, this Note discusses where the Federal Circuit stands on this issue and the arguments that support a finding that panel stacking is a violation of procedural due process. Then this Note discusses the potential overall effects on patent law if the USPTO is allowed to continue this panel stacking regime. Finally, this Note discusses a proposed solution for the selection of judges on expanded panels.


    A person may challenge patent validity through proceedings at the USPTO or through the federal courts. Although both systems can adjudicate the validity of the patent, the processes and the precedential effect of the decisions issued by each system are different.

    1. Trial Level Adjudication of Patent Law Claims

      1. Adjudication Procedures at the USPTO

        The USPTO is the administrative agency tasked with granting and issuing patents. (10) Included in the duties of the USPTO are administrative proceedings which prescribe panels to decide appeals, derivation proceedings, post-grant reviews, and inter partes review proceedings. (11) These panels consist of at least three members of the Patent Trial and Appeal Board. (12)

        Although there are several choices when it comes to proceedings at the USPTO, inter partes review dominates the field with 93% of all petitions filed at the USPTO in 2016 falling into this category. (13) Because of the prevalence of inter partes review proceedings (IPRs), this Note mostly focuses on IPRs as a mechanism to evaluate to district court proceedings.

        An inter partes review proceeding is instituted by a petitioner who is not the owner of a patent. (14) Because the USPTO is not an Article III forum, and because there is no requirement in the statute, the petitioner does not have to meet the requirements of Article III standing. (15) The petitioner may request that one or more claims in a patent be cancelled as unpatentable, but only under novelty and obviousness. (16) The petition for this proceeding must be filed either nine months after the patent is granted or after the termination of any post-grant review proceedings, whichever is later. (17) However, if a prospective petitioner is served with a complaint alleging infringement, a petition for an IPR must be filed within one year of receipt of the complaint. (18)

        When the USPTO receives the petition, the director determines whether to institute a proceeding, based on whether there is a reasonable likelihood that the petitioner will prevail with respect to at least one of the challenged claims. (19) This intermediate determination is final and non-appealable. (20) Additionally, if the petitioner has already filed a civil action, an IPR may not be instituted. (21)

        After an IPR has been instituted, the Patent Trial and Appeal Board (PTAB) conducts the proceeding with a minimum three-member panel. (22) A final written decision is issued after the proceeding on the patentability of the challenged patent claim. (23) The petitioner must persuade the panel by a preponderance of the evidence that a claim is unpatentable. (24) After a decision has been issued in an IPR, parties to the action can appeal the decision to the United States Court of Appeals for the Federal Circuit. (25)

        However, on occasion, a panel deciding the IPR at the USPTO may be expanded, (26) and a re-hearing may be granted by the PTAB. (27) According to the USPTO's Standard Operating Procedure, "[a]n expanded panel is not favored and ordinarily will not be used." (28) The standard operating procedure lists four reasons for expanding a panel: (1) "[t]he proceeding ... involves an issue of exceptional importance ...," (2) "[consideration by an expanded panel is necessary to secure and maintain uniformity of the [PTAB]'s decisions ...," (3) the commissioner or the commissioner's delegate submit a written request identifying the issue before the board as "containing an issue of first impression," and (4) "[a] written request from the [commissioner ... or the [commissioner's delegate identifying [the issue] before the board as one presenting an issue governed by a previous decision of the board" where "the [commissioner ... has determined that it would not be in the public interest to follow the prior decision," and "ask[s] the board to reconsider and overrule the prior decision." (29)

        The power to designate panel members was originally granted to the Director of the USPTO. (30) However, this power was re-designated to the chief administrative patent judge (chief judge) by the Manual of Patent Examination Procedures. (31) Generally, when the need for an expanded panel has been decided, the judges initially assigned to the panel will remain on the expanded panel. (32) The additional judges assigned shall be chosen "based on [their] technical or legal expertise." (33) The chief judge has discretion to determine the number of judges he or she chooses to assign to the panel. (34) The Director, as head of the agency, has significant influence over these decisions. This influence is what allows the Director to stack the panel to reach a desired outcome.

        The decision to designate an expanded panel can occur either before or after a decision has been made. (35) If a previous panel enters a decision, a later expanded panel decides the rehearing on the merits. (36) After an expanded panel in an IPR proceeding reaches a decision, it may be appealed to the United States Court of Appeals for the Federal Circuit. (37)

      2. Empirical Outcomes of Adjudication at the USPTO

        The Patent Trial and Appeal Board has acquired the nickname "Patent Death Squad" (38) because statistics show a large number of patents are declared unpatentable during the proceedings. (39) From 2012 through 2016, 71% of final written PTAB decisions have found all claims in the disputed patents to be unpatentable, with 2016 coming in at 67%. (40) In addition, 2016 saw 15% of disputed patents have a mix of some claims being upheld, and some claims held unpatentable. (41) This means that only 18% of patents were upheld with all claims determined to be patentable. (42)

      3. Patent Proceedings in District Court

        The district courts have original jurisdiction over any civil action brought relating to patents; state courts do not have jurisdiction over any claim arising under any Act of Congress relating to patents. (43) Patent proceedings in district court are similar to those in other civil cases. Like all cases filed in district court, the plaintiff must have Article III standing. A complaint is filed, followed by a response. One unique feature to the patent litigation process is the claim construction hearing before trial. (44) These hearings are often referred to as "Markman hearings," (45) in reference to the case that determined claim construction was the responsibility of the trial judge, not the jury. (46) After the Markman hearing, the court hears summary judgement motions then pre-trial motions...

To continue reading