The changing guard of patent law: Chevron deference for the PTO.

• Jurisdiction: United States
• Author: Wasserman, Melissa F.
• Date: 01 May 2013

2. Force-of-Law Prerequisite

   This Section examines whether the congressional conferral of formal adjudicatory powers to the PTO is sufficient to infer that the Agency has the ability to speak with the "force of law." (126) The Section begins by developing a conceptual framework to determine when a grant of formal adjudicatory authority would be sufficient to infer a delegation of interpretative authority. The Section then turns to explore conceivable counterarguments.

   At first glance, the application of the force-of-law concept to the PTO's postgrant review proceedings appears to be relatively straightforward. The Mead Court was quite explicit that a congressional conferral of formal adjudicatory authority and exercise thereof generally satisfy the force-of-law requirement. (127) Thus, if a court determines that Congress intended the postgrant review proceedings to be effectuated through formal adjudication, the PTO's interpretations of ambiguous terms of the Patent Act announced during postgrant review proceedings should be entitled to Chevron deference. Of course, Mead states that a congressional conferral of formal adjudicatory authority is a "very good indicator" that Congress intended to delegate legislative power to an agency, not that it is dispositive of the intent of Congress. (128) If a subset of grants of formal adjudicatory authority exists that is insufficient to trigger the application of the Chevron framework, just what are the characteristics of these inadequate grants?

   To date, the force-of-law requirement, especially in the context of formal adjudications, has suffered from a lack of judicial guidance and scholarly attention. (129) One exception is the scholarship of Thomas Merrill and Kristin Hickman, who have argued in favor of equating the force-of-law requirement with the power to render binding formal adjudication. (130) Merrill and Hickman admit that their approach fails to explain Supreme Court precedent, thus the binding requirement is, at best, a significant indicator of congressional delegation. (131) Nevertheless, to the extent Merrill and Hickman's rule demarcates the types of formal adjudication that are sufficient but not necessary to meet the delegation of interpretative authority, it still provides valuable insight when applied to the PTO context. The PTO's legal decisions on the validity of a patent during a post-grant review proceeding are binding on all individuals who were parties to the hearing. (132) Thus, under Merrill and Hickman's more stringent conceptualization of the force-of-law requirement, the Chevron framework would be applicable to the PTO.

   Along a similar vein, Thomas Merrill suggested that a key variable in determining whether a grant of formal adjudication carries the power to speak with the force of law is the presence or absence of congressionally imposed sanctions or other adverse consequences for individuals who violate a policy announced during an agency's adjudication. (133) Similar to the binding requirement, Merrill readily admits that courts have failed to follow this approach consistently. (134) However, to the extent that penalties or other adverse consequences represent a sufficient but not necessary condition to infer a congressional delegation of power to act with the force of law, their application to the PTO is fruitful. Patent applicants who fail to heed the PTO's legal decisions announced during postgrant review will suffer a denial of their patent application. (135) Thus, again, an application of the adverse-consequence or penalty indicator provides for Chevron deference to the PTO's legal determinations announced during postgrant review.

   Although the binding and penalty indicators are conceptually appealing, the fact that contemporary courts have not always acted consistently with these approaches suggests that further exploration of the force-of-law concept is warranted. (136) From a fundamental perspective, granting an agency formal adjudicatory authority that carries the power to speak with the force of law necessarily means that Congress intended the agency to make law and policy--or generalized determinations that may affect the rights of many--during its adjudications. (137) To date, the Supreme Court has near uniformly equated a grant of formal adjudicatory authority with the ability to speak with the force of law. In one of the few, possibly only, times the Supreme Court has found a conferral of formal adjudicatory powers to an agency insufficient to infer a delegation of interpretative authority, the Court faced resolving a dispute among two agencies regarding the interpretation of the Occupational Safety and Health Act (OSH Act) of 1970. More specifically, Martin v. Occupational Safety & Health Review Commission involved a split-enforcement model, wherein one agency, the Secretary of Labor, had rule-making authority and another agency, the Health Review Commission, had formal adjudicatory powers. (138) In concluding that the Health Review Commission lacked interpretative authority over the OSH Act, the Court emphasized that Congress intended the Health Review Commission to possess only the ability to make "findings of fact" and apply already-determined law "to those facts in making a decision." (139) According to the Court, Congress intended the Commission to be viewed as nothing more than a "neutral arbiter." (140)

   The Court's conception that an agency charged only with fact-finding in individualized disputes lacks the ability to speak with the force of law suggests that the key inquiry in determining whether an agency has legislative power turns on Congress's intent when it prescribed formal adjudication procedures: whether Congress intended the agency to act simply as a highly stylized adjudicator --deciding fact-intensive issues between parties--or whether it also intended the agency to make policy or law that affects the rights of many people. Under this conceptualization of a delegation of interpretative authority, strong evidence exists that Congress intended the PTO to speak with the force of law when it granted the Agency the power to partake in postgrant review. (141) Congress did not view postgrant review proceedings solely as an apparatus for determining individualized, factual disputes. Instead, the AIA envisioned the exact opposite. The AIA specifically states that postgrant review proceedings are to be used to decide "novel or unsettled legal question[s] that [are] important to other patents or patent applications" (142)--or in other words, used to announce rules that govern a group of individuals. This statutory language provides strong support that Congress intended postgrant review to be accompanied with a policy-making or law-making ability.

   This conclusion is further substantiated by the fact that the statutory basis for invalidating a patent during a postgrant review proceeding is substantially larger than the pre-AIA reexamination proceedings. While pre-AIA reexamination proceedings--and inter partes review--limited the grounds that could be raised to questions of novelty or nonobviousness on the basis of prior art consisting of patents and printed publications, (143) the new postgrant review allows challenges to be made on any grounds "relating to invalidity of the patent." (144) Therefore, challengers utilizing the new postgrant review proceedings will be able to raise broad legal and policy issues regarding all of the patentability requirements. Allowing the PTO to decide all contours of patentability during the postgrant review also supports the notion that Congress intended the agency to play a larger policy-making function. Thus, the statutory language of the AIA, including its expansion in statutory basis for challenging patents, supports the conclusion that Congress viewed postgrant review proceedings as a law-making vehicle by which the PTO could announce patent law and policy determinations that affect the rights of many and carry the force of law.

   Up until this point, this Section has focused on developing a theoretical framework for when a grant of formal adjudicatory authority satisfies the force-of-law requirement. Nevertheless, because courts overwhelmingly interpret Mead as establishing the norm that a congressional conferral of formal adjudicatory authority generally satisfies the force-of-law requirement, (145) a query into whether the PTO should be an exception to this norm is fruitful. In answering this question, it is important to note that although scholars have amply criticized the Chevron and Mead decisions, (146) these cases articulated the legal framework that represents the current administrative law norms. As a result, patent exceptionalism to administrative law is justified only to the extent it is premised on the specific context of the patent system and not solely on the rehashing of arguments against the legal framework offered by Chevron and its progeny.

   The rest of this Section addresses context-specific counterarguments as to why the PTO should be an exception to the norm that a grant of formal adjudicatory power carries with it interpretative authority. This Subsection concludes that conceivable counterarguments--such as the so-called major question exception, the fact that the PTO lacks robust substantive rule-making authority, and the existence of the Federal Circuit--are insufficient to justify such a departure. As a result, this Subsection ultimately concludes that the congressional conferral of formal adjudicatory authority to the PTO satisfies the force-of-law requirement.

   1. Too Big to Delegate

      Perhaps the strongest argument against granting Chevron deference to the PTO is the so-called major question exception to the Chevron framework. Under this exception, courts deem certain issues too significant to support an inference of congressional delegation based on statutory ambiguity. (147) In other words, courts, in "extraordinary cases," have declined...