The PTAB is Not an Article III Court: A Primer on Federal Agency Rule Making
| Author | David E. Boundy |
| Pages | 11-59 |
Published in Landslide® magazine, Volume 10, Number 2, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2017 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
What rules may the United States Patent and Trademark Ofce (USPTO) pro-
mulgate? What procedures must the agency follow when it promulgates
a rule? What effect do various rules have? Some are binding against the
public, some are only hortatory. Some require extensive rule making procedure,
some can be promulgated with the stroke of a pen. Some are unilateral in bind-
ing only agency employees but not the public. And some are simply invalid.
How is agency rule making power different than an Article III court’s?
Administrative law expertise is becoming more and more important to suc-
cessful representation of clients in intellectual property matters.1 This article
gives an overview of the basic framework of agency rule making. In particular,
I provide a table that classies agency rules—this table simplies and claries
a great deal of overly complicated discussion in the standard administrative law
treatises. This table and its discussion describe the choices and tradeoffs that
agencies face in their rule making decisions, and the opportunities that those
choices create for parties before the agency. Expertise in administrative law and
agency rule making can guide agency tribunals to favorable decisions, and pres-
ent compelling arguments to courts after unfavorable decisions.
THE PTAB IS NOT AN
ARTICLE III COURT
A PRIMER ON FEDERAL AGENCY RULE MAKING
BY DAVID E. BOUNDY
David E. Boundy of Cambridge Technology Law LLC, in Cambridge, Massachusetts,
practices at the intersection of patent and administrative law, and consults to other rms
on PTAB trials and appeals. In 2007-09, David led teams that successfully urged the Ofce
of Management and Budget withhold approval of the PTO’s continuations, 5/25 claims,
IDS, and appeal regulations under the Paperwork Reduction Act. He may be reached at
DBoundy@CambridgeTechLaw.com.
Image: iStockPhoto
Published in Landslide® magazine, Volume 10, Number 2 , a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2017 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
Foundations
Starting Point: The Constitution
Let’s revisit rst year of law school—the basic constitutional
principles for separation of powers. Article I, section 1, vests
“All legislative Powers” in Congress. Article III, section 1,
vests “The judicial Power” in the courts.
The executive branch and its agencies are not the leg-
islature. Administrative judges have neither presidential
appointment nor Senate conrmation to be “judges” or to have
Article III law making authority. So executive branch agencies
have no inherent power to make laws—but they do so all the
time. How does the USPTO get power to make laws?
By delegation from Congress. Various statutes, including
5 U.S.C. §301 and 35 U.S.C. §2(b), §3(a)(2)(A), §3(b)(2)
(A), §316(a), and §326(a), delegate rule making authority to
the USPTO and the Director. The Supreme Court enforces con-
stitutional limits on the relative powers of the executive and
legislative branches. The current truce line permits Congress
to delegate rule making authority, but the delegation must be
express or clearly implied, and the agency must follow the pro-
cedures set by Congress in promulgating executive branch laws.2
The starting point for understanding rule making is to
understand the defaults:
• The Constitution assigns legislative authority to Congress.
Executive agencies have rule making authority only to the
extent, and only on the terms, delegated by Congress.3
• Binding rules exist in writing, in validly promulgated
form. An agency may only enforce rules that have been
validly promulgated. Agencies can bind themselves and
their employees by informal guidance documents and
similar “light” procedure, but not the public.
• In the context of ex parte prosecution, if the USPTO
has no statute or regulation to either require or forbid
an act, everything an applicant might want to do is per-
mitted and optional.
When Is a Rule a “Rule,” and When Do the Requirements
for “Rule Making” Apply?
The term “rule” is broadly dened in 5 U.S.C. §551(4),
encompassing far more than the regulations codied in the
Code of Federal Regulations. A “rule” is anything an agency
purports to apply generally or prospectively, whether binding
or only advisory, whether promulgated as a rule to bind the
public or as self-regulation of agency employees. One of the
key administrative law cases from the DC Circuit notes that
the denition of “rule” in §551(4) “include[s] nearly every
statement an agency may make,” and that exceptions to statu-
tory rule making procedures are “limited.”4
If the USPTO raises an objection, rejection, or requirement
based on a legal principle arising on its own authority (that is,
other than a statute or court decision), the USPTO must show
that it complied with applicable rule making procedure to pro-
mulgate a rule that is validly binding against the public.
Laws Governing Rule Making
In roughly the order of adoption, this section catalogs the key
laws and policies emanating from the Executive Ofce of the
President that govern agency rule making.
None of these laws is self-executing. Each facially requires
an agency to take certain actions, but only rarely are agencies
penalized for noncompliance. Some rule making laws create a
tribunal within the executive branch to provide regulatory over-
sight during the rule making phase, and parties may make their
concerns known there. Almost all provide that agency nonper-
formance renders a rule potentially unenforceable. However,
after a rule issues, as a practical matter, self-correction by
agencies is uncommon (and when user fees are at issue, essen-
tially nonexistent), and the only venue for redress is judicial
review. And regardless of whether the venue is administrative
or judicial, neither remedy will occur unless an aggrieved party
complains, represented by a competent, informed advocate.
Without a properly represented complainant, the default is that
agency rule making power is greater than statutes provide.
Housekeeping Act
The Housekeeping Act, 5 U.S.C. §301, was one of the rst laws
enacted by the rst Congress. The Housekeeping Act authorizes
any head of any executive branch department to prescribe regula-
tions governing the agency’s own employees, and the performance
of the agency’s business. There are almost no procedural prereq-
uisites for rules governing agency employees—when an agency
head says so, agency employees are bound.
Administrative Procedure Act
The Administrative Procedure Act (APA) is divided into two broad
sections, now 5 U.S.C. chapters 5 and 7. Chapter 5 of the APA, 5
U.S.C. §§551–559, species duties of agencies as they go about
their day-to-day business of rule making, adjudicating, conducting
hearings, and the like: the fundamental obligation on an agency
under chapter 5 is to explain the agency’s rationale, and to do so in
a way that demonstrates “reasoned decisionmaking.”5
Much of this article will focus on §553, which governs
rule making. Section 553 requires agencies to give the pub-
lic proper notice of proposed rules, and an opportunity for
the public to provide input on those proposed rules. To allow
informed comment, the agency must explain its rationale, and
make available any data, testing, models, software, or other
analytical support for the proposed rules.
5 U.S.C. §553 – Rule making.
(a) This section applies, according to the provisions thereof,
except to the extent that there is involved—
....
(2) a matter relating to agency management or
personnel ....
Published in Landslide® magazine, Volume 10, Number 2, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2017 by the American Bar Association. Reproduced with permission. All rights reserved. This
information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
(b) General notice of proposed rule making shall be
published in the Federal Register, unless persons
subject thereto are named and either personally
served or otherwise have actual notice thereof in
accordance with law. The notice shall include—
(1) a statement of the time, place, and nature
of public rule making proceedings;
(2) reference to the legal authority under
which the rule is proposed; and
(3) either the terms or substance of the pro-
posed rule or a description of the subjects
and issues involved.
Except when notice or hearing is required by statute, this
subsection [(b)] does not apply—
(A) to interpretative rules, general statements of policy, or
rules of agency organization, procedure, or practice; or
(B) when the agency for good cause nds (and incorporates
the nding and a brief statement of reasons therefor in
the rules issued) that notice and public procedure thereon
are impracticable, unnecessary, or contrary to the public
interest.
(c) After notice required by this section, the agency shall
give interested persons an opportunity to participate in the
rule making through submission of written data, views, or
arguments with or without opportunity for oral presenta-
tion. After consideration of the relevant matter presented,
the agency shall incorporate in the rules adopted a concise
general statement of their basis and purpose. ...
(d) The required publication or service of a substantive rule
shall be made not less than 30 days before its effective
date, except—
(1) a substantive rule which grants or recognizes an
exemption or relieves a restriction;
(2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause
found and published with the rule.
(e) Each agency shall give an interested person the right to
petition for the issuance, amendment, or repeal of a rule.
Independent Ofces Appropriations Act
The Independent Ofces Appropriations Act (IOAA) and
related laws govern user fees.6 In two 1974 decisions, the
Supreme Court conned fee-setting to incentive-neutral cost
recovery, and forbade agencies from setting fees to achieve
policy goals, or to encourage one behavior or discourage
another, unless Congress expressly delegates such discretion.7
Paperwork Reduction Act
The Paperwork Reduction Act (PRA), with its implementing
regulations promulgated by the Ofce of Information and Reg-
ulatory Affairs (OIRA) within the Ofce of Management and
Budget (OMB),8 protect the public from burdensome paper-
work that involves any “collection of information” by or on
behalf of an agency. The PRA requires agencies “to minimize
the burden on the public to the extent practicable.”9 In the con-
text of the USPTO, the PRA covers essentially all USPTO rule
making, and essentially all paperwork collected by the USPTO.
The PRA and its implementing regulations impose a num-
ber of common-sense obligations on an agency. For example:
• The agency must review all rules calling for collection
of information to ensure that the agency needs and will
actually use the information.10 The agency must ensure
that the information it seeks from applicants has “prac-
tical utility,” that is, that the information has “actual,
not merely the theoretical or potential, usefulness of
information to or for an agency, taking into account
its accuracy, validity, adequacy, and reliability, and the
agency’s ability to process the information it collects.”11
• The agency must certify to the OMB that the agency has
reduced the burden “to the extent practicable and appropri-
ate.” The agency must “demonstrate that it has taken every
reasonable step to ensure that the proposed collection of
information ... [i]s the least burdensome necessary for the
proper performance of the agency’s functions.”12
• Rules and requests for information must be “written
using plain, coherent, and unambiguous terminology.”13
• The agency must ensure that the information it seeks
from applicants is not “unnecessarily duplicative.”14
• “The agency shall also seek to minimize the cost to
itself of collecting, processing, and using the infor-
mation, but shall not do so by means of shifting
disproportionate costs or burdens onto the public.”15
During any rule making that calls for submission of paper-
work to the agency (any rule, no matter how promulgated),16
the agency must use notice and comment to gain the public’s
view on these above bullet points, and then explain to the
OMB how the agency complies with them. The agency must
repeat this inquiry every three years.
The PRA has a practical implementation problem. All
requests for approval ow through a handful of people at
the OMB. Agencies submit over 5,000 approval requests to
the OMB annually, and the OMB can focus on only the few
where public comment requests attention. Agencies have mul-
tiple incentives to shortcut procedure and to underestimate the
actual burden that their regulations impose—large cost bur-
dens trigger agency responsibilities under other laws, and small
numbers mean that the overworked OMB staff is unlikely to
pay attention, so that OMB approval can be an action of default
without real inquiry. Thus, the PRA—which can be a tre-
mendously powerful law during the rule making stage, and in
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