Have a Seat Over There — Petitioner Has No Standing to Appeal PTAB Decision

In Allgenesis Biotherapeutics Inc., v. Cloudbreak Therapeutics, LLC, [2022-1706] (November 7, 2023), the Federal Circuit dismissed the appeal of the PTAB’s final written decision that claims 4 and 5 of U.S. Patent No. 10,149,820 had not been shown to be unpatentable, because Allgenesis has failed to establish an injury in fact sufficient to confer standing to appeal.

Although a party does not need Article III standing to file an IPR petition or to obtain a Board decision, the party must establish Article III standing once it seeks review of the Board’s decision in this Court.  To meet the Article III standing requirements, an appellant must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.”  To establish an injury in fact, an appellant must show it has suffered an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical.

Allgenesis first argued it has suffered an injury in fact based on the potential infringement liability stemming from its development of nintedanib treatments for pterygium.  Where an appellant relies on potential infringement liability as a basis for injury in fact, it must establish that it has concrete plans for future activity that creates a substantial risk of future infringement or likely cause the patentee to assert a claim of infringement.  The Federal Circuit found that Allgenesis failed to identify any specific, concrete plans for Allgenesis to develop a nintedanib product that might implicate claims 4 and 5 of the ’820 patent.

Allgenesis also argued it has suffered an injury in fact based on the Board’s priority determination. Specifically, the Board found that Allgenesis’ PCT, which has a later effective filing date of June 22, 2015, is not prior art to Cloudbreak’s application.  The Federal Circuit found that Allgenesis has not established that the Board’s decision will have preclusive effect, noting that collateral estoppel will not attach to the Board’s non-appealable priority determination.

Board Decision Vacated; Patentability Determination is Confined to the Grounds upon which the Board Actually Relied

In In re Google, [2022-1012] (January 9, 2023) the Federal Circuit vacated the PTAB’s decision affirming the final rejection of Google’s application methods for filtering the
results of an internet search query such that only results appropriate for the user (e.g., age appropriate) are displayed.

The Board adopted the examiner’s findings, and purported to “agree with the Examiner” that modifying Parthasarathy’s threshold “to take into account query length as taught by Rose” would have been obvious at the time of filing.

On appeal, the PTO argued that the Board’s decision should be affirmed because there are only two ways to predictably modify Parthasarathy’s threshold to incorporate query length as taught by Rose, and both would have been obvious to try. Specifically, it asserts a skilled artisan would have recognized that Rose’s adjusted relevance score could be used to modify either Parthasarathy’s search-query-intent score or its threshold and that either modification would predictably result in a threshold based on the number of words in a query.

Meritorious or not, the PTO’s arguments cannot sustain the Board’s decision below because they do not reflect the reasoning or findings the Board actually invoked. It is a foundational
principle of administrative law that a court may uphold agency action only on the grounds that the agency invoked when it took the action. The Federal Circuit said its review
of a patentability determination is confined to the grounds upon which the Board actually relied. Contrary to the PTO’s characterization of the Board’s decision, it did not rest on a finding that there were only two ways to modify Parthasarathy using Rose or suggest that these modifications would have been obvious to try. Indeed, although the Board concluded
that modifying Parthasarathy’s threshold to take into account query length would have been obvious. Entirely absent from its decision is any discussion of how such a modification would be accomplished. Certainly, the Board did not discuss or suggest the specific modifications the PTO advances on appeal. In the absence of any specific findings by the Board on these matters, we may not adopt the PTO’s fact-based arguments in the first instance on appeal.

The Federal Circuit concluded that the Board’s expressed reasoning cannot sustain its rejection of claims 1, 3–10, 12–19, and 21–27 and therefore vacate the Board’s

Discovery Order not Reviewable Under Collateral Order Doctrine

In Modern Font Applications LLC v. Alaska Airlines, Inc., [2021-1838] (December 29, 2022) the Federal Circuit dismissed the appeal under the collateral order doctrine.

To avoid unnecessary delay from parties arguing or litigating the form of a protective order, the District of Utah adopted a Standard Protective Order. Pursuant to that protective order, Alaska Airlines designated certain source code files as “CONFIDENTIAL INFORMATION –
ATTORNEYS’ EYES ONLY,” which precluded MFA’s inhouse counsel from accessing those materials under the Standard Protective Order. When MFA challenged Alaska’s designations, Alaska filed two motions to maintain its protective order designations. The magistrate judge granted Alaska’s motions to maintain its protective order designations and denied MFA’s motion to amend the protective order. The district court affirmed.

Modern Font Applications LLC sought an interlocutory appeal to challenge an order of the district court which affirmed a magistrate judge’s decision deeming MFA’s in-house counsel a “competitive decisionmaker” and maintaining Alaska Airlines, Inc.’s Attorneys’ Eyes Only designations as to its source code. MFA argued that the Federal Circuit should hear its interlocutory appeal under the collateral order doctrine.

The Federal Circuit noted that Congress limited its jurisdiction to appeals from a
“final” decision of a district court arising under any Act of Congress relating to patents. Under the “final judgment rule, a party may not appeal until there has been a decision by the district court that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment. The Federal Circuit explained that the collateral order doctrine is a practical construction of the final judgment rule that permits review of not only judgments that “terminate an action, but also the “small class” of collateral rulings that are appropriately deemed “final.” Courts of appeals may allow interlocutory appeals of decisions that (1) are “conclusive;” (2) “resolve important questions separate from the merits;” and (3) are “effectively unreviewable on appeal from the final judgment in the underlying action.”

The Federal Circuit further said that the Supreme Court has repeatedly emphasized the limited scope of the collateral order doctrine, explaining that it should “never be allowed to swallow the general rule that a party is entitled to a single appeal, to be deferred until final judgment has been entered.”

The Federal Circuit said that MFA’s appeal did not satisfy the third requirement of the collateral order doctrine because it is reviewable after a final judgment. The Federal Circuit said that numerous cases have ruled that such discovery orders are outside appellate
jurisdiction because they can be reviewed after final judgment.

Following the Rules is Not Enough (Check the Statutes)

In Mondis Technology Ltd. v. LG Electronics Inc., [2020-1812] (August 3, 2021), the Federal Circuit dismissed LG’s appeal from a jury verdict that it infringed U.S. Patent No. 7,475,180, directed to a display unit configured to receive video signals from an external video source .

The jury found that the accused LG televisions infringed claims 14 and 15 of the ’180 patent, that the claims were not invalid, and that LG’s infringement was willful, and awarded plaintiffs $45 million in damages. Following the jury verdict, LG filed several post-trial motions including: (1) a motion for JMOL or new trial of non-infringement, (2) a motion for JMOL or new trial of invalidity, and (3) a motion for JMOL, new trial, or remittitur regarding the damages award and willfulness finding.

On September 24, 2019, the district court denied LG’s motions regarding infringement, invalidity, and willfulness but ordered further briefing on damages. On April 22, 2020, the district court granted LG’s motion for a new trial on damages. Less than 30 days later, on on May 8, 2020, LG filed notice of interlocutory ppeal challenging the district court’s decision denying LG’s post-trial motions regarding infringement, invalidity, and willfulness (all of which were decided in the September 24 Order).

The problem for LG is that its interlocutory appeal is governed by 28 U.S.C. § 1292(c)(2), which provides the Federal Circuit with exclusive jurisdiction over “an appeal from a judgment in a civil action for patent infringement which would otherwise be appealable to the United States Court of Appeals for the Federal Circuit and is final except for an accounting.” 28 U.S.C. § 2107(a) sets the time for appeal as “within thirty days after the entry of such judgment, order or decree.” Under § 1292(c)(2), a judgment is final except for an accounting when all liability issues have been resolved, and only a determination of damages remains.

The September 24 Order resolved all issues of liability, so the appeal was due by October 24, and thus the May 2020 filing was more than six months late, and thus the Federal Circuit had no jurisdiction to consider the appeal.

LG argued that FRAP 4(a)(4) instructs that, if a party timely files any of several enumerated motions, including post-trial motions for judgment under FRCP 50(b) or for a new trial under FRCP 59, “the time to file an appeal runs for all parties from the entry
of the order disposing of the last such remaining motion.”

The Federal Circuit noted that LG’s timeliness arguments focus on the Federal Rules,
rather than the statutory requirements for jurisdiction, observing that the Rules cannot override federal statute, and to the extent that there is any conflict between the Rules and federal statutes, the statutes must prevail.

However, not all is lost for LG. While its interlocutory appeal was dismissed, LG is not precluded from from challenging the liability determinations of the district court under our § 1295 jurisdiction once the damages determination is completed.

While PTO Action was Frustrating; Applicants can only Appeal Final Agency Actions

In Odyssey Logistics and Technology Corporation v. Iancu, [2019-1066] (May 22, 2020), the Federal Circuit affirmed the district court that the challenges of Application No. 11/005,678 and 11/465,603 concerned non-final agency actions, and the challenge to the amendments to the Rules of Practice were barred by §2401.

After winning an ex parte appeal in the ‘678 application, the USPTO issued a request for rehearing, arguing that the Board applied the wrong version 35 USC 102(e), Odyssey filed petitions objecting to the rehearing procedure, and requests for re-consideration when those petitions were dismissed. Odyssey eventually made some arguments on the merits “under protest,” but instead of waiting for the Board’s decision on these arguments, Odyssey filed this challenge to the request for re-hearing in the Eastern District of Virginia.

Odyssey appealed the examiner’s rejections of the ’603 application.  And in response to the Examiner’s Answer, Odyssey believed that the answer included new grounds, and filed a petition, requesting that the Technology Center Director designate certain portions of the Asnwer as new grounds of rejection.  Rather than filing a brief replying to the examiner’s answer and waiting to see if the Board would strike certain portions of its reply as improper, Odyssey challenged the dismissal of the petition in the Eastern District of Virginia.

The district court dismissed the first two challenges because Odyssey was challenging actions not yet final before the Board; the Board could provide Odyssey with an adequate remedy, and if not, Odyssey had statutory remedies for appeal under 35 U.S.C. §§ 141 or 145.

The third challenge was to the PTO’s 2011 amendments to its rules of practice in ex parte appeals.  The district court dismissed the third challenge holding that 28 U.S.C. § 2401 barred the claims.

With respect to the first challenge, the Federal Circuit said that until the Board issues its rehearing decision, the PTO has not consummated its decision-making process and Odyssey’s rights and obligations in the ’678 patent have not been determined. Without such final action from the PTO, the APA does not entitle Odyssey to judicial review.

With respect to the second challenge, the Federal Circuit said that the dismissal of Odyssey’s petition to designate new grounds is non-final agency action because the dismissal did not determine any rights or obligations or result in any legal consequences. The Federal Circuit said that until the Board refuses to consider arguments made in Odyssey’s reply brief for exceeding the permissible scope of the brief under 37 C.F.R. § 41.41, the denial of Odyssey’s petition to designate new grounds has not determined any rights or resulted in any legal consequences. The district court was therefore correct to dismiss Count II for lack of finality. With respect to the third challenge, the Federal Circuit found the district court’s decision was unquestionably correct.   The challenged rules were published in the Federal Register on November 22, 2011; Odyssey filed  its  facial  challenge  on January  23,  2018, more than six years later.  The challenge was therefore barred by 28 U.S.C. § 2401.

Board Must Consider Applicant’s Reply to New Grounds in the Examiner’s Answer

In In re Durance, [2017-1486] (June 1, 2018), the Federal Circuit vacated the Board’s determination of obviousness and remand for the Board to consider applicants’
reply-brief arguments in the first instance.

Durance, Fu, and Yaghmaee filed a patent application on improved methods and
apparatuses for “microwave vacuum-drying of organic materials, such as food products and medicinal plants.  Applicants appealed a final rejection of the claims, and in her Answer, the Examiner raised a new structural identify argument to counter applicant’s argument against the rejection.  Applicants challenged the examiner’s structural-identity
rejection in its reply brief. Durance explained that the Examiner’s never-before articulated understanding of the corresponding structure from the specification was
extremely inaccurate.   The Board affirmed the rejection, disregarding Durance’s
reply-brief arguments by citing 37 C.F.R. § 41.41(b)(2) and stating that these arguments were “not responsive to an argument raised in the Answer.”  The Board denied rehearing, reiterating that it would not consider applicant’s reply-brief arguments, because applicants did not provide such a showing or indicate where a new argument requiring such a response was raised in the Examiner’s Answer.

The Federal Circuit noted that throughout the examination, the Patent Office continually
shifted its position on which structures and what characteristics of those structures are the bases for the Office’s grounds of rejection, such that the Court was “not confident” in the reasoning for the rejection.  As to the failure to consider arguments in applicants’ reply brief, the Federal Circuit noted that Section 41.41(b)(2) permits a reply brief to respond to “an argument raised in the examiner’s answer.” The Federal Circuit added that nothing in this provision bars a reply brief from addressing new arguments raised in the Examiner’s Answer that are not articulated in the Final Office Action, regardless of whether the examiner designated that new argument as a “new ground of rejection.  The Federal Circuit said:

If an examiner’s answer includes arguments raised for the first time, i.e., not in the Final Office Action, an applicant may address those arguments in the reply.

The Federal Circuit said that the equivocal nature of the examiner’s and Board’s remarks throughout the examination of the application, including whether inherency was the basis for the rejection, clouded the issues before applicants.  Accordingly, applicants had no notice, prior to the examiner’s answer, of the grounds on which his application was being rejected, and it was therefore proper under § 41.41(b)(2) for applicants to
to respond to the argument raised in the examiner’s answer.  The Federal Circuit rejected the Patent Office’s argument that applicant should have petitioned to have the
examiner’s answer designated as a new ground of rejection, finding no such requirement in the regulations.


A §145 Action May Not Be As Appealing as a Trip to the Federal Circuit

In Nantkwest, Inc. v. Matal, [2016-1794] (June 23, 2017), the Federal Circuit reversed the denial of attorneys fees to the USPTO in successfully defending civil action under 35 USC §145 brought by a patent applicant.  The statute provides that the applicant must pay “[a]ll of the expenses of the proceeding . . . regardless of the outcome.” The district court held that “expenses” did not include attorneys fees.

The Federal Circuit found that the ordinary meaning of “expenses” as defined in dictionaries and the Supreme Court’s interpretation of this term lend significant weight to the conclusion that when Congress used the phrase “all expenses,” it meant to include attorneys’ fees.  Accordingly, the Federal Circuit held “[a]ll expenses of the proceedings”
under § 145 includes the pro-rata share of the attorneys’ fees the USPTO incurred to defend applicant’s appeal.

The Federal Circuit remanded the case for the district court to enter an additional award of $78,592.50 in favor of the Director.

Although it may seem unfair that an applicant losing an appeal has to pay the Office’s cost in successfully defending the appeal of a rejection, as the Federal Circuit pointed out, this is how Congress chose to allocate the cost of an appeal to the district court.  What is unfair, however, is that this is how Congress chose to allocate the cost of an applicant’s successful appeal of an improper rejection as well.  Thus, an applicant faced with an improper rejection who brings an action under §145 and wins, is still on the hook for the Patent Office’s attorneys fees.  This unfair result alone might suggest that Congress did not intent to include attorneys’ fees in “expenses,” otherwise Congress is putting a high price on justice.

So why would an applicant chose to take a PTAB decision to district court, rather than appeal to the Federal Circuit?  The principal reason is that the PTAB may have pointed out an evidentiary defect in the applicant’s case.  If the applicant appeals to the Federal Circuit the record is fixed, and if the PTAB was correct about the defect, the Federal Circuit will simply affirm the PTAB.  However, in an action under §145 the applicant can introduce additional evidence, for example a declaration by the inventor, or by an expert, or perhaps even evidence of objective indicia of non-obviousness.  This could allow the applicant to obtain a patent, when an appeal would otherwise be futile.  Depending upon the importance of the invention, this might well be worth an additional $78,000 or so.

However is a §145 action the only way to obtain this result?  Perhaps not.  One might assume that if you do not appeal the PTAB decision that it becomes final and res judicata will prevent the application from ever getting the claims that the were the subject of the appeal. This would be a good reason to pursue the §145 action.  However, the underlying assumption may be wrong.  In In re Donohue, 226 USPQ 619 (Fed. Cir. 1985), the Federal Circuit held that the Patent Office should not apply res judicata where the applicant made a different record, for example by supplying a new affidavit or declaration:

Appellant has made a record different from that in Donohue I by submitting the Fields affidavit. This new record presents a new issue of patentability with respect to whether the previously sustained anticipation rejection can still be maintained. In view of this new issue, the PTO properly declined to make a formal res judicata rejection . . .

226 USPQ 621.  As long as Donohue remains good law, a patent applicant can file an RCE or even a continuation, supplement its records, and continue to prosecute claims whose rejection was affirmed by the PTAB (and not have to spend $80,000 on the the USPTO’s expenses in a §145 action.

It is still unfair that a successful applicant in a §145 action has to pay for the unsuccessful efforts of the USPTO in defending an improper rejection, but at least the applicant has an alternative route to continue to pursue the claims after an unsuccessful appeal to the PTAB.