“Whether the USPTO is capable of handling the constitutional mandate from Arthrex will undoubtedly be one of the major IP stories to watch throughout 2022, and the Federal Circuit’s decision on New Vision Gaming’s motion for reconsideration could be an interesting first chapter in that saga.”
In the last few weeks of 2021, patent owner New Vision Gaming & Development filed a motion for reconsideration of a remand order issued by the U.S. Court of Appeals for the Federal Circuit. That ruling, entered in early December, remanded New Vision Gaming’s appeal of covered business method (CBM) review proceedings back to the Patent Trial and Appeal Board (PTAB) “for the limited purpose” of requesting Director review of the CBM review decisions under the U.S. Supreme Court’s Arthrex standard. New Vision Gaming’s recent motion for reconsideration raises several issues regarding the U.S. Patent and Trademark Office’s (USPTO’s) implementation of Director reviews under Arthrex, making this particular case an important one to follow through at least early 2022.
Remand Order Should Direct USPTO to Follow Formal Rulemaking Under APA, PRA
Last May, the Federal Circuit issued a ruling vacating final written decisions in two CBM review proceedings that had invalidated New Vision Gaming patent claims under Section 101, and remanding those proceedings back to the the PTAB under the Federal Circuit’s decision in Arthrex v. Smith & Nephew (2019), which held that the authority held by PTAB administrative patent judges (APJs) made them principal officers under the Appointments Clause. The Federal Circuit’s 2019 ruling severed tenure provisions for APJs to render them inferior officers, and many cases like New Vision Gaming’s appeal were remanded for rehearing by new APJ panels under this standard until the U.S. Supreme Court decided Arthrex v. Smith & Nephew last June. That ruling vacated the Federal Circuit’s ruling and found that Director review of requests for rehearing from PTAB final decisions was sufficient to cure the constitutional defect. This past December, the Federal Circuit issued a remand order vacating the May ruling in New Vision Gaming’s appeal and remanding the CBM decisions for Director review instead of rehearing by an APJ panel.
New Vision Gaming’s motion for reconsideration points out that the USPTO has had issues implementing a process for Director review to handle remands under Arthrex. Instead of implementing rules under a notice-and-comment process conforming to the Administrative Procedures Act (APA), the USPTO has instead published a question-and-answer webpage on Arthrex Director reviews that has been updated multiple times. Of the 86 decisions issued by the USPTO on requests for Director review, 84 have been boilerplate denials without any reasoning or signature indicating the ruling’s final decision maker.
While New Vision Gaming is “not necessarily averse to having the case remanded,” it argues that such a remand should include an order that the USPTO follow proper rulemaking procedures for Director reviews as required by statute. New Vision Gaming notes that the Director is required to prescribe regulations governing the conduct of PTAB proceedings under relevant provisions of the America Invents Act (AIA), which established CBM reviews. Even if the USPTO believes that rules on Director reviews might meet an exception to notice-and-comment rulemaking under the APA, 5 U.S.C. § 552(a)(1)(C) requires agencies to publish any rules of procedure that have an intended binding effect in the Federal Register. New Vision Gaming also points out that the USPTO’s ad hoc approach to Director review rules ignores requirements of the Paperwork Reduction Act, which requires a notice-and-comment period and review by the Office of Management and Budget (OMB) for sub-statutory law proposed by the agency.
New Vision Gaming Seeks Transparency in Advisory Committee, Reasoned Basis for Decision
An amended remand order should also require the USPTO Director to identify members of an advisory committee who, according to the agency’s Arthrex Q&A page, advise the Director on whether certain requests merit review, New Vision Gaming argues. “From a due process perspective, we should be long past the days of anonymous panels of unknown government employees—particularly when those employees are making important decisions concerning property rights,” New Vision Gaming’s motion reads. Without transparency as to the composition of the advisory committee, which the Arthrex Q&A page indicates may include APJs from the PTAB, New Vision Gaming contends that there are doubts whether the agency is actually adhering to the constitutional mandate from Arthrex requiring review of PTAB decisions by those other than the original decision maker.
While CBM reviews and other AIA validity trials at the PTAB are considered formal proceedings under the APA following Federal Circuit case law such as Dell Inc. v. Acceleron, LLC (2016), New Vision Gaming argues that the boilerplate language in the agency’s denials of Director review don’t even meet the APA’s minimum standards requiring an explanation of reasoning behind decisions in informal proceedings. Under 5 U.S.C. § 555(e), agency decision makers must provide a brief statement of grounds for the denial of a petition unless the denial is self-explanatory. New Vision Gaming argues that issues in AIA proceedings have enough complexity that denials will seldom be self-explanatory, and that the remand order should instruct the USPTO to provide reasons or bases for its denial of Director review as required by 5 U.S.C. § 557(c).
Arthrex Requests for Director Review: A Major Story Developing Throughout 2022
New Vision Gaming also requests that the Federal Circuit’s remand order stays the agency’s decision on the request for Director review until the Senate confirms a USPTO Director. Drew Hirshfeld, to whom the requests for Director review have been referred, is performing the functions and duties of the USPTO Director and doesn’t have the requisite authority for issuing binding rulings with Director’s authority under the Federal Vacancies Reform Act of 1998. New Vision Gaming notes that “[t]he President has nominated a well-qualified individual for the Director position” in Kathi Vidal, “and the Senate may confirm the nomination in short order.” Indeed, support for Vidal’s nomination to serve as the USPTO Director has been growing in the Senate and in recent days Senator Thom Tillis (R-NC), Ranking Member of the Senate IP Subcommittee, has publicly supported Vidal for the Director position as her nomination moves towards a Senate vote.
However, other issues raised by New Vision Gaming’s motion for reconsideration presage issues in the USPTO’s handling of requests for Director review of PTAB decisions that could undermine the constitutional fix handed out by the Supreme Court’s Arthrex decision. With 84 of 86 requests for Director review being summarily denied, New Vision Gaming argues that agency practice in these denials have confirmed predictions that a Director or Acting Director would be inclined to deny most if not all requests for review, “in effect rubber stamping the APJs final determinations.” Whether the USPTO is capable of handling the constitutional mandate from Arthrex will undoubtedly be one of the major IP stories to watch throughout 2022, and the Federal Circuit’s decision on New Vision Gaming’s motion for reconsideration could be an interesting first chapter in that saga.
Image Source: Deposit Photos
Image ID: 16506689