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What does USPTO director review really change?

The USPTO HQ in Alexandria, Virginia

Ha Kung Wong at Venable and April Breyer Menon at April Breyer Consulting delve into the practical implications of the US Supreme Court’s ruling in US v Arthrex

After the US Supreme Court created the director review procedure in June 2021 with its US v Arthrex opinion, a key concern for practitioners was the practical effect the new process might have on inter partes review and post-grant review proceedings. 

To find out exactly what kind of impact the decision had, we examined what happened in the first five months after the director review was established.

We looked at the status of the cases placed in abeyance before SCOTUS’s decision, the outcomes of the requests for director review, additional cases presenting constitutional issues with post-grant proceedings, and the future of director reviews.

The USPTO issued guidance on the newly created director review procedure in June 2021, along with answers to frequently asked questions.

Parties to IPR and PGR proceedings could request that the director review the final written decision (FWD) or seek a panel rehearing decision, if it was granted, within 30 days of those respective decisions. However, parties could not request both.  

But if a panel rehearing was granted, a party could then request that the director review the panel’s rehearing decision. The director could also initiate sua sponte (when a court takes action on its own motion) review of any FWD or FWD rehearing decision. 

The USPTO head could review any issue, including fact and law, and would review the case de novo (when a court decides an issue without deference to a previous court's decision).

While no criteria were set forth for when the director would grant a request for review, USPTO guidelines suggested that requests might include “material errors of fact or law, matters that the board misapprehended or overlooked, [and] novel issues of law or policy”.

Issues on which Patent Trial and Appeal Board (PTAB) panel decisions were split, issues of particular importance to the office or patent community, and inconsistencies with office procedures, guidance, or decisions might also be included, according to the USPTO.

The first 100

At its outset, the director review process affected more than 100 cases placed in administrative abeyance since May 1 2020 that were awaiting a determination from SCOTUS on whether they needed to be reviewed again by new panels of administrative patent law judges (APJs). 

The abeyance was officially lifted on October 26 2021, and we reviewed each of these cases to determine their status.  US v Arthrex

We found that of the 100 IPRs and PGRs listed, 12 settled before the implementation of US v Arthrex, four settled without requesting review, one proceeded in its appeal on the merits, 73 had the abeyance lifted and are currently pending, and 10 received decisions on their requests for review (as of November 30 2021). 

Of those pending, 27 are awaiting a decision on their request for director review, and it remains to be seen whether any of the other 46 will file a request. 

Of those that had already received decisions on their review requests, one was granted and nine were denied. 

Overall, then, since the director review procedure was implemented, there had been 132 requests as of November 30 2021 – 75 of these were denied, one was granted, one was granted in part, one was withdrawn, and 54 are still awaiting a decision.

The time to decision by the director averaged 47.6 days, with the shortest time being 12 days and the longest being 93 (in three related IPRs). 

The one decision that was granted took 62 days, and the one granted in part took 79 days. 

While, based on very preliminary data, the grant rate of 20% (two of 10) is not high for decisions taking longer than 60 days, it is much higher than the 0% grant rate for decisions taking less than 60 days. 

Therefore, it’s possible that requests that are pending longer may have a better chance of an actual written director opinion, which may lead to more granted requests. 

Every denial so far has been issued without opinion, but it’s probably too early to draw any reliable trends from the available data.

Drew Hirshfeld, the de-facto acting director for the USPTO, granted review in part in Ascend Performance Materials Operations v Samsung SDI and remanded the case for the PTAB to address whether two claims were entitled to their provisional application’s priority date.

The matter was also remanded to address their patentability in view of the appropriate filing date, because the initial FWD did not specifically address these claims, and under Lucent Techs v Gateway, “patent claims are awarded priority on a claim-by-claim basis based on the disclosure in the priority applications”. 

The director declined to review the FWD based on Samsung’s other arguments, including that the board fashioned its own ground of review in violation of the Administrative Procedure Act. 

In the second review grant in Proppant Express Investments v Oren Technologies, the director remanded the case for the board to “weigh any evidence of record showing that the patented invention itself, in addition to any unclaimed elements, contributes to the commercial success and praise”.

He did so after finding the case to be substantially similar to one the Court of Appeals for the Federal Circuit vacated and remanded for a similar legal error of failing to consider objective evidence of non-obviousness.

Little consequence?

Since the director has granted only two of 77 requests for review (2.6%) and written only two opinions, it has been difficult to determine what types of challenges will be taken up in the future, but it’s possible he or she (soon to be she) will be more inclined to review issues of law than fact. 

Thus far, reviews have proceeded in a similar manner to requests for rehearing, in that they are rarely granted. 

In fact, if the grant rate of less than 3% of requests continues, they may be granted even less frequently than rehearings, which have been accepted about 10% of the time. 

As a result, the director review process may prove to be of little consequence, other than to delay a final decision in all but a handful of cases. 

Those who have lost PGRs have not allowed the denial of director review to end their efforts to overturn the PTAB’s decisions. 

There have already been a number of additional constitutional challenges to the PGR process at the PTAB, and more are likely. 

So far, the Federal Circuit has determined that cases closed before Arthrex in which there are no appointments clause challenges raised are not eligible to be reopened in light of the Arthrex edict. An exception may be requests based on changed circumstances or newly discovered evidence.

Other constitutional challenges, such as arguments that APJs with an impermissible financial interest in instituting America Invents Act proceedings and having the same panel institute and render a final decision violates due process, have similarly failed at the Federal Circuit.

Future issues

A possible future issue will be whether the director review process will need to be extended to cover institution decisions. 

Discussed by Judge Pauline Newman in her dissent in Mobility Workx, institution decisions are final and non-appealable, but are rendered by inferior officers without oversight by the director, which “appears likely to violate the appointments clause”.

This may provide an avenue for those seeking to challenge institution decisions, an area SCOTUS and the Federal Circuit have spoken on numerous times – including in Thryv v Click-to-Call and Apple v Optis – reiterating that judicial review is not available for institution decisions.

One contested issue awaiting an opinion from the Federal Circuit in VirnetX v Mangrove Partners Master Fund is whether acting director Hirshfeld has the authority to render opinions under the appointments clause.

It has been argued that as an official performing the functions and duties of the director who was not appointed by the president and confirmed by the Senate, he is an inferior officer and his opinions suffer from the same constitutional issue as those of APJs that created the director review process in the first place.

Of the 132 requests for director review, at least 73 (55%) have noted this issue in their requests. 

Opinions from an acting USPTO chief may not be an issue for too much longer, because President Joe Biden nominated Kathi Vidal from Winston & Strawn for the position in late October 2021. But Hirshfeld’s past decisions remain.

Congress is also concerned with the new director review process. On September 30 2021, Senator Patrick Leahy introduced the Restoring the America Invents Act to address the potential for politicisation of director opinions, which requires a written opinion by the USPTO chief setting forth the reasons for the review, modification, or setting aside of the FWD. 

While there is always the possibility of the politicisation of opinions, this bill may not change much in the way of PTAB practice, because it is unlikely the director would change the outcome of a FWD without a written opinion, and so far has not issued any opinions of his own, only remanding cases to the PTAB. 

However, requiring a written opinion could encourage guidance on how issues where various panels have diverged should be reviewed or decided. 

Since the director has not agreed to review many cases, it is unlikely that requiring a written opinion on those that are reviewed would be overly burdensome, but it could potentially delay the time to a final decision. 

Although director review has had the potential to significantly disrupt post-grant proceedings, so far it has changed very little and has at least temporarily delayed final resolution in over 100 cases.

Since it seems the USPTO head will be very selective in the cases reviewed, the new procedure appears to do little more than increase the time and expense involved in post-grant proceedings, unless Vidal or future directors change course and begin to review a greater percentage of decisions. 

This article was authored by Ha Kung Wong, a partner at Venable in New York, and April Breyer Menon, founder of April Breyer Consulting in Chicago

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