Monday, December 17, 2012

Wasserman on Chevron Deference for the PTO

The America Invents Act (AIA) shifts interpretive authority over patentability standards from the courts to the PTO, argues Melissa Wasserman in her forthcoming article, The Changing Guard of Patent Law: Chevron Deference for the PTO. My co-blogger Sarah Tran has argued that the AIA gives the PTO some substantive rulemaking authority, though not over core patentability standards. Arti Rai has stated that post-grant review proceedings "bear the hallmarks of formal adjudication" and that the PTO could ask for Chevron deference under the AIA. But Wasserman’s article is the first detailed examination I've seen of this issue, and it illustrates how a compelling legal challenge seeking greater deference to the PTO on patentability issues might proceed.

The Supreme Court stated in Mead that formal rulemaking or adjudicatory authority is "a very good indicator of delegation meriting Chevron treatment," but noted that the Court has "sometimes found reasons for Chevron deference even when no such administrative formality was required and none was afforded." The PTO has historically not had authority to engage in formal adjudication or rulemaking—reexamination proceedings lack the required procedural safeguards—and has thus not been afforded Chevron deference.

But Wasserman argues that Congress intended the new post-grant review proceedings under the AIA to follow the formal adjudication rules of the Administrative Procedures Act (APA): the statute states that "either party [has] the right to an oral hearing" and requires the PTO to allow discovery (which is even more than required by the APA). Wasserman notes that the new "Patent Trial and Appeal Board" name and the committee report's statement that "[t]he Act converts inter partes reexamination from an examinational to an adjudicative proceeding" further illustrate that post-grant review should be afforded formal adjudicatory protections. The AIA also states that post-grant review should be used to decide "novel or unsettled legal question[s] that [are] important to other patents or patent applications."

Wasserman explains that the PTO should not be an exception to the norm that formal adjudicative authority implies interpretive authority. She also argues that the PTO is a better institution for setting patent policy than the Federal Circuit: it is able to acquire and analyze the necessary economic data, and it is no more prone to capture (and has recently taken steps to reduce capture problems).

In addition to making the case for Chevron deference for the PTO, Wasserman makes a second important contribution in pointing out how the asymmetry in this deference regime might lead to an expansion in the boundaries of patentability. (She has previously made a similar argument to Jonathan Masur about asymmetry in the current system, which I found less convincing.) As Wasserman explains, an institutional decision to contract patentability would be challenged by disgruntled patent applicants and would receive no deference, but a decision to expand patentability would become enshrined in a post-grant review decision and would thus receive strong deference. I think this is an important concern, and Wasserman has a thorough discussion of the options for eliminating this bias.

Wasserman's article is a thought-provoking application of administrative law to the patent system (though I'm not sure that it has "substantial implications for administrative law" more generally—Wasserman discusses a circuit split over how to determine whether formal adjudication rules are triggered, but I don't see how patent law helps resolve this split). Highly recommended reading, especially for those interested in the balance of power between the PTO and the Federal Circuit.

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