Sunday, April 22, 2018

Chris Walker & Melissa Wasserman on the PTAB and Administrative Law

Christopher Walker is a leading administrative law scholar, and Melissa Wasserman's excellent work on the PTO has often been featured on this blog, so when the two of them teamed up to study how the PTAB fits within broader principles of administrative law, the result—The New World of Agency Adjudication (forthcoming Calif. L. Rev.)—is self-recommending. With a few notable exceptions (such as a 2007 article by Stuart Benjamin and Arti Rai), patent law scholars have paid relatively little attention to administrative law. But the creation of the PTAB has sparked a surge of interest, including multiple Supreme Court cases and a superb symposium at Berkeley earlier this month (including Wasserman, Rai, and many others). Walker and Wasserman's new article is essential reading for anyone following these recent debates, whether you are interested in specific policy issues like PTAB panel stacking or more general trends in administrative review.

Although administrative law students all learn the basics of formal adjudication under the Administrative Procedure Act (APA), Walker and Wasserman argue that this is part of the "lost world of administrative law." The "new world" increasingly involves "formal-like agency adjudication outside of the APA." Situated against the broad array of adjudicatory procedures used by other agencies (as cataloged by my colleague Michael Asimov), Walker and Wasserman argue that "the PTAB adjudicatory proceedings are not that unusual," and that the Federal Circuit is wrong to suggest that they must be governed by the APA's formal adjudication requirements. Table 2 helpfully illustrates how PTAB adjudication has many of the hallmarks of APA-governed formal adjudication, as well as the key differences.

But PTAB procedures are unusual even in this new world in "one critical respect": the USPTO Director does not have final decision-making authority. In APA-governed formal adjudication, and in most formal-like adjudications today, the agency head reviews an ALJ's decision without deference. Such authority allows the agency head to ensure consistency and control policy, both of which are important concerns at the USPTO given its high volume of complex adjudications and lack of substantive rulemaking authority.

The Director can partially substitute for this lack of appellate review through the controversial practice of "panel stacking," or expanding a PTAB panel to achieve a particular outcome. Judge Dyk recently questioned the legality of this practice in his Nidec concurrence, and some Supreme Court Justices expressed concerns with it at the Oil States argument. Walker and Wasserman conclude that the Director does have statutory authority for the practice, but that there is at least a colorable argument that panel stacking violates due process. Yet as they note, such as conclusion seems counterintuitive when there is clearly no constitutional violation under the standard federal model when an agency head directly reverses an ALJ's decision.

Even if constitutional (or constitutional avoidance) challenges to panel stacking fail, Walker and Wasserman suggest that it is unfair as a matter of administrative justice and is unlikely to be an adequate substitute for actual agency-head review. Absent congressional action to give the Director final decision-making authority, the most promising alternative may be designating more PTAB opinions as precedential. As Walker and Wasserman note, the PTAB's designation as precedential of only 13 out of over 1500 decisions under its new adjudicative procedures is "alarmingly low." They suggest modifying the cumbersome current process to allow the Director to designate an opinion as precedential without additional review—authority that already seems to be granted by the Patent Act.

The New World of Agency Adjudication is of obvious interest to the patent law community, but I think it is also likely to appeal to administrative law scholars more generally. I don't think Walker and Wasserman have fully resolved the seeming contradiction between the clear legality of agency-head review and the potential due process violation of panel stacking, and this seems like an excellent opportunity for administrative law scholars to further investigate the theoretical justifications for agency-head review and the underdeveloped caselaw on the due process requirements of administrative adjudication. The USPTO also seems like a good context to study the tension between decisional independence of administrative decisionmakers and the need for quality improvement programs (see, e.g., p. 88 of Dan Ho's excellent article on agency peer review). I look forward to reading the many Notes and Articles that will surely build on this work—and to seeing how the USPTO and the Federal Circuit respond to Walker and Wasserman's call.

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