The America Invents Act (“AIA”) act granted final authority whether to institute an inter partes review (“IPR”) to the Director of the United States Patent Office (“the PTO”). Specifically, 35 U.S.C. §314(d) states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” On its face, the statute appears clear. However, somewhat conflicting with the AIA, the Administrative Procedures Act (“APA”) grants federal courts the authority to review agency action, unless a statute specifically precludes agency review. Section 5 U.S.C. §702 states that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.”
The dichotomy between certain interpretations of these two statutes poses an interesting question regarding which branch has final review of a decision to institute an IPR. Is the Director’s decision final and non-appealable or do federal courts have the authority to review the PTO’s action? A United States District Court in the Eastern District of Virginia was posed with this question last Friday. In Dominion Dealer Solutions, LLC. v. Lee, No. 3:13CV699 (E.D. Va 2014), Dominion appealed the PTO’s decision to deny Dominion’s request of inter partes review of five patents.
On March 28, 2013, Dominion filed five IPRs, and subsequently filed a motion to stay in a related district court proceeding in California. On May 22, 2013, the district court in California entered the stay “pending final exhaustion of all pending IPR proceedings.” Approximately three months later, the PTO denied all five IPR petitions. Dominion filed a Request for Rehearing with the PTO, which was also denied. Dominion later filed this action in the district court of the Eastern District of Virginia.
The PTO filed a motion to dismiss Dominion’s action for lack of jurisdiction and failure to state a claim. On April 18, 2014, the court granted PTO’s motion to dismiss. The court provided interesting rationale for dismissing the action.
(1) This Is an “Appeal:” First, the court accused Dominion of inconsistencies and warned it not to be “volte-face.” Specifically, Dominion argued that §314(d) of the AIA only precludes direct appeals to the Federal Circuit and does not preclude agency review in the district court because the action before the court was not an “appeal” of an agency decision. That is, Dominion appeared to argue that this cause of action was a new trial to “review” an agency action, and not an appeal.
In response to this argument, the court noted that not only has Dominion referred to this case as an “appeal” in its filings with the court, Dominion has also “made the tactical decision to present its Complaint as an ‘appeal’ so as to avoid triggering the end of the California’s district court’s stay order.” The court scolded Dominion for arguing that this action was an appeal in an attempt to prevent exhaustion in one instance, and for arguing that this case was not an appeal to receive agency review in another instance.
(2) Establishes a Prerequisite for Appeal: Second the court tried to honor the legislative intent of the statute. The court noted that “Congress intended the AIA and the IPR proceedings to decrease the volume of patent litigation in the federal courts and streamline the patent administrative process.” While the court recognizes that a review of a decision to institute an IPR would use less resources than a full trial, the court reasons that the large numbers of reviews from disgruntled petitioners might undermine the legislative intent of the AIA. Thus, the court noted that “[i]t is entirely logical, then, for Congress to reserve the right of appeal for those petitioners who were able to obtain IPR, and to bar judicial review for those petitioners who were unable to satisfy the comparatively low threshold of ‘reasonable likelihood’ in their petitions.”
By using this reasoning, the court has implied that a prerequisite is required before being entitled to the right of appeal of a PTO decision. The court has suggested that one must first meet the threshold of showing a reasonable likelihood that it will prevail and be granted institution of an IPR proceeding, before being granted a right to appeal a PTO decision.
(3) Distinguishes from Inter Partes Reexaminations: Lastly, the court distinguished inter partes review from inter partes reexam. While most practitioners recognize that IPRs are considerably different from inter partes reexams, most practitioners still look to reexam case law to provide guidance in the relatively new post-AIA proceedings. Under inter partes reexam, the Director’s determination of whether a new question of patentability was raised was “final and non-appealable.” 35 U.S.C. 312 (2010). Dominion referred to reexam case law indicating that a PTO’s decision in a reexam may be appealable under agency review.
However, in Dominion, the court disagreed with Dominion’s attempt to draw similarities between the two proceedings. The court expressly stated that the legislative history and the current statute for inter partes review is significantly different than that of the old statute for inter partes reexam. The court pointed out that §314(d) expressly bars appeals of decisions to institute an IPR proceeding. This is in contrast to inter partes reexams, in which appeals were limited to the determinations of whether a substantial new question was presented. The court also noted that this cause of action questioned the merits of PTO’s legal decision and was not related to a collateral issue.
While this case is fact specific, the court clearly stated that agency review at the district court of a PTO decision to institute an IPR is not appropriate. Parties will have to seek an alternate door for relief.
Margaret M. Welsh is an associate in the firm’s Electrical/Mechanical Group. Ms. Welsh’s practice focuses on the preparation and prosecution of domestic and foreign patent applications as well as counseling clients on intellectual property matters. She has experience in a wide range of mechanical and electrical technologies, including semiconductor and nanotechnologies and technologies in various automobile components, such as tires, transmissions, engines, fuel-injectors, motors, lamps, steering systems, connectors/wiring, valves, and control/monitoring systems.
Ms. Welsh previously has worked as an energy consultant where she provided various entities with technical, regulatory, and strategic support for many of their energy initiatives. She was also the Managing Editor of Volume XXI of Fordham’s Intellectual Property, Media and Entertainment Law Journal.