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Congress Needs to Confirm a PTO Leader, Newly Retired Judge Says

March 23, 2022, 7:45 PM

One of the biggest issues facing the intellectual property space now is not having a confirmed leader of the U.S. Patent and Trademark Office, retired Federal Circuit Judge Kathleen M. O’Malley says.

While the agency has been operating well under interim director Drew Hirshfeld, the PTO needs a permanent leader to provide guidance on issues such as patent eligibility under Section 101 of the Patent Act and proposed policy changes on patents essential to industry standards, O’Malley said.

“I don’t think Congress appreciates the fact that it’s dangerous to leave agencies untethered, especially an agency with authority for such important issues,” O’Malley said. Although “dangerous” might be an overstatement, “it’s difficult for the agency to do their job properly, and it’s difficult for stakeholders to know what the positions are going to be going forward,” she said.

O’Malley spoke to Bloomberg Law on the need for Congress to confirm a director, her concerns that the U.S. IP system has been weakened, and how to increase the diversity of attorneys arguing before the U.S. Court of Appeals to the Federal Circuit.

President Joe Biden tapped Winston & Strawn partner Kathi Vidal to lead the PTO in October. The former head, Andrei Iancu, stepped down in January 2021.

It’s been too long since a Senate-confirmed leader has been in place, O’Malley said, adding that the lack of a permanent director might be one reason there hasn’t been U.S. Supreme Court movement on a case dealing with noisy driveshafts that divided the Federal Circuit on when an invention is patent-eligible.

Justices haven’t considered a case on when an invention actually should earn patent protection since 2014, and attorneys and judges have begged for clarification since. The court in May asked the government to weigh in on the case, American Axle & Manufacturing Inc. v. Neapco Holdings LLC, but the Office of the Solicitor General hasn’t yet filed a brief.

The holdup, O’Malley said, might have to do with Vidal awaiting a full Senate confirmation vote. The agency doesn’t have independent litigating authority, but the Department of Justice has been solicitous of the PTO’s views, she said.

There’s not much flexibility the Federal Circuit judges have in reconsidering eligibility law, which is governed by Section 101 of the Patent Act, O’Malley said. At this point, it’s up to either the Supreme Court or Congress to step in.

“Have you ever seen all 12 active judges on a court beg the Supreme Court to take an issue and the Supreme Court not do it? Now we have American Axle which seems to be just sitting there, where there were lots of strong opinions, and, again, asking for the court to clarify,” O’Malley said. “The Federal Circuit has done a lot to try to point out to the Supreme Court where the confusions are and where we might need some clarification, but the Supreme Court doesn’t seem very anxious to jump back in.”

‘Real Debate’

Another area for Supreme Court guidance is on when injunctions should be issued in patent infringement cases, O’Malley said. She doesn’t like the idea that other parts of the world think that the fallout from the Supreme Court’s eBay Inc. v. MercExchange LLC decision has “dramatically weakened the patent system in the United States.”

Justices in the 2006 case determined that an injunction shouldn’t automatically be issued in patent infringement cases. Instead, courts must weigh a four-factor test to figure out if an injunction should be issued.

Having been on a district court, O’Malley said that cases were easier to settle before eBay because both sides had something to lose. Now, she said, the worst that can happen for an alleged infringer is that it pays the license it should have been paying all along if a patent is found to be valid and infringed.

To fix the issue and make the IP system more balanced, the Supreme Court could weigh in and say it didn’t mean to go as far as it did in eBay, O’Malley said.

“I wrote an opinion many years ago saying that I don’t think the Supreme Court went as far as parties and district court judges were seeming to believe, but I don’t think anybody bought that,” O’Malley said. “Maybe the Supreme Court could tell us it didn’t need to go that far, or it would have to come from Congress. It’s a real debate.”

Bench and Bar Diversity

O’Malley officially stepped down after nearly 30 years as a judge on March 11. She served on the Federal Circuit since 2010 and said her decision was, in part, due to timing. Biden would nominate her replacement, and he was chairman of the Senate Judiciary Committee during the Clinton administration, which put O’Malley on the U.S. District Court for the Northern District of Ohio.

O’Malley emphasized that her leaving the bench is about looking forward to her next chapter. O’Malley couldn’t see herself sitting on the sidelines during full court reconsiderations as a senior judge, and other district court judges who came on around her same time were also deciding to leave.

Her number one desire for her replacement was that it be a district court judge. Judge Leonard Stark, a judge on the U.S. District Court for the District of Delaware, replaced O’Malley. His experience handling nearly 2,400 patent cases, of which 63 have gone to trial, in his decade on the bench made him a “home run,” O’Malley said. Stark is now the only Federal Circuit judge with trial experience—a position O’Malley previously held.

Stark’s confirmation meant that the Federal Circuit would no longer have a 6-6 gender parity among its judges, which O’Malley said she was pleased to be a part of. For future vacancies, O’Malley would like to see a candidate with in-house counsel experience come on the court.

“It’s always good to have people who have actually litigated cases either as a district court judge or as a trial lawyer,” O’Malley said. “You can serve two purposes—you can find diverse candidates who fit those criteria as well.”

All of the judges would also like to see more diversity in counsel arguing before the bench, O’Malley said. The challenge is getting younger, more diverse attorneys the experience, which she said could be done through pro bono veterans or U.S. Merit Systems Protections Board cases.

More needs to be done to increase the pipeline of women and minorities going into patent law by pushing STEM education and showing how those topics are applied in law, O’Malley said.

“It’s going to be a road that the whole IP system is going to have to go down,” she said, “but I think everyone is dedicated to seeing it happen.”

To contact the reporter on this story: Samantha Handler in Washington at shandler@bloombergindustry.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloombergindustry.com, Melissa B. Robinson at mrobinson@bloomberglaw.com