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Federal Circuit Faces Pressure From Four Directions in New Year

Dec. 30, 2020, 11:01 AM

The U.S. Supreme Court, the Patent Trial and Appeal Board, federal district courts, and Congress all will have eyes on the Federal Circuit in 2021.

The Supreme Court will review a U.S. Court of Appeals for the Federal Circuit decision about administrative patent judges, the board is testing the limits of its own discretion to make procedural rules, and a trial court in Texas is actively attracting patent cases. Then there’s Congress, which may consider making changes to patent law.

The Federal Circuit “is now the hub of a lot of different pressures coming” from those four directions, according to Mark Davies, co-head of Orrick Herrington & Sutcliffe LLP’s Supreme Court and appellate litigation practice.

Each of those entities seems to be very interested in what the Federal Circuit is doing and in the patent litigation system in general, he said.

And that plays into how the Federal Circuit decides cases: The judges aren’t just thinking about what the Supreme Court or Congress will do, or how the PTAB or district courts will respond. They are thinking about how all of these entities work together, Davies said.

Here’s what to watch from each of those corners.

Justices Eye Arthrex

The Supreme Court agreed in October to review the Federal Circuit’s decision in Arthrex Inc. v. Smith & Nephew Inc., which held that PTAB judges had such power over patents that they should be nominated by the president and confirmed by the Senate or, alternatively, be allowed to be fired without cause.

The Federal Circuit ruling resulted in a mishmash of orders in which some board decisions were sent back while others remained in place. Patent owners have tried to have challenges dismissed, and other judges have questioned the panel’s decision.

The Supreme Court could go a number of routes with the case, Eliot D. Williams, chair of Baker Botts LLP’s Palo Alto intellectual property department, said. It could throw all of the board’s rulings into disarray by finding the judges unconstitutional; it could question the Federal Circuit’s remedy; it could put the question back in the hands of Congress, he said.

The board may have to redo hundreds of cases, which could then be appealed again to the Federal Circuit. “So it could have a pretty dramatic impact on the Federal Circuit’s docket depending on how the Supreme Court comes out,” Finnegan, Henderson, Farabow, Garrett & Dunner LLP partner Dori Hines said. “That one is the case to watch this year,” she said.

PTAB’s Discretion

The Federal Circuit and the PTAB, which hears administrative challenges, have been vying recently over the board’s proper role in the patent system.

Patent litigator Christopher E. Loh of Venable LLP in New York pointed to a new appeal of a decision from the PTO’s Precedential Opinion Panel in DynaEnergetics Europe GmbH v. Hunting Titan Inc. The panel held the PTAB can “in certain rare circumstances” raise invalidity grounds in inter partes review that a party didn’t advance or sufficiently develop. Hunting Titan says the agency doesn’t have authority to craft new rules without notice and comment.

The decision is an “illustration of a broader trend between the Federal Circuit and the PTAB over which body gets to say what procedures apply in IPRs and whether the PTAB has the ability to set its own rules when it comes to procedural issues that aren’t related to institution,” Loh said.

The board’s application of its NHK Spring/Fintiv rule on whether to institute IPRs when parallel district court litigation is pending is another test of the agency’s power.

The Federal Circuit hasn’t shown much of an appetite to take up challenges arguing the board exceeded its statutory authority in adopting the rule, Williams said. But the agency is engaged in rulemaking, there’s an Administrative Procedure Act case over the rules in district court, and the Supreme Court might be interested, he said.

Litigation’s Role

The Federal Circuit’s docket has been flooded lately with challenges to orders from Judge Alan D. Albright of the U.S. District Court for the Western District of Texas. He has been actively attracting patent cases to his court in the two years he’s been on the bench.

“It will be illuminating to see how his play to make this the new patent forum of choice for plaintiffs plays out,” Williams said.

So far, the Federal Circuit has been skeptical of several orders refusing to transfer cases out of Albright’s court. “In general, the judges of the Federal Circuit don’t like forum shopping, and they don’t like activities that encourage forum shopping,” Williams said.

As more cases in Albright’s court go to trial and are appealed, “we’ll get to get a better sense of how the Federal Circuit is reacting into his jurisprudence,” Williams said.

Congress Hovers

Davies said Congress has been “hovering around” the patent space, considering solutions to the fate of PTAB judges, the confusion over what is eligible for patent protection, and the rules that govern the patent office.

Bills to clarify the Federal Circuit’s conflicting case law on eligibility were gaining traction last year, but got sidetracked by the pandemic. Any action from Congress “seems unlikely for the foreseeable future,” Hines said.

Instead it may be up to the Federal Circuit to make incremental progress and provide some predictability, she said.

Congress may pick up patent issues again when the pandemic pressure eases, and the court will likely be mindful of that as it writes opinions.

Court Changes

The court itself will see some changes in the coming year. Chief Judge Sharon Prost’s tenure at the head of the court will end when she turns 70 in May. Next in line for the position is Judge Kimberly A. Moore.

“I am sure that Judge Moore will be very hands-on as chief just as Chief Judge Prost was,” patent litigator Nitika Gupta Fiorella of Fish & Richardson PC said. “I think we’ll still see a very smooth running operation in terms of the administration and in terms of docketing,” she said.

The court also could see some new blood if older judges retire.

One thing Loh has learned from watching the court is to “keep your eyes open.”

He pointed to American Axle & Manufacturing Inc. v. Neapco Holdings LLC, an eligibility case nobody thought would be controversial, and Arthrex, where the constitutionality of PTAB judges wasn’t even raised.

“We always try to read the tea leaves and figure out what’s important to watch, but as we’ve seen, important issues can come up where we’re least expecting them,” he said.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloomberglaw.com; Kibkabe Araya at karaya@bloomberglaw.com

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