Why 35 USC 146 Practice Should BoomDec 2000 – Intellectual Property Today, Vol. 7, No. 12, December 2000, page 48
Why 35 USC 146 Practice Should Boom (1)
by Charles L. Gholz
Suppose that you've just lost an interference. Suppose further that, in the cold, grey light of the dawn, the horrible thought occurs to you that you could have argued and/or presented your case better. Or simply suppose that you think that the panel erred grievously, but you suspect that, in light of Dickinson v. Zurko, 119 S. Ct. 1816, 50 USPQ2d 1930 (1999), the judges of the Federal Circuit will not review the panel's decision with sufficient rigor to give you a reversal.
Would you like to start over, free of any taint arising from the panel's decision? You bet! And I'm here to tell you how you can do that.
Winner International Corp. v. Wang
In Winner International Royalty Corp. v. Wang, 202 F.3d 1340, 53 USPQ2d 1580 (Fed. Cir. 2000) (opinion by Circuit Judge Michel for a panel that also consisted of Circuit Judges Rader and Gajarsa), the court decided that the decisions of the Board of Patent Appeals and Interferences are subject to de novo review in 35 USC 146 actions as to any issue on which the plaintiffs submit live testimony.(2)
The court first noted that, "Because the record before the district court may include the evidence before the Board as well as evidence that was not before the Board, we have often described the district court proceeding as 'a hybrid of an appeal and a trial de novo'."(3) It then stated that "The issue before us is whether the scope of the evidence admitted by the district court was sufficient to require a complete trial de novo, or whether the district court was instead required to give deference to some or all of the Board's findings of fact."(4) It conceded that, "Although our precedent makes clear that a de novo trial is appropriate in some circumstances in actions under both section 146 and the parallel provisions in 35 U.S.C. § 145, it does not make clear exactly what those circumstances are,"(5) and it asserted that "The statutory provisions themselves offer little guidance...."(6) Accordingly, the court turned to public policy, logic, and its understanding of how patent interferences are handled at the administrative level.
The outcome determinative point, according to the court, is that:
at no point in the interference proceeding is a party allowed to present live testimony before the Board. The Board reviews testimony only in the form of affidavits and transcripts of depositions, and other facts in the form of responses to interrogatories and requests for admissions. See 37 C.F.R. §§ 1.653(a), 1.677(a). Thus, although the proceeding before the Board in an interference differs from that following an ex parte examination, the two proceedings are the same in at least one important respect -- in no case is live testimony given before the Board, which would allow the Board to observe demeanor, to hear the witnesses rebut one another's testimony in response to questioning from the parties and the judges, and thus to determine credibility. As we have stated before, because the district court may observe witnesses under examination and cross-examination[,] it can have a "powerful advantage" over the Board[,] which can never receive testimony in such a manner. Burlington Indus.[, Inc. v. Quigg, 822 F.2d 1581, 1582, 3 USPQ2d 1436, 1437 (Fed. Cir. 1987)].(7)
The court accordingly held that:
the admission of live testimony on all matters before the Board in a section146 action, as in this case, makes a factfinder of the district court and requires a de novo trial.4 Thus, although the live testimony before the district court might be the same or similar to testimony before the Board in the form of affidavits and deposition transcripts, a district court should still make de novo factual findings, while treating the record before the Board when offered by a party "as if [it was] originally taken and produced" in the district court. 35 U.S.C. § 146. Accordingly, because Winner submitted live testimony on all matters before the Board, the entire district court proceeding should have been a trial de novo, based both on the Board record and the district court evidence.
4 As this case involved further testimony relating to everything in issue before the Board, we express no opinion on whether testimony relating solely to some facts or issues results in other facts or issues being reviewed deferentially based solely on the fact findings of the Board. Indeed, we do not decide whether a given dispute could be parsed into discrete "issues" or facts so that such a determination could be made, or if it could, how a court would draw the line between such facts or issues.(8)
(1) The court's footnote 4 is fascinating -- and suggestive of much litigation to come. How the issue is defined will often control the outcome of the case.(9) For example, it is not clear what would happen if a plaintiff (or, for that matter, a defendant) in a 35 USC 146 action put in live testimony on less than all of the four Graham factors. The teaching point, of course, is that one should always put in live testimony on at least the first three of the Graham factors!
(2) The court's blanket assertion that "in no case is live testimony given before the Board, which would allow the Board to observe demeanor, to hear the witnesses rebut one another's testimony in response to questioning from the parties and the judges, and thus to determine credibility"(10) is not right.(11) In the first place, one can submit video depositions, and they are actually more useful than live testimony if one really believes that a judge can tell whether a witness is lying by observing the witnesses demeanor, since the judge can stop the video, zoom in on the witness's upper lip (to see if beads of sweat have formed), etc. In the second place, the APJs have taken actual live testimony in a hearing room at the board on at least one occasion(12) -- and I think that they will do that more often in the future(13).
(3) Paul Morgan, in-house interference specialist at Xerox, argues that "there would not necessarily be the same result for a priority determination by the Board, where I think it is fair to say, from reading the cases over the years, that traditionally the Court has given Board interference priority decisions much more respect, unless they involve an evidentiary or due process error." While I agree with Mr. Morgan that only patentability issues were before the court in Winner and that, accordingly, there is room to argue for that distinction, I doubt that the court will accept it. The court said that "our holding....establishes a clear rule that live testimony admitted on all matters that were before the Board triggers a de novo trial."(14) I think that it meant to establish a general rule that is much broader than the facts that were before the court, and I suspect that it will adhere to that general rule.
(4) Despite the court's offhand characterization of 35 USC 145 as being "parallel"(15) to 35 USC 146, the ex parte nature of an appeal to the board under 35 USC 134 is so different from the inter partes nature of an interference trial before the board under 35 USC 135 that I recommend against assuming that the holding in Winner is also applicable to 35 USC 145 proceedings. However, that argument will no doubt be made.(16)
What the PTO Can Do About Winner
The interference APJs are, no doubt, unhappy about the Federal Circuit's opinion in Winner. It arguably turns their efforts into a dress rehearsal for a follow-on 35 USC 146 action. But what can they do about it? The Solicitor (now known as the General Counsel), who often intervenes or files amicus briefs in interference appeals to the Federal Circuit, failed to intervene or file an amicus brief in Winner, and it is now too late to request reconsideration.
Well, there are at least two things that the board could do to ameliorate the effect of Winner. First, the board could start to hear more live testimony, thereby depriving the Federal district courts of that alleged comparative advantage. However, that solution would drive up the PTO's costs significantly, which means that it is unlikely to be adopted. Second, the board could encourage (or even require) the submission of (1) video tapes of depositions and (2) selected highlights from the video tapes. That change in practice would cost the PTO very little, and, to the extent that demeanor really is a factor in evaluating the kind of evidence that is submitted in interferences, it might even promote "the just...determination of every interference." 37 CFR 1.601, preamble.
Published in Intellectual Property Today, Vol. 7, No. 12, December 2000, page 48.
1. See also my earlier article, Why Are 35 USC 146 Actions Becoming So Popular?, 5 Intellectual Property Today No. 9 at page 6 (1998).
2. In the interest of complete candor, I note that I was co-counsel for Winner International Royalty Corp.
3. 202 F.3d at 1345, 53 USPQ2d at 1584, citing Estee Lauder Inc. v. L'Oreal, S.A. 129 F.3d 588, 592, 44 USPQ2d 1610, 1612 (Fed. Cir. 1997); General Instrument Corp. v. Scientific-Atlanta, Inc., 995 F.2d 209, 212, 27 USPQ2d 1145, 1147 (Fed. Cir. 1993); Case v. CPC Int'l, Inc., 730 F.2d 745, 752, 221 USPQ 196, 202 (Fed. Cir. 1984); and Conservolite, Inc. v. Widmayer, 21 F.3d 1098, 1102, 30 USPQ2d 1626, 1629 (Fed. Cir. 1994).
4. 202 F.3d at 1345, 53 USPQ2d at 1584.
5. 202 F.3d at 1345, 53 USPQ2d at 1584.
6. 202 F.3d at 1345, 53 USPQ2d at 1584.
7. 202 F.3d at 1347, 53 USPQ2d at 1585.
8. 202 F.3d at 1347, 53 USPQ2d at 1585-86; interpolation by the court.
9. See Gholz, A Critique of Recent Opinions of the Federal Circuit in Patent Interferences, 80 JPTOS 321, 353-54 (1998).
10. 202 F.3d at 1347, 53 USPQ2d at 1585.
11. Please note that we did not make that argument to the court! The court came up with that argument on its own.
12. Chao v. Iwamoto, Interference No. 104,051.
13. See Tropix Inc. v. Lumigen Inc., 53 USPQ2d 2018, 2020 n. 5 (PTOBPAI 2000) (expanded panel):
On the issue of derivation, all cross-examination will take place in a trial setting at the board in Arlington, Virginia, over which at least one administrative patent judge assigned to the Trial Section will preside.
14. 202 F.3d at 1347-48, 53 USPQ2d at 1584; emphasis by the court.
15. 202 F.3d at 1345, 53 USPQ2d at 1584.
16. An amicus brief filed in support of Wang's unsuccessful petition for certiorari argued that Wang clearly applies to 35 USC 145 actions; that, since the Federal Circuit indicated in Wang that it reviews district court fact findings in 35 USC 146 actions under the clearly erroneous standard, it will similarly review district court fact findings in 35 USC 145 actions under the clearly erroneous standard; and that that would gut the salutary effect of the Supreme Court's holding in Dickinson.