Federal Circuit opens door for patent cases

Intellectual property attorneys who challenge decisions before the Patent Trial and Appeal Board say a recent Federal Circuit ruling means they no longer can be barred from introducing new evidence in appeals at the U.S. District Court.

Until the Federal Circuit’s July 11 decision in Troy v. Samson Manufacturing Corp., which originated out of Massachusetts, federal District Court judges across the country typically prohibited counsel from presenting any legal issues that had not been raised below.

But a three-judge panel held in Troy that an aggrieved party may now do just that if the evidence in question is otherwise admissible under the Federal Rules of Evidence and Federal Rules of Civil Procedure.

The panel found that U.S. District Court Judge William G. Young improperly blocked the plaintiff from introducing new evidence in a 35 U.S.C. 146 interference proceeding over who had invented a patent for a handguard that attaches to rifles and carbines. The issue in an interference action is which applicant has “priority of invention” and is entitled to a patent.

Damian R. LaPlaca of Nelson, Kinder & Mosseau in Boston, who represented the plaintiff, said Troy is a “significant pronouncement” that undoubtedly will change the way judges analyze appeals.

“I do think a lot of people were waiting for the ruling to see what standard the court would set with these types of appeals,” he said. “The analysis now that District Court judges have to engage in no longer involves the question of whether a new legal issue has been presented, because there are no ifs, ands or buts about it anymore. It’s just admitted.”

In reaching its decision, the Federal Circuit cited the U.S. Supreme Court’s 2012 Kappos v. Hyatt opinion, which found that District Court judges should not set any limitations on a patent applicant’s ability to introduce new evidence in a 35 U.S.C. 145 proceeding.

The Troy court rejected an argument from the defendant and the U.S. Patent and Trademark Office, which filed an amicus brief, that Hyatt related only to the presentation of new evidence on issues previously raised to the board.

“We find it impossible to reconcile the limitation on evidence that Samson and the PTO seek with the Supreme Court’s unequivocal language, analysis, and holding in Hyatt,” Judge Kimberly A. Moore wrote for the Federal Circuit. “We conclude that to the extent that our prior precedent … held that new evidence on an issue not presented to the Board was generally to be excluded in district court proceedings, it is no longer viable following the Supreme Court’s Hyatt decision.”

New work

LaPlaca said Troy overrules Conservolite v. Widmayer, a 1994 Federal Circuit decision holding that new evidence on an issue a party did not present to the Patent Trial and Appeal Board generally was excluded from consideration in a §146 action.

PTAB appeals are paper-intensive and time-consuming and many federal judges likely are reading Troy and correctly concluding that it will create a lot of new work for them, LaPlaca said.

“These cases already begin with a record created by the [PTAB] that’s pretty voluminous,” he said. “So even before you get to the question of new evidence, the judge has a lot of work to do just to get his hands around the record that’s been prepared by the board.”

LaPlaca described the newly discovered evidence he presented to the court as “silver bullet” evidence that previously was not available to him. It included a deposition and sworn affidavit.

He argued to Young that equity factors warranted its admissibility even though the procedural rules in place at the time called for its exclusion.

“Interestingly, the Federal Circuit concluded that the evidence we tried to introduce in the District Court was a new legal issue, which we had disputed,” LaPlaca said. “They just found that whether it is a new legal issue or not, it comes in, and that’s a nuance a lot of people reading this decision haven’t really picked up on.”

Laura L. Carroll of Burns & Levinson in Boston, who represented the defendant, said the case is still within the time period allowed for seeking review of Federal Circuit decisions. Her client is evaluating its options, she said.

In the meantime, Carroll said, the ruling has the potential to create a lot of uncertainty in the patent bar.

Hyatt had held that new evidence not presented to the Board of Patent Appeals and Interferences — now the PTAB — could be offered to a District Court judge in patentability cases under 35 U.S.C. 145, she said.

But some have taken the position in the wake of Troy that the Federal Circuit is extending that principle to interference and derivation cases under §146 and permitting the raising of new legal issues to judges, not just the submission of new evidence.

“One question that arises from this case is: What does it mean for decisions made by the PTAB?” she asked. “People are now wrestling with where this leaves the PTAB. And I don’t think anyone really knows at this point.”

The PTAB was established by Congress presumably to determine specialized patent issues in the first instance, she said, a point emphasized by the Patent and Trademark Office in its amicus brief.

She said the PTAB is an administrative body with specific expertise in patent matters, which is why many lawyers think its determinations should be given some deference.

“Is the Federal Circuit really saying that there is a complete do-over in the District Court?” Carroll asked.

Nathan K. Kelley, solicitor for the Patent and Trademark Office in Washington, D.C., could not be reached for comment prior to deadline.

‘Start from scratch’

William L. Boesch of Boston’s Sugarman, Rogers, Barshak & Cohen said in most appellate situations in and out of the patent arena, the record is confined to facts and arguments raised below. The only exceptions judges usually make are for evidence developed after the fact in good faith, he said.

“On its face, this sounds surprising,” Boesch said of Troy. “Typically, if what the District Court is doing is reviewing what an administrative body has done, then — just like in any sort of appeal or review situation — the record is fixed once it goes up.”

Ronald E. Cahill, who practices at Nutter, McClennen & Fish in Boston, said interference proceedings eventually will become obsolete under the America Invents Act and will be replaced with derivation proceedings.

The question in derivation proceedings will be whether a non-inventor derived an invention from the inventor and applied for a patent without the inventor’s authorization.

Although Troy is silent on the issue, most IP attorneys, including Cahill, think the Federal Circuit’s opinion will apply equally to derivation proceedings.

“[Troy] basically says that you now get a whole new trial,” Cahill said. “What it means is that you can now put in whatever evidence you want on whatever issue you want. And that’s a significant change.”

But Cahill, who chairs his firm’s intellectual property litigation group, said it will not impact post-grant proceedings or inter partes reviews. The statute allows those matters to be appealed only to the Federal Circuit.

“The point of having a formal proceeding is that you’re supposed to be able to narrow issues, not try them and then, if you don’t win, get to just start over again from scratch,” he said.