Shearman & Sterling LLP | IP Blog | <p >In Split Opinion, Federal Circuit Holds PTO Has Standing To Proceed Without Patent Challenger, As Sole Party Defending PTAB Inter Partes Invalidity Decision</p >
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  • In Split Opinion, Federal Circuit Holds PTO Has Standing To Proceed Without Patent Challenger, As Sole Party Defending PTAB Inter Partes Invalidity Decision

    On April 6, 2018, the United States Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion affirming an examiner’s rejection of various patent claims in an inter partes reexamination. Knowles Elec. LLC v. Iancu, case no. 2016-1954.  The United States Patent and Trademark Office (“PTO”) had intervened in the appeal to defend the examiner’s rejection.  In its opinion, the CAFC ruled that the PTO had standing to defend the examiner’s rejection even though the petitioner in the inter partes reexamination had abandoned the appeal. 

    A third party had requested inter partes reexamination of various claims of a patent owned by Knowles Electronics LLC.  The examiner rejected the claims, and the PTO’s Patent Trial and Appeal Board affirmed the rejection, cancelling the challenged claims.  Knowles appealed to the CAFC.

    The victorious third party declined to participate in the appeal, but the PTO intervened to do so. When it reached the merits, the CAFC affirmed the rejection.  However, before reaching the merits, the CAFC considered whether the PTO had standing to participate in the appeal.

    The PTO had intervened pursuant to 35 U.S.C. § 143, which provides, “[t]he Director shall have the right to intervene in an appeal from a decision entered by the Patent Trial and Appeal Board in a derivation proceeding under section 135 or in an inter partes or post-grant review under chapter 31 or 32.”  The PTO took the position that this statute gave it an absolute right to participate in the appeal, and a majority of the CAFC panel (Clevenger, J., and Wallach, J.) agreed.

    Judge Newman, however, dissented.  She took the view that the agency did not have Article III standing to defend the rejection, but only had standing to “explor[e] matters of agency concern such as the agency’s jurisdiction or procedures or regulations.”  Ordinarily, this limitation on the PTO’s standing would not be relevant, because there would be an appellee with standing to defend the rejection.  In this case, however, there was no appellee—the patent challenger having withdrawn—and there were no questions of agency concern at issue, only the merits of the rejection.  Thus, in Judge Newman’s view, there was only one party to the proceeding participating in the appeal (appellant Knowles), there was no appellee for the intervening agency to support, and the PTO lacked standing and should not have been permitted to participate.

    The dissent accepted that the statute gave the PTO the right to intervene, but argued that the statute did not and could not create Article III standing for the agency; the PTO was not a party to the inter partes action, and it had no stake in the outcome of the appeal.  Judge Newman cited Supreme Court opinions for the proposition “that ‘an intervenor’s right to continue a suit in the absence of the party on whose side intervention was permitted is contingent upon a showing by the intervenor that he fulfills the requirements of Article III.’” 

    There was no dispute that Knowles had standing to appeal the cancellation of its patent claims.  There was still a live controversy between Knowles and the victorious third-party requester, despite the third party’s choice not to participate in the appeal.  The only standing issue was whether the PTO could participate in the appeal of the merits on its own.

    Lurking in the background is the Oil States case now pending in the Supreme Court, which concerns the Constitutionality of inter partes review proceedings, and whether the PTO itself has the power to revoke an issued patent, or whether adjudication by an Article III court is required.  The majority’s decision that the PTO had standing to participate as a party to the appeal is consistent with the CAFC’s view that the agency is not acting as a disinterested adjudicator in such proceedings, while the dissent seems to be suggesting that the PTO, while not an Article III court, should nonetheless be acting as an adjudicator of the substantive issues in such inter partes proceedings.  It will be interesting to see whether the standing issue is raised in another appeal before another panel of the CAFC, and how, if at all, the Supreme Court’s forthcoming Oil States decision changes the calculus on the PTO’s standing to act as a sole appellee.