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Challenging in Court U.S.P.T.O. Administrative Decsions: A Primer on Litigation Issues

Charles E. Bruzga
© 1989 Charles E. Bruzga

Reprinted with permission from Selected Legal Papers, Vol. 7, No.2 (December 1989), published by the American Intellectual Property Law Association.


The typical practitioner before the U.S. Patent and Trademark Office (“U.S.P.T.O.”) will only infrequently be called upon, it is believed, to challenge in court an administrative decision of the Commissioner of Patents and Trademarks (“Commissioner”). An extensive investigation into this “administrative” area of practice was made while prosecuting a lawsuit to reinstate a patent on the alleged basis of an unavoidably delayed maintenance fee payment. [1]

The following outline presents a primer on litigation issues involved in such “maintenance fee” lawsuit, and also addresses statute-of limitations and attorney’s fee-award issues.

I. Where Can You Sue? – (i.e., What is the Venue?)

Suits against the Commissioner can be brought in either of two forums:

1. The U.S.D.C. for the District of Columbia. 28 U.S.C. §1391(e)(1) (where “defendant… resides”) [2]; or

2. Where the plaintiff resides. 28 U.S.C. §1391(e)(4).

II. What Jurisdictional Bases Can You Allege?

There is some choice, depending on how the cause of action is framed:

1. For actions arising under the patent laws: 28 U.S.C. §1338(a). For example:

(a) Actions concerning regulations issued under 35 U.S.C. §6(a) that are “inconsistent with law”; or
(b) Actions concerning a remedial right such as, for example, the right to have a patent reinstated upon a showing of “unavoidable delay” in the payment of a maintenance fee. 35 U.S.C. §41(c).

2. For actions arising under the U.S. Constitution or other U.S. laws: 28 U.S.C. §1331.

3. For actions under the Administrative Procedure Act (APA) complaining of administrative decisions: 5 U.S.C. §701 et seq. [3] (Apparently an independent basis of jurisdiction must also be alleged [4]

4. For a mandamus action: 28 U.S.C. §1361.

III. What Rules or Decisions Can be Challenged?

1. Decisions on Petition – resulting from an adjudicatory proceeding.

2. Formal Rules – contained in Title 37 of the Code of Federal Regulations.

3. Informal Rules – a declaration of an agency’s interpretation of law that may merely be published, for example, in the Official Gazette.

E.g., the PTO interpretation of the maintenance fee statutes[5] that “[u]nder [such] statutes, the [PTO] has no duty to notify patentees when their maintenance fees are due.” 1046 O.G. 34 (1984) (emphasis added).

Note: Knowledge that the foregoing informal rule can be challenged may be the most valuable part of this presentation.

IV. What Are the Standards of Review?

1. Notice-and-Opportunity-to-Comment Must Be Provided for Certain (i.e., Legislative [6]) Rules.

Inapplicable for “interpretive” [7] rules, in general. 5 U.S.C. §553(b).

Satisfied if proposal is published in Federal Register and opportunity to comment is “not unreasonable.” [8]

2. If Agency Applies Incorrect Legal Standard, the Question of Law at Issue is Freely Reviewable.

The situation is directly analogous to a jury verdict based on an incorrect legal standard. [9] E.g. in the maintenance fee context, it may be advisable to attack a PTO decision on petition on the basis that the PTO applied the incorrect legal standard of “unavoidable delay” when it (wrongfully?) assumes that it lacks any duty to timely notify patent owners when their fees are due.

3. The Other Major Standard: “Arbitrary and Capricious.”

As applied to adjudication: Unless agency adjudication ignores important factors or is severely defective, any judicial challenge is like “walking into the jaws of death,” [10] since the agency’s decision is normally upheld. [11]

As applied to rules: “Legislative” rules (see Appendix), involving agency expertise, are nearly impervious to attack (see Assoc. of Am. Railroads v. United States, cited in footnote 23); while “interpretive” rules, involving more nearly a judicial role, are more susceptible to being stricken (see footnote 23). In the maintenance fee context, for example, a challenge could be made against the standards of Rule 378, [12] but would face the hurdle of attacking a legislative rule.

4. The Substantial Evidence Standard Is Inapplicable.

– Only applies where Congress has by statute “orchestrated” the procedures of a statutory agency hearing. See 5 U.S.C. §706(2XE).

5. Mandamus Relief is Also Available, but Caselaw Largely Focuses Instead on APA Remedies.

28 U.S.C. 1361 concerns mandamus relief.

V. What New Evidence Can You Introduce?

This depends on the nature of the right asserted.

1. If Constitutional: Caselaw exists to support the position that a Constitutional claim must be heard de novo by an “Article 111” [13] Court – de novo applying both to findings of fact and to findings of law. [14]

2. If Non-Constitutional: The prevailing caselaw holds that the judicial litigant must show that the agency fact-finding procedures were “inadequate” – and this typically has required the showing of a major flaw in the agency factfinding procedures. [15] (This view is challenged in the Rydeen v. Quigg case cited in footnote 1.)

VI. What is the Statute of Limitations for Reinstatement of a Lapsed Patent?

In the typical absence of a federal statute concerning the legal right sued on,[16] a federal court would presumably apply the District of Columbia [17] statute of limitations in a suit against the Commissioner of Patents and Trademarks, which is 3 years [18] from the date the cause of action arose. [19]

VII. Are Attorney’s Fees Recoverable?

The Equal Access to Justice Act, 28 U.S.C. §2412, includes respective provisions for a discretionary award and for a not-so-discretionary but qualified award:

1. Discretionary Award: “Unless expressly prohibited by statute” – the Act states – “a court may award reasonable fees and expenses of attorneys” (28 U.S.C. §2412[b]).

2. Not-so-Discretionary But Qualified Award:
“[U]nless the court finds that the position of the United States [or its agencies or their officials] was substantially justified or that special circumstances make an award unjust,” the Act states that a prevailing party “shall [be] award[ed]. .. fees and other expenses” (28 U.S.C. §2412[d][1][A]) provided, however, that (i) the party’s net worth and size are limited [20] and (ii) the legal rights sued on constitute either a Constitutional tort, [21] or a non-tort. [22]

Administrative Procedure Act (APA): An act setting forth provisions for:

(a) “Administrative Procedure” at 5 U.S.C. §§551-559; and

(b) “Judicial Review” at 5 U.S.C. §§701-706 (but 5 U.S.C. §559 should be consulted regarding limitations on the scope of the APA).

“Legislative” vs. “Interpretive” Rules:

“Legislative Rules: Create new law in a legislative fashion.

“Interpretive” Rules: Merely state the agency’s interpretation of existing law.

Significance: Courts generally give more deference to legislative, than to interpretive, rules. [23]

[1] Rydeen v. Quigg, No. 88-1786·JHP (D.D.C. filed June 30, 1988).

[2] Venue in such court was admitted by the Commissioner in Rydeen v. Quigg, supra note 1, and in Katrapat, A.G. v. Quigg, No. 87·0250 (D.D.C. filed April 21, 1987).

[3] The Appendix cites other relevant sections of the APA.

[4] See Califano v. Sanders, 430 U.S. 99, 108, 97 S.Ct. 980, 985 (1977) (concluding that “the APA does not afford an implied grant of subject matter jurisdiction permitting federal judicial review of agency action”).

[5] Public Laws 96·517, enacted on Dec. 12, 1980 and 97-247, enacted on Aug. 27, 1982, codified in 35 U.S.C. 41.

[6] “Legislative” and “interpretive” rules are defined in the Appendix, and also, e.g. in Wamsley, The Rulemaking Power of the Commissioner of Patents and Trademarks, 64 J.P.O.S. 490 (Part 1),539 (Part 2), and 604 (Part 3) (1982), specifically at 64 J.P.O.S. 545-46.

[7] [d.

[8] E.g. Conn. Light & Power v. Nuclear Regulatory Commission, 673 F.2d 525, 534 (D.C. Cir. 1982), cert. denied, 459 U.S. 835, 101 S.Ct. 79 (1982) (“[w)hile technical complexity of [proposed) regulations is such that a somewhat larger comment period might have been helpful,” the agency’s choice of a 30-day comment period was “not unreasonable” where it had been exploring the problem with the industry for over five years).

[9] E.g., North Georgia Bldg., & Const. Trades Council v. Goldschmidt, 621 F.2d 697, 708 (5th Cir. 1980) (under the APA questions of law are “freely reviewable” by the courts) (quoting from Coca-Cola Co. v. Atchinson, Top, & S.F. Ry. Co., 608 F.2d 213, 218 [5th Cir. 1979).

[10] See, e.g., Motor Vehicles Mfrs. Assoc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 44, 103 S.Ct. 2856, 2866-67 (1983) (“[n]ormally, an agency rule would be arbitrary and capricious if the agency … entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to … the product of agency expertise”).

[11] See, e.g., Motor Vehicle Mfrs. Assoc. v. Ruckelshaus, 719 F.2d 1159,1164 (1983) (the arbitrary and capricious standard is ” ‘highly deferential’ and presumes the validity of agency action”) (citation omitted).

[12] Rule 378, 37 C.F.R. §1.378, requires, for example, that a patentee show that “reasonable care was taken to ensure that the maintenance fee would be paid timely.” 37 C.F.R. §1.378(b)(3).,.

[13] The U.S. Constitution, Art. III states that “[tlhe Judges … of the supreme and inferior Courts … shall hold their Offices during good Behaviour, and shall, at stated Times, receive for their Services, a Compensation, which shall not be diminished during their Continuance in Office.”

[14] E.g., Northern Pipeline Constr. Co. v. Marathon Pipeline Co., 458 U.S. 50, 77-85,102 S.Ct. 2858, 2874-78 (1982) (plurality opinion) (constitutionally-recognized rights are entitled to de novo fact-finding and legal review by an Article III court); Crowell v. Benson, 285 U.S. 22, 60, 52 S.Ct. 285, 296 (1932) (“[i]n cases brought to enforce constitutional rights, the judicial power of the United States necessarily extends to the independent determination of all questions both of fact and law, necessary to the performance of that supreme function”); Federal Trade Commission v. Simeon Management Corp., 532 F.2d 708, 713 (9th Cir. 1976) (citing with approval Crowell v. Benson, supra); Adolph Coors Co. v. Wallace, 570 F.Supp. 202, 206 <N.D. Cal. 1983) (citing with approval Northern Pipeline, supra).

[15] E.g., Nat’l. Org. of Women, Washington, D.C. Chapter v. Social Security Admin., 736 F.2d 727, 745 (D.C. Cir. 1984)(concurring opinion)(“[w]e can only conclude that the procedure must be severely defective before a court proceeding under the APA can substitute de novo review for review of the agency’s record”); see Porter v. Califano, 592 F.2d 770, 783 (5th Cir. 1979) (“[b]ut a more fundamental inadequacy lies at the heart of the agency procedures used in this case. Given the [extreme] circumstances of this case [involving agency bias], we would be hard-pressed to imagine adequate fact-finding procedures which did not include an opportunity for Porter to discover … evidence”).

[16] Legal rights under the Administrative Procedure Act (5 U.S.C. §§551-559 & 701-706), the Patent Statute (35 U.S.C. §§1 et. seq.) or the U.S. Constitution Due Process Clause, for example, lack specific statutes of limitation for actions against the Commissioner of Patents and Trademarks.

[17] This assumes that the Commissioner “resides” in the District of Columbia. See note 2, supra. As stated, e.g., in Richards v. Mileski, 662 F.2d 65,68 (D.C. Cir. 1981): “[A]s no specific statute of limitations has ever been enacted by Congress for [the particular federal rights at issue], the appropriate local statute of limitations is borrowed.”

[18] Under D.C. Code §12-301 (1988), actions for reinstating patents lapsed for failure to pay a maintenance fee are apparently governed by the 3-year period of subsection (2) (“for the recovery of personal property”).

[19] When a cause of action arises would presumably depend on how the cause of action is framed. In the maintenance fee context, if one merely alleges that the Commissioner’s failure to provide timely notice of a fee becoming due violates Constitutional Due Process, the cause of action would apparently arise near the last due date for the fee. If in contrast, one alleges remedial rights under 35 U.S.C. §41(c) to reinstate a patent based on a fee payment being unavoidably delayed – although also alleging that reliance on never-received timely notice was reasonable on Due Process grounds -, the cause of action would appear to arise when the Commissioner denies such remedial right; and this typically occurs when a patent owner’s petition for reconsideration under 37 C.F.R. §1.378(e) is denied.

[20] Subsection (d)(2)(B) of 28 U.S.C. §2412 (Supp. 1989) defines an eligible party as (i) an individual whose net worth did not exceed $2,000,000 when the civil action was filed, or as (ii) “any owner of an unincorporated business, or any partnership, corporation, association, unit of local government, or organization” whose net worth and employee-number limits were $7,000,000 and 500, respectively, when the civil action was filed.

[21] H.R. Rep. No. 96-1418, at 18, reprinted in 1980 U.S. CODE CONG. & ADMIN. NEWS 4984,4997.

[22] 28 U.S.C. §2412(dX1XA). What differentiates “tort” and “non-tort” cases is open to interpretation: Tort cases were excluded, according to legislative history, since they already enjoyed “legal remedies [that were) adequate and equitable.” H.R. Rep. No. 96-1418, reprinted in 1980 CODE CONG. & ADMIN. NEWS 4984,4997. The then- (and now-) existing federal tort remedies set forth in the Federal Tort Claims Act, 28 U.S.C. §§2671-80, narrowly define an actionable tort by the United States as limited to claims where the United States “in the same manner and to the same extent as a private individual under like circumstances” would be liable. Query whether any obligation of the Commissioner to provide timely notice of a maintenance fee becoming due has a counterpart obligation in the context of a private individual. If not, such Commissioner’s obligation would not constitute a tort under federal tort law (see, e.g., Devlin Lumber and Supply Corp. v. United States, 488 F.2d 88, 89 [4th Cir. 1973); Baker V. F & F Inv. Co., 489 F.2d 829, 835 [7th Cir. 1973); and qualification “(ii)” would be satisfied.

[23] E.g., Ass’n of Am. Railroads v. United States, 603 F.2d 953, 962 (O.C. Cir. 1979) (“[u]nlike legislative rules, which are entitled to judicial deference, interpretive rules are regarded as merely an agency’s opinion concerning the meaning of the law”); Caterpiller Tractor Co. v. Comm’r of Patents, 650 F. Supp. 218, 220 (E.D.Ya. 1986) (“[n]or is the court inclined to accord substantial deference to an agency’s interpretation that its own regulation is not in conflict with a treaty provision”).