Fed. Cir. Removes Limitations on New Evidence in §145 Civil Actions Against USPTO

Hyatt v. Kappos, 2007-1066 (November 8, 2010) (en banc)

When Applicants are dissatisfied by a USPTO action, there are 2 avenues for potential relief: (1) appeal to the Federal Circuit, and (2) file a §145 civil action in district court. While an appeal limits review of an application to the evidence of record, §145 actions afford an applicant the opportunity to introduce new evidence after the close of administrative proceedings.

In Hyatt v. Kappos, the applicant filed a mammoth application in 1995 ultimately containing 238 pages, 40 drawings, and 117 claims. The application claimed priority to a chain of applications dating back to 1975.

The examiner issued a final office action that contained an avalanche of rejections - all told, 2,546 separate rejections were made of Hyatt's 117 claims. Hyatt appealed, and the BPAI reversed 93% of the rejections, but maintained rejections directed to written description, noting that "merely pointing to the occurrence of isolated words in the specification . . . did not adequately establish that the specification contained written description for the particular combination of elements that made up each limitation."

Hyatt filed a civil action under 35 U.S.C. §145 to the District Court for the District of Columbia, asking the court to reverse the BPAI's rejections. In support of the action, Hyatt filed a written declaration in which he identified portions of the specification that one of skill in the art would understand to describe the limitations challenged by the USPTO.

The district court rejected the declaration, and granted summary judgment to the PTO.

The court found that the Board’s written description rejections were substantively identical to, albeit more detailed than, the rejections issued by the examiner. The court found that the Board’s written description rejections were substantively identical to, albeit more detailed than, the rejections issued by the examiner. . . . Because Mr. Hyatt’s declaration was directed to those written description rejections, the court concluded that he could have presented the declaration earlier, "certainly by the time his patent application was considered by the Board."  Finding that Mr. Hyatt had no explanation for why he failed to offer his declaration during the proceedings before the Board, the court determined that "[Mr.] Hyatt's failure to explain why he didn’t submit his declaration earlier is negligent, and the district court need not consider evidence negligently submitted after the end of administrative proceedings."

On appeal to the Fed. Cir., the majority ruling noted that "it is clear from the record that Hyatt willfully refused to provide evidence in his possession in response to a valid action by the examiner" and affirmed the district court.

After en banc review, the majority opinion (6-2-1) vacated the earlier ruling and remanded the application:

We hold that 35 U.S.C. § 145 imposes no limitation on an applicant’s right to introduce new evidence before the district court, apart from the evidentiary limitations applicable to all civil actions contained in the Federal Rules of Evidence and Federal Rules of Civil Procedure. In doing so, we reject the Director’s proposal that only "new evidence that could not reasonably have been pro-vided to the agency in the first instance" is admissible in a § 145 action. . . .While the proceedings before the Patent Office do not limit the admissibility of new evidence in the district court, they may be considered by the district court if they cast doubt on the reliability of late-produced evidence, as with inconsistent statements or new recollections of previously forgotten events. As with any evidence introduced in a civil action, the district court as factfinder may give less weight to evidence introduced by an applicant in a § 145 action if the district court questions its credibility or reliability. Because the district court abused its discretion when it excluded Mr. Hyatt’s declaration under the wrong legal standard, we vacate the decision of the district court and remand.

The majority further held that, while evidence of record is reviewed using the "substantial evidence" standard of the Administrative Procedure Act (APA), "new" evidence submitted by the applicant would be reviewed de novo.

The ruling is important for applicants in that it provides flexibility for the submission of evidence during appeals. One of the issues raised in the dissent was that applicants were now free to withhold evidence from the USPTO in hopes that a de novo review on the withheld evidence would yield more favorable results. While the majority opinion acknowledged this possibility, the court remarked that "[a]lthough we agree that encouraging full disclosure to administrative tribunals is sound policy, Congress—not the Federal Circuit—must decide how best to do this."

Moreover, as the majority opinion recognized, intentionally withholding evidence is not a good tactic when considering the substantial costs involved:

To deter applicants from exactly the type of procedural gaming that concerns the Director, Congress imposed on the applicant the heavy economic burden of paying "[a]ll the expenses of the proceedings" regardless of the outcome. 35 U.S.C. § 145. An applicant has every incentive to provide the Patent Office with the best evidence in its possession, to obtain a patent as quickly and inexpensively as possible. "It would be counterintuitive for an applicant to deliberately withhold non-cumulative evidence that would help persuade the BPAI.  Indeed, the fact that the vast majority of applicants pursue an on-the-record appeal instead of a § 145 action indicates that applicants generally consider the evidence before the Patent Office to be sufficient.

Read/download a copy of the opinion here (link)