Patent Puzzles after the Supreme Court’s 2024 Administrative Law Cases: Stare Decisis, Rulemaking, and Discretion

Guest post by Arti K. Rai, Elvin R. Latty Distinguished Professor of Law and Co-Director, Center for Innovation Policy at Duke Law

In a flurry of recent decisions, the Supreme Court has continued its skepticism of administrative agencies.  Although these decisions may not have as significant an impact in patent law as in other areas, they do pose interesting puzzles with respect to stare decisis as well as agency rulemaking and discretion that will provide many litigation opportunities going forward.

Consider first stare decisis and the Court’s overruling of Chevron deference (i.e. deference to reasonable agency interpretations of ambiguous statutes) in Loper Bright Enterprises v. Raimondo.  While the Loper Bright Court said that principles of “statutory stare decisis” meant its decision did not “call into question” holdings of cases that applied Chevron to find “specific agency actions” lawful, the Court did not discuss in any detail what “specific agency action” means.

Notably, the 2016 patent law case of Cuozzo v.  Lee was the last case in which the Court itself found an agency action reasonable, and therefore lawful, under Chevron.  In Cuozzo, the Court (per Justice Breyer) unanimously upheld the agency’s “broadest reasonable interpretation” (BRI) standard for claims litigated at the Patent Trial and Appeals Board (“PTAB”).  But the claim construction regulation that the Court upheld as reasonable in Cuozzo is of course different from the regulation currently in place. In November 2018, the USPTO replaced the BRI standard with the claim construction approach used in Article III litigation, which was articulated by the Federal Circuit in Phillips v. AWH Corp. Many commentators applauded the USPTO change, saying that using the same standard for interpreting claims across different tribunals would improve efficiency and reduce gaming potential, particularly because most cases litigated at the PTAB are also litigated in district court.

Could the current rule now be challenged as an incorrect interpretation of the America Invents Act (“AIA”)?  A challenger wouldn’t necessarily have to hurry to the courthouse.  After the Court’s decision in Corner Post v. Board of Governors of the Federal Reserve System, the rule could be challenged by a firm that did not exist in November 2018 and therefore would not immediately be subject to the Administrative Procedure Act’s 6-year statute of limitations.  The new entrant would have until 6 years from its formation to challenge the rule.

The problem for a court receiving the challenge would be (as the Cuozzo Court noted when it found ambiguity and decided to defer) that the AIA’s statutory text moves between treating post-grant proceedings as similar to district court litigation (e.g. allowing discovery, specifying to some extent the relationship between PTAB and district court proceedings) and treating them as more administrative in nature (e.g. no standing requirement).  And the text says nothing at all about claim construction standards specifically.

Might complete silence mean that determinations regarding claim construction are delegated to the USPTO’s discretion? After all, Loper Bright specifically states that sometimes the best reading of a statute is that it authorizes the agency “to exercise a degree of discretion,” including by issuing rules that “fill up the details” of a statutory scheme.  And the AIA does indeed order the Director to “prescribe regulations . . . establishing and governing inter partes review . . .”

On the other hand, the Supreme Court’s latest word on PTAB discretion does not give necessarily give much comfort to those who might like the current claim construction standard.  In the 2018 case of SAS v. Iancu, the Court (per Justice Gorsuch) argued strongly against agency discretion on partial institution and on PTAB procedural questions more generally.  As Dennis Crouch has recently noted, the reach of SAS may soon be tested in United Therapeutics Corp. v. Liquidia Technologies, where UTC has filed a petition for certiorari.  Meanwhile, Justice Gorsuch’s 2024 Ohio v. EPA opinion indicates that agency rulemaking will be closely scrutinized for signs that it does not respond exhaustively to every argument raised by commenters and should therefore be struck down as “arbitrary or capricious.”

On the ITC front, the Federal Circuit has over the years upheld a number of ITC interpretations of the Tariff Act on Chevron grounds.  A relatively recent case is the Federal Circuit’s 2015 decision in Suprema v. ITC, where the court gave Chevron deference to an ITC adjudicatory holding that the agency’s authority encompasses cases where infringement occurs after importation. Prior to the actual decision in Loper Bright, Google had anticipated Chevron’s overruling and moved (in the case of Sonos v. Google) for en banc reconsideration of the Federal Circuit’s Suprema decision.

To the extent the ITC’s position has not changed, Loper Bright gives the Federal Circuit no independent doctrinal reason to overturn the courts’ own prior rulings.  But the Federal Circuit could choose to see Loper Bright as a green light to overrule Suprema (or other decisions upholding ITC determinations on Chevron grounds).

In sum, the result of the latest round of Supreme Court administrative law rulings, even in the relatively unscathed area of patent law, will be a host of puzzles and continuing litigation over these puzzles.