The Federal Circuit in Incorporated v. Hirshfeld: Parties CAN Seek Review of USPTO Director’s Decision to Vacate Ex Parte Reexamination

I. Introduction

In Incorporated v. Hirshfeld1 the Federal Circuit analyzed whether a party’s challenge to the United States Patent & Trademark Office (“USPTO”) Director’s decision to vacate requests for ex parte reexamination without deciding if a “substantial new question of patentability” was raised, is subject to judicial review. The underlying case involved a party— Incorporated (“Alarm”)—who had first challenged a number of patents through the USPTO’s inter partes review (“IPR”) process. After unsuccessful attempts at IPR, Alarm then requested ex parte reexamination of the same patents. The Director vacated the requests without deciding whether there was a substantial new question of patentability, reasoning that Alarm should have raised its grounds for reexamination when it petitioned for IPR. In response, Alarm challenged the Director’s decision under the Administrative Procedure Act (“APA”) in District Court, where the court found that Alarm was precluded from seeking review. Alarm appealed this decision to the Federal Circuit, who reversed the District Court and found that Alarm could proceed with its District Court challenge to the Director’s decisions.

II. Background

A. Ex Parte Reexamination and Inter Partes Review

The ex parte reexamination process2 allows any person at any time to file a request for reexamination of any claim of a patent on the basis of patents and printed publications which that person believes to have a bearing on the patentability of the challenged clams.3 The Director will determine whether a “substantial new question of patentability affecting any claim of the patent concerned is raised by the request.”4 If the Director finds that a substantial new question of patentability is raised, the Director will order reexamination for resolution of the question.5 However, if the Director determines that no substantial new question of patentability has been raised, that determination “will be final and nonappealable.”6 If the Direct orders a reexamination, the patent owner may file a statement on the substantial new question of patentability identified by the Director, and the requester may file a reply.7 The reexamination is then conducted like an initial examination of a patent application.8 Once reexamination is completed, the patent owner has the option to appeal any adverse decision to the Patent Trial & Appeal Board (“PTAB”), and then to the Federal Circuit.9

Also relevant to this case is the statutory scheme for inter partes review,10 which has a similar but distinct basis for review of a patent claims as compared to reexamination. In an IPR, a person who is not the owner of a patent may file a petition to institute an IPR of that patent on a ground that could be raised under 35 U.S.C. §§ 102 or 103 on the basis of patents or printed publications.11 The Director will institute an IPR if “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”12 If the IPR is instituted, the PTAB will issue a final written decision with respect to the patentability of any challenged or added claim.13 Key to this case is an estoppel provision within the IPR scheme that provides:

The petitioner in an [IPR] of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the [USPTO] with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that [IPR].14

B. Procedural History

In 2015, Vivint, Inc. sued Alarm in the District Court for the District of Utah, for the infringement of three patents.15 In 2017, Alarm filed several IPR petitions against the patents Vivint asserted against it.16 The PTAB issued three final written decisions, finding that Alarm had not carried its burden of proving certain claims of the asserted patents unpatentable, which the Federal Circuit reviewed and affirmed.17

i. Alarm’s Reexamination Proceedings

In June of 2020, Alarm filed three requests for reexamination of the same claims it challenged earlier via IPR, presenting different grounds from its IPRs.18 The Office of Patent Legal Administration (which the Federal Circuit referred to as “the Director” in its opinion) vacated the proceedings without making determinations as to the presence of substantial new questions of patentability under 35 U.S.C. § 303(a).19 Instead, the Director found that Alarm reasonably could have raised its reexamination grounds in its earlier IPRs and was estopped under § 315(e)(1) from requesting reexamination.20

ii. Alarm’s District Court Complaint

In February 2021, Alarm filed a complaint in the District Court for the Eastern District of Virginia against the Director and the USPTO under the APA, which provides that a person is entitled to judicial review of an agency action if they are suffering legal wrong because of or are adversely affected by that action.21 Alarm asserted that the Director’s vacatur decisions were unlawful final agency actions that should be set aside as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” and “in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.”22 The government moved to dismiss the complaint for lack of jurisdiction, arguing in-part that Alarm’s APA claims come within 5 U.S.C. § 701(a)(1), which states that the APA does not apply to statutes that preclude judicial review.23 The District Court dismissed the suit, reasoning that the Alarm’s challenge to the Director’s finding of estoppel was precluded by the reexamination statutory scheme.24

III. Federal Circuit Decision

A. 35 U.S.C. § 303(c) Does Not Apply to the Director’s Vacatur Decisions

The Federal Circuit noted that the only portion of the reexamination statutory scheme that precludes judicial review is 35 U.S.C. § 303(c), which narrowly states that “[a] determination by the Director pursuant to subsection (a) of this section that no substantial new question of patentability has been raised will be final and nonappealable.”25 Further, on appeal, the government conceded that Section 303(c) does not expressly preclude Alarm’s challenge.26 As the Director’s determinations did not include a finding that there was no new question of patentability, and instead were based on estoppel under 35 U.S.C. § 315(e)(1), the sole textual preclusion of reexamination did not apply in this case.27 In so holding, the Federal Circuit referenced Supreme Court and its own precedent that analyzed the limits on the scope of Section 303(c) and other non-reviewability provisions in Title 35.28

B. The Ex Parte Reexamination Scheme As a Whole Does Not Deprive Requesters of the Right to Judicial Review

The government argued that the reexamination scheme as a whole demonstrates a congressional intent to deprive requesters of all rights to judicial review because the scheme specifies “what can be reviewed (only decisions adverse to patentability in an ordered reexamination proceeding, § 306), who can seek judicial review (only patent owners, id.), where judicial review can be sought (only in this court following an appeal to the [PTAB]), and when (within the time allowed by [USPTO] regulations (63 days of the [PTAB] decision)).”29 The government argued that these provisions implicitly preclude any kind of relief sought by a requester who is not the patent owner.30 The Federal Circuit rejected these arguments, finding that Section 306’s provision of certain appellate rights to the patentee did not clearly and convincingly establish the non-reviewability of determinations that fall outside of the specific non-reviewability provision of Section 303(c).31  The Federal Circuit thus rejected the government’s argument as insufficient to overcome the APA’s presumption of reviewability.32 In doing so, the Federal Circuit again extensively analyzed Supreme Court and its own precedent.33

C. The Legislative History Does Not Demonstrate a Congressional Intent to Bar Review of the Director’s Determinations

Turning to the legislative history of the reexamination scheme, the Federal Circuit noted that the government’s strongest evidence was a House Report, which states:

Subsection 303(c) makes final and nonappealable a decision by the Commissioner not to conduct reexamination. . . . No one would be deprived of any legal right by a denial by the Commissioner of a request for reexamination. A party to a reexamination proceeding could still argue in any subsequent litigation that the PTO erred and that the patent is invalid on the basis of the cited prior art.34

However, the Federal Circuit noted that there was no reason to infer that the House Report was referring to anything other than the reexamination scheme Congress was adopting at that time, and also noted that other estoppel and multiplicity provisions of Title 35 (i.e., §§ 315(e)(1), 325(d), (e)(1)) were added after the 1980 enactment of the reexamination regime.35 Thus, the House Report is best understood to address only the non-reviewability of a determination under Section 303(c), and not the reviewability of other determinations that did not exist at the time of the Report.36 The Federal Circuit further pointed to the enactment of the America Invents Act, which left Section 303(c) untouched while “enacting a broad non-reviewability bar in the new IPR system” under Section 314(d) (“The determination by the Director whether to institute an [IPR] under this section shall be final and nonappealable.”).37 Based on these observations, the Federal Circuit held that the government’s “legislative history evidence, like the statutory scheme evidence, is too weak to supplant the text and the accompanying presumption of judicial review for the estoppel determination in question.”38

IV. Parties Can Seek Review of USPTO Director’s Decision to Vacate Ex Parte Reexamination

Ultimately, the Federal Circuit reversed the district court’s determination that Alarm’s APA claims challenging the Director’s decisions to vacate the reexamination proceedings were precluded and remanded to the district court.39 Although the Federal Circuit eventually found that Alarm was entitled to seek judicial review of the Director’s vacatur decisions, this outcome serves as a reminder to parties who plan to file a request for reexamination after an unsuccessful attempt at inter partes review: a party may be estopped under 35 U.S.C. § 315(e)(1) from filing for reexamination if it could have raised the same grounds in its earlier IPR. After the Federal Circuit’s decision in Incorporated v. Hirshfeld, such a party will not be without recourse, as it may challenge the estoppel decision under the APA in district court.

1 Case No. 21-2102, slip op. (Fed. Cir. Feb. 24, 2022).
2 See generally 35 U.S.C. §§ 301–307.
3 Id. §§ 301(a)(1), 302; see also 37 C.F.R. § 1.510(a).
4 35 U.S.C. § 303(a).
5 Id. § 304
6 Id. § 303(c).
7 Id. §304. If the requester files a reply, it is the end of their participation in the proceeding. See id. § 305; 37 C.F.R. § 1.550(g) (“The active participation of the ex parte reexamination requester ends with the reply . . . and no further submissions on behalf of the reexamination requester will be acknowledged or considered.”).
8 35 U.S.C. § 305.
9 Id. § 306; see also id. §§ 134(b), 141(b).
10 See generally 35 U.S.C. §§ 311–319.
11 Id. § 311(a), (b). The patent owner may file a response to the petition. Id. § 313.
12 35 U.S.C. § 314(a). This determination is final and non-appealable. Id. § 314(d).
13 35 U.S.C. § 318(a).
14 Id. § 315(e)(1)
15 Incorporated v. Hirshfeld, Case No. 21-2102, slip op. at 4 (Fed. Cir. Feb. 24, 2022).
16 Id. at 5.
17 Id.
18 Id.
19 Id.
20 Id. at 5–6.
21 5 U.S.C. § 702.
22, Case No. 21-2102, slip op. at 6–7; see also 5 U.S.C. § 706(2)(A), (C).
23, Case No. 21-2102, slip op. at 7.
24 Id. Note that Alarm also challenged the Director’s application of a “Clarification of General Policy and Practice” for applying § 315(e)(1)’s estoppel precondition that the Director relied on in his vacatur decisions. Id. at 6–7. The district court found that Alarm lacked standing to the extent it was seeking broad prospective relief against the General Policy, as Alarm’s alleged harm was the denial of its reexamination and not the issuance of the policy. Id. at 7.
25 Id. at 10.
26 Id.
27 Id.
28 See id. at 10–12.
29 Id. at 12 (citations omitted).
30 Id. at 12–13.
31 See id. at 13.
32 Id.
33 Id. at 13–19.
34 Id. at 20 (quoting H.R. Rep. No. 96-1307, pt. 1, at 7 (1980)). Note that the quoted House Report references the “Commissioner,” who was then the head of the USPTO, before the title was changed to “Director.” Id.
35 Id. at 21.
36 Id.
37 Id.
38 Id. at 22. The Federal Circuit did not reach the district court’s ruling dismissing Alarm’s challenge to the USPTO’s General Policy as Alarm indicated on appeal that it would withdraw such challenge should the Federal Circuit hold that Alarm may pursue challenges against the Director’s vacatur decisions. Id. at 23.
39 Id. at 23.