United States: Federal Circuit's Concern Regarding PTAB ‘Panel-Stacking' – Back To The Future?

Last Updated: September 5 2017
Article by William F. Smith

In Nidec Motor Corp. v. Zhongshan Broad Ocean Motor Co., 2017 U.S. App. LEXIS 15923, Circuit Judge Dyk, in a concurring opinion joined by Circuit Judge Wallace, questioned "whether the practice of expanding panels where the PTO is dissatisfied with a panel's earlier decision is the appropriate mechanism of achieving the PTO's desire for uniformity." Id. concurring slip op. at 4. This question arose in view of the Patent Trial and Appeal Board (PTAB) convening an expanded panel to consider Broad Ocean's request for rehearing in the underlying inter partes review regarding the original three-Administrative Patent Judge panel decision to deny joinder under 35 U.S.C. § 315(b), (c). The newly expanded panel set aside the original panel's decision and permitted joinder.

The enlargement of a PTAB panel upon rehearing raises two questions. Is the PTAB authorized to expand an original panel after it issues its decision? And does such an expansion of the panel after it issues its decision raise due process issues? Both of these questions were in front of the Federal Circuit in In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc), overruled on other grounds by In re Bilski, 545 F.3d 943 (Fed. Cir. 2008). 

The en banc Alappat panel consisted of 11 circuit judges. Judge Rich authored an opinion, joined by Circuit Judges Newman, Lourie and Rader ("plurality opinion"), which held that the court had jurisdiction to hear the appeal and that the PTO could "stack" a board panel in order to reach a predetermined outcome. Chief Judge Archer and Circuit Judges Nies and Plager concurred only in the conclusion that the court did have jurisdiction to hear the appeal, as Alappat had waived the issue of "panel-stacking," while Circuit Judges Mayer, Michel, Clevenger and Schall dissented therefrom.

As reported in Alappat, the underlying board case was initially decided by a three-member panel of the board that reversed the pending rejection of the claims under 35 U.S.C. § 101 as being directed to non-statutory subject matter. Id. 33 F.3d at 1530. The patent examiner requested reconsideration of the decision on the basis that the "panel's decision conflicted with PTO policy" and "that such reconsideration be carried out by an expanded panel." Id. 33 F.3d at 1530-31. An expanded eight-member panel of the board consisting of the three original members of the panel, the then-serving commissioner of patents, the deputy commissioner of patents, the assistant commissioner for trademarks, the chairman of the board and the vice chairman of the board were appointed to evaluate the request for reconsideration. Id. 33 F.3d at 1531. The majority of the expanded panel consisting of the newly appointed panel members issued a new opinion in which they affirmed the examiner's Section 101 rejection and the three original panel members dissented on the merits for the reasons set forth in their original opinion. Id.

The court plurality first considered the legality of the board's expanded rehearing panel, holding that the then-existing provisions of 35 U.S.C. § 7 provided for the commissioner to designate "at least three" board members to hear each appeal as well as granting the "commissioner the authority to designate the members of a panel to consider a request for reconsideration of a Board decision" including "designating an expanded panel made up of the members of an original panel, other members of the Board, and himself as such, to consider a request for reconsideration of a decision rendered by that original panel." Id. 33 F.3d at 1531-32. The plurality went on to note that "[i]n those cases where a different panel of the Board is reconsidering an earlier panel decision, the Board is still the entity reexamining that earlier decision; it is simply doing so through a different panel." Id.

Upon enactment of the AIA on Sept. 16, 2011, 35 U.S.C. § 6(c) provided that "[e]ach appeal, derivation proceeding, post-grant review, and inter partes review shall be heard by at least 3 members of the Patent Trial and Appeal Board, who shall be designated by the Director. Only the Patent Trial and Appeal Board may grant rehearings." Thus, as a matter of procedure in convening board panels, the reasoning of the Alappat plurality would apply to the present circumstances.

In considering this issue, however, it is important to keep in mind the plurality's observation that:

[T]he Commissioner has but one vote on any panel on which he sits, and he may not control the way any individual member of a Board panel votes on a particular matter. However, the present statutory scheme does allow the Commissioner to determine the composition of Board panels, and thus he may convene a Board panel which he knows or hopes will render the decision he desires, even upon rehearing, as he appears to have done in this case, but that the "Commissioner may not unilaterally overturn a decision of a Board panel or instruct other Board members how to vote." Id. 33 F.3d at 1535.

In other words, in order for the director to control the outcome of a board decision, the director must convene a panel whose members have signaled that they will render a desired decision. Thus, the real issue is whether selecting panel members behind the scenes at the board based upon their willingness to vote a certain way deprives an aggrieved party of due process.

The Federal Circuit Bar Association (FCBA) filed an amicus curie brief in Alappat urging in part that the commissioner's expansion of the board panel raised an issue of due process. Id. 33 F.3d at 1535. However, the court determined that it need not consider that issue, as the FCBA had no standing to raise it and Alappat did not raise this issue on its behalf. Id. Thus, this issue was not reached by the court.

In this case, Nidec did cite Alappat in its opening brief to the court, stating that "[p]anel-stacking of the type described above deprives patent owners of an important procedural protection and raises due process concerns ..." and that the "USPTO's alternative panel-stacking procedure implicates due process concerns, because the ultimate joinder decision under § 315(c) is not being performed by impartial decision makers, but rather by the Director who selectively staffs panels to achieve her preferred interpretation." Id. at 41.

Appellees addressed Nidec's argument in their responsive brief, arguing, inter alia"[p]etitioner moved for an expanded panel pursuant to the Board's Standard Operating Procedure 1 §III(A)(2) (Rev. 14, May 8, 2015) which explains that a panel may be expanded when 'necessary to secure and maintain uniformity of the Board's decisions, such as where different panels of the Board render conflicting decisions on issues of statutory interpretation or rule interpretation, of a substantial difference of opinion among judges exists on issues of statutory interpretation or rule interpretation.'" Id. at 61. Since Nidecdid not argue below that its due process rights would be violated if the request for an expanded panel was granted, appellees argued that the issue was waived. Id. at 61-64.

The PTO intervened in this appeal, arguing in its brief that the "Director has the authority to constitute a new panel for reconsideration," citing In re Alappat, 33 F.3d at 1530-31. Id. at 30.

In its reply brief, Nidec argued that a majority of the court had not held in Alappat that the PTO had the authority to stack panels and that the "opinions of the four judges in dissent would seemingly carry a similar level of persuasiveness." Id. at 21.

The PTO's panel-stacking has always been off-putting, especially since it occurs behind the curtain without either the parties' knowledge or, if an expanded panel is requested by a party, any explanation of how the additional board members are selected. While it seems clear that the director has statutory authority to designate a board panel for either the initial consideration of a case or upon rehearing, it is less clear whether the director, in exercising this statutory authority, may properly pre-poll board members to ascertain their willingness to reach a predetermined outcome. Reading the votes in Alappat suggests that this issue is still open. Since the board has now expanded to more than 250 members, inconsistent panel opinions are to be expected. Perhaps now is the time for the court to address this issue – either in Nidec, as a threshold question of jurisdiction as discussed in Alappat, or in the next case where this issue is presented – and decide whether the director can designate board panels in order to reach a predetermined outcome.

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