Articles
To Appeal or Not to Appeal: General Issues to Consider Before Making that Decision
China IP News
February 2009
Hulse M.D., Tina E.
Article
With an increasing number of Chinese companies becoming involved in patent prosecution and litigation in the United States, it is important for those companies to understand the various legal options available after obtaining a final judgment—whether favorable or not. The U.S. legal system allows those who obtain an adverse judgment in a patent-related matter to appeal that judgment. Regardless of which jurisdiction or what venue the case originates in, U.S. patent laws require all appeals for patent-related matters to be heard by the U.S. Court of Appeals for the Federal Circuit.
General Background Information Regarding the Federal Circuit
The Federal Circuit was formed relatively recently in 1982. Before its formation, appeals from the U.S. Patent and Trademark Office (“PTO”) were heard by the U.S. Court of Customs and Patent Appeals, whereas appeals from patent infringement actions in the U.S. district courts were heard by regional circuit courts. Because different appellate courts would decide various patent issues differently, Congress established the Federal Circuit in Washington, D.C., to instill uniformity in reviewing patent-related decisions.
The Federal Circuit includes sixteen judges (twelve judges on active status, and four judges on senior status) who have diverse backgrounds and experiences. Historically, approximately one-third of the Federal Circuit’s cases have been patent matters. Moreover, several of the judges have technical degrees. For example, Judges Newman and Lourie have Ph.D.s in chemistry, and Judges Gajarsa, Linn, and Moore all have degrees in electrical engineering. Moreover, most of the judges hire law clerks (i.e., assistants who have graduated from law school) with technical degrees and/or patent experience to assist with their cases. Thus, the Federal Circuit is a unique appellate court with a panel of judges who have specialized knowledge and experience in patent law and technical subject matter.
As seen in more detail below, the Federal Circuit hears patent cases from three primary venues: the PTO, the district courts, and the International Trade Commission (“ITC”).
Appeals from PTO Proceedings
Appeals from the PTO typically arise from one of two types of proceedings. The first, and more common type follows from the issuance of a final rejection during prosecution of a patent application. There, the applicant first appeals the examiner’s decision to the Board of Patent Appeals and Interferences (“the Board”). If the Board affirms the examiner’s rejection, the applicant can then take his case to federal court. The second type of proceeding that can be appealed from the PTO are interferences. Because the U.S. patent system is a first-to-invent system, if two parties claim the same subject matter, the Board declares an interference, which is a quasi-judicial proceeding to determine which party was the first to invent that subject matter.
When a party obtains an adverse decision from the Board in either case, that party has a right to appeal the PTO’s judgment in one of two ways—to the district court or directly to the Federal Circuit. In choosing which route to take, there are various factors to consider.
During prosecution of a patent application and during interferences, the parties typically submit evidence for the PTO to consider through declarations and, in the case of interferences, deposition transcripts. Only on very rare occasions will the Board hear live testimony regarding any issue. One advantage of appealing a PTO decision to the district court is that the party may introduce new evidence in the case. Although the appellant may not raise completely new issues on appeal, the appellant has a statutory right to submit new evidence to support the arguments that he raised before the PTO. The Federal Circuit, on the other hand, does not permit any additional discovery or evidence to be submitted. Thus, a party who appeals a PTO decision to the Federal Circuit is limited to the record evidence obtained below.
Another advantage of appealing a PTO decision to the district court is that if the party offers new evidence in the case, the district court reviews the PTO’s decision de novo—that is, without deference to the PTO’s decision. The Federal Circuit has established this de novo review by the district court because of the district court’s unique ability to assess the credibility of the live witnesses and new evidence, which the PTO did not do. Accordingly, if an appellant believes his case will be improved by taking further discovery, which was not available before the PTO, then pursuing the appeal before the district court first is likely the better option.
One drawback to appealing the PTO decision to the district court, however, is that it will unavoidably prolong the case and therefore increase cost. This increased cost, however, may be worth it to some. For a patent applicant, appealing to the district court allows the applicant an extra opportunity to convince the court of the validity of his patent. And for an interference party, particularly an interference party who is the patent holder, it may make strategic sense to prolong a case. Prolonging an interference will lengthen the party’s status as patentee and keep the opponent patent applicant from obtaining their patent while the PTO’s decision is being reviewed. If neither further discovery nor increased time and cost are necessary, appealing the PTO’s decision to the Federal Circuit is likely the best option. Last year, the court adjudicated 22 cases appealed from the PTO on the merits.
Appeals from District Courts and ITC Litigations
The Federal Circuit hears all patent cases that are appealed from all district courts throughout the country and from the ITC. Included among district court cases are cases alleging infringement of utility and design patents, cases arising under the Hatch-Waxman Act involving generic pharmaceuticals, and any district court appeals from decisions of the PTO.
Most cases arising from the ITC are cases involving imported goods alleged to infringe a U.S. patent. The ITC is particularly relevant to Chinese business practice, as some reports have shown that one-third of all ITC cases in the last ten years have involved Chinese companies.
In 2008, the Federal Circuit adjudicated on the merits 268 patent cases from the district courts, and 10 cases from the ITC.
General Procedure for Appealing a Case
In general, only final judgments may be appealed to the Federal Circuit. In some circumstances, an adverse judgment may be appealed before the case is over. For example, if the district court denies a party’s motion for a preliminary injunction to stop an accused infringer from making or selling its accused product, that party may immediately appeal the decision to the Federal Circuit as a matter of right. Otherwise, if a party receives an adverse interim judgment (such as an unfavorable claim construction or an order granting partial summary judgment that does not fully dispose of the case), the party must specifically request that the district court certify and allow an interlocutory appeal of that judgment to the Federal Circuit.
To appeal an adverse judgment, the party must file a notice of appeal, after which the Federal Circuit dockets the case. This docketing begins the clock for the briefing schedule, which occurs over the next four months. After the last brief is filed, the oral argument is typically scheduled within two or three months. Oral argument is usually heard by a panel of three randomly selected judges. After oral argument, the time it takes to obtain a decision varies, but on average is about three months. The Federal Circuit notes that the average time between the date of docketing and the date of disposition is approximately 9.8 months for cases appealed from the PTO, 11.9 months for cases from the district courts, and 12.4 months for cases from the ITC. If, after all this, an adverse judgment is still obtained, the party may seek a rehearing by the same panel or a rehearing en banc, during which all judges hear the argument. Rehearings, and particularly rehearings en banc, however, are rarely granted.
Issues to Consider When Deciding Whether to Appeal
In addition to considering the time and cost of appealing a decision, a party should evaluate the chances of success to decide whether to go forward with the appeal. Of course, it is difficult to predict the outcome of any case, but several issues provide some guidance.
In reviewing the decisions below, the Federal Circuit applies varying standards of review for different issues. In addition, while the Federal Circuit applies Federal Circuit case law to issues unique to patent law (e.g., claim construction, infringement, and invalidity), the court applies the law of the regional circuit in which the district court is located for any issues that are not (e.g., standards for issuing a preliminary injunction or granting judgment as a matter of law). Thus, although it recognizes that it is a specialized court for hearing patent cases, the Federal Circuit also respects the fact that it hears cases from across the country, where different regions may have different standards when reviewing certain issues.
Because the standard of review applied by the Federal Circuit ranges from highly deferential to completely de novo, a party should consider what the standard of review will be in assessing the chances for success on appeal. For example, issues of fact determined by the district court are reviewed for clear error. Such issues include the underlying factual findings supporting a court’s holding regarding inequitable conduct. The “clear error” standard requires a definite and firm conviction that a mistake has been made. Accordingly, this is a difficult standard to overturn.
Issues of law, however, are always reviewed de novo. Such issues include claim construction, indefiniteness, and the grant or denial of summary judgment. On appeal, the Federal Circuit considers these issues without deference to the decision below. Accordingly, some have reported that the Federal Circuit has reversed anywhere from 30% to 50% of claim constructions issued by district courts over the past ten years.
In between the clear error and the de novo standards of review is the “substantial evidence” standard. On appeal, jury verdicts and the factual findings by an agency, including the PTO and the ITC, are reviewed to determine whether “substantial evidence” supports the factual findings expressly or implicitly made by the tribunal or jury. While “substantial evidence” requires more than a mere scintilla of evidence, it only requires enough evidence that a reasonable mind might accept as adequate to support a conclusion.
In light of these varying standards of review, the Federal Circuit’s reversal rate varies by venue, as well. According to the Federal Circuit’s own statistics, in 2008, the court reversed 24% of cases from the ITC and 19% of cases from the district court. Because this latter figure includes non-patent cases, as well, some have reported the reversal rate of district court patent cases to be as high as 35%. Notably, in 2008, the court did not overturn any decisions heard from the PTO.
Thus, the standard of review and the venue are important considerations in deciding whether to appeal an adverse judgment. If the adverse judgment is obtained during prosecution of a patent application, the fact that the Federal Circuit did not reverse any cases from the PTO may deter a party from filing an appeal directly to the Federal Circuit. A party may choose to appeal his case to the district court first, or pursue other options before the PTO. On the other hand, if a party obtains an adverse judgment of infringement in a district court action that is based upon an incorrect claim construction, the party’s chance of successfully reversing the decision is relatively high.
Conclusion
The U.S. patent laws offer various possibilities for appealing adverse decisions, including appealing to the highly specialized court of appeals, the Federal Circuit. Because there are no guarantees that the court will rule in favor of the appellant on appeal, appealing a case to the Federal Circuit should not necessarily follow automatically from an adverse decision below. A party should understand the nuances of appellate practice in the United States so that it may weigh all of the relevant factors and make an informed decision regarding whether to go forward with the appeal or pursue other options.