Versata v. Rea - An APA Challenge to the AIA - Part 2

In this four-part series, we follow Versata’s challenge under the Administrative Procedure Act (APA) to the USPTO’s implementation of the Transitional Program for Covered Business Method Patents, Section 18 of the AIA. Part 1 of this series examined Versata’s original complaint filed in the United States District Court for the Eastern District of Virginia. Part 2 reviews the USPTO’s motion to dismiss; Part 3 discusses Versata’s response; and Part 4 summarizes intervenor SAP’s arguments in support of dismissal.

In its motion to dismiss Versata’s suit challenging the USPTO’s authority to institute a post-grant review of U.S. Patent 6,553,350, the agency argues that Versata’s arguments are precluded by three doctrines limiting the availability of judicial review under the APA:

1. the AIA statutorily insulates the PTAB’s decision by rendering the decision “final and nonappealable”;
2. the decision to institute a PGR is not a reviewable “final agency action” under the APA; and
3. Versata cannot seek judicial review under the APA in District Court because AIA permits the outcome of a PGR to be appealed to the Federal Circuit.

The USPTO’s statutory argument relies on 35 U.S.C. § 324(e), which provides that “[t]he determination by the Director whether to institute a post-grant review . . . shall be final and nonappealable”, which, the agency argues, expressly precludes review. In addition, the agency points to the incompatibility between granting review and the congressional intent that post-grant review proceedings provide a rapid, cost-efficient alternative to district-court litigation, as evidence that 35 U.S.C. § 324(e) impliedly precludes review.

The agency also argues that APA review is precluded because the PTAB’s decision to institute a PGR — though final under 35 U.S.C. § 324(e) — is not final within the meaning of APA, 5 U.S.C. § 704. Here, the agency relies on the Supreme Court’s decision in FTC v. Standard Oil Co., 449 U.S. 232 (1980), in which the Court held that “final agency action” under the APA requires the “consummation of the agency’s decision-making process,” which results in the determination of “rights or obligations . . . or from which legal consequences will flow.” Drawing a parallel between PGR and ex parte reexamination, the USPTO emphasizes the interlocutory nature of the decision to institute a PGR proceeding, and discounts Versata’s forced participation in the proceedings as a sufficient legal burden or consequence in light of Standard Oil.

Finally, the USPTO asserts that review under the APA is unwarranted because the AIA provides an alternative means to seek review: an appeal from the PTAB’s final written decision at the conclusion of a PGR to the Federal Circuit. 35 U.S.C. §§ 328(a), 329. Because the appeal would provide “an adequate, alternative remedy,” the agency argues that review is precluded by 5 U.S.C. § 704, which allows review under the APA only when “there is no other adequate remedy.”

In Part 3, we examine the Versata’s opposition to the agency’s motion to dismiss.