Patent Office Tees Up Appeals Fight Over Unilateral Rulings (1)

US Patent & Trademark Office leaders twice this year inserted language into orders terminating administrative patent-validity reviews seemingly blocking the Federal Circuit from hearing the appeals.

Director John A. Squires, in undoing a Patent Trial and Appeal Board invalidity ruling based on witness testimony this month, concluded his decision with a note that it “does not constitute a final written decision” under the section of the law that permits appeals to the Federal Circuit. The Oct 1. ruling was initially styled as a reversal, then revised Oct. 9 to substitute “vacated” in place of “reversed.”

Earlier this year, then-acting Director Coke Morgan Stewart overturned a final written decision by a PTAB panel, then “de-instituted” the review, also noting that her action “does not constitute a final written decision.”

The use of that language could ultimately expand the outer bounds of the PTO director’s powers, several lawyers and law professors said. It’s one of several areas in which PTO leadership in President Donald Trump’s second administration has raised the bar for patent challengers and consolidated authority over patent challenge reviews, including Squires’ decision to take over the task of making the generally non-appealable decisions whether to institute patent challenge proceedings—called inter partes reviews.

“If you looked at this decision without the statement about this not being a final written decision and asked what is this—it kind of looks like a final written decision,” said Kit Crumbley, a former PTAB judge and a partner at Bracewell LLP, referring to Squires’ order. “The types of issues it’s deciding—credibility of a witness—is very much the type of issue the board typically decides in a final written decision.”

“At some point, if it looks like a final written decision and quacks like a final written decision, it’s a final written decision, whether the director says it or not,” Crumbley said.

The legality of marking rulings as not final written decisions to insulate them from appellate review ironically will be decided by the US Court of Appeals for the Federal Circuit, which oversees all patent law appeals. The court frequently reviews validity decisions from the Patent Trial and Appeal Board. But the Patent Act specifies that the court’s jurisdiction is limited to taking up final decisions on the merits, and it can’t review decisions whether to institute those reviews in the first place.

The two companies subject to Squires’ order—Interactive Communications International Inc. and Blackhawk Network Inc.—have been battling over intellectual property relating to lottery tickets since 2021. Blackhawk sued InComm for breach of contract and patent infringement in federal and state courts, and InComm later challenged Blackhawk’s US Patent No. 11,488,451, which describes a method for selling pre-printed online lottery tickets—the dispute Squires terminated.

InComm hasn’t appealed the ruling. Its counsel didn’t respond to a request for comment.

The PTO didn’t respond to a request for comment on Squires’ decision.

Pending Appeal

The Federal Circuit has generally sided with the PTO on whether the agency has unreviewable authority to end validity challenges even after they’ve cleared the screening stage. Dennis Crouch, a law professor at the University of Missouri who runs the Patently-O blog, noted the Federal Circuit in 2015, 2016, and 2019 agreed with the agency that the PTAB could revisit its earlier institution decisions without second-guessing from the court, even after starting the process of adjudicating an IPR on the merits.

Verizon Connect Inc. sought review of then-acting director Stewart’s June 3 order undoing a PTAB final written decision and terminating the proceeding. Stewart voiced her disagreement on the merits with the PTAB panel and wrote that she normally would’ve remanded the case for further proceedings before a three-judge panel, but doing so would be inefficient because the Omega Patent LLC patent had withstood “seven prior challenges.”

Verizon appealed to the Federal Circuit despite the order’s language stating it wasn’t a final decision. The PTO intervened to seek a dismissal, arguing there wasn’t an appealable final decision and that Stewart’s decision was effectively on institution—where the PTO’s powers to take or not take cases are generally the last word. The agency emphasized the Patent Act gives the director broad discretion when it comes to decisions to institute patent validity proceedings, or to “de-institute” them later.

The PTO’s motion to dismiss that appeal and Squires’ Blackhawk-InComm decision cite several of the same Federal Circuit precedents to justify the director’s authority. Verizon contested those points in a response brief Wednesday.

Attorneys said Squire’s decision to end InComm’s challenge based on trial evidence and expert testimony represents a further expansion of the director’s powers.

If the Blackhawk decision isn’t a one-off, Crouch said, “the USPTO will have effectively achieved unreviewable control over IPR outcomes that favor the patentee. Patent owners will gain a powerful new defense: seek Director Review, argue merits error, and obtain termination without appeal.”

The court hasn’t always agreed with agency tribunals on the extent of its appellate jurisdiction, said Matt Rizzolo, a partner at Ropes & Gray. He pointed specifically to Amarin v. ITC, where the Federal Circuit in 2019 said that although an International Trade Commission decision not to probe claims of deceptive advertising didn’t use the words “final determination,” the ruling reached the merits of the case and was functionally the same thing, giving the complainant a right to appeal.

Similarly, the appeals court in 1990 exercised jurisdiction in an appeal from the ITC by Amgen Inc., which convinced the Federal Circuit that the agency’s dismissal of its case for lack of subject matter jurisdiction “was intrinsically a final decision on the merits.”

“Appellate courts often closely scrutinize what they may view as gamesmanship to try to prevent appeals,” Rizzolo said. “There’s a number of cases out there that talk about not elevating form over substance when it comes to jurisdiction or appealability.”

The case is Interactive Commc’ns Int’l Inc. v. Blackhawk Network Inc., P.T.A.B., IPR2024-00465, granting director review and vacating.