[00:00:14] Speaker 05:
Next case for argument is 141728, Automated Merchandising versus Lead.

[00:00:48] Speaker 02:
May I please report?

[00:00:52] Speaker 02:
Go ahead.

[00:00:53] Speaker 02:
Thank you, Your Honor.

[00:00:54] Speaker 02:
The PTO lost jurisdiction to maintain these proceedings upon the entry of the consent judgment in West Virginia.

[00:01:01] Speaker 02:
The three issues I'd like to address this morning are, first, a consent judgment is the final decision under all existing definitions.

[00:01:10] Speaker 02:
Second, the Patent Office lacks the authority to assign a new meaning to the term, final decision.

[00:01:16] Speaker 02:
Third, upholding patent validity,

[00:01:19] Speaker 02:
includes and exceeds the lower standard of failing to sustain the burden of proving invalidity.

[00:01:25] Speaker 04:
Can I ask the obvious threshold question, which the government characterizes as jurisdictional, and we can put aside whether that characterization is right for a moment.

[00:01:35] Speaker 04:
Why is there final agency action in a decision by the PTO to refuse to stop an ongoing proceeding?

[00:01:43] Speaker 02:
The primary reason for that, Your Honor, is because the exception to final agency action has always been that if the agency is acting beyond their jurisdiction, then judicial review is appropriate.

[00:01:57] Speaker 02:
And that is the McCart decision from the Supreme Court, which is often cited by this court to say that the agency action has not been exhausted.

[00:02:08] Speaker 02:
It also has that secondary

[00:02:10] Speaker 02:
stipulation that the exception is where the agency is operating beyond their jurisdiction.

[00:02:17] Speaker 04:
What does that mean in a way that's identifiably distinguishable from agency lacked the authority to do what it was proceeding to do?

[00:02:29] Speaker 02:
I don't know about in other cases, but Your Honor, in this case, when the statute says that they may not maintain a proceeding after a threshold issue has been established, I think that that is, as a practical matter, where I draw the line.

[00:02:44] Speaker 02:
So in this case, the statute says they don't have jurisdiction anymore.

[00:02:47] Speaker 02:
And that is the point on appeal.

[00:02:50] Speaker 02:
Interestingly, it was the same point that came up in the Nippon Steel case.

[00:02:53] Speaker 02:
that in that case there was an allegation that I believe it was the Commerce Department had instigated an additional or supplemental review.

[00:03:05] Speaker 02:
And the question was, did they have the discretion to do that?

[00:03:09] Speaker 02:
Did they have the authority under the statute to do that?

[00:03:12] Speaker 02:
The Court of International Trade said that the agency did not and stopped it.

[00:03:18] Speaker 02:
came on appeal to this court and this court said we have to review the decision, although acknowledging normal exhaustion of agency action, we have to resolve the issue because the issue here is whether they have jurisdiction to maintain this additional investigation.

[00:03:35] Speaker 02:
I believe the result in that case was that the agency did have the authority

[00:03:40] Speaker 02:
to conduct that additional supplemental investigation.

[00:03:44] Speaker 04:
And that review by us was conducted in the middle of the investigation, not at the end, is that right?

[00:03:50] Speaker 02:
It was in the middle.

[00:03:51] Speaker 02:
In fact, because the Court of International Trade issued an injunction stopping the agency, that the agency had stopped, and then the review came to this court.

[00:04:02] Speaker 02:
But I believe that if you look at the cases, all of the cases that talk about

[00:04:06] Speaker 02:
exhausting your agency action.

[00:04:08] Speaker 02:
They all talk in terms of the exception is where the allegation is you're beyond the agency's authority.

[00:04:17] Speaker 02:
They don't have the authority to proceed.

[00:04:22] Speaker 02:
Final decision.

[00:04:23] Speaker 05:
This is a practical matter, however.

[00:04:25] Speaker 05:
It's clear that you would have gotten review of this.

[00:04:29] Speaker 05:
One of two things would have happened if the Patent Office preceded them.

[00:04:32] Speaker 05:
One is they would have found in your favor which would have mooted all the concerns.

[00:04:36] Speaker 05:
Or two, you would have raised this challenge on 317B on review with us, right?

[00:04:43] Speaker 02:
That is correct, Your Honor.

[00:04:45] Speaker 02:
And one of my concerns with that is that, as you can see from the briefing on this issue alone,

[00:04:50] Speaker 02:
This briefing has exhausted almost all of what's allowed in briefing.

[00:04:55] Speaker 02:
So in addition to arguing this issue, should we await the decision by the board and then come on appeal to this court, we'll have to brief this issue as well as all the substantive issues that arise in that.

[00:05:08] Speaker 02:
And frankly, I think this issue would be lost on appeal if we have to await final agency review on the merits.

[00:05:14] Speaker 04:
What do you mean it would be lost?

[00:05:17] Speaker 02:
Right now, I think that we have maybe 100 pages of briefing on this issue alone.

[00:05:21] Speaker 04:
Sometimes arguments get better if they're compressed.

[00:05:24] Speaker 02:
I agree with that, Your Honor.

[00:05:25] Speaker 02:
In this case, and I'd like to see it compressed because I think the issue is very straightforward.

[00:05:30] Speaker 02:
The statute says that they have to stop if there's been a final decision entered that the party challenging validity who initiated the inner party's review, excuse me, re-examination,

[00:05:44] Speaker 02:
has failed to sustain the burden of proving invalidity.

[00:05:47] Speaker 04:
What about the judgment of the West Virginia court here indicates that admittedly a final decision, that that final decision was on the specific point referenced in the 317 statute?

[00:06:02] Speaker 02:
The specific point referenced in the 317 statute, and there's actually, the government really doesn't dispute this point, is that the finding is the parties stipulate that, and then it lists all of the patents.

[00:06:14] Speaker 04:
So it's a finding about what the parties did.

[00:06:16] Speaker 04:
It's not a finding about what the plaintiff showed.

[00:06:22] Speaker 02:
That is correct, Your Honor.

[00:06:24] Speaker 04:
Why isn't it just plain on its face that this final decision does not come within the language of 317?

[00:06:32] Speaker 02:
It clearly is covered by the language of 317 for two reasons.

[00:06:37] Speaker 02:
This court in addressing that very issue, its jurisdiction is predicated upon the entry of a final decision below under 1295A.

[00:06:47] Speaker 02:
And this court consistently and routinely finds that where the final decision is an entry by the court below of party stipulations.

[00:06:56] Speaker 04:
But 317 doesn't stop at the word final decision and it doesn't say final decision in litigation over the patent.

[00:07:04] Speaker 04:
It says final decision

[00:07:07] Speaker 04:
Finding a specific thing.

[00:07:09] Speaker 04:
It doesn't say fine.

[00:07:09] Speaker 04:
Your honor.

[00:07:10] Speaker 04:
What it said was final decision that the party the party challenging But this is not a final decision that the plaintiff failed to meet its burden of fruit Ukraine would certainly be a stop by that validity determination.

[00:07:27] Speaker 02:
They they they stipulated to it

[00:07:30] Speaker 02:
It's in a consent judgment that was entered by the court as a judicial decree.

[00:07:35] Speaker 04:
Again, the standards both of this court and... And when you say a stop, do you mean a stop in the issue preclusion sense or simply a stop because it agreed to something?

[00:07:47] Speaker 02:
Actually, I think it would be claim preclusion that would... They stipulate... Okay, claim preclusion, but even that's different from issue preclusion.

[00:07:55] Speaker 04:
With claim preclusion, there doesn't have to be a decision about any specific issue.

[00:08:01] Speaker 04:
The judgment resolves the claim.

[00:08:08] Speaker 02:
Your Honor, to go back to your earlier point, the second point I wanted to make, I think should clarify a little bit.

[00:08:14] Speaker 02:
Every consent judgment, regardless of how it's worded, reflects the party's stipulation.

[00:08:19] Speaker 02:
That is, by definition, what a consent judgment is.

[00:08:22] Speaker 02:
And so the Patent Office has agreed, and there have been dozens and dozens of cases where they've terminated these inter-party re-examinations based on an entry of consent judgment.

[00:08:33] Speaker 02:
And in this case, what they're really focusing on is the words in the order that we obtained that says the parties stipulate that.

[00:08:43] Speaker 02:
That is what they're really arguing the difference is, and I think that's form over substance, because every order is based on the party's stipulation when it's a consent judgment.

[00:08:53] Speaker 02:
What they were arguing, the nuance that they were trying to make in the court below was very difficult for Judge Trend, I think, to understand.

[00:09:02] Speaker 02:
He was troubled by the fact that the Patent Office was saying, the difference in this case between us having to stop under the statute and allowing them to continue were the words that say the parties stipulate that.

[00:09:15] Speaker 02:
Because he kept saying, it's just the words that you're focusing on.

[00:09:18] Speaker 02:
And I think you can see that confusion reflected in his order.

[00:09:22] Speaker 02:
Because what he came down with is an order that says the final decision in this context means the judge actually has to try the issue.

[00:09:30] Speaker 02:
either got to be decided by summary judgment, it's got to be tried either to the judge or the jury, but it's got to be decided by the court.

[00:09:37] Speaker 02:
That's the language that's really at issue in this case, is that the patent office has come in and said, well, what this language in the statute means is the court must decide independently on the merits.

[00:09:49] Speaker 02:
And that, I respectfully submit, is not in the statute, and it shouldn't be read into it, because we haven't established meaning for final decision.

[00:09:57] Speaker 02:
We as lawyers and judges use that terminology all the time.

[00:10:01] Speaker 02:
And we use it to include things that are not decided on the merits independently by the court.

[00:10:13] Speaker 02:
I think, Your Honor, going back one issue I did want to touch on, and I omitted it.

[00:10:19] Speaker 02:
On review of agency action at this point, the agency did in fact identify this final decision as a final agency action.

[00:10:29] Speaker 02:
And have we not appealed from, I have no doubt, they would say we had waived that issue.

[00:10:36] Speaker 02:
I have one issue that, just skip ahead, I'd like to reserve much of my remaining time for rebuttal, but I did want to touch on an issue I think that is central in this case, and that is how much authority does the Patent Office have to assign new meaning to an established term?

[00:10:54] Speaker 02:
And I submit they have no jurisdiction, no authority to do so.

[00:10:57] Speaker 02:
that if you look at, whether you look at it from the perspective of statutory construction or if you look at it from the perspective of deference to agency action, it's the same.

[00:11:08] Speaker 02:
It's very clear where the words are not ambiguous, that there's no interpretation that's necessary.

[00:11:15] Speaker 02:
And I submit final decision is not an ambiguous term.

[00:11:19] Speaker 02:
Even if it were, what I've found in going back through the cases in terms of review of agency action,

[00:11:26] Speaker 02:
The deference is sort of it depends what is the term that's at issue.

[00:11:30] Speaker 02:
What I found in my review on this is that if the term that's at issue is a term that's used by the agency in their rules or in their guidelines, then courts give that a lot of deference.

[00:11:46] Speaker 02:
If a term that's at issue is a term of art within that agency's field of experience, there is deference given.

[00:11:56] Speaker 02:
But where the term is not either those things, it's just a legal term, there's no deference to be given to the patent office interpretation or any agency.

[00:12:07] Speaker 02:
It's a legal term, and it's not a term of art, and it's not out of their institutional guidelines or their rules.

[00:12:17] Speaker 02:
And I'd like to reserve the remaining time.

[00:12:19] Speaker 02:
That's fine.

[00:12:20] Speaker 02:
Thank you.

[00:12:23] Speaker 05:
Ms.

[00:12:24] Speaker 05:
Paparo.

[00:12:27] Speaker 01:
I'd like to start with the question of reviewability under section 704 of the APA.

[00:12:37] Speaker 01:
AMS has argued that there's an exception to the finality requirement in the APA based on McCart and Mipun's deal.

[00:12:45] Speaker 01:
That is not in fact true.

[00:12:47] Speaker 01:
There's no exception.

[00:12:49] Speaker 01:
McCart dealt with principles of exhaustion.

[00:12:52] Speaker 01:
And as the Supreme Court made clear in Standard Oil, exhaustion is distinct and should be distinguished from finality.

[00:12:59] Speaker 01:
There is a requirement that there be a final agency action.

[00:13:03] Speaker 01:
What we have here is not a final agency action.

[00:13:06] Speaker 01:
We have a decision by the agency to continue an ongoing proceeding.

[00:13:11] Speaker 05:
What are we to do with the fact that your friend alluded to at the end, which is that that's what the Patent Office told him it was, a final agency action, and his concern or fear that if he didn't appeal it, he'd say he waived his right later on in the proceeding.

[00:13:27] Speaker 01:
The agency did mislabel one of the decisions on the petitions for review in the director's

[00:13:36] Speaker 01:
final agency action.

[00:13:37] Speaker 01:
The agency's label that it places on a document is not determinative.

[00:13:43] Speaker 01:
We cited cases from the Ninth and D.C.

[00:13:45] Speaker 01:
Circuit to that effect.

[00:13:47] Speaker 01:
The question is the practical effect of this action.

[00:13:51] Speaker 01:
Now, there's no question that this was not in fact a final action.

[00:13:55] Speaker 01:
Moreover, this court can and has reviewed the underlying 317B decision in the Function Media case, for example.

[00:14:04] Speaker 01:
This court reviewed

[00:14:06] Speaker 01:
the agency's 317B determination in the context of a review on the final agency action, which was the merits of the re-examination proceeding.

[00:14:17] Speaker 01:
So certainly AMF could raise the 317B issue when it appeals from the... In terms of the question about how

[00:14:28] Speaker 04:
they could have protected themselves or might they have had to file a suit in the Eastern District of Virginia and awaited your response at that point saying no final agency action, at which point you couldn't possibly

[00:14:44] Speaker 04:
Whipsaw them later.

[00:14:47] Speaker 04:
I certainly in my earlier life had to file notices of appeal when I wasn't sure whether something was final and then actually move to dismiss it on the ground that it wasn't final precisely to protect myself.

[00:15:00] Speaker 01:
And I understand the concern given the label that was placed by the agency here.

[00:15:06] Speaker 04:
And you're saying that was plainly wrong and there might have been a way to protect themselves against your coming back later and saying, gotcha.

[00:15:14] Speaker 01:
That was incorrect.

[00:15:15] Speaker 01:
This court has reviewed a 317B decision in the context of an appeal from the board decision.

[00:15:22] Speaker 04:
You addressed McCart.

[00:15:23] Speaker 04:
What about Nippon?

[00:15:25] Speaker 01:
With respect to Nippon Steel, in Coors Group PLC, this court recognized that Nippon Steel was dealing with a different jurisdictional provision than Section 704, and in fact recognized the strict finality requirement in Section 704

[00:15:41] Speaker 04:
which would have been from any suggestion in the pond field at the end of that strike right now the record that you did not america finally agency action argument that correct uh... at least something may turn on whether the issue of whether there's final agency action jurisdiction in the specific that

[00:16:05] Speaker 04:
Either you're entitled to ask us to decide it or we're even obliged to consider it even if you didn't ask, which is not the point here.

[00:16:13] Speaker 04:
So what makes the question of final agency action jurisdictional in the relevant sense, namely that we are obliged to overlook your not having raised it in district court?

[00:16:26] Speaker 01:
respectfully your honor i disagree with the premise that there would be any distinction whether or not it was jurisdictional in terms of whether we could read it because at that point we of course were entitled even if not obligated entitled to read

[00:16:40] Speaker 04:
any alternative ground for a firm and that's not what i think i think we'll know if i'm looking for a fictional you know titled to make an argument that you did not make below you know i don't do it what's your view we we may have according to be you have authority

[00:16:57] Speaker 04:
in certain exceptional circumstances to say, we'll let you do that even though you waived it, forfeited it, failed to preserve it, doesn't matter below.

[00:17:07] Speaker 04:
But your initial characterization in your red brief is, this is actually jurisdictional so we don't have to find exceptional circumstances.

[00:17:15] Speaker 04:
Why is that true?

[00:17:16] Speaker 01:
And taking both of those points, first, this court has indicated that the question is jurisdictional.

[00:17:23] Speaker 01:
Cases cited on page 15 of our brief including the Telecare case where this court in fact affirmed a dismissal for lack of jurisdiction because there was an adequate alternative judicial remedy in that case.

[00:17:36] Speaker 01:
There are other cases including unpublished decisions where this court has

[00:17:40] Speaker 01:
affirm dismissals for failure to meet the requirements in section 704.

[00:17:46] Speaker 01:
So having identified the issue on appeal, we felt obligated to bring it to the court's attention given that the court has discussed it as jurisdictional, has analogized it to rightness for review.

[00:17:58] Speaker 01:
And again, there's no dispute in this case.

[00:18:01] Speaker 04:
If you're well aware that the scope of the word jurisdictional is, to put it mildly, influx on the theory that maybe use of it from the Supreme Court on down has been a little profligate over time, and the Supreme Court has started tightening that up.

[00:18:19] Speaker 04:
Put aside specific precedents.

[00:18:21] Speaker 04:
Explain why this one actually is properly viewed as jurisdictional.

[00:18:28] Speaker 01:
Well, again, I know Your Honor has asked me to set aside the precedence, but as appearing before a panel of this court, we felt obligated to follow this court's precedence on the jurisdictional question.

[00:18:41] Speaker 01:
And turning back again, I think whether or not this court finds it's jurisdictional or would disagree with its precedence or whether it's jurisdictional

[00:18:51] Speaker 01:
Again, we're talking about a question that has overtones of jurisdiction.

[00:18:56] Speaker 01:
This court has analogized it to ripeness.

[00:18:59] Speaker 01:
As appellee, this, and I understand your honest concern that this question was not raised below.

[00:19:06] Speaker 01:
But again, this court has been very clear that appellees always have the right to assert alternative grounds for affirmation.

[00:19:13] Speaker 04:
Raised below.

[00:19:14] Speaker 01:
Well, supported by the record.

[00:19:17] Speaker 01:
And this is a legal question.

[00:19:19] Speaker 01:
It's clearly supported by the record.

[00:19:21] Speaker 01:
The decision that we're talking about is not in any way final agency action.

[00:19:28] Speaker 01:
And AMS doesn't even make the argument really that there's not an alternative judicial remedy.

[00:19:35] Speaker 03:
Can I pursue that?

[00:19:37] Speaker 03:
the subhead to the former 317 was inter-parties re-examination prohibited.

[00:19:43] Speaker 03:
That's the purpose of the section.

[00:19:46] Speaker 03:
And then it talks about the situations where inter-parties re-examination is prohibited and it says where you have a final decision

[00:19:52] Speaker 03:
that the party can't sustain its burden of invalidities.

[00:19:55] Speaker 03:
We'll get to that in a second.

[00:19:56] Speaker 03:
But if I'm AMS, I'm settling the case, and I'm relying on this statute, what's not final about the decision of the agency to proceed over an express statutory prohibition?

[00:20:11] Speaker 01:
Well, Your Honor, the agency may make many decisions in the course of the administrative proceeding.

[00:20:20] Speaker 01:
which are final in the sense that the agency may not revisit them.

[00:20:23] Speaker 01:
For example, and even analogizing to district court proceedings, there may be cases where somebody files a motion to dismiss that's based on the passage of a statute of limitations or a lack of standing where if the motion to dismiss were granted, it would mean, or if they were correct in bringing that motion, it would mean there was no ground for the court to continue.

[00:20:46] Speaker 01:
But even in those cases in courts having analogized final decisions to final agency action, the fact that you have a denial of a motion to dismiss does not mean that's immediately appealable.

[00:20:59] Speaker 01:
The same is true here.

[00:21:00] Speaker 01:
There may be many instances where the agency makes decisions in the course of its proceeding that might not be revisited by the agency, but that doesn't mean that they satisfied the benefit test for final agency action because they're not the confirmation of the agency's

[00:21:14] Speaker 03:
decision-making process, which we have at the end of the re-examination.

[00:21:28] Speaker 03:
justifiable grounds for re-examining the patent.

[00:21:31] Speaker 03:
It says you can't.

[00:21:32] Speaker 03:
It says may not.

[00:21:33] Speaker 03:
So I'm just, you're saying that's still not appealable.

[00:21:37] Speaker 03:
You get to, you the agency, get to conduct the proceeding anyway and the person has to, even though they thought they were buying their piece in the infringement action, you have to go through the whole expense and time of the administrative proceeding before you can say it should have been dismissed in the first place.

[00:21:55] Speaker 01:
This was very similar to the argument that the oil companies raised in the Supreme Court standard oil decision where they said the agency action was in fact unlawful because there was no statutory basis for the agency to have initiated those proceedings.

[00:22:09] Speaker 01:
So Cal complained that it would be subject to the substantial burden and expense of engaging in an agency proceeding that may in fact be unnecessary even outside the agency's statutory authority.

[00:22:19] Speaker 01:
And the Supreme Court very clearly said the substantial burden of participating in an administrative proceeding is not reason for us to find final agency action.

[00:22:30] Speaker 01:
It walked through the practical effect and said what's happened here is a decision to initiate a proceeding against you.

[00:22:37] Speaker 01:
that's very similar to what we have here where we have a decision to continue proceedings.

[00:22:42] Speaker 01:
And even if there is substantial burden and expense in engaging in those proceedings, that is not enough to render the decision final agency.

[00:22:51] Speaker 03:
Is there any significance in the fact that in the AIA, when this section is amended, there's now express language saying that the PTO can continue

[00:23:04] Speaker 03:
the proceedings on its own if it chooses to do so.

[00:23:07] Speaker 03:
And the old statute didn't say that.

[00:23:09] Speaker 01:
I think notably the new statute actually allows for party settlement to terminate the inter-party re-examination proceeding.

[00:23:19] Speaker 01:
not present in the old version of Section 317B, which was explicitly excluded from that.

[00:23:25] Speaker 01:
So I would draw the contrary inference that the revision to allow for settlement.

[00:23:30] Speaker 03:
No, except it says may.

[00:23:31] Speaker 03:
It doesn't say must.

[00:23:32] Speaker 03:
It doesn't say may.

[00:23:34] Speaker 03:
There's a permissive, at least the way I read it, there's permissive language in there that gives the agency the option of proceeding if it feels in its discretion that it should, which isn't in the old 317B.

[00:23:46] Speaker 01:
Well, and I take the court's concern about may not thereafter be maintained by the office, but again, I think that that's similar and AMS has argued, look, there's no agency jurisdiction here.

[00:23:57] Speaker 01:
Again, you know, that's as the Supreme Court pointed out in the City of Arlington, that the agency jurisdiction is really a misnomer.

[00:24:05] Speaker 01:
It's really a question of statutory authority.

[00:24:07] Speaker 01:
And when the issue of statutory authority or an agency proceeding unlawfully comes up,

[00:24:12] Speaker 01:
The courts have repeatedly cited Standard Oil that the allegation that an agency is acting outside of its authority does not make the decision immediately appealable.

[00:24:26] Speaker 01:
And here there is an adequate alternative judicial remedy.

[00:24:29] Speaker 01:
Again, if in fact the agency erred in its 317B decision, which we don't think it did, given the language of the consent judgment in this case, which appears to have been

[00:24:40] Speaker 01:
quid pro quo between the parties, you know, relating to their settlement agreement where they stipulated to the... Can I just push you on that one a little bit?

[00:24:47] Speaker 03:
Because, you know, I'm a district judge, so this is near and dear to my heart.

[00:24:52] Speaker 03:
You have a consent judgment where you don't hear the evidence and the parties are stipulating we can't prove invalidity.

[00:24:59] Speaker 03:
If we adopted the construction that the PTO is arguing for here, you could have what we used to call in the criminal courts a slow plea.

[00:25:09] Speaker 03:
People could just say, here's my evidence.

[00:25:12] Speaker 03:
We can't prove invalidity.

[00:25:13] Speaker 03:
Judge, tell us that we don't have enough evidence to prove validity.

[00:25:17] Speaker 03:
And as I understand your argument, that would be OK.

[00:25:20] Speaker 03:
The judge wouldn't have to look very deeply as long as the judge simply said, well, the parties are telling me they can't prove their case.

[00:25:27] Speaker 01:
What the agency is trying to do here is to ensure that Section 317B is satisfied while respecting the findings of the district court judge.

[00:25:37] Speaker 01:
Now, the Supreme Court has said in Anderson that we shouldn't look behind or second-guess a district court's judgment.

[00:25:45] Speaker 01:
And we've cited cases showing that consent judgments can do a variety of different things.

[00:25:50] Speaker 01:
You could have a consent judgment where, in fact, the district court did make findings specific to invalidity.

[00:25:55] Speaker 01:
If the agency sees the district court findings indicated in a consent judgment or in another judgment, the agency's not going to second guess what the judge is doing.

[00:26:06] Speaker 03:
What I'm trying to say is, as a practical matter, findings like that can easily be orchestrated.

[00:26:10] Speaker 03:
I mean, this goes back to the form over substance.

[00:26:13] Speaker 03:
Unless you're saying the judge has to make an independent inquiry,

[00:26:16] Speaker 03:
as the judge would have to do, say, in approving a class action or something like that.

[00:26:20] Speaker 03:
Then it's just a question of what words are in the judgment, whether you're just signing the line saying, I'm signing the proposed order, or I'm signing off on the party's consent judgment that they can't prove validity, excuse me, invalidity, or you could have some more facts there and the judge is signing them.

[00:26:36] Speaker 03:
But what I really hear you saying is that the court has to independently evaluate the question of

[00:26:43] Speaker 03:
of invalidity, and that seems to me to be rewriting the statute.

[00:26:49] Speaker 01:
We're not requiring an independent district court analysis per se of invalidity, but rather what the statute requires is a district court finding that the party has not sustained a burden of proving invalidity.

[00:27:02] Speaker 01:
Now that may come about in any variety of ways, but what the agency is doing is reasonably assuming that if a district court judge signs his or her name

[00:27:10] Speaker 01:
to a judgment that says the court finds, and if it's a court finding, we would probably expect to see different language.

[00:27:16] Speaker 01:
The court finds these patents are not invalid, as the quote says.

[00:27:20] Speaker 01:
The party stipulates that they're valid.

[00:27:21] Speaker 01:
But if the agency sees the court signing that, it can reasonably assume that a neutral third-party arbiter, an Article III district court judge,

[00:27:31] Speaker 03:
looked at the evidence, whatever it may be, and has found, as the judgment states, that the party has... So you really are, I think you're saying it in a subtler way than I did, but you are implying some cognitive input into the result of a part of the different court.

[00:27:47] Speaker 01:
And let me be clear, Judge Fogel, even if there were no such input, because what I'm not suggesting is that the agency should look behind the judgment in any

[00:27:56] Speaker 01:
fashion in that respect, but just that the agency recently assumes if a district court signs into her name indicating that there is a finding that the patents are not invalid, that the agency should respect that district court finding.

[00:28:11] Speaker 01:
It would satisfy the plain language of 317B.

[00:28:14] Speaker 01:
And as many of the decisions that AMS included in the Joint Appendix show, the agency would terminate the ongoing re-examination procedure if there was such a judgment that satisfied them.

[00:28:27] Speaker 04:
So while the agency is not going to look behind what the judgment says, it's a practical matter.

[00:28:34] Speaker 04:
The trial judge has to try the issue.

[00:28:36] Speaker 04:
I mean, try here to include summary judgment or anything else because

[00:28:42] Speaker 04:
Every judgment that rejects a validity challenge is in fact no more than a determination that the plaintiff did not put on sufficient evidence to prove invalidity.

[00:28:57] Speaker 01:
I don't think that it needs to be the case that the parties have tried the issue.

[00:29:05] Speaker 04:
I tried in the broad sense that includes summary judgment.

[00:29:09] Speaker 01:
Well, what the agency would look for, and what we know from the decisions, including those included in the appendix... That could be a perfectly sensible view of 317, but that is the position, right?

[00:29:23] Speaker 04:
A district judge is not going to put his or her name on an order that says the plaintiff didn't carry the burden without deciding that the plaintiff didn't carry the burden.

[00:29:35] Speaker 01:
And then there is a decision by the court that the party hasn't carried their burden, and the statute would be satisfied.

[00:29:44] Speaker 01:
So if we had a consent judgment, and I take the point of what does the district court need to do in order to enter a consent judgment that says what the statute requires, which is that there's a finding by the court that the party has not seen its burden of proving invalidity.

[00:30:02] Speaker 01:
And that's not something within the agencies

[00:30:05] Speaker 01:
special expertise that the agency has.

[00:30:08] Speaker 04:
It may affect whether this is a sound interpretation of 317 because if in order to get a judgment that actually eliminates the risk of the PTO proceeding to the patent owner, the trial judge has to do

[00:30:29] Speaker 04:
a lot of work, more than notice and sign off on the party's agreement, there are likely to be fewer resolutions because the patent owner can't control the risk of invalidation through the ex-party re-examination procedure.

[00:30:52] Speaker 04:
The question is, I mean, maybe that makes sense or maybe it doesn't make sense, but it quite changes

[00:30:58] Speaker 04:
the practical likelihood of these settlements?

[00:31:06] Speaker 01:
What I can say is that we have examples of a number of consent judgments that contain language with district court findings in them.

[00:31:15] Speaker 01:
Now, those consent judgments are presumably based on the party's settlement or agreements.

[00:31:20] Speaker 01:
Otherwise, they wouldn't be consent judgments, but they contain the language that

[00:31:25] Speaker 01:
the district by at the party has failed to sustain its burden or otherwise indicating that the court had found or stated that this wasn't that I know I can't give your honor a lot of comfort in terms of what went on in the district court

[00:31:41] Speaker 04:
that led to the court to be comfortable signing his or her name to... So it might be the district court presented with the challenger's express agreement that it did not supply sufficient invalidity proof, would feel comfortable in relying on that as a ground for the judge him or herself.

[00:32:05] Speaker 04:
writing a sentence that says the plaintiff did not meet the burden of proving infidelity.

[00:32:12] Speaker 01:
And that may be the case.

[00:32:14] Speaker 01:
And the important point here again is that the agency isn't and shouldn't be in the position of second-guessing what the district court, you know, signs its name to in the face of that order in terms of whether there's merely as we have in this consent judgment here a statement that both parties

[00:32:35] Speaker 01:
have co-stipulated that the other parties' patents are valid, which clearly doesn't satisfy the language in 317b, as opposed to a statement by the district court that it found that the patents were not invalid.

[00:32:50] Speaker 01:
which suggests there was at least some additional consideration by the district court judge before signing that order.

[00:32:58] Speaker 01:
And 317B instructs the agency to terminate the interparties reexamination proceedings in the latter case but not in the former.

[00:33:10] Speaker 03:
parties in a contested patent case come to me and the plaintiff for the defendant says I can't prove invalidity.

[00:33:16] Speaker 03:
You know, we've done our discovery and we can't prove it and we're settling the case.

[00:33:22] Speaker 03:
What I'm afraid I'm hearing you say is I still need to do some independent inquiry into that to make sure that in fact they can't before I sign my name to it.

[00:33:31] Speaker 01:
Oh, I think in that circumstance, Your Honor, could sign a consent judgment that says

[00:33:36] Speaker 01:
You know, the court, it can be the court states that the parties have failed to satisfy their burden of proving invalidity and the basis for that may be the parties coming forward to the court and saying, look, we don't have sufficient evidence on invalidity.

[00:33:52] Speaker 03:
And again, I don't want to prolong this, but isn't that what the plaintiff did here?

[00:33:55] Speaker 03:
They said we stipulate that we can't establish invalidity.

[00:33:59] Speaker 01:
Well, actually, I mean, the consent judgment here could have been based on economic reasons, business relationship probably was.

[00:34:07] Speaker 01:
Right, exactly.

[00:34:08] Speaker 01:
Issues unrelated to the merits of the invalidity defense, which is the agency's concern, of course, when you see a consent judgment that nearly says the parties have agreed that the patents are valid, that that may have nothing to do with the prior art that's being presented in the agency proceedings.

[00:34:24] Speaker 03:
So how are you not looking behind the judgment?

[00:34:27] Speaker 01:
I mean, again, I know this maybe is not particularly satisfying to your honor, but where the agencies relying on the court, the Article III judge's statement about whether there's merely a party stipulation to validity or whether there's a court finding on validity.

[00:34:48] Speaker 01:
And in the latter case,

[00:34:50] Speaker 01:
you know, perhaps there's some additional work required by the Article 3 judge, but again, that allows the agency to have the comfort that 317B has been satisfied.

[00:35:06] Speaker 02:
If I may?

[00:35:08] Speaker 02:
I'd like to start briefly with the jurisdictional issue, Your Honors.

[00:35:13] Speaker 02:
The government is relying very heavily on the Standard Oil case.

[00:35:17] Speaker 02:
And we addressed that in our brief at pages 10 to 11.

[00:35:20] Speaker 02:
And I'd like to point out a distinction that really, I think, exists between us and Standard Oil.

[00:35:25] Speaker 02:
In Standard Oil, there was a FTC investigation.

[00:35:31] Speaker 02:
And the decision that had been made was, quote, it had reason to believe, end quote, that a violation had occurred.

[00:35:38] Speaker 02:
That finding was obviously preliminary in nature.

[00:35:42] Speaker 02:
And what the court did in addressing the jurisdictional issue there, it said that, really, this is a preliminary determination.

[00:35:50] Speaker 02:
Nothing's been decided yet.

[00:35:52] Speaker 02:
Let the agency work through that issue.

[00:35:55] Speaker 02:
Was there, in fact, a violation?

[00:35:57] Speaker 02:
Not just whether there was reason to investigate it.

[00:36:00] Speaker 04:
And this is different how?

[00:36:01] Speaker 02:
In our case, we have a jurisdictional limitation that says they don't have jurisdiction to maintain this.

[00:36:06] Speaker 02:
We've got a final decision.

[00:36:08] Speaker 02:
If Your Honor recalls, the way that we had to go through this is we had to file a petition with the commissioner, not the examiners branch, with the commissioner to determine whether or not 317 applied as a matter of law.

[00:36:20] Speaker 02:
They said no.

[00:36:22] Speaker 02:
Everything that's going on at the Patent Office at this moment has nothing to do with that decision.

[00:36:27] Speaker 02:
That decision is not being revisited.

[00:36:29] Speaker 02:
The decision that 317B does not apply in this case that the Patent Office made, no one's working on that.

[00:36:35] Speaker 02:
That's final.

[00:36:36] Speaker 02:
That's not being reviewed where it's in here.

[00:36:38] Speaker 02:
The FTC had started investigation saying there's reason to believe that there's a violation.

[00:36:45] Speaker 02:
And the question that they wanted to stop was, well, stop the investigation because we don't think there's a reason to believe.

[00:36:50] Speaker 02:
So I think that there is a distinction.

[00:36:53] Speaker 02:
The other distinction, and Your Honor, this is just improved in this court's decisions, I found Inrei Kuzo, C-U-O-Z-Z-O,

[00:37:03] Speaker 02:
speed technologies that was issued February 4th of this year.

[00:37:06] Speaker 02:
And it was an issue, I think, about IPRs, not about inter-party re-examination.

[00:37:12] Speaker 02:
But the question came up, the jurisdiction, whether there had to be final agency action.

[00:37:17] Speaker 02:
In this court, and I'm quoting from page 8, which is a slip decision, the answer is that mandamus may be available to challenge the PTO's decision

[00:37:31] Speaker 02:
to grant a petition to institute IPR after the board's final determination, a situation where the PTO has clearly and indisputably exceeded its authority.

[00:37:42] Speaker 02:
That, again, is the caveat that we're working on, is we believe they're beyond their authority.

[00:37:47] Speaker 02:
And just so the record's complete and your honors are aware,

[00:37:50] Speaker 02:
We did file this complaint in the district court in Virginia seeking review under the APA, but we also saw it mandamus.

[00:37:59] Speaker 02:
And the mandamus was under statute.

[00:38:09] Speaker 04:
If I remember the law of mandamus correctly, if they were right about no final agency action because in addition under 704 there's an adequate remedy to review the continuation of the proceeding once the proceeding is over, then there would be an adequate remedy at law objection to mandamus to change anything.

[00:38:36] Speaker 02:
That is their contention.

[00:38:37] Speaker 02:
I don't believe it does because

[00:38:38] Speaker 02:
Whether they have jurisdiction to make us do anything is the question, not whether we can get it reverse laid or after much effort and money is spent.

[00:38:47] Speaker 02:
And the statute that we saw mandamus under was 28 USC 1361, which, and I don't recall off the top of my head, is to require a government officer to do what the statute requires them to do.

[00:39:00] Speaker 02:
So we are seeking that mandamus in addition to APA review.

[00:39:03] Speaker 02:
Very quickly, and I think this goes to one of the points

[00:39:06] Speaker 02:
The main argument that I wanted to address was we do have a final judicial decree, and I think that the approach that the Patent Office is taking undermines that judicial decree.

[00:39:17] Speaker 02:
And the public has an interest in seeing those judicial decrees upheld.

[00:39:21] Speaker 02:
And also, I think that their approach does not respect the balance that Congress struck.

[00:39:26] Speaker 02:
Congress created this inter-party re-examination and did two parts.

[00:39:30] Speaker 02:
There was already an existing ex parte review where the person challenging validity had one filing and then they were basically out of it.

[00:39:38] Speaker 02:
Congress came in and said, let's involve them more.

[00:39:41] Speaker 02:
If they do that, they do elect to file this inter-parties reexamination, there can be consequences.

[00:39:47] Speaker 02:
And one of them is what we see in 317, Congress created the balance.

[00:39:52] Speaker 02:
If they give up for whatever reason, whether it be economic, whatever, they have given up on that issue, and 317B comes into effect.

[00:40:00] Speaker 02:
That was the whole purpose.

[00:40:01] Speaker 02:
One of the reasons that we negotiated settlement was so that we could get that stipulation, we could get that judicial decree, and the inter-parties reexaminations would end.

[00:40:11] Speaker 02:
The final point I want to make it beyond time if I could just make one last point.

[00:40:17] Speaker 02:
One of the issues that

[00:40:24] Speaker 02:
The Patent Office keeps coming back to him saying, and Your Honor, I think you were addressing the practical matter.

[00:40:29] Speaker 02:
Well, we're in district court litigation.

[00:40:32] Speaker 02:
I've not had the opportunity to be in front of Your Honor, but this is what I do.

[00:40:35] Speaker 02:
And we're in front of district courts all the time.

[00:40:37] Speaker 02:
And this is how these cases end, for the most part.

[00:40:40] Speaker 02:
And that's a very valuable tool for the court and for the parties to be able to stop the litigation.

[00:40:46] Speaker 02:
In this case, stopping the litigation alone was not of sufficient interest to AMS.

[00:40:50] Speaker 02:
They need also to stop the inter-party's re-examination.

[00:40:54] Speaker 04:
Am I right?

[00:40:55] Speaker 04:
I mean, this is a problem that if I read the new version for inter-party to review, if the merits determination has not been made by the board, you do or do not now have a right to stop the proceedings.

[00:41:11] Speaker 02:
The inter-party's review is a totally different procedure.

[00:41:13] Speaker 02:
In fact, they don't even have a corollary to what we're dealing with in 317.

[00:41:20] Speaker 02:
You could try the case in district court and win, and it doesn't matter.

[00:41:24] Speaker 02:
The inter-party review.

[00:41:25] Speaker 04:
So 317A, the new statute says, an inter-party.

[00:41:29] Speaker 04:
And I'm reading from the government's brief, so I'm just going to assume this is an accurate quote.

[00:41:33] Speaker 04:
An inter-party's review instituted under this chapter shall be terminated with respect to any petitioner upon the joint request of the petitioner and the patent owner unless the office has decided the merits of the proceedings before the request for termination is filed.

[00:41:51] Speaker 02:
That's right.

[00:41:52] Speaker 02:
So that has nothing to do with whether there is a final decision in the district court.

[00:41:57] Speaker 02:
It's totally divorced, totally different approach.

[00:41:59] Speaker 02:
In that case, you can settle an IPR by written agreement and still litigate the case in district court.

[00:42:06] Speaker 02:
I don't know why you'd want to do that as a defendant, but you could.

[00:42:09] Speaker 02:
It's not an apples to apples sort of comparison.

[00:42:12] Speaker 02:
But the Patent Office, by the way, Your Honor, I don't know if you followed their rulings on this.

[00:42:16] Speaker 02:
But they give the opportunity to terminate IPRs based on a written submission.

[00:42:22] Speaker 02:
Sounds like a low standard, but in reality it's not.

[00:42:25] Speaker 02:
That catchphrase that's added on at the end, unless they determine otherwise, it gives them full discretion to say, I don't want to terminate this.

[00:42:33] Speaker 02:
I've seen cases where they've terminated the IPR after the final hearing.

[00:42:36] Speaker 02:
And I've seen cases where they've refused to terminate the IPR very early, relatively, in the proceeding.

[00:42:43] Speaker 03:
They also can keep the IPR going even without the original parties, without the original petitioner.

[00:42:53] Speaker 03:
They can just say, you're out of here, but we're going to continue the IPR.

[00:42:58] Speaker 02:
I've not said that, but that's possible.

[00:42:59] Speaker 02:
That's what we have here.

[00:43:00] Speaker 03:
That's what the new statute says, too.

[00:43:03] Speaker 02:
But the last thing I wanted to mention before I sit down, I appreciate the additional time, is that the Penal Office keeps referring to the dozens and dozens of cases that they've terminated where it says the court ordered in the judge.

[00:43:16] Speaker 02:
And I went through and I looked at some of them.

[00:43:18] Speaker 02:
And just in preparing for today's hearing, in particular, they're starting to one decision that's the Joint Appendix 270 through 272.

[00:43:30] Speaker 02:
And that's one that they relied on to say that the court adjudged something.

[00:43:33] Speaker 02:
It was the court that did it.

[00:43:34] Speaker 02:
So I just went back and found what was filed with the Patent Office to support that.

[00:43:39] Speaker 02:
And I wasn't at all surprised by what I found.

[00:43:41] Speaker 02:
It begins with the preamble as a practical matter.

[00:43:43] Speaker 02:
When I'm presenting a paper to a court, to the district court, you've got to say something about what this is.

[00:43:49] Speaker 02:
And not surprisingly, this has a title.

[00:43:51] Speaker 02:
It's Final Judgment on Consent.

[00:43:53] Speaker 02:
So it notes consent judgment.

[00:43:54] Speaker 02:
But it goes down the very first paragraph.

[00:43:56] Speaker 02:
It says, the party's here to having consented.

[00:43:59] Speaker 02:
by their undersigned attorneys to the entry of this final judgment.

[00:44:02] Speaker 02:
And then it says in big, bold letters, ordered adjudged in decree.

[00:44:07] Speaker 02:
This is no different than our case.

[00:44:10] Speaker 02:
The words are rearranged, but it's form over function.

[00:44:13] Speaker 02:
We have a judicial decree upholding the validity, and the patent officer's own practices say,

[00:44:20] Speaker 02:
upholding validity satisfactorily meets the requirement of failing to prove invalidity.

[00:44:26] Speaker 02:
So that's not really an issue in this case.

[00:44:28] Speaker 02:
The only issue in this case is whether the court has to decide something independently on the merits.

[00:44:35] Speaker 02:
And we submit that that is not, in fact, what the words final decision mean.

[00:44:39] Speaker 02:
Thank you.

[00:44:40] Speaker 02:
Thank you.

[00:44:40] Speaker 02:
Thank you.

[00:44:41] Speaker 02:
We thank all the bribes and the cases submitted.