Whereas Congress has increasingly turned to administrative agencies to regulate complex technical areas, the patent system has remarkably remained an outlier. In the patent arena, the judiciary--not a federal agency--is perceived to be the most important expositor of substantive patent law standards. Yet, as the criticism toward the patent system has grown, so too have the challenges to this unusual power dynamic. The calls for institutional reform culminated in late 2011 with the enactment of the historic Leahy-Smith America Invents Act (AIA). Although scholars have recognized that the AIA bestows a glut of new powers upon the United States Patent and Trademark Office (PTO), this Article contends that commentators have failed to recognize the extent to which the AIA alters the fundamental power dynamic between the judiciary and the PTO. By anointing the PTO as the primary interpreter of the core patentability standards, this Article posits that the AIA rejects over two hundred years of court dominance in patent policy.
Although the patent system has traditionally suffered from a lack of serious engagement with administrative law, applying administrative law principles to the AIA has tremendous implications for the roles of patent institutions and, as this Article argues, results in a normatively desirable outcome. The AIA, by making the PTO the primary expositor of the core provisions of the Patent Act, ushers the patent system into the modern administrative era--which has long recognized the deficiencies associated with judge-driven policy. Moreover, the incorporation of administrative law principles into the patent system has substantial implications for administrative law itself. As this Article attempts to reconcile the distinctive features of patent administration with existing administrative law jurisprudence, it provides insight into a prolonged circuit split on the proper approach to determining the triggering provisions for formal adjudication, as well as when a grant of formal adjudicatory authority carries with it the ability to speak with the force of law.
TABLE OF CONTENTS INTRODUCTION I. CHEVRON AND THE HISTORICAL LACK OF JUDICIAL DEFERENCE TO THE PTO A. Strong Judicial Deference and the Supreme Court B. The Historical Lack of Deference Paid to the PTO's Legal Decisions II. POSTGRANT REVIEW AND ADMINISTRATIVE LAW A. Formality and the Postgrant Review Proceedings 1. Opposing Presumptions 2. The Chevron Approach B. Force-of-Law Prerequisite 1. Too Big to Delegate 2. Is the Lack of Substantive Rule Making Fatal? 3. Creation of the Federal Circuit C. Rejecting the Dominant Chevron Approach III. NORMATIVE CASE FOR DEFERENCE: COMPARATIVE INSTITUTIONAL ANALYSIS A. Expertise B. Capture and Institutional Bias CONCLUSION
The modern administrative state is built on the premise that administrative bodies, as a result of their focus, manpower, and proficiency, will reach more effective decisions than their counterparts in the judiciary or legislature. (1) Thus, it is hardly surprising that Congress has increasingly chosen to delegate broad law-making authority to administrative agencies. (2) Today, administrative institutions assume primary interpretative authority over federal statutes that regulate fields ranging from the environment, to pharmaceutical drugs, to telecommunications. Yet, the patent system has remarkably remained an outlier, even though it shares the same technocratic attributes as legal arenas that are overwhelmingly dominated by agency policy making.
Although the Patent Act defines the patentability standards in broad and vague language, the United States Patent and Trademark Office (PTO or Agency) lacks robust substantive rulemaking authority (3) and receives no judicial deference for its legal interpretations of the Patent Act. (4) As a result, the United States Court of Appeals for the Federal Circuit (Federal Circuit), which is vested with near-exclusive jurisdiction over patent appeals, is largely perceived to be "the most important expositor of the substantive law of patents in the United States." (5)
Yet, as criticism toward the patent system has grown, so too have the challenges to this unusual power dynamic. (6) An increasing number of commentators believe this lopsided institutional structure is the root cause of the patent system's systemic failures. (7) An even larger contingency of scholars support reforms that would shift greater power to the PTO. (8) The cries for institutional reform culminated in 2011 when Congress enacted the historic Leahy-Smith America Invents Act (AIA). (9) The AIA provided the first major overhaul to the patent system in sixty years and undeniably increased the stature of the PTO by granting the Agency a host of new responsibilities, such as fee-setting authority (10) and the ability to conduct new adjudicatory proceedings in which patent rights may be obtained or challenged. (11)
This Article contends, however, that commentators have generally failed to recognize the extent to which the AIA alters the fundamental power dynamic between the Federal Circuit and the PTO. Although scholars acknowledge that the AIA bestows a glut of new powers upon the Agency, (12) they have nearly uniformly concluded that "Congress stopped short of allowing the PTO to interpret the core provisions of the Patent Act--those that affect the scope of what is patentable." (13) Though Stuart Benjamin and Arti Rai have observed that certain congressional bestowals of adjudicatory authority may entitle the PTO's legal interpretations of the Patent Act to strong judicial deference, (14) this Article provides the first in-depth exploration of whether the actual powers granted by the AIA would result in the PTO becoming the primary interpreter of the core patentability requirements. This Article concludes that the AIA rejects over two hundred years of court dominance in patent policy by anointing the PTO as the chief expositor of substantive patent law standards.
In general, the patent system has historically suffered from a lack of serious engagement with administrative law, (15) even though Supreme Court intervention in 1999 made clear that standard administrative law norms--including the Administrative Procedure Act--apply to the PTO. (16) Applying administrative law principles to the AIA provides that the PTO's legal interpretations of the Patent Act, as announced by its new adjudicatory proceedings, are entitled to the highly deferential standard of review articulated in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. (17) As this Article argues, this deference is a normatively desirable outcome. (18) Making the PTO the primary interpreter of the core patentability standards ushers the patent system into the modern administrative era, which has long recognized the deficiencies associated with judge-driven policy. (19) This provides the institutional foundation for infusing economic policy into the patent system, enabling the tailoring of patentability standards to advance the system's constitutionally mandated goal: the promotion of innovation.
Additionally, the incorporation of administrative law principles into the patent system has substantial implications for administrative law. As this Article attempts to reconcile the distinctive features of patent administration with existing administrative law jurisprudence, it tests, and at times, brings into better focus, the contours of this doctrine. This exercise in reconciliation offers insight into a prolonged circuit split on the proper approach to determining the triggering provisions of formal adjudication and when a grant of formal adjudicatory authority carries the ability to speak with the force of law. Even though an agency's eligibility for Chevron deference turns on whether its actions carry the force of law, in the adjudicatory context the force-of-law concept has been largely undertheorized. (20)
This Article proceeds as follows. Part I provides a brief summary of the Supreme Court's strong judicial deference doctrine and then chronicles why the PTO's patentability determinations have never been afforded Chevron deference. Part I concludes by introducing the Agency's new adjudicatory proceedings--specifically postgrant review and inter partes review. (21) Part II analyzes how existing administrative law jurisprudence applies to these new proceedings and, from a doctrinal standpoint, concludes that the Federal Circuit should give Chevron deference to reasonable PTO validity determinations announced during postgrant or inter partes review. This conclusion rests on only two principles: first, that Congress intended the PTO's new adjudicatory powers to be effectuated through formal adjudication, and second, this grant of formal adjudicatory authority was accompanied with the ability to speak with the force of law. (22) In making this latter argument, Part II begins by developing a conceptual framework to determine when a grant of formal adjudicatory authority would be sufficient to infer a delegation of interpretative authority, and then it turns to addressing conceivable counterarguments. Finally, this Part also provides insight into a twenty-five year circuit split on determining the triggering provision of formal procedures by furnishing a strong theoretical basis for rejecting the dominant approach.
Part III makes the normative justification for Chevron deference. This Part maintains that the PTO has a comparative institutional advantage over the Federal Circuit and also argues that the Federal Circuit does not emerge as a clear winner with respect to the comparative risk of interest group influence. Consequently, Part III concludes that this shift in the power dynamics between the PTO and the Federal Circuit is normatively desirable.
I. CHEVRONAND THE HISTORICAL LACK OF JUDICIAL DEFERENCE TO THE PTO
The PTO is a federal agency housed in the Department of Commerce, which fulfills its mission of fostering innovation and competition primarily through examining patent applications and determining which inventions warrant the grant of a patent. (23) The Federal Circuit, which is vested with near-exclusive jurisdiction over patent appeals, reviews the Agency's validity decisions. (24) However, unlike most agencies, the PTO's legal interpretations of its enabling act--the Patent Act--are afforded no deference, much less strong judicial deference. This Section begins by summarizing the Supreme Court's strong judicial deference doctrine and then turns to chronicling why the PTO's patentability determinations have never been afforded Chevron deference. This Section concludes by introducing the Agency's new adjudicatory powers.
A. Strong Judicial Deference and the Supreme Court
Although the major developments of the strong deference doctrine in administrative law have been told many times before, this account highlights two themes of the Supreme Court's deference jurisprudence: first, the Court's emphasis that strong deference to an agency's statutory interpretations turns on an inquiry into congressional intent, and second, the Court's growing recognition that Congress can implicitly signal such intent.
Since the early decades of modern administrative law, the Supreme Court has emphasized that strong judicial deference to an agency's legal interpretations is mandated when Congress intends an agency to speak with the force of law. Thus, when Congress expressly delegates authority to an agency "to define a statutory term or prescribe a method of executing a statutory provision," (25) the Court's jurisprudence has long called for substantial judicial deference. (26)
In Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., the Court substantially expanded the sphere of mandatory judicial deference when it announced that courts must defer to an agency's reasonable interpretations when Congress expressly, as well as implicitly, delegates interpretive authority. (27) The Chevron decision made clear that when Congress is silent or leaves ambiguity in a statute that an agency is charged with administering, it satisfies the latter concern. (28) The Court's formulation of this mandatory deference is known as the famous two-step Chevron test. Under step one, the court asks whether the statute, when interpreted clearly and unambiguously, resolves the issue. (29) If the statute is unclear, the court proceeds to step two, under which it must defer to an agency's interpretation that is "based on a permissible construction of the statute." (30)
Chevron's seemingly simple two-part formulation, however, generated considerable confusion in lower courts. (31) Perhaps the largest source of disagreement is what has become known as the matter of "step zero": When should the Chevron framework apply? (32) The Supreme Court in United States v. Mead Corp. provided much needed guidance when it offered a two-part test of its own for determining when an agency's interpretation is eligible for Chevron deference: whether Congress delegated interpretative authority, or the ability to speak with the "force of law," to the agency in question; and if so, whether the agency has "exercise[d] ... that authority." (33) The Mead Court further clarified that a congressional delegation of formal adjudicatory or rule-making power is generally sufficient to infer--more specifically, "a very good indicator" of-congressional intent to delegate interpretative authority to an agency. (34) The Mead decision left open the possibility that a grant of less formal mechanisms of agency action may, at times, also satisfy the force-of-law requirement. (35) However, ensuing Supreme Court opinions have failed to provide substantial guidance on what types of informal procedures are sufficient to infer such a delegation. (36)
Although subsequent case law refined the Court's strong judicial-deference doctrine, the basic architecture has remained intact. The key inquiry as to whether an agency's legal interpretation is afforded Chevron deference continues to be one of congressional intent: Did Congress mean for the agency to speak with the force of law? Furthermore, ensuing Supreme Court cases have not disturbed the principle that a grant of formal adjudicatory or rule-making power is generally sufficient to satisfy the force-of-law requirement. (37)
B. The Historical Lack of Deference Paid to the PTO's Legal Decisions
Like many other organic statutes, the Patent Act does not always speak to the precise issue at hand--that is, determining whether an invention merits an award of a patent often requires substantial interpretive discretion. (38) For example, take the doctrine of utility, which precludes patents on inventions that have no use. (39) The courts and the PTO have developed three distinct doctrines of utility --credible, specific, and substantial utility--and an invention must meet all three in order to be eligible for patenting. (40) Nevertheless, the utility doctrine is derived from a single word in the Patent Act: "useful." (41) Even though not every PTO validity determination may involve the interpretation of a pure legal standard, it will, at a minimum, involve the application of a legal standard to a factual finding. Because the highly deferential standard announced in Chevron applies both to pure questions of legal interpretation and to the interpretation involved in applying legal standards to facts, (42) every PTO validity determination could theoretically warrant strong judicial deference.
The Federal Circuit has yet to afford the PTO's validity determinations any deference, much less the highly deferential standard announced in Chevron. To help understand why, it is fruitful to undergo a brief exposition of the two primary activities of agencies --rule making and adjudication--along with the levels of formality with which each can be effectuated. The Administrative Procedure Act (APA), which governs the way most agencies partake in rule making and adjudication, defines a rule as "an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy." (43) Rule making is defined as the "process for formulating, amending, or repealing a rule." (44) By contrast, adjudications are defined as matters other than rule making. (45) Thus, any agency decision that involves a final decision other than rule making, such as the decision to grant or deny a patent, constitutes an agency adjudication. (46)
The APA sets up a "feast-or-famine" archetype for adjudicatory procedures. (47) Sections 554, 556, and 557 of the APA set forth an array of trial-type protections that govern formal adjudications. (48) These protections are generally equivalent to the safeguards available in a civil judicial trial. They include, for example, entitling parties to oral arguments, (49) conducting cross-examination of witnesses, (50) and making exceptions to prior rulings. (51) Moreover, the APA requires a neutral hearing officer, who is prohibited from participating in ex parte communications, (52) to preside over the case and submit written opinions that provide the legal and factual basis of the agency's conclusions. (53) In contrast, if formality is not required, then the APA imposes only minimal procedures for adjudications. (54) Thus, agency decisions made under "informal adjudication" are not afforded trial-like protections but instead often rely on the use of "inspections, conferences, and negotiations." (55)
The PTO, however, has not historically possessed the authority to engage in formal adjudication or rule making--the two formal procedures that Mead indicates would likely warrant deference. (56) Although Mead explicitly leaves open the possibility that Chevron deference could apply to agency actions that are informal in nature, (57) this Section purports to establish only that the PTO has not traditionally engaged in the formal procedures that denote the most straightforward cases under Mead.
Unlike most notable agencies, the PTO lacks significant substantive rule-making authority. Federal statutes give the Agency the authority to make rules that "govern the conduct of proceedings in the Office." (58) The Federal Circuit has repeatedly interpreted this grant as primarily enabling the PTO to make rules on a variety of procedural matters. (59) Thus, the Agency does not possess the power to issue binding rules that carry the force of law on the core issues of patentability, like obviousness or novelty.
The PTO also conducts at least three statutorily authorized adjudications, although none bear the hallmarks of formal adjudication, (60) which could conceivably merit deference. First, Congress explicitly delegated to the PTO "all duties required by law respecting the granting and issuing of patents." (61) In order to obtain a patent, an inventor must file a patent application with the PTO and try to persuade an officer, known as a patent examiner, that her invention meets the patentability standards. (62) A patent examiner's initial validity determination proceeds largely through a series of negotiations between the patent applicant and the examiner, and thus is informal in nature. (63) As a result, when a party challenges the PTO's decision to grant a patent during a declaratory judgment action or a counterclaim in a patent infringement suit, it is unexceptional that the Federal Circuit fails to strongly defer to the PTO's legal interpretations of the Patent Act. (64)
Second, the PTO has the power to adjudicate patent denials. If a patent examiner rejects a patent application for failing to meet one or more of the patentability requirements, then the patent applicant has a statutory right to pursue an appeal before the Patent Trial and Appeal Board (Board), formerly known as the Board of Patent Appeals and Interferences, (65) which is composed of administrative patent judges (APJs). (66) Although the process by which the Board reviews patent rejections is more formal than the PTO's initial patentability decisions, it nonetheless fails to resemble trial-like proceeding associated with formal adjudication. (67) Thus, it is not too surprising that the Federal Circuit has declined to afford Chevron deference to the PTO's legal determinations announced during patent denials, though the appellate court's adoption of de novo review is unusual. (68)
Third, the PTO is statutorily authorized to conduct ex parte and inter partes reexamination, (69) wherein one asks the PTO to reconsider its decision to grant an already-issued patent. (70) These proceedings also lack the signature characteristics of formal adjudication, as they have been traditionally examinational rather than adjudicative in nature. (71) Neither provides the procedural safeguards associated with civil trials, such as oral arguments, (72) and unlike the PTO's review of patent denials, the arbitrator is a member of the PTO's examining corps, not an APJ. (73) One can appeal the result of a reexamination proceeding to the Board. (74) Similar to Board review of patent denials, the Board's process lacks the distinctive features associated with formal adjudication. (75) Akin to the PTO's patent denials, the Federal Circuit has held that the Agency's legal determinations announced during ex parte and inter partes reexamination proceedings are entitled to no deference. (76)
The recently enacted Leahy-Smith America Invents Act provides the PTO with additional adjudicatory powers and concomitantly adds another pathway by which third parties can challenge the validity of an already-issued patent. (77) Among other things, the AIA significantly modified inter partes reexamination, renaming the transformed procedure "inter partes review," (78) and created an entirely new postgrant opposition procedure called "post-grant review." (79) Whereas inter partes and postgrant review differ in certain aspects, (80) they share a host of common features that set them squarely apart from their predecessors. The most revolutionary facet of the new and modified administrative hearings is the type of proceedings by which they must be effectuated. The AIA requires that both inter partes review and postgrant review take place in an adversarial, court-like proceeding, wherein parties are entitled to oral arguments and discovery. (81) In addition, a panel of APJs, rather than the examining corps, conducts the initial review of the patent. (82) The AIA is silent as to the deference owed to the PTO's legal determinations announced during the inter partes and postgrant review. As the inter partes review and postgrant review generally share the same procedural requirements for effectuation, and it is the for-reality of these procedures that is critical to this Article's argument, inter partes and postgrant review will hereinafter be referred to collectively as "postgrant review."
II. POSTGRANT REVIEW AND ADMINISTRATIVE LAW
This Section argues that an application of administrative law principles to the new and modified postgrant review proceedings triggers Chevron deference for the PTO's interpretation of ambigu- ous terms of the Patent Act announced during these proceedings. In making the case that the PTO should have primary interpretative authority over the key patentability requirements, this Section proceeds by focusing exclusively on the Chevron step zero inquiry: Did Congress intend for the PTO, which has the sole authority to adjudicate the validity of patent applications, (83) to have interpretative authority over the Patent Act? This Section concludes that Congress intended for the Agency to be the chief expositor of the core patentability standards. The conclusion rests on the establishment of only two principles. First, Congress intended the PTO to effectuate the postgrant review proceedings through formal adjudication. Second, this grant of formal adjudicatory power accompanied a delegation of interpretative authority. With respect to establishing the latter premise, this Section proceeds by developing a conceptual framework for determining when a grant of formal adjudicatory authority is sufficient to infer the ability to speak with the force of law and then turns to addressing conceivable counterarguments. Finally, this Section provides a theoretical basis for rejecting the dominant approach in the split among circuit courts on the proper method for determining the triggering provision of formal procedures.
A. Formality and the Postgrant Review Proceedings
To determine the level of formality that must accompany the postgrant review proceedings called for by the America Invents Act, the PTO must interpret the AIA in light of the Administrative Procedure Act (APA). (84) Section 554 of the APA states that the language "in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing," triggers the formal procedures outlined in [section] 554 and [section][section] 556-557. (85) Thus, if the phrases "hearing" and "on the record" are both present in the AIA, formal adjudications are required. (86)
However, like many other statutes, the AIA utilizes the term "hearing" without the phrase "on the record." Specifically, the AIA states that the postgrant review proceedings must provide "either party with the right to an oral hearing as part of the proceeding." (87) Circuit courts have taken divergent approaches when confronted with such enabling statutes. Until 1984, the courts of appeals generally followed one of two approaches: presumption in favor of formal procedures (88) or presumption against them. (89) The Supreme Court's Chevron decision resulted in a third approach in which courts defer to an agency's reasonable interpretation of whether a hearing requires formal or informal adjudication. (90)
Because the Federal Circuit has yet to face this issue, this Section briefly examines, and then applies, the three different approaches to the AIA taken by circuit courts with respect to the triggering provisions of formal adjudication. (91) Since Mead cautions that only congressional conferrals of formal adjudicatory authority are generally sufficient to satisfy the force-of-law requirement, (92) this Section also examines the extent to which each approach turns on the intent of Congress.
1. Opposing Presumptions
In Seacoast Anti-Pollution League v. Costle, the First Circuit established a presumption that, without congressional intent to the contrary, the statutory requirement of a hearing triggers the formal procedures in [section] 554 and [section][section] 556-557. (93) In City of West Chicago v. U.S. Nuclear Regulatory Commission, the Seventh Circuit adopted the exact opposite presumption, noting that when the statute lacked the "on the record" language, clear congressional "intent to trigger the formal, on-the-record hearing provisions of the APA" must be present to require formal procedures. (94) While Seacoast and West Chicago established opposing presumptions that can be rebutted by evidence of congressional intent, (95) the majority of subsequent cases that purport to apply either opinion rarely, if ever, reason in the language of presumptions. Instead, these ensuing opinions almost exclusively focus on the intent of Congress, suggesting that the presumption for or against formal procedures is quite fragile. (96) Moreover, while courts generally agree on the type of evidence that is relevant in determining congressional intent--the text, (97) structure, (98) and legislative history (99) of the statute in question--they substantially vary on the sufficiency of evidence needed to evince the intent of Congress. (100) As a result, examining the type of hearing Congress intended with respect to the postgrant review proceedings is imperative to the application of either of the presumptive approaches.
Perhaps the strongest argument that Congress intended the postgrant review proceedings to be effectuated through formal procedures is found within the language of the AIA itself. The Act requires the PTO to allow oral arguments and discovery as part of the postgrant review proceedings. (101) The requirement of oral arguments alone meets a number of the formal adjudicatory protections required by the APA. (102) Further, the mandate of discovery for postgrant review proceedings goes beyond the more minimally prescribed protections in the APA for formal adjudications. (103) Because discovery is a hallmark of adversarial proceedings and the procedural protections set by the APA for formal adjudications are understood to mimic the protections afforded by trial-like proceedings, (104) it seems unlikely that Congress would require the PTO to adopt formal procedures that surpass the expectations of the APA while not also intending for the PTO to adopt the more nominal procedures outlined in the APA. In other words, it seems illogical that Congress would require discovery to be used during postgrant review proceedings only to take away any meaningful use of the procedure--for example, by not requiring the PTO to prohibit, as the APA requires for formal adjudications, ex parte communications regarding the merits during the decisional process. (105)
Moreover, the AIA also calls for the PTO to promulgate regulations regarding other trial-type dealings, such as prescribing sanctions for attorney misconduct (106) and providing protective orders governing the exchange of confidential information. (107) Even though these requirements do not necessarily involve expanding the protections afforded by the APA, they do provide further evidence that Congress envisioned that the postgrant review proceedings would be governed by adverse, trial-like adjudications. Finally, the fact that the statute renames the Patent Board of Appeals and Interferences, which is responsible for conducting the postgrant review proceedings, to the Patent Trial and Appeal Board, further evinces that Congress intended the postgrant review proceedings to be effectuated by adversarial hearings. (108)
Beyond the language of the AIA, its legislative history clearly shows that Congress understood the Act to "convert inter partes reexamination from an examinational to an adjudicative proceeding" (109) while establishing a new procedure known as postgrant review that "would take place in a court-like proceeding." (110) The repeated reference to trial-like proceedings in the legislative history of the AIA further substantiates Congress's intent for postgrant review proceedings to be afforded formal adjudicatory protections. (111)
If the Federal Circuit follows or the Supreme Court chooses to endorse Seacoast, the AIA language calling for a "hearing" will trigger formal adjudication, as there is little evidence that Congress intended for the PTO to utilize informal proceedings. However, if courts endorse West Chicago, whether a formal adjudication is triggered becomes a much closer call because the strength of the presumption--or the sufficiency of evidence necessary to provide congressional intent--will be largely determinative. Courts that adopt a strong presumption or require a high threshold of congressional intent may conclude that informal procedures are sufficient. However, courts that adopt a weak presumption or a low threshold of congressional intent are likely to hold that the PTO must effectuate the postgrant review proceedings through formal adjudication, as there is ample evidence to suggest that Congress intended formal procedures to be used. As congressional intent is the touchstone of the presumptive approaches, a court that determines that the PTO must utilize formal adjudicatory procedures to effectuate the postgrant review proceedings under either of these approaches is necessarily also concluding that Congress intended that the PTO implement postgrant review proceedings through formal adjudication.
2. The Chevron Approach
While deciding the issue for the first time since 1984, the D.C. Circuit established a third approach, which has become the dominant framework, (112) when it applied the Chevron two-step test to an agency's interpretation of the word "hearing." (113) The D.C. Circuit noted that the statutory hearing provision, without more, was ambiguous. (114) Instead of using the inherent ambiguity as the basis for a judicial presumption for or against a formal, trial-type proceeding, the court deferred to the expertise of administrative officials in designing a hearing process that best fit the decision that an agency was congressionally authorized to make. (115)
If the Federal Circuit chooses to follow the D.C. Circuit's approach, under step one of Chevron, it will consider "whether Congress has directly spoken to the precise question at issue," (116) or whether the statutory hearing provision in the AIA is ambiguous. To answer this question, the Federal Circuit will consider the "text, structure, purpose, and history" of the AIA, as well as the AIA's relationship to other statutes.H7 As discussed, both the statutory language and the legislative history of the AIA support the notion that Congress intended formal procedures to be utilized. (118) Nonetheless, for the purposes of the Chevron analysis it is helpful to consider the possibility that the Federal Circuit may find the statutory hearing provision in the AIA ambiguous.
In Chevron step two, the reviewing court must determine whether the PTO's interpretation of the provision is "based on a permissible construction" or "reasonable construction" of the AIA. (119) The PTO recently proposed regulations for conduct involving postgrant review proceedings that provide for trial-type protections afforded under formal adjudication, including the APA requirements of [section] 554 and [section][section] 556-557. (120) Although the Supreme Court has never definitively defined when an agency's interpretation would be reasonable, it has stated that in order to uphold an agency's interpretation, a court need not determine if the agency's construction was the best interpretation of a statute or the interpretation that the court would have chosen. (121) Beyond this guidance, however, the Chevron step two analysis is not well defined. The Federal Circuit appears to oscillate between, and sometimes apply both of, the two most prevalent types of analysis: examination of statutory materials to evince legislative intent (122) and evaluation of the agency's reasoning process. (123) If the Federal Circuit adopts the former analysis, it will likely find the PTO's interpretation reasonable. After all, as discussed above, both the language and the legislative history of the AIA support the notion that Congress intended the postgrant review proceedings to be effectuated through formal adjudication. (124) If the Federal Circuit considers the PTO's reasoning process, then it is difficult to state definitively whether the PTO would pass Chevron step two, as the Agency has not specifically stated its motives for adopting formal procedures. Nevertheless, this Article has argued that effectuating postgrant review through formal adjudication is both reasonable and logically coherent. (125) Thus, as long as the PTO defends its choice to implement formal procedures by pointing to such reasoned decision making, the Agency's decision should be upheld.
Importantly, a court that adopts the dominant Chevron approach, and holds both that the term "hearing" in the AIA is ambiguous and that the PTO's decision to adopt formal adjudicatory procedures is reasonable, is also necessarily concluding that Congress intended to delegate interpretative authority to the PTO to determine the level of formality that should accompany the postgrant review proceedings. The latter delegation is larger than a grant of formal adjudicatory powers alone. Thus, a court that applies the Chevron framework and holds the use of formal procedures permissible is also determining that Congress intended the postgrant review proceedings to be effectuated by formal adjudication.
Finally, it should be noted that the PTO could choose to adopt more formal proceedings than Congress intended. Thus, if the Federal Circuit held that Congress did not intend for postgrant review to be effectuated through formal adjudication, the Agency may nevertheless adopt formal proceedings if it believes such procedures are prudent. In such a circumstance, the PTO's utilization of formal adjudication would not be sufficient to conclude that the Agency was granted force-of-law authority. As discussed above, the key inquiry to a force-of-law determination is the intent of Congress. As a result, the determining factor is whether Congress intended an agency to have formal adjudicatory powers, not whether an agency elects to utilize more formal procedures than Congress required.
In summary, it appears that only if courts adopt the approach of a presumption against formal procedures along with a high threshold for overturning the presumption, will they conclude that Congress did not require the Agency to utilize formal procedures in effectuating the postgrant review proceedings. If courts choose either to follow (1) the Chevron approach, (2) the presumption for formal procedures, or (3) the presumption against formal procedures but nonetheless choose to adopt a weak presumption, then the courts will conclude that Congress intended the PTO to adopt formal procedures when implementing the postgrant review proceedings. As a result, this Section concludes that a court will likely find that Congress desired the postgrant review proceedings to be effectuated through formal adjudication.…