U.S. Court of Appeals for the Federal Circuit Chief Judge Sharon Prost. Photo: Diego M. Radzinschi/ALM

"My first question is where is the PTO?"

That's how Chief Judge Sharon Prost of the U.S. Court of Appeals for the Federal Circuit kicked off an hour-long argument last month in a patent validity appeal involving Facebook Inc. and the USPTO's new Precedential Opinion Panel.

Cooley partner Heidi Keefe was arguing for Facebook that the D.C.-based appellate court should extend deference to the POP, which PTO director Andrei Iancu formed last fall to create more uniformity in the agency's administrative case law. But Prost kept circling back to the agency's decision not to appear. "Do you think they're making the assumption that now that they've spoken in a precedential opinion, end of story?" she asked.

On Wednesday, the PTO and the Justice Department finally weighed in, following a formal invitation from the court. "Under settled principles of administrative law, the POP's precedential decisions interpreting the [America Invents Act] qualify for Chevron deference," the government states, in a brief signed by Jeffrey Sandberg of the DOJ's civil division appellate staff. Also appearing on the brief are PTO Solicitor Thomas Krause and Associate Solicitor Joseph Matal, who has documented the AIA's legislative history.

The brief plunges the PTO into an extremely thorny area of administrative and patent law. Six judges of the Federal Circuit's 12 judges went on record two years ago saying the decisions of the PTO's Patent Trial and Appeal Board should not be accorded deference under the Supreme Court's Chevron v. Natural Resources Defense Council. But that was before Iancu reformulated and took an active role in the process for designating opinions precedential. The Supreme Court has also grown increasingly hostile in more recent years to the idea that Article III courts should defer to executive agency interpretations of statutes.

The government argues that Congress formally authorized the PTO to implement the AIA, and that the POP provides notice of its hearings, invites amicus briefs from the public and holds oral hearings. "That procedure is comparable to processes employed by other adjudicative bodies to which the Supreme Court and courts of appeals routinely afford Chevron deference," the government's brief states.

Facebook v. Windy City Innovations seems like a textbook case pitting agency expertise against statutory language. Windy City Innovations holds patents from the 1990s on improving privacy and security in a conferencing environment. The four patents it's asserting against Facebook number 830 separate claims. The AIA requires that petitioners bring their validity challenges within one year of being "served with a complaint alleging infringement of the patent."

But Windy City had not specified which specific claims it would be litigating until after the year ran. Challenging the validity of all 830 claims would have required 30 petitions for inter partes review at a cost of nearly $1 million just for filing, Facebook argues. Consequently, the company took the approach many other PTAB petitioners have taken: It challenged the claims it perceived as most perilous in three petitions before the one-year window closed. After Windy City narrowed its district court case, Facebook moved to join five new petitions to its existing PTAB case. The PTAB ended up cancelling some claims while upholding others.

The PTAB's rank-and-file administrative judges have long disagreed about whether joinder is an acceptable end around the one-year time bar. Once the PTAB institutes IPR proceedings, the AIA gives the PTO director discretion to "join as a party … any person who properly files a petition" within 30 days. The dispute is over whether that means a party can join its own proceedings. Even in Facebook's case, two of the three judges on its panel said they disagreed with the agency's interpretation.

The Precedential Opinion Panel settled the issue in March in a separate case. PTAB Chief Judge Scott Boalick wrote in Proppant Express Investments v. Oren Technologies that the AIA permits parties to join their own litigation, but that the PTAB would allow it only in limited circumstances, such as in the case of gamesmanship. Iancu and Commissioner of Patents Drew Hirshfeld concurred.

At the August Federal Circuit hearing, Prost and Judge S. Jay Plager of the U.S. Court of Appeals for the Federal Circuit signaled that they considered this to be a just outcome but one that simply can't be reconciled with the language of the America Invents Act.

"There's nothing ambiguous about the statute," Plager told Facebook attorney Keefe. "It's straightforward. It says exactly what it means. Whether that's a good idea is a whole other issue."

Plager also sounded dead set against extending deference, which he said at a minimum requires advance notice in the Federal Register. "They can do all the precedential opinions they want and they can advertise them any ways they want, and it will never qualify under the Administrative Procedure Act as a proper notice and procedure," Plager said.

Prost said that the Supreme Court's June decision in Kisor v. Wilkie set forth factors for extending a related type of deference, "and it seems to me those factors are non-existent here."

Keefe argued that the AIA explicitly supplies the PTO director discretion to permit joinder. "When Congress is silent or in fact actually passes the imprimatur onto the administrative agency, that's when Chevron deference actually applies the most," she told the court.

When Brown Rudnick's Vincent Rubino III gave his argument to the court for Windy City, Prost again asked about the PTO's absence.

"Your honor, I don't know why the Patent Office isn't here. I don't even know why they would be here," Rubino said.

"Well, your friend's left defending that we ought to give Chevron deference to a precedential opinion of their's," Prost said, referring to Keefe. The court hasn't "definitively decided" whether deference is owed. "Don't you think that's kind of significant for them?"

Following the argument the court formally invited briefing from the PTO, and on Wednesday the government responded. It argues that the PTO's implementation of the AIA should not be limited to formal regulations. "Congress certainly understood that such regulations would not and could not resolve every interpretive problem that would arise in administering the AIA," the government's brief states.

Courts defer to decisions of the Board of Immigration Appeals, the National Labor Relations Board and the International Trade Commission, the government argues, and the PTO deserves the same. The Proppant decision itself is "not foreclosed by the text" of the AIA and is reasonable in light of its text, nature and purpose.

And in this instance Facebook deserves a break, the government argues. "Despite its diligence, Facebook was unable to ascertain within one year which patent claims were at issue in the infringement litigation, because Windy City withheld that information until after the one-year bar had passed."

Asked about the agency's late entry, a PTO spokesman said the agency had no comment beyond the brief.