February 26, 2020

Thryv, Inc. v. Click-to-Call Technologies, LP

PATENT LAW

In an Appeal from the Final Written Decision of the Patent Trial and Appeal Board in an Inter Partes Review, Is the Federal Circuit Authorized to Vacate the Board’s Decision as to Patentability on the Ground that the Review was Improperly Instituted Because the Petition Was Time-Barred by 35 U.S.C. 315(B)?

CASE AT A GLANCE

The Court will consider whether Congress intended to preclude jurisdictional review of decisions not to institute an inter partes review (IPR) under the Leahy-Smith America Invents Act (AIA). Sections 315(a)(1)–(b) of the AIA provides that inter partes review also “may not be instituted” if (1) “before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent”; or (2) “the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.” Further, with respect to judicial review, Section 314(d) of the AIA provides that the United States Patent and Trademark Office’s determination whether to institute an inter partes review “shall be final and nonappealable.” The Federal Circuit, en banc, initially held that the Patent Trial and Appeal Board’s (PTAB or Board) determination that a petition is timely under Section 315(b) is reviewable on appeal, despite the categorical text of Section 314(d), based on the presumption of judicial review of agency actions. Subsequently, following the Federal Circuit’s decision in Wi-Fi One, an en banc panel of the Federal Circuit granted rehearing and held that the Board had erred in instituting inter partes review because the petition was time-barred under Section 315(b) finding that the statute “unambiguously precludes” the USPTO from instituting an inter partes review if the petition seeking institution is filed more than one year after the petitioner is served with a complaint alleging infringement of the patent at issue, “irrespective of subsequent events.” The Supreme Court will now consider the propriety of the Federal Circuit’s holding that the timeliness of a petition under Section 315(b) is not judicially reviewable based on the language of Section 314(d) in view of the “strong presumption” favoring judicial review of administrative actions.

Docket No. 18-916
Argument Date: December 9, 2019
From: The Federal Circuit
by Kean DeCarlo
Womble Bond Dickinson (US) LLP, Atlanta, GA

ISSUE

Does the language of Section 314(d) of the Leahy-Smith America Invents Act (AIA) providing that the United States Patent and Trademark Office’s (USPTO’s) determination whether to institute an inter partes review “shall be final and nonappealable” preclude judicial review of Section 315(b) time-bar determinations?

INTRODUCTION

In the AIA, and in an effort to create a more efficient patent system, Congress established new procedures, to be conducted before the Board, through which third parties may challenge the patentability of claims in issued patents. For challenges to patentability brought nine months after the disputed patent was issued, the AIA established inter partes review, which is limited to challenges based on lack of novelty or obviousness. Further, Congress authorized the USPTO to issue regulations “establishing and governing inter partes review” and “setting forth the standards for the showing of sufficient grounds to institute a review under section 314(a).”

Under the AIA and the issued USPTO regulations, inter partes review proceeds in two phases: institution and trial. Under the AIA, the USPTO is not required to institute review in any circumstance, but, conversely, the AIA identifies circumstances in which the USPTO cannot institute inter partes review. One such circumstance requires that the USPTO Director determine that “there is a reasonable likelihood that the petitioner would prevail  with respect to at least 1 of the claims challenged in the petition.” Additionally, inter partes review also “may not be instituted” if (1) “before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent”; or (2) “the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.” See 35 U.S.C. 315(a)(1)–(b).

To enable the Board to make the determination whether particular inter partes reviews should be instituted, the USPTO requires a petitioner to set forth in any petition for inter partes review a certification that the patent for which review is sought is available for inter partes review and that the petitioner is not barred or estopped from requesting an inter partes review challenging the patent claims on the grounds identified in the petition. A party dissatisfied with the decision whether to institute inter partes review may request rehearing by the Board; however, with respect to judicial review, the AIA provides that the USPTO’s determination whether to institute an inter partes review under this section shall be “final and nonappealable.” See 35 U.S.C. 314(d).

The instant case requires the Court to assess whether the Federal Circuit, based on the nonappealable preclusion language of Section 314(d), erred in holding that a USPTO’s finding that a petition for inter partes review is time-barred under Section 315(b) is not judicially reviewable on appeal.

FACTS

This dispute arises from an inter partes proceeding brought by petitioner in response to a complaint alleging infringement of U.S. Patent No. 5,818,836 (the ’836 patent). Petitioner Thryv, Inc. (formerly known as Dex Media, Inc.) is the successor in interest to Ingenio, Inc., a company formed through a 2003 merger of Inforocket.Com, Inc., and Keen, Inc. In September 2001, Inforocket had previously served on Keen a complaint alleging infringement of the ’836 patent. After Keen acquired Inforocket, however, the companies stipulated to a voluntary dismissal of the suit without prejudice.

In 2011, respondent Click-to-Call Technologies, LP, acquired ownership of the ’836 patent and, in May of 2012, sued Ingenio, among others, for infringement of that patent. Less than one year later, Ingenio petitioned the Board for inter partes review of the ’836 patent. In response, Click-to-Call argued that Section 315(b) barred institution pursuant to Ingenio’s petition because Inforocket had served Ingenio’s predecessor-in-interest Keen with a complaint alleging infringement of the ’836 patent 12 years earlier. The Board rejected that contention and instituted inter partes review on several of the challenged claims, concluding that the voluntary dismissal without prejudice of the earlier suit had left the parties as though the action had never been brought, and that the service of the 2001 complaint did not trigger Section 315(b)’s one-year time bar. After conducting the inter partes review, the Board issued a final written decision, in which it found unpatentable each of the claims on which it had instituted review.

Click-to-Call appealed the Board’s decision to the Federal Circuit, seeking review exclusively “of the Board’s decision to institute” inter partes review. The government intervened and argued that the Board’s application of Section 315(b) in the institution decision was unreviewable and that the Board’s application of that provision was correct. Initially, relying on its earlier decision in Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015), cert. dismissed, 136 S. Ct. 998 (2016), the court of appeals held that Section 314(d) prohibits the court from reviewing the Board’s determination to initiate inter partes review proceedings based on its assessment of the time-bar of Section 315(b). Additionally, the court of appeals held that the Board’s decision did not amount to ultra vires agency action that might fall into the implicit and narrow exception to statutory bars on judicial review.

In 2016, this Court granted Click-to-Call’s petition for a writ of certiorari, vacated the court of appeals’ judgment, and remanded the case for further consideration in light of the Court’s intervening decision in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). On remand from this Court, and relying on its then-recent holding in Wi-Fi One, LLC v. Broadcom Corp., 837 F.3d 1329 (Fed. Cir. 2016), the court of appeals again dismissed for lack of jurisdiction holding that Cuozzo did not overrule the court’s previous decision in Achates. The appeals court held that later panels of the court remain bound by the holding in Achates that Section 314(d)’s reviewability bar applies to Section 315(b) determinations.

Subsequently, the Federal Circuit agreed to rehear Wi-Fi One en banc. The en banc court in Wi-Fi One held that the Board’s determinations regarding the time bar in Section 315(b) are reviewable by the court of appeals notwithstanding Section 314(d), reasoning that the strong presumption favoring judicial review of administrative actions is limited to the determination by the Director whether to institute inter partes review under Section 314. The Wi-Fi One court concluded that Section 314(d) does not preclude review of the Director’s Section 315(b) determination because Section 315(b) is not closely related to the institution decision addressed in Section 314(a). The dissent noted that the plain text of Section 314(d) makes Congress’s intent to preclude judicial review of the Board’s time-bar determinations clear.

Following the panel’s decision in Wi-Fi One, the Federal Circuit granted rehearing and issued a revised opinion, holding that the Board had erred in instituting inter partes review because the petition was time-barred under Section 315(b). The Federal Circuit panel held that Section 315(b) precludes the USPTO from instituting an inter partes review if the petition seeking institution is filed more than one year after the petitioner is served with a complaint alleging infringement of the patent at issue, “irrespective of subsequent events.” The court therefore vacated the Board’s final written decision and remanded for the agency to dismiss the petition for inter partes review.

Thryv, Inc., petitioned the Court for a writ of certiorari on January 11 2019, and, on June 24, 2019, the Court granted the petition.

CASE ANALYSIS

In this case, the Court must determine whether the Federal Circuit’s holding that the USPTO’s determination whether a petition for inter partes review is time-barred under Section 315(b) is not judicially reviewable is consistent with the statutory text and the specific and explicit congressional intent of the AIA.

On the issue of whether a disappointed inter partes petitioner can seek judicial review on appeal of the USPTO’s finding that a petition for inter partes review is time-barred under Section 315(b), petitioner and respondent frame the issue before the Court in different ways. Petitioner frames the issue as a misconstruction of the statutory structure and purpose of Sections 314(d) and 315(b) and a misapplication of the presumption that a statute provides for judicial review of agency decisions, noting that such a presumption is overcome only when there are clear and convincing indications that Congress intended to preclude judicial review. Contrarily, respondent suggests that the question be framed as whether the judiciary retains its usual power to set aside agency action not in accordance with law or in excess of statutory jurisdiction, authority, or limitations.

Petitioner argues that the AIA contains clear and convincing indications that Congress intended to preclude judicial review of the Patent Trial and Appeal Board’s (PTAB’s) determination that Section 315(b)’s time bar does not apply. Because the decision whether the Section 315(b) time bar applies is an integral part of the institution decision as a condition precedent for institution, petitioner suggests that Congress specifically contemplated that the patent owner would assert the time bar in its response to the filed inter partes petition. Petitioner argues that Congress directed the agency to consider this response in deciding whether to institute an inter partes review. Petitioner argues that this interpretation is confirmed by the appeal provisions of the AIA that provide for judicial review only of the final patentability determination and is also confirmed by other Patent Act restrictions on judicial review, which were written more narrowly to preclude appellate review only of the agency’s preliminary merits determinations, not its holdings on other aspects of the institution decision.

Petitioner finds support in the Court’s decision in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016). Petitioner notes that Cuozzo held that Section 314(d) applies to a statute closely tied to the application and interpretations of statutes related to the Patent Office’s decision to initiate inter partes review. Because Section 315(b) is a condition precedent to institution, petitioner argues that the PTAB’s decision that Section 315(b) is inapplicable to a patent-infringement complaint subsequently dismissed without prejudice does not fall within the exceptions to nonreviewability recognized in Cuozzo.

Petitioner further argues that the Court’s decision in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), did not alter the holding in Cuozzo that Section 314(d) precludes judicial review where the question is closely tied to the decision to institute an inter partes review. Petitioner distinguishes SAS Institute, noting that the statute provision at issue in that case becomes relevant only after the institution decision is made. According to petitioner, SAS Institute allowed judicial review because that provision defined the scope of an inter partes review that has been instituted. Conversely, petitioner argues that the one-year time bar in Section 315(b) implicates whether review can be instituted in the first place, not the scope of the inter partes review trial after the inter partes review begins. Thus, petitioner argues that both Cuozzo and SAS Institute confirm that the PTAB’s patentability decisions made at institution phase of the inter partes review process, which includes time-bar determinations under Section 315(b), are unreviewable. Petitioner suggests that the Federal Circuit’s holding that appellate review is proscribed only for determinations “closely related” to the Board’s preliminary patentability determination is inconsistent with both the language of the statute and this Court’s decision in Cuozzo.

Petitioner further suggests that the overall purpose of the AIA confirms that Section 314(d) was meant to preclude judicial review of timeliness determinations under Section 315(b) and that this purpose would be eviscerated by allowing the Federal Circuit to overturn the PTAB’s patentability decisions based on preliminary procedural rulings. Petitioner argues that requiring relitigation of patentability findings already made by the expert agency, based only on disagreement with the agency’s preliminary procedural rulings, would not only be inefficient and a waste of the Board’s scarce resources, but also harmful to the public interest by allowing patent owners to enforce invalid patents.

The government argues that the text, structure, and history of the AIA demonstrate that the USPTO’s Section 315(b) determinations are not reviewable. The government suggests that a contention that the Director unlawfully instituted review based on a misapplication of Section 315(b) is thus “final and nonappealable” under the plain text of Section 314(d). The government argues that if Congress had intended to preclude judicial review only of the Director’s threshold patentability determination, and not the other prerequisites to institution, it could easily have adapted the language of former Section 312(c) to Section 314(a)’s new “reasonable likelihood” standard. Instead, it chose the broader language of Section 314(d), and the government argues that the Court should respect that choice.

The government looks to Cuozzo to analogize that the USPTO’s Section 315(b) determinations are not reviewable. In that case, the Court found that a challenge to the USPTO’s institution decision based on an alleged misapplication of the “particularity” requirement in Section 312(a)(3) was unreviewable on appeal from the Board’s final written decision. For support, the government further cites the Court’s SAS Institute holding that Section 314 authorizes the Director to determine whether to institute the requested review, not whether and to what extent review should proceed, and it notes that SAS Institute did not challenge the agency’s determination whether review should be instituted, but only the scope of that review.

The government further notes that precluding review of the USPTO’s Section 315(b) determination is consistent with the AIA’s purposes. Allowing judicial review of a petitioner’s challenge to the Board’s institution decision would undermine Congress’s objective to give the USPTO “significant power to revisit and revise earlier patent grants,” by permitting the Federal Circuit to unwind the Board’s final decision on patentability on the basis of an unrelated threshold determination. The government suggests that enforcing Section 314(d) in accordance with its broad literal terms would enhance Congress’s efforts to improve patent quality by focusing judicial review on the merits of the Board’s patentability determinations.

Finally, the government argues that the Federal Circuit’s interpretation of Section 314(d) does not meaningfully serve the purposes of Section 315(b)’s time bar. The government notes Section 314(d)’s purpose is not to prevent the USPTO from reconsidering the validity of any particular patent, but rather to manage the burden on patent owners and minimize the wasted resources that duplicative judicial and administrative proceedings might entail.

Respondent argues that, under Section 315(b), Congress placed a clear limit on the USPTO’s authority, and nothing in Section 314(d) suggests that Congress left the agency as the sole arbiter of its own jurisdiction. Respondent argues that there is a strong traditional presumption favoring judicial review and that that presumption cannot be overcome without a compelling showing. Respondent argues that such a presumption suggests that courts have the authority to review the USPTO’s construction of Section 315(b) because plain language of Section 314(d) forecloses the judiciary’s role.

Respondent suggests that a plain-text interpretation of Section 314(d) supports the argument that Congress was focused on the initial merits determination found in Section 314(a), not statutory limits imposed elsewhere in that chapter. Respondent suggests that Congress is not in the habit of handing agencies blank checks and further suggests that if the USPTO exceeds its statutory authority, then judicial review is necessary to ensure proper agency function.

Respondent further claims that this Court has already rejected the foundation of the government’s and petitioner’s argument in SAS Institute and asserts that the USPTO does not have unreviewable authority to construe the outer limits of its own power. Respondent suggests that there is no indication that Congress stripped the courts of their traditional reviewing function and that Cuozzo, as correctly applied, limits Section 314(d)’s bar to the Director’s institution decision under Section 314(a)—not the Director’s interpretation of the entire statutory framework.

Respondent further suggests that protecting judicial review also advances Congress’s objectives in the AIA of preventing waste and abuse that might tax judicial and party time and resources. Respondent argues that any costs “squandered” in an individual proceeding are more than outweighed by the costs saved on a systemic level through the use of judicial review.

The Federal Circuit Bar Association (FCBA), as amicus in support of neither party, argues that the AIA does not afford the Director unfettered discretion to institute an inter partes review. Rather, the Director may institute an inter partes review only if certain enumerated conditions are met, and is not obligated to do so under any circumstances. Accordingly, the Court has labeled the Director’s authority as discretion to “deny” institution of inter partes review. The FCBA suggests that the language of Section 315(b) does not afford the Director any actual discretion, but rather requires him not to institute an inter partes review if the restrictive one-year time bar condition is met. Therefore, the FCBA argues that any institution of an inter partes review upon an untimely petition would exceed the Director’s authority under Section 315(b) and that, under well-settled legal principles, any agency action that exceeds its statutorily granted authority should be appealable to consider whether the Director exceeded his statutory authority.

As amicus in support of neither party, the PTAB Bar Association (PTAB) notes that inter partes review strikes a balance between patent challengers’ interest in deferring challenges until the significance of a patent is clearer, and patent owners’ interests in finality. In one instance, inter partes review allows parties to wait to seek inter partes review until the value of the patent is better understood, and PTAB highlights that the deadline for seeking inter partes review is not tied to when the patent was issued. Rather, under Section 315(b), the deadline is keyed to service of a complaint alleging infringement of the patent. As a result, PTAB argues that putative petitioners need not decide whether to challenge a patent before they are sued, reducing the likelihood that the Patent Office will be burdened by proceedings on claims that may lack value. Thus, PTAB argues that potential inter partes review petitioners can instead defer the effort and expense to challenge a patent until the patent’s significance is clearer, that is, when the patent is used as the basis for an infringement action, and a year of litigation crystallizes the most important patent claims. PTAB further suggests that the Court’s opinion in this case can have far ranging implication for the reviewability of time-bar and other determinations in multiple different statutory AIA contexts as well.

Atlanta Gas Light Company (Atlanta Gas), as amicus in support of petitioner, notes that Congress enacted the AIA’s post-issuance review provisions in an effort to improve the quality of patents and to shorten and streamline disputes about patent validity. Atlanta Gas argues that, because patents grant monopoly power, post-issuance review serves the public interest by removing patent restrictions on subject matter that never should have been removed from the public domain in the first place. Atlanta Gas argues that the Federal Circuit’s decision erroneously allows the courts to reverse, on a procedural technicality, a merits finding by the Patent Office that a patent claims unpatentable subject matter. Atlanta Gas notes that such a ruling sends the parties to district court to relitigate issues of patent validity that the Board has already decided, wasting resources that Congress specifically sought to preserve. Further, Atlanta Gas argues that the Federal Circuit’s decision defeats the public purpose of inter partes reviews by returning to private hands subject matter that the Patent Office has determined belongs in the public domain.

As amicus in support of the petitioner, Intel Corporation (Intel) suggests that the AIA’s strict limitations on judicial review reflect Congress’s judgment that appellate review should focus on patentability and that the Board’s invalidation of a patent should not be overturned on the basis of procedural technicalities. Intel suggests that because a patentee will appeal the Board’s timeliness determination only when the Board has instituted review and invalidated the patent, appellate review of the issue will invite the Federal Circuit to overturn the Board’s invalidation of a patent for reasons having nothing to do with patentability. At the same time, judicial review of timeliness determinations is not necessary to protect any recognized interest of the patentee. Intel argues that the time bar does not protect any private interest in repose, as Congress provided that any person may petition  for inter partes review at any time during the life of the patent, but, rather, suggests that the time bar is designed to prevent the inter partes review proceeding from interfering with pending infringement litigation. Intel further argues that permitting appellate review of the Board’s timeliness determinations will undermine the efficacy of inter partes review and will enable patentees to reinstate patents that the expert agency has held to be invalid, thereby undermining the public interest in promoting innovation. Intel points to the Court’s opinion in Cuozzo, in arguing that Congress determined that “bad patents,” and the high cost of litigating patent validity in court, impede the innovation encouraging policies of the patent system.

ON Semiconductor Corporation, et al. (ON), as amicus in support of petitioner, argues that under the plain text of the statute, an improperly granted patent was not intended to be revived on appeal based solely on alleged error in the institution decision. ON argues that by finding that inter partes review unpatentability rulings can be vacated based on review of the petition’s timeliness, the Federal Circuit has deviated from the plain language of section 314(d), which contradicts Cuozzo and frustrates the purpose of the statutory scheme. ON further suggests that the Federal Circuit’s decision allows invalid patents to be left in play based not on their merit but rather solely because the Federal Circuit disagrees with the PTAB’s decision that a petition was not time-barred. Once left in play, ON suggests that such invalid patents continue to impede innovation and product development and to impose detrimental costs on the public in the form of higher prices, diminished product availability, and reduced confidence in the patent system.

Superior Communications Inc. (Superior), as amicus in support of petitioner, notes that, as a practical matter, permitting judicial review of a PTAB institution decision allows a patent owner (after the patent has been determined to be invalid) to set aside the invalidity determination and continue to enforce an invalid patent against the public, based solely upon an error in the institution decision having nothing to do with the merits of the validity issue. Inter partes review proceedings were intended to be a less costly alternative procedure to litigation for determining the validity of a patent. Superior argues that Congress could have set up the inter partes review process to involve just a final written decision, but its choice to forbid appeal only of the institution decision reflects that Congress did not intend for the outcome of an inter partes review to be overturned, after the expenditure of significant resources directed to a determination of the validity of the patent, based solely upon an error in the institution decision. Thus, Superior suggests that permitting the outcome of the administrative proceeding to be set aside, after the fact, based solely upon an error in the institution decision, effectively turns the Congressional scheme on its head and results in the inter partes review process becoming a more expensive and wasteful alternative for eliminating invalid patents.

As amicus in support of neither party, the American Intellectual Property Law Association (AIPLA) argues that, consistent with the Court’s opinions in Cuozzo and SAS Institute, Section 314(d) should not prohibit review of the Board’s determination that it has complied with the limits placed on it under Section 315(b) as that determination is not “closely related” to the Board’s determination under Section 314(a) that there is a reasonable likelihood the claims are unpatentable on the grounds asserted in the petition. Having placed limits on the Board’s ability to institute inter partes review proceedings under Section 315(b), AIPLA suggests that Congress did not intend to remove appellate review of such time-bar determinations.

AARP and AARP Foundation (AARP), as amicus in support of petitioner, argues that Section 314(d), along with all sections of the America Invests Act, must be interpreted to effectuate the overriding goal of the statute. AARP notes the congressional record describes the purpose of the Act as allowing invalid patents that were mistakenly issued by the USPTO to be fixed early in their life, before they disrupt an entire industry or result in expensive litigation.

As amicus in support of respondent, New York Intellectual Property Law Association (NY IPLA) argues that action by the USPTO outside its statutory limits or in excess of statutory jurisdiction may be properly reviewable in an appeal from a final written decision in an inter partes review proceeding petition. NY IPLA notes that the statutory time bar at issue here is not some minor statutory technicality, but is part of the fundamental statutory basis on which Congress authorized the USPTO to institute an inter partes review proceeding. NY IPLA argues that the USPTO would be acting outside its statutory limits and in excess of statutory jurisdiction, if it institutes an inter partes review based on a time-barred petition. Thus, the NY IPLA suggests that the Federal Circuit’s holding that the time-bar determination is subject to judicial review avoids turning the statutory limits on the USPTO’s authority into a nullity and upholds the strong presumption in favor of judicial review.

The Pharmaceutical Research and Manufacturers of America (PhRMA), as amicus in support of the respondent, suggests that the statutory text and structure confirm that Section 314(d) renders nonappealable only the agency’s discretionary determination under Section 314(a), that is, whether to institute inter partes review based on a conclusion that a petitioner has a reasonable likelihood of prevailing with respect to at least one of the claims challenged. PhRMA further suggests that the text of Section 314(d) does not insulate from judicial review the agency’s determination of the mandatory prohibition in Section 315(b) on conducting inter partes review of a petition that is not filed within a year of service of an infringement complaint, a rule which governs the relation of inter partes review to proceedings in federal court. PhRMA also argues that the Section 314(a) determination of whether to institute review based on a reasonable likelihood of a petition succeeding on at least one of the claims challenged is the type of determination commonly committed to agency discretion. By contrast, PhRMA suggests that the Section 315(b) time bar goes to the limits of the agency’s statutory authority and Congress’s desire for inter partes review not to interfere unduly with court proceedings. PhRMA notes that such questions are of a type that are rarely, if ever, insulated from judicial review.

The Biotechnology Innovation Organization (BIO), as amicus in support of the respondent, argues that the USPTO exceeds its statutory authority when it institutes inter partes review in violation of the text of Section 315(b). BIO notes that Section  314(d) shields from judicial review the determination “whether” to institute an inter partes review, which by its terms connotes discretion to choose between two alternatives. However, BIO argues that the USPTO has no discretion to institute an inter partes review based on a time-barred petition. BIO further suggests that judicial review of the USPTO’s construction of Section 315 is necessary to protect against abuses in the patent system because the USPTO’s erroneous construction of multiple provisions of Section 315 has bred abuse and encouraged harassment of patent holders.

As amicus in support of respondent, Professor Stephen I. Vladeck (Vladeck) argues that it would be fundamentally inconsistent with the Court’s clear statement rules regarding judicial review, and the institutional values they represent, for the Court to rule that courts lack power to review interpretations by the USPTO of the time bar in 35 U.S.C. § 315(b). Because Congress provided no clear statement, in Section 315(b), Section 314(d), or anywhere else, that it intended to cut off judicial review of those interpretations, Vladeck argues that it is unambiguous that Congress intends for decisions interpreting Section 315(b) to be reviewable under the language of clear statement rules.

Power Integrations, Inc. (Power), as amicus in support of respondent, argues that the policy arguments, particularly those policy arguments suggesting that this Court should reverse the Federal Circuit because judicial review would impede the inter partes review process thereby preventing the Board from invalidating bad patents, lack merit. According to Power, these policy arguments fail both because inter partes reviews are not an unmitigated good, and because enforcing the Section 315(b) time bar (including through judicial review) helps to prevent serial challenges to valid patents.

Professors of Patent and Administrative Law (PPAL), as amicus in support of respondent, suggest that judicial review of Section 315(b) time-bar determinations is foundational to safeguarding the court-agency balance of patent powers, whose scope and impact extend well beyond the PTAB and into the courts. Accordingly, PPAL argue that the Federal Circuit’s conclusion that such review is available correctly applies this Court’s guidance in Cuozzo and is strengthened even further by this Court’s subsequent decision in SAS Institute.

SIGNIFICANCE

A decision reversing the Federal Circuit’s holding that the timeliness of a petition under Section 315(b) is not judicially reviewable based on the language of Section 314(d) in view of the “strong presumption” favoring judicial review of administrative actions would enable patentees to reinstate patents that the expert agency has held to be invalid, thereby undermining the public interest in promoting innovation and could also undermine the efficiency and cost-effectiveness of inter partes review. Further, allowing judicial review of USPTO determination that a petition was time-barred under Section 315(b) could create uncertainty and make it more difficult for parties to weigh predictably the costs and benefits of inter partes review proceedings.

However, the Court’s affirmation of the Federal Circuit’s holding that the Board had erred in instituting inter partes review because the petition was time barred under Section 315(b) would allow for judicial scrutiny of the application of Section 315, which could promote efficiencies in future adjudicatory proceedings and provide clarity to all participants in the patent system.

ISSUE

Does the “discovery rule” apply to the one-year statute of limitations under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq.?

FACTS

Petitioner Kevin Rotkiske incurred about $1,200 in credit card debt between 2003 and 2005. In March 2008, the respondents Klemm & Associates and Paul Klemm attempted to sue the petitioner, but the suit was withdrawn because service was ineffective. In 2009, the respondents again attempted to serve the petitioner at the same address. According to the respondents, Klemm changed firms and not all the file data merged, due to software incompatibility. An affidavit of service was filed. The petitioner claimed the affidavit falsely stated that a suitable adult had been served. Later that year, a default judgment was entered against the petitioner. The petitioner said he was not aware of the lawsuit or the judgment until he attempted to get a mortgage in 2014. Within a year of “discovery,” the petitioner sued respondents under the FDCPA alleging ineffective or fraudulent service. The district court dismissed the suit as untimely because it was outside of the FDCPA’s one-year statute of limitations. A Third Circuit panel heard the case but before an opinion was issued, the court sua sponte ordered an en banc hearing. It then affirmed the dismissal, saying the statute began to run at the time of the violation, not when it was discovered. The Third Circuit is at odds with the Fourth and Ninth Circuits, which follow the discovery rule.

CASE ANALYSIS

Application of the discovery rule would benefit a claimant such as the petitioner by delaying or suspending the running of the statute of limitations until the claimant knew or should have known of the violation of the statute. The petitioner points out that the FDCPA proscribes a wide range of violations that may occur without immediate awareness by the debtor. He states that he is a “quintessential blamelessly ignorant” plaintiff, the “victim” of a fraudulent affidavit of service. He points out that the willful failure to properly serve a complaint but nevertheless file proof of service is common enough to have its own name in the debt collection industry—”sewer service.”

According to the petitioner, the fundamental question before the Court is whether an equitable doctrine, i.e. the discovery rule, may be included in the statute or whether the text forecloses that possibility.

Equitable tolling, where a court ameliorates the impact of a statute of limitations, is a similar but not identical remedy. The Third Circuit said, in apparent contrast to its holding, that the court may permit equitable tolling but not in this case because it was not raised on appeal.

The parties appear to agree that the statute of limitations is not a statute of repose. A statute of repose is a harder end date that generally benefits defendants and would preclude an equitable remedy.

But the law does not clearly state that an FDCPA claim is time-barred after a year from discovery, petitioner says. “The answer to that question lies elsewhere—in the common law reflected in, and developed by, this Court’s decisions, and in the remainder of the FDCPA itself, whose purpose and structure strongly suggest the discovery rule applies,” the petitioner asserts.

The case thus explores the application of common law principles to statutes. The petitioner asserts that the caselaw preceding the FDCPA would have led Congress to conclude that a suit like the petitioner’s, brought within a year of discovery, would not be dismissed as untimely. Nothing in the statute indicates the caselaw does not apply, as would be expected if that was Congress’s intent, the petitioner argues.

Petitioner goes back to the 1874 case of Bailey v. Glover, 88 U.S. 342, a bankruptcy case that said a fraud prevented the statute of limitations from running. The Court upheld Bailey in 1918 and again in 1946 in Holmberg v. Armbrecht, 327 U.S. 392. In the latter case, the Court said that the equitable doctrine is read into every federal statute of limitation (emphasis by petitioner).

More cases followed, culminating with American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974). In that case, the Court said, “the mere fact that a federal statute providing for substantive liability also sets a time limitation upon the institution of suit does not restrict the power of the federal courts to hold that the statute of limitations is tolled under certain circumstances not inconsistent with the legislative purpose.”

The petitioner then turns to the purposes and structure of the FDCPA to suggest that the discovery rule applies. Here he reminds the Court that abuse and deceit are what led Congress to regulate debt collection in the first place.

One of the techniques that Congress employed is private civil lawsuits, the petitioner continues. It also structured the law to include a remedy in numerous situations where the victim is unaware of the violation at the time, he argues (which contradicts the Third Circuit’s assumption that victims will generally be aware of FDCPA violations). “The existence of victims ‘blamelessly ignorant’ of FDCPA violations giving rise to liability is a logical consequence of the statute’s provisions—not an anomaly,” he states. The scheme set up by Congress would be impaired by effectively immunizing “broad swaths of misconduct,” hurting consumers and undermining the legislative goal of putting creditors and debtors on a level ground.

In conclusion, the petitioner points out that the purpose of most statutes of limitations is to protect defendants against stale claims, but that purpose is not served in the case of a blamelessly ignorant plaintiff.

The respondents are adamant that the plain text of the law is unambiguous and means that the statute of limitations begins to run when the violation occurs, and that Supreme Court caselaw confirms that. “When the violation occurs” means when the violation occurs, and not a different date depending on an extra-textual reading. The Supreme Court should resolve this case under standard tools of statutory interpretation, respondents assert.

The respondents first turn to TRW Inc. v. Andrews, 434 U.S. 19 (2001), where the Court said that the words “from the date on which the liability arises” did not incorporate the discovery rule. Congress knows how to incorporate such a rule, the respondents noted.

And in Gabelli v. SEC, 568 U.S. 442 (2013), the language “from the date when the claims first accrued” foreclosed the discovery rule, respondents continue. That was the result even when fraud was involved.

If the plain meaning of the statutory language is insufficient to settle the matter, the respondents continue, its reading of the law also advances the purposes of limitations periods and of the FDCPA. That includes repose, elimination of stale claims, and certainty about a plaintiff’s potential recovery.

That’s because the FDCPA is not only about bad actors, it is about ensuring that responsible debt collectors do not face unfair competition, respondents assert. “It is no secret that the FDCPA created incentives for lawyers to file a high volume of flimsy FDCPA suits to win a few quick settlements. Reading the discovery rule into the statute would only exacerbate this problem and increase the costs of defense,” respondents warn.

The respondents appear to want to end the discussion there, saying the petitioner’s contrary arguments are unavailing. They claim that the petitioner ignores the text while promoting a common-law default presumption in favor of discovery. There is no such wide-ranging presumption and if there were, the unambiguous statute would override it, respondents continue. Congress has recognized such a presumption only when the law “cries out for application of the discovery rule,” such as in fraud cases, respondents assert. In other cases, the “standard” rule was established in Bay Area Laundry and Dry Cleaning Pension Trust Fund v. Ferbar Corp. of Cal., 522 U.S. 192 (1997). There, the Court held the limitations period commences when the plaintiff has a complete and present cause of action. Bay Area Laundry has since been restated at least five times, respondents argue.

Respondents tersely continue that “debt collection hardly fits that bill” and that violations of the statute will be obvious, which some might question. Of course, the petitioner claims that the false affidavit of service makes this a fraud case, as he points out in his reply brief. The case is before the Court on a motion to dismiss, which means that petitioner’s allegations should be accepted as true.

Respondents continue by asserting that the remainder of the petitioner’s argument is really about equitable tolling, which turns on specific facts. Not only is the application of equitable tolling unlikely, it is not the question litigated below or on which the petitioner sought certiorari, which are important procedural considerations, the respondents argue. Respondents note that the district court did not apply equitable tolling and the petitioner did not challenge it. Petitioner submits that the respondents have conceded that equitable principles may apply to a FDCPA claim since they argued that the petition for certiorari should be denied because equitable tolling was available to the petitioner.

SIGNIFICANCE

Statutes of limitations and tolling periods are generally productive fodder for litigation. This case likely will resolve a split in the circuits and thereby decide whether there is a common law  discovery rule under this statute, which will supply obviously needed clarification.

As would be expected, amici have weighed in on both sides, with the United States supporting the respondents and having the opportunity to argue before the Court. The solicitor general argues that there is no “discovery rule presumption” and if there was, it would be superseded by the statute. This approach would relieve the courts of having to decide when a plaintiff discovered, or should have discovered, a violation of the statute. Equitable tolling might save the petitioner’s case, if he had not forfeited the argument in proceedings below, the solicitor general argues. The Court could decide the case without any ruling on equitable tolling.

Other amici aligned with creditors to urge the Court to keep the one-year statute on pain of a tsunami of litigation over an extra-textual reading of the statute, pointing out that there is no statute of repose in the FDCPA. Similarly, some lawyers say the case is important to class action practice “because the FDCPA is one of those many ‘gotcha’ statutes that offer classwide statutory damages for technical violations, and a discovery rule could reopen endless events of the past to fresh litigation today.” https://www.jdsupra.com/legalnews/time-stops-for-no-one-the-supreme-court-87899/

But other amici, including the National Consumer Law Center, urge the Court not to automatically foreclose claims after one year. Debt collection is often accompanied by deception and abuse, it argues, and this impacts low-income persons, the elderly, and persons of color particularly disproportionally. It presents the Court with many examples of situations where statutory violations were not discovered within a year, including some based on bad service of process.

A group of law professors urge the Court to consider the origin of the discovery rule, which is in fraud cases. While they disagree that equitable tolling applies, they argue that “because Congress legislates against this background, statutes that neither expressly include nor expressly preclude a discovery rule are best read to include a discovery rule in cases of alleged fraud,” including this one.

Barbara L. Jones is an attorney and editor of Minnesota Lawyer newspaper. She can be reached at barbarajones14@comcast.net or 651.587.7803.

PREVIEW of United States Supreme Court Cases 47, no. 1 (October 7, 2019): 36–38. © 2019 American Bar Association

ATTORNEYS FOR THE PARTIES

  • Attorneys for Petitioner Kevin C. Rotkiske (Scott E. Gant, 202.237.2727)
  • Attorneys for Respondents Paul Klemm, et al. (Shay Dvoretzky, 202.879.3939)

AMICUS BRIEFS

In Support of Petitioner Kevin C. Rotkiske

  • National Consumer Law Center (Stuart Todd Rossman, 617.542.8010)

In Support of Respondents Paul Klemm, et al.

  • ACA International (Megan Starace Ben’Ary, 703.647.5933)
  • Mortgage Bankers Association and the Chamber of Commerce of the United States of America (Elaine Janet Goldenberg, 202.220.1114)
  • National Creditors Bar Association (Misha Tseytlin, 312.759.5947)
  • Receivables Management Association International, Inc. (Donald S. Maurice Jr., 908.237.4570)
  • United States (Noel J. Francisco, Solicitor General, 202.514.2217)

In Support of Neither Party

  • Samuel L. Bray, David Marcus, and Stephen C. Yeazell (Stuart Banner, 310.206.8506)