Yearly Archives: 2021

Patent Fake News

Feb 22, 2021 Jack BeermannAdd a Comment

Complaints about the patent system are legion. Critics complain that it is too easy to get a patent, that it is too easy to challenge an existing patent, that many patent denials are rationally inexplicable, that aggressive enforcement of patents stifles innovation, that patent trolls abuse the system to extort money from innocent users of widespread technology, and that inventors leverage modest modifications of existing patents to extend the patent period beyond intended legislative limits. While Janet Freilich’s forthcoming article, Ignoring Information Quality, may not reveal the root of all patent evil, it illuminates an important problem in the U.S. patent system, namely that patent examiners rely on low quality information to make their ever-important decisions on patentability. This, according to Professor Freilich, leads examiners to grant patents based on dubious claims that undercut, rather than further, patent law’s purpose of encouraging useful innovation and to reject deserving patents based on an incorrect understanding of background information.

The attentive reader may wonder why this is an administrative law jot rather than an intellectual property one. The answer is simple—the Patent and Trademark Office (PTO), the agency that grants patents, is an administrative agency, and thus Professor Freilich’s article is a case study in the importance of high quality information across the spectrum of administrative law. Information quality problems like those that plague the patent system exist in many corners of administrative law where sensible policy decisions and predictions are possible only in light of high quality information. Professor Freilich’s paper shines a light on a problem in the patent system that is similar to problems that have been noticed in administrative rulemaking, where mountains of comments may overwhelm the capacity of agencies to separate the wheat from the chaff and in adjudications where subjects of administrative action in areas such as immigration enforcement may lack the capacity or knowledge to gather and present the facts relevant to their cases.

Through careful examination of numerous patent files and caselaw on patent validity, Professor Freilich illustrates that patent examiners are not “digging” (her word) into the quality of evidence that is key to whether an invention is patentable. This is because, as courts have acknowledged, examiners lack the capacity to do the scientific work that would be necessary to evaluate the information. Patents may be granted or denied based on a cursory look at information that, with appropriate inquiry, would be revealed to support the opposite conclusion. Freilich contends, quite persuasively, that examiners’ “failure to evaluate evidence . . . permeates every aspect of examiner behavior.” If true, and Freilich’s article seems to establish that it is true, what we have is an unreliable administrative system for making highly consequential determinations, something administrative law should not tolerate.

Even more startling, in my view, is Professor Freilich’s analysis of the PTO’s policies which seem to guarantee that patent awards will be based on low quality, biased information. One key element of patentability is that an invention must be “useful.” PTO rules tell examiners that ordinarily they should accept an applicant’s assertion that their invention is useful and should only “rarely” request additional evidence. Even further, the PTO’s rules specify that the claim that an invention is useful should be rejected mainly only when the claim violates a scientific principle. Professor Freilich summarizes this as a requirement that examiners “accept the applicant’s stated utility unless it is utterly impossible.” This extreme standard does not inspire confidence in the accuracy of patent determinations.

Professor Freilich supports her claim that examiners rarely inquire into the quality of the information contained in the patent application with research that indicates that when examiners reject patent applications, it is always because a required piece of information is absent, not because the information provided is of insufficient quality. This is a disturbing finding because patentability depends on the accuracy of the information provided by the applicant, not merely whether the applicant has completed all of the required sections of the application.

Professor Freilich proposes to address the pervasive problem of low quality information in the patent system in a number of ways, all of which could be applied across a wide spectrum of information-dependent administrative proceedings. Professor Freilich’s first, quite simple, proposal is to require applicants to provide scientific corroboration for their conclusory statements on the elements of patentability, such as lab notebooks, copies of scientific analyses and physical models, or detailed drawings. She also suggests that all parties to patent applications, including inventors and their attorneys, should be held rigorously to a duty of disclosure to the PTO, with penalties such as additional scrutiny applied to applicants and their agents who do not disclose all relevant information in a useful format. Finally, she observes briefly that automation in the form of artificial intelligence may be useful tools for improving PTO performance.

Another of Professor Freilich’s proposals raises a central issue in administrative law—deference. In light of the generally low quality of information underlying many patents, she proposes that courts should no longer presume that patents are valid, at least not with regard to those elements that are fact-dependent. In her view, the patent process should be viewed more like a registration system than an examination system. In this light, courts would presume only that the PTO’s formal requirements have been satisfied, while leaving the substantive question of patentability open to non-deferential judicial determination. Professor Freilich recognizes that post hoc judicial determination is far from ideal, preferring her proposed internal reforms, but she recognizes that until the PTO starts performing more reliably, it may be the only alternative.

Professor Freilich’s article should be of interest to two groups of scholars, most obviously patent scholars but more broadly administrative law scholars looking to broaden their perspective into agencies that are rarely considered in the general study of administrative law. We have seen in recent decades a judicial broadening of the scope of general principles of administrative law to agencies that previously seemed to function in their own, isolated, spheres. Perhaps the PTO will be next.

Defending “Universal Vacatur” — Nationwide Injunctions for Administrative Law Nuts

Jan 19, 2021 Michael E HerzAdd a Comment

The nationwide injunction has seized the imagination of courts and law professors in recent years. Not surprisingly, JOTWELL’s pages screens have given it extensive attention. Recent jots have described important work by Samuel Bray (twice), Amanda Frost (also twice), Russell Weaver, and Alan Trammell that attacks, defends, or theorizes nationwide (or “universal”) injunctions. Jack Beermann, in praising Bray and Frost, did have one complaint: “As an administrative law nut, I wish they both grappled more with the meaning of the APA’s instruction that reviewing courts should ‘hold unlawful and set aside’ unlawful agency action.” Mila Sohoni has now filled that void. Sohoni convincingly shows that there just can be no question that in the Administrative Procedure Act Congress authorized—indeed, indicated a preference for and established a presumption in favor of—nationwide relief when a court finds a regulation defective. When APA § 706(2) authorizes a reviewing court to “set aside” an agency rule, it means exactly that.

In 2018, Attorney General Jeff Sessions distributed Litigation Guidelines instructing civil litigators in the Department of Justice (DOJ) to oppose universal injunctions always and everywhere. The memo’s seven sections gave seven reasons why such relief was beyond the pale, including the assertion that it was unconstitutional. Section VII was headed: “In APA Cases: Universal Vacatur is not Contemplated by the APA.” Sohoni’s article resoundingly contradicts this assertion.

The term “universal vacatur,” used by DOJ and adopted by Sohoni, is a neologism. No court has ever used it, and a Westlaw search of the secondary legal literature reveals only two usages: one in the current article and the other an article by . . . Mila Sohoni. When a court finds an agency regulation unlawful, the order typically “vacates” the rule; that action is “vacatur.” There is some dispute about whether and when a court can or should remand a defective rule to an agency without vacating it—a practice the Administrative Conference of the U.S. has endorsed though only in limited circumstances—which is known as “remand without vacatur.” But there has not been any disagreement about what “vacate” means in this setting: to “vacate” a rule or portion thereof means to set it aside or to invalidate it, period. Therefore “universal vacatur” at least borders on redundancy. Still, Sohoni adopts the term, explaining that while it “is relatively unfamiliar (and perhaps a bit loaded), it does crisply capture the concept of setting aside a rule not just as to the plaintiffs, but as to anyone.” Let it be some solace to DOJ that it has won the (terminological) battle even though it has lost the (substantive) war.

Sohoni begins by situating universal vacatur within the administrative law context. Challenges to statutes often arise in the context of the application of the statute to a particular person; to grant the litigating party relief does not require “setting aside” the statute universally. Challenges to regulations can arise in that setting, as, for example, when an entity challenges the validity of a regulation as a defense in an enforcement action. When that happens, the obvious and often sufficient relief is to block application of the regulation to the party. But the APA also authorizes a direct challenge to a regulation. Post Abbott Labs, that is the norm. And it does so through language that directly authorizes courts to consider the validity of the rule itself, not the validity of its application in particular circumstances. Accordingly, preconceptions about universal relief appropriate to challenges to statutes have to be left at the door.

With that groundwork laid, the article is a familiar and convincing exercise in statutory interpretation.

With regard to text, the APA’s grant of authority to “set aside” a regulation reads naturally as authorizing universal vacatur. The obvious synonym, or definition, Sohoni says, is “invalidate.” What else could “set aside” mean? DOJ does not deny that “set aside” means “set aside.” Instead, it contends that the thing that courts are authorized to set aside is not the regulation itself but only its application to the party challenging it. As Sohoni explains, that is a bizarre way of understanding the standard pre-enforcement challenge to an agency regulation.

Sohoni also offers a lengthy examination of equitable remedies against agencies in the pre-APA period, demonstrating that what we would today call a nationwide or universal injunction was well-established by 1946, so there is no reason not to take the text to mean what it says. The provenance of the phrase “set aside” is not completely clear, but she offers one compelling nugget from the 1941 Attorney General’s Report, which noted that a “judgment adverse to a regulation results in setting it aside” (emphasis added). That sure sounds like it is the regulation, not its application, that is invalidated. The direct legislative history from Congress’s drafting and consideration of the Act five years later is thin on this point, so Sohoni has little to say about it, but she does draw some supportive inferences from the history of § 705, regarding stays during litigation. (Sections 705 and 706 are mutually supportive; if a court can grant universal vacatur under the latter, it surely can grant a nationwide injunction against the enforcement pending litigation under the former, and vice versa.)

Finally, Sohoni describes the consistent post-1946 understanding (at least consistent until the recent brouhaha) that courts that set aside a regulation under § 706 have authority to grant relief in the form of universal vacatur.

This article is not and does not purport to be the last word on the nationwide injunction debate. (Of course, the last word is unlikely ever to be uttered, though the Supreme Court may weigh in this Term.) Larger constitutional issues loom in the background, and Sohoni perhaps brushes them off a little quickly. But The Power to Vacate a Rule is the definitive statement on the statutory issue of the legitimacy of universal relief in challenges to regulations under the APA.