Situating PTAB Adjudication Within the New World of Agency Adjudication

In 2011, Congress created a series of novel proceedings for private parties to challenge issued patents before the newly formed Patent Trial and Appeal Board (PTAB). While the PTAB proceedings are immensely popular, they have also been controversial. A series of legal challenges to these new adjudicatory proceedings are working their way through the federal judiciary and up to the Supreme Court, and the latter is deciding this Term the constitutionality of PTAB adjudication. Yet to date, there has been no sustained comparison of these new adjudicatory proceedings with other agency adjudications. This comparison could be provide numerous payoffs, including highlighting the unique facets of PTAB adjudication that may serve for successful legal challenges as well as providing opportunities for improving the decisional processes of adjudicatory boards.

In The New World of Agency Adjudication, we seek to begin this endeavor by situating PTAB adjudication in the modern administrate state. Every administrative law student learns the basics of “formal” adjudication under the Administrative Procedure Act (APA). The paradigmatic APA-governed formal adjudication involves an evidentiary hearing held before an administrative law judge (ALJ) wherein parties are entitled to oral arguments, rebuttal, and cross-examination of witnesses. The ALJ’s decision is then reviewable by the agency head, who typically can reverse the decision for largely any reason. Thus, the critical difference between APA formal adjudication—also known as Type A adjudication—and the judicial model is that the agency head has final decision-making authority.

The vast majority of agency adjudications today, however, do not take the form of APA-governed formal adjudication. The new world of agency adjudication comprises agency actions that are adjudicated by non-ALJ agency personnel that have diverse titles, such as administrative judge, administrative appeals judge, hearing officer, immigration judge—just to name a few. These non-ALJ judges have less independence and protections than ALJs. A substantial portion of these proceedings are known as Type B adjudications which still require evidentiary hearings, and hence are relatively formal. In contrast to APA governed formal adjudication, however, the APA imposes virtually no requirements on these proceedings including agency head review. Yet similar to Type A adjudication, a common feature of Type B adjudication is that the agency head has final decision-making authority.

How do the PTAB proceedings fit within this modern world of agency adjudication? Although the new PTAB proceedings have many of the hallmarks of APA formal adjudication, they lack at least two features that suggest they should not receive a Type A classification. Perhaps most saliently, the Patent Act requires these proceedings to be presided over by administrative patent judges, not administrative law judges. The second critical difference is that the Director of the Patent Office does not have final decision-making authority over PTAB determinations. Although an aggrieved party to a PTAB proceeding can file a request for a rehearing by the Board, the Director does not have the authority to review PTAB determinations as a matter of right. As a result, we argue the best understanding of PTAB proceedings is that they are Type B rather than Type A adjudication. The more difficult question is how do the new PTAB proceedings stack up to its Type B adjudication peers? We conclude quite favorably. Drawing on a recent ACUS study that focuses on identifying the best practices of Type B adjudications, we find that PTAB meets the majority of these recommendations and scores as well as most Type B proceedings.

Our Article concludes by exploring one critical difference between PTAB proceedings and most Type B adjudications: the lack of agency-head review of PTAB determinations. The standard administrative model vests final decision-making authority with the agency head for a number of reasons, including providing the agency head with policy control and the ability to bring consistency to the adjudicatory board decisions. While the Director does not have the authority to directly review PTAB determinations, she does have the ability to influence PTAB outcomes. More specifically, the Director can assign APJs to a panel that share her policy views in hopes that they will vote in accordance with her preferences. This “panel-stacking” often occurs once a rehearing and an expanded panel has been granted, so that the expanded, stacked panel reverses the original three-member decision.

Although we conclude that the Director’s designation procedures are statutorily authorized, we argue this procedure raises a colorable due process violation. Case law on permissible agency-head designation procedures is relatively sparse. One exception is the Sixth Circuit’s opinion in Utica Packing Co. v. Block, in which the Secretary of Agriculture replaced an agency adjudicator with another when the initial adjudicator failed to rule as she wished. The appellate court refused to accept the argument that the Secretary, having delegated to the agency adjudicator the original authority to resolve certain matters, could reappropriate that power at will based on disagreement with the adjudicator’s conclusions. Instead, the court held, “[t]here is no guarantee of fairness when the one who appoints a judge has the power to remove the judge before the end of proceedings for rendering a decision which displeases the appointer.”

Under the reasoning set forth in Utica, there is at least a colorable argument that the Director’s designation procedures raise substantial due process violations. Similar to the Secretary of Agriculture in Utica, the Director in effect removes the original panel before the end of the proceedings when she designates an expanded panel that she hopes will arrive at a different substantive outcome. Although the Director does not technically replace any judge, the practical effect of adding a sufficient number of new members to reverse the original panel decision is functionally equivalent to the Secretary of Agriculture’s removal of the judicial officer in Utica.

Given this colorable due process concern, our Article concludes by examining alternative mechanisms the Director of the Patent Office could utilize to ensure that PTAB consistently applies the agency’s policy preferences. While a congressional grant of agency head review would be the most straightforward way to proceed, our Article also urges the Patent Office to consider an increased reliance on rulemaking and precedential PTAB decisions. With respect to the latter, our Article encourages the Patent Office to consider streamlining the process by which it designates PTAB decisions as precedential to provide the Director with more unilateral authority in making this determination.

This is Guest Article by Christopher J. Walker, The Ohio State University Moritz College of Law and Melissa F. Wasserman, The University of Texas School of Law. Originally it was published in Patentlyo.

About Authors:

1. Melissa Wasserman:

She joined the University of Texas law faculty in 2016. Her research focuses on the institutional design of innovation policy, with a particular emphasis on patent law and administrative law. Her articles have been published or are forthcoming in both student edited law reviews and peer review journals including Stanford Law Review, California Law Review, Vanderbilt Law Review, Texas Law Review, Duke Law Journal, Review of Economics and Statistics, and Journal of Empirical Legal Studies. Prior to joining the Texas faculty, she served as Professor at the University of Illinois College of Law. Her work has been selected for presentation in the 2015 Yale/Stanford/Harvard Junior Faculty Forum and in 2012 she was awarded the University of Illinois College of Law’s Carroll P. Hurd Award for Excellence in Faculty Scholarship, which is given to the most outstanding piece of faculty scholarship published in the previous year.

Professor Wasserman received her B.S. in chemical engineering with high honors from Pennsylvania State University. She received her Ph.D. in chemical engineering from Princeton for her work on the thermodynamics of network-forming liquids at low temperatures. As a graduate student, Professor Wasserman was both a National Science Foundation Graduate Research Fellow and American Association of University Women Selected Professions Fellow. She received her J.D. magna cum laude from New York University School of Law, where she served as an articles editor of New York University Law Review. Following law school, Professor Wasserman clerked for Judge Kimberly A. Moore of the U.S. Court of Appeals for the Federal Circuit and then was an academic fellow and lecturer at the Petrie Flom Center for Health Law, Policy, Biotechnology, and Bioethics.

Specialties: Patents, Intellectual Property and Administrative Law

2.  Christopher J. Walker: 

He is an Associate Professor of Law (with tenure) at The Ohio State University Moritz College of Law and Director of the Moritz Washington, D.C., SummerProgram. At Moritz, he teaches Civil Procedure, Constitutional Litigation, the Ethics of Washington Lawyering, Federal Courts, Legal Analysis and Writing (LAW II), Legislation and Regulation, and State and Local Government Law.

Professor Walker’s research focuses primarily on administrative law, regulation, and law and policy at the agency level. His publications have appeared in the Michigan Law Review, Stanford Law Review, and University of Pennsylvania Law Review, among others. He has also written a report for the Administrative Conference of the United States on the role of federal agencies in the legislative process, and he coauthors the agency adjudication chapter of the American Bar Association’s annual book Developments in Administrative Law and Regulatory Practice. His article Legislating in the Shadows was selected as the recipient of the 2016 American Association of Law Schools Scholarly Papers Competition Award.

Professor Walker brings to his scholarship and to the classroom extensive practical experience of having worked in all three branches of the federal government as well as in private practice. Prior to joining the law faculty in 2012, Professor Walker clerked for Justice Anthony M. Kennedy of the U.S. Supreme Court and Judge Alex Kozinski of the U.S. Court of Appeals for the Ninth Circuit. He also worked for several years at a litigation boutique in Washington, D.C., as well as on the Civil Appellate Staff at the U.S. Department of Justice, where he represented federal agencies and defended federal regulations in a variety of contexts. During Winter Semester 2017, he served as an academic fellow on the Senate Judiciary Committee, working on the Gorsuch Supreme Court confirmation as well as on regulatory reform legislation for Senator Orrin Hatch. During the summer of 2017, Professor Walker served on Senators Portman and Brown’s bipartisan judicial advisory commission to help fill the three federal district court vacancies in Ohio.

Outside Moritz, Professor Walker serves as one of forty Public Members of the Administrative Conference of the United States, as a Governing Council Member and Adjudication Committee Co-Chair of the American Bar Association’s Section of Administrative Law and Regulatory Practice, and as a member of the Ohio State Bar Association’s Administrative Agency Law Specialty Board.  He is also a regular blogger at the Yale Journal on Regulation and the Section Editor for Jotwell’s Administrative Law Section.

Professor Walker received his law degree from Stanford and a master’s in public policy from Harvard’s Kennedy School of Government.  At Stanford, he served as managing editor of the Stanford Law Review and editor-in-chief of the Stanford Law and Policy Review.

Areas of Expertise: Administrative Law, Constitutional Law, Legislation and U.S. Supreme Court.