In a decision that reverberated throughout the regulatory world, the Supreme Court ruled on June 28th, in Loper Bright Enterprises v. Raimondo, that federal courts may no longer defer to an agency’s interpretation of an ambiguous statute. In doing so, the Supreme Court overturned the decades-long “Chevron deference” precedent, which had been the basis for agency discretion to regulate everything from the environment and healthcare to financial services and intellectual property.
As one of the most cited cases in U.S. administrative law, the precedent established in the 1984 ruling Chevron U.S.A v. Natural Resources Defense Council has consistently been applied when regulatory disputes reach the courts. Under Chevron, if a court determined that a congressional statute was ambiguous and that an agency’s application of that statute was based on a “reasonable” interpretation of the ambiguity, it would defer to the agency’s interpretation when challenged.
The Supreme Court’s Loper Bright ruling turns Chevron on its head. When agency regulations are challenged, courts are now empowered to exercise “independent judgment” to determine the proper interpretation of ambiguous statutes, though they may still “seek aid” from longstanding agency interpretations, which could require “special justification” to reverse.
Although the agencies enforcing patent law have historically relied on Chevron less than other agencies, in part because the USPTOUnited States Patent and Trademark Office. See also PTO. lacks substantive rulemaking authority in most of the areas in which it operates, there is little doubt that its reversal could reshape IP rulemaking. This is most evident at the International Trade Commission, where plaintiffs are already challenging the ITC’s interpretation of when it can exclude products from U.S. markets under Section 337 of the 1930 Tariff Act.
One such challenge is underway between the speaker company Sonos and Google, whose Pixel smart products and Nest Audio speakers were found by the ITCInternational Trade Commission to infringe on five Sonos audio player patents. The appeal centers around an ambiguity in the Tariff Act: whether products which did not infringe on a patent at the time of importation, but whose manufacturer “induced infringement” after importation, can be excluded under Section 337. In the 2015 case Suprema vs. ITCInternational Trade Commission, the courts applied Chevron to defer to the ITC’s assessment that products which infringe after importation could indeed be retroactively excluded. With Chevron overturned, however, Google – whose products only infringed once users downloaded an app or reconfigured their device settings – filed a petition seeking an en banc review of the April decision to uphold their infringement ruling.
In another case, the eyelash extension company Lashify is using Loper to attempt to affect the ITC’s interpretation of the domestic industry requirement. Previously, the ITCInternational Trade Commission ruled that competitors of Lashify had infringed on its patents. However, it declined to ban imports of the competitor products, as Lashify failed to meet the “economic prong” of the domestic industry requirement, which requires that “significant investments [be] made in the U.S. relating to [the complainant’s] products” for the complainant to be entitled to federal IP rights. While the ITCInternational Trade Commission did not explicitly rely on Chevron in its interpretation of the economic criteria, Lashify argued in a July notice to the U.S. Court of Appeals that the ITC’s interpretation was “owed no deference,” and that the court should thus feel empowered to rule against it in its ongoing investigation.
This kind of appeal – which does not challenge an agency interpretation specifically upheld via Chevron, but rather proactively calls for courts to rule on ambiguous statutes independently of an agency’s prior finding – seems poised to be the most widespread effect of the Loper decision. Indeed, at the PTABPatent Trial and Appeal Board. Reviews adverse decisions of examiners on written appeals of applicants and appeals of reexaminations, and conducts inter partes reviews and post-grant reviews. The Board also continues to decide patent interferences, as it was known as the Board of Patent Appeals and Interferences (BPAI) before the AIA., where Chevron had rarely been invoked to defend USPTOUnited States Patent and Trademark Office. See also PTO. regulations, attorneys still widely expect patent litigants to leverage the Loper ruling to challenge past and present rulemaking they find objectionable.
Patent Progress readers will be well aware of the NHK-Fintiv rule, implemented by former USPTOUnited States Patent and Trademark Office. See also PTO. Director Andrei Iancu, which empowered the PTABPatent Trial and Appeal Board. Reviews adverse decisions of examiners on written appeals of applicants and appeals of reexaminations, and conducts inter partes reviews and post-grant reviews. The Board also continues to decide patent interferences, as it was known as the Board of Patent Appeals and Interferences (BPAI) before the AIA. to issue discretionary denials for patent infringement cases that are already being litigated in civil court. Inasmuch as many saw Fintiv as a deviation from the intent of the America Invents Act, experts like Jonathan Stroud of Unified Patents LLC believe “the path to challenging [Fintiv] is much more straightforward than it was” before Loper.
Meanwhile, other pending regulations which may go beyond the USPTO’s procedural rulemaking authority – including the recently-announced Notice of Proposed Rulemaking (NPRM) on discretionary denial – could become easier targets post-Chevron. The NPRM, which among other changes, includes reforms to terminal disclaimer practice, will no longer benefit from deference if challenged by the pharmaceutical industry, as is broadly expected.
These are some of the many areas where Loper could shake up the IP regulatory landscape. Still, it remains to be seen the extent to which federal courts choose to “seek aid” from longstanding agency rules or establish their own interpretations of patent law. As this ruling begins to play out at the ITCInternational Trade Commission – and in all likelihood, soon after at the PTABPatent Trial and Appeal Board. Reviews adverse decisions of examiners on written appeals of applicants and appeals of reexaminations, and conducts inter partes reviews and post-grant reviews. The Board also continues to decide patent interferences, as it was known as the Board of Patent Appeals and Interferences (BPAI) before the AIA. – what is certain is that agency interpretations stand on weaker footing than they did under Chevron, opening the door for robust challenges to established precedents.
Now more than ever, legislation is needed to address the ambiguities in existing patent law with clarity and specificity. For this, the recent introduction of the Advancing America’s Interests Act is one welcome mark of stability in the otherwise unprecedented regulatory environment we are entering.
