United States: Hyatt Applies To § 146 Proceedings And Permits New Evidence Of Issues Not Before The Board

In Troy v. Samson Manufacturing Corp., No. 13-1565 (Fed. Cir. July 11, 2014), the Federal Circuit held that a party in a 35 U.S.C. § 146 proceeding may raise issues that were not previously raised before the Board.  Because the district court erred in refusing to consider new evidence pertinent to the determination of priority, the Court vacated the district court's decision and remanded.

In an interference proceeding between junior party Stephen P. Troy, Jr. and senior party Samson Manufacturing Corp. ("Samson"), Troy attempted to prove actual reduction to practice in early February 2004, conception at several dates prior to February 2004, inurement, and derivation.  The Board concluded that Troy failed to prove prior conception or actual reduction to practice and cancelled the claims of Troy's involved patent.  Troy challenged the Board's decision in district court under § 146.

In the § 146 action, Troy proffered new evidence of an actual reduction to practice in July 2004 and asserted that Samson engaged in inequitable conduct by including in its provisional application confidential drawings misappropriated from Troy.  In affirming the Board, the district court refused to consider the new evidence, reasoning that "[a] party is generally precluded from raising issues or theories of law in a Section 146 proceeding that were not previously raised before the board."  Slip op. at 3-4 (alteration in original) (quoting Troy v. Samson Mfg. Corp., 942 F. Supp. 2d 189, 198 (D. Mass. 2013)).  Troy appealed.

"Based on the Supreme Court's holding in Hyatt that there are no limits on the admissibility of evidence in such civil actions except those in the Federal Rules of Evidence and Federal Rules of Civil Procedure, we conclude that new evidence on new issues is admissible in such proceedings."  Slip op. at 6.

On appeal, the Federal Circuit held that "the Supreme Court's decision in [Kappos v. Hyatt, 132 S. Ct. 1690 (2012),] permits new evidence to be admitted without regard to whether the issue was raised before the Board," since Hyatt "held, without qualification, that 'there are no evidentiary restrictions beyond those already imposed by the Federal Rules of Evidence and the Federal Rules of Civil Procedure.'"  Slip op. at 5 (quoting Hyatt, 132 S. Ct. at 1694).  Because Samson and the PTO relied on the same administrative exhaustion and APA arguments that the Supreme Court rejected in Hyatt, the Court concluded that it was "impossible to reconcile" the limitation on evidence sought "with the Supreme Court's unequivocal language, analysis, and holding in Hyatt."  Id. at 6.  Addressing the Court's prior cases holding that new evidence on an issue not presented to the Board was generally to be excluded in district court proceedings, the Court concluded that this precedent had been implicitly overruled as inconsistent with Hyatt.

The Federal Circuit rejected Samson's argument that Hyatt applies only to § 145 actions.  Examining the statutory history of §§ 145 and 146, the Court concluded that the language of the two current statutes did not support the application of different evidentiary rules.  Rather, the Court noted, "the language of § 146 is stronger in its indication that new evidence be admissible."  Id. at 10.  The Court explained that, although both sections provide for a remedy by civil action, § 146 by its express terms does not require the PTO record to be part of the district court civil action.  The Court "interpret[ed] this language as contemplating a fresh start in the district court."  Id.  The Court also observed that, unlike § 145, "§ 146 expressly states that the parties have 'the right . . . to take further testimony.'"  Id. (quoting 35 U.S.C. § 146).  The Court thus concluded that the language of the statute provided it with "no basis for concluding that new evidence is permitted in § 145, but not in § 146."  Id.

Finally, the Federal Circuit addressed two cases the Supreme Court distinguished in HyattButterworth v. United States ex rel. Hoe, 112 U.S. 50 (1884), and Morgan v. Daniels, 153 U.S. 120 (1894).  The Court first concluded that there was no logical or textual reason to limit the Butterworth new evidence principles to § 145 actions, although Butterworth did not involve a technical appeal from the PTO.  The Morgan Court, on the other hand, dealt with "the standard of review that ought to apply in interferences when no new evidence has been introduced," and thus "was not making any determinations about [the] admissibility of evidence."  Slip op. at 11.  Accordingly, the Court concluded that the Supreme Court's Hyatt decision "ought not to be read to create an evidentiary chasm between § 145 and § 146."  Id. 

Turning to the case before it, the Court vacated the district court's decision and remanded with instructions for the district court to consider the new evidence and arguments raised by Troy, including all evidence to establish a July 2004 reduction to practice and arguments and evidence regarding inequitable conduct based on misappropriation.

Judges:  Prost, Bryson, Moore (author)

[Appealed from D. Mass., Judge Young]

This article previously appeared in Last Month at the Federal Circuit, August, 2014.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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