Chairman Johnson's Opening Statement in Hearing on “The Patent Trial and Appeal Board After 10 Years, Part II: Implications of Adjudicating in an Agency Setting

Watch the hearing HERE.

Welcome again to this morning's hearing on the PTAB. This hearing is called "Part II" because it is the second in a series of hearings this Committee is conducting on the PTAB. In our first hearing, which we held last month, we explored the impact of the PTAB on innovation and small businesses.

Today, we will hear testimony about the decision-making processes of the PTAB and whether the PTAB's placement within the larger organizational structure of the United States Patent and Trademark Office affects its decision-making processes. In particular, we will explore whether parties that appear before the PTAB are provided with a forum that has the due process protections normally associated with adjudicatory decision-making.

As we heard at our previous hearing, the PTAB is one of the busiest forums in the United States for litigating the validity of a patent. The PTAB conducts trial-like proceedings pursuant to the 2011 Leahy-Smith America Invents Act—or "AIA." The most popular proceeding is called an "inter partes review." Congress intended for inter partes review to be faster and more efficient than district court litigation to address the technical question of whether a patent claims a new and non-obvious advance over the prior art.

AIA proceedings before the PTAB can involve patents that are worth, sometimes, billions of dollars. For this reason, it is imperative that the parties who go before the PTAB are ensured due process and transparent treatment. But parties can get a fair hearing only if the judges presiding over that hearing are themselves free from bias and undue influence.
The judges who preside over AIA proceedings before the PTAB are called Administrative Patent Judges or "APJs." APJs have expertise not only in patent law, but also in various technologies. This makes APJs well-situated to handle the technical aspects of patent validity.

We have heard, however, troubling reports that APJs are not always free to make decisions in an independent manner based on the evidentiary record and relevant legal authority. Instead—as I anticipate today's hearing will show—APJs are often subject to influence in their decision-making from higher-ups at the USPTO.

In my view, such influence is in tension with Congress's intent in creating the PTAB, where the decision-making was explicitly assigned to a 3-judge panel meant to be insulated from outside influence. This type of influence would also violate several norms usually assumed to apply in an adjudicatory context—such as a prohibition on ex parte communication and a party's right to know the decisionmaker's identity.

About a year ago, Ranking Member Issa and I asked the Government Accountability Office to investigate allegations of interference in PTAB decision-making. Today, we will hear the GAO's preliminary findings for the first time. I anticipate that the GAO's testimony will confirm that some of our concerns about due process and transparency before the PTAB are warranted.

In United States v. Arthrex, the Supreme Court held that the structure of the PTAB violated the Constitution's Appointments Clause. The Court concluded that the constitutional violation could be remedied by giving the Director the authority to change the outcome of any proceeding by striking the portion of the Patent Act granting exclusive ability to grant rehearings to the PTAB. The Court did so because it concluded that the Appointments Clause requires a transparent decision for which a politically accountable officer must take responsibility.

I recognize that, in the 10 years since the AIA was enacted, the PTAB had to grow quickly to handle the onslaught of cases that were being filed. And I understand that it is difficult, from a managerial perspective, to obtain consistency among so many judges on important questions relating to the new AIA laws. Nevertheless, as the Supreme Court observed in Arthrex, a director's unfettered political control over the pre-issuance decisions of APJs is problematic. And, although the Court appeared to "fix" the Appointments Clause problem, it left open the question of whether Director control violates the Constitution's requirements for due process.

Thus, I believe it is Congress's responsibility to consider whether a legislative fix to the PTAB's structure—one that preserves both due process and transparency for the parties, and freedom from undue influence for the APJs—is needed. This hearing will provide us with facts so that we can act to provide a sensible solution.

I am pleased that we have a panel of government experts, legal scholars, and distinguished practitioners. Thank you for being here today, and I look forward to your testimony.

Watch the hearing HERE.