Chevron is Done — What Does Loper mean for the PTAB and ITC? | White & Case LLP
In Loper Bright Enterprises v. Raimondo, the Supreme Court expressly overruled Chevron USA Inc. v. Natural Resources Defense Council, Inc. This landmark 6-3 ruling ends nearly 40-years of Chevron deference, the doctrine of deferring to an agency’s interpretation of allegedly ambiguous statutory language. Instead, courts will now exercise independent judgment over statutory interpretation traditionally under the purview of agencies. This ruling will increase the opportunities for regulated companies to challenge agency rules, including in proceedings before the Patent Trial and Appeal Board (PTAB) and the International Trade Commission (ITC). The ruling also calls into question the powers courts will have to make judgments in the fields of science and tech (including A.I.).
Takeaways
- The Supreme Court overturned 40-years of Chevron deference.
- Courts will now exercise independent judgment over agency statutory interpretation.
- Courts can still defer to an agency’s statutory interpretation under Skidmore deference based on “the thoroughness evident in [the agency’s] consideration.”
- The decision expressly carves out “prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful… are still subject to statutory stare decisis.” A challenger must provide a “special justification” to overrule Chevron-era cases.
- At the International Trade Commission, Commission opinions and specifically its interpretation of Section 337 will no longer be entitled to Chevron deference.
- The en banc Federal Circuit decision in Suprema upheld the Commission’s interpretation of Section 337 based on Chevron. The Loper decision’s “special justification” requirement might insulate the Suprema decision. However, it is also possible that new statutory challenges against “induced infringement” of products that do not infringe at the time of importation and method claims will increase at the ITC, in light of the Loper opinion.
- At the PTAB, the PTAB Consolidated Trial Practice Guide (Nov. 2019), PTAB Precedential Opinion Panel (“POP”) decisions and Informative Decisions, and Director Memorandums are not entitled to Chevron deference.
- Discretionary Denials under 35 USC. § 314 (i.e., Fintiv denials) were curbed by a Director Memorandum. That Memo may be more open to attack based on the Court’s decision.
- PTAB POP and Informative Decisions are no longer entitled to as much deference. Challenges to the POP and Informative Decisions could have a wide range of impacts on PTAB practice ranging from the application of Fintiv to how to calculate the statutory one-year bar.
- For appeal, companies should stay vigilant in changes and active challenges to statutory interpretations at the PTAB and ITC. If a party wishes to challenge agency action based on the agency’s statutory interpretations, it should develop a robust record and clearly lay out its statutory argument before the PTAB and ITC, to ensure the argument is preserved for appeal.
The Supreme Court Overrules Chevron
The United States Supreme Court overruled the 40-year-old Chevron deference standard in a landmark 6-3 ruling in Loper Bright Enterprises v. Raimondo, 603 US __ (2024). Under the Chevron doctrine, courts were required to defer to “permissible” agency interpretation of statutes. Chevron USA Inv. v. Natural Resources Defense Council, Inc., 467 US 837, 843 (1984). Specifically, the deference of interpretation of said statutes was limited to statutes the agency administered. Id. Chevron deference applied even where a reviewing court interpreted the statute differently. Id.
Chevron deference required that, where interpretation of an agency statute was needed, that courts follow the below test:
- Courts must first decide whether a statute is ambiguous. If it is not ambiguous then the Court should apply the plain meaning of the statute.
- If the statute is ambiguous the Court discerns “whether Congress ha[d] directly spoken to the precise question at issue.” Chevron, 467 US at 842. If Congress is clear, the court must defer to Congress’ interpretation. Id.
- Where Congress did not address the issue and the statute was silent or ambiguous on said issue, a court must set aside its interpretation and defer the interpretation to an agency if the agency has a “permissible construction on the statute.” Ibid.
In Loper, the Court held that the Chevron doctrine “defied the command” of the Administrative Procedure Act (APA). Loper, 603 US __ at *21. The Court held that under the APA courts are required to exercise “independent judgment” to decide whether an agency has acted within their statutory authority, rather than defer to an agency’s interpretation of an ambiguous statute. Id. at 16.
“When the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits.”
Now, courts will no longer defer to the regulatory body. Instead, courts will apply Skidmore deference.
The Skidmore Deference Test is Now in Effect
Since Chevron deference is overruled, Skidmore deference is once again the standard for judging agency interpretations of statutes. Skidmore deference originated in 1944 and was the law until the Court announced Chevron in 1984. Under Skidmore, a court is not compelled to follow an agency’s interpretation of a statute, but instead, would determine the amount of deference to give an agency depending on “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore v. Swift & Co., 323 US 134. 140 (1944). In so doing, the Loper Court stated that courts may use careful attention to the judgment of the Executive Branch to inform statutory interpretation. Loper, 603 US __ at *35. Hence, deference will now occur on a case-by-case basis and will be based on various factors and assessments of an agency’s interpretation of a statute.
How things will be the same
Under Loper, judges “must exercise independent judgment in determining the meaning of statutory provisions.” Loper, 603 US __ at *16. Loper state that “courts [should] use every tool at their disposal to determine the best reading of the statute and resolve the [statutory] ambiguity.” Id. at *23.
However, in many ways the framework Court’s use to analyze statues will not change. As explained above, under Chevron, “step zero” requires the Court to decide whether a statute is ambiguous. If the statue is not ambiguous then the Court should apply the plain meaning of the statute. Arguably when a statue is “clear and unambiguous” a Court using “every tool at their disposal to determine the best reading of the statute” should reach the same result under Loper as it did under Chevron, because even under Chevron, agency interpretations of an unambiguous statue get no deference.
As one example, in Facebook, Inc. v. Windy City Innovations, LLC, the Federal Circuit considered the PTAB’s interpretation of 35 USC. § 315(c). 973 F.3d 1321, 1338 (Fed. Cir. 2020). In Facebook, Petitioner Facebook filed a petition for IPR for each of four asserted patents. Id. at 1328. After Facebook’s IPRs were on file, Patent Owner Windy City asserted additional claims in a parallel district court case. Id. Some of these new claims “were claims that Facebook had not challenged in its petitions for IPR.” Id. Subsequently Facebook prepared two additional petitions for IPR challenging these additional asserted claims. Id. However, “[b]ecause the petitions would otherwise have been time-barred under 35 USC. § 315(b)” Facebook filed the new petitions along with motions asking the Board to join each new proceeding to the already-instituted IPR on the same patent under § 315(c). Id. The question therefore arose whether 315(c) allowed “same-party joinder”—i.e., whether Facebook could join an earlier Petition filed by Facebook under 315(c). Id.
The Board instituted Facebook’s new petitions and granted Facebook’s motions for joinder. Id. In particular, the Board found that Facebook “ha[d] established good cause for joining this proceeding with the [existing] IPR.” Id. In a concurring opinion, two Administrative Patent Judges (“APJs”) stated that “§ 315(c), when properly interpreted, does not authorize same-party joinder” but that “the Director repeatedly has taken the position … that such same-party joinder is permitted by § 315(c)” and the concurring APJs agreed to follow that position in this case, “[d]espite [their] disagreement with the Director’s interpretation.” Id. The Board’s Precedential Opinion Panel also analyzed this issue in Proppant Express Investments, LLC v. Oren Technologies, LLC, No. IPR2018-00914, Paper 38, 2019 WL 1283948 (P.T.A.B. Mar. 13, 2019), and concluded that “315(c) permits a petitioner to be joined to a proceeding in which it is already a party.” Id. at 1335. In Facebook, the USPTO director also argued that Chevron deference should apply to at least POP decisions.
However, on appeal the Federal Circuit explained that “§ 315(c) does not authorize same-party joinder, and also does not authorize joinder of new issues.” Id. at 1338. To reach this conclusion the Federal Circuit relied on “traditional tools of statutory interpretation.” Id. In particular, the Court explained that “the clear and unambiguous language of § 315(c) does not authorize same-party joinder” and, therefore, “we need not defer to the PTO’s interpretation of § 315(c).” Id.
The Facebook decision, therefore, represents one way a Court’s analysis of statues will not change in light of the Loper decision. Where a statue was found to be “clear and unambiguous” Chevron did not afford any deference to the agency interpretation. This will arguably stay the same under Loper. Likewise, as noted in the Loper decision, “Chevron does not apply if the question at issue is one of ‘deep economic and political significance.'” Loper, 603 US __ at *27. Therefore, the Loper decision should have less of an impact on these questions of “deep economic and political significance.”
How things may be different
In contrast where a statue is ambiguous, Loper may have an impact on the result of the case.
As one example, in Suprema, Inc. v. Int’l Trade Comm’n, 796 F.3d 1338 (Fed. Cir. 2015), the en banc Federal Circuit considered whether § 1337 has a temporal requirement where infringement must be measured at the time of importation for induced infringement. In particular, under § 1337 the ITC may block the importation of “articles that infringe” a valid US Patent. 19 USC. § 1337. However, in Suprema, the Respondent Suprema “makes hardware for scanning fingerprints.” Suprema, 796 F. 3d at 1341. But “the scanners are not standalone products… [and] must be connected to a computer … [with] custom-developed software installed and running” to function. Id. at 1341-1342. “Suprema does not make or sell this software.” Id. Instead, Suprema “ships each scanner with a “software development kit” (“SDK”) that is used for developing custom programs that control the functions of its scanners.” Id. Therefore, Suprema argued that its product did not infringe at the time of importation.
However, the ITC interpreted § 1337 to include articles that do not infringe at the time of importation, but which are used, after importation, to directly infringe at the inducement of the seller. The Commission therefore found that Suprema’s distributor, Mentalix “directly infringed” and that Suprema “had actively encouraged” Mentalix’s direct infringement. Id. at 1343.
On appeal, a divided panel at the Federal Circuit “vacated the Commission’s findings that Mentalix directly infringed … and that Suprema induced infringement.” Id. at 1344. In particular, the panel found that “Section 337’s language, ‘articles that infringe,’ is a temporal requirement and that infringement must be measured at the time of importation.” Id. Therefore, the panel concluded that the Commission lacks authority under Section 337 to issue an exclusion order predicated on induced infringement because such imports are not in an infringing state upon importation. Id.
The en banc Federal Circuit reversed the panel and concluded that “the Commission’s interpretation of Section 337 is entitled to Chevron deference” and upheld the Commission’s interpretation of 19 USC. § 1337(a)(1)(B)(i). Id. at 1340. While Suprema may fall under Loper’s exemption for cases that have already relied on Chevron deference, it is instructive for how Loper may have an impact on the outcome of a case. In particular, under Loper, the Commission’s interpretation of Section 337 would not be given Chevron deference and instead Skidmore deference would apply.
Under Skidmore deference the Commission’s opinions still represent “‘a body of experience and informed judgment to which courts and litigants [could] properly resort for guidance,’ even on legal questions.” Loper, 603 US __ at *10. In the case of Suprema, the Federal Circuit explained how “[n]othing in nearly a century of US trade law enactments is inconsistent with the Commission’s interpretation.” Suprema, 796 F.3d at 1350. The Supreme Court also explained that the Commission “reasonably determined that its interpretation would further the purpose of the statute.” Id. at 1352. In particular, the en banc Federal Circuit noted that the panel’s decision “effectively eliminated trade relief under Section 337 for induced infringement and potentially for all types of infringement of method claims.” Id.
Therefore, some may argue that the Commission’s interpretation of 19 USC. § 1337(a)(1)(B)(i) could survive Skidmore deference if the Federal Circuit has occasion to revisit Suprema. Id. at 1351 (“This court has consistently affirmed the Commission’s determination that a violation of Section 337 may arise from an act of induced infringement.”) (citing Young Eng’rs Inc. v. Int’l Trade Comm’n, 721 F.2d 1305 (Fed.Cir.1983); Vizio, Inc. v. Int’l Trade Comm’n, 605 F.3d 1330 (Fed.Cir.2010); Emcore Corp. v. Int’l Trade Comm’n, 449 Fed.Appx. 918 (Fed.Cir.2011)). However, as least one panel at the Federal Circuit felt that § 1337 requires infringement to be measured at the time of importation. Under Loper, without Chevron deference, the Suprema decision may have gone the other way.
Loper’s Impact on Agencies
Overruling Chevron calls into question the extent to which courts will now have to make decisions on specific scientific and technical matters that were traditionally within the purview of agencies.
In the Court’s opinion, Justice Roberts stated that the Loper decision does not “call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite our change in interpretive methodology.” Loper, 603 US __ at * 34. The Majority explains that “[m]ere reliance on Chevron” is not enough to counter the force of stare decisis; a challenger will need an additional “special justification.” Id. But as Justice Kagan’s dissent notes, it is unclear what these “special justification[s]” are, and in practice “Courts motivated to over-rule an old Chevron-based decision can always produce something to label a ‘special justification.'” Loper, 603 US __ at *31 (Kagan, dissenting).
The majority opinion also states that the Court has not cited Chevron since 2016. Loper, 603 US __ at * 29. Yet, in Justice Kagan’s dissent she articulates how Chevron has been cited in more than 18,000 federal court decisions. Loper, 603 US __ at *30 (Kagan, dissenting). She also explains how “Congress and agencies alike have relied on Chevron—and have assumed its existence—in much of their work for the last 40 years. Statutes passed during that time reflect the expectation that Chevron would allocate interpretive authority between agencies and court.” Id.
The effects on agencies and how Congress makes laws could be far reaching. Below we explain some possible issues that are specific to ITC and PTAB practice and the deference given to their interpretations.
Impact On the ITC – Is Suprema Dead?
Decisions from the International Trade Commission (ITC) have historically been given Chevron deference—most notably in Suprema, Inc. v. Int’l Trade Comm’n, 796 F.3d 1338 (Fed. Cir. 2015). Therefore, the Loper decision calls into question the precedential power of Commission Opinions going forward.
Moreover, as explained above, in Suprema, the en banc Federal Circuit upheld under Chevron the ITC’s interpretation that Section 337 includes articles that do not infringe at the time of importation, but which are used, after importation, to directly infringe at the inducement of the seller. The Suprema decision may fall under Loper’s exemption for cases that have already relied on Chevron deference. However, it is unknown how Judge Roberts’ “special justification” doctrine will operate for Federal Circuit opinions. Until that is decided, Suprema arguably remains the law of the land.
If Suprema does not fall under Loper’s exemption, then under Skidmore deference the Commission opinions still represent “‘a body of experience and informed judgment to which courts and litigants [could] properly resort for guidance,’ even on legal questions.” Loper, 603 US __ at *10. Therefore, some may argue that the Commission’s interpretation of 19 USC. § 1337(a)(1)(B)(i) could survive Skidmore deference. Others may argue that Section 337 has a temporal requirement where infringement must be measured at the time of importation for induced infringement.
In the interim, we can expect more challenges to the Commission’s opinions and specifically its interpretation of Section 337.
Impact on the PTAB – Is Finitiv Back? What to Do About POP Decisions?
The Patent Trial and Appeal Board (PTAB) has several sources of administrative and statutory guidance. For example, the PTAB Consolidated Trial Practice Guide (Nov. 2019) “apprised the public of standard practices before the Board during AIA trial proceedings, including inter partes reviews, post-grant reviews, covered business method reviews, and derivation proceedings.” PTAB Consolidated Trial Practice Guide at 1. PTAB Precedential Opinion Panel (“POP”) decisions and Informative Decisions detail the PTAB’s interpretation of dozens of statues. Moreover, the USPTO Director, in recent years, has issued several Guidance Memorandum which include detailed analysis of statutory provisions. See, e.g., Director Vidal, Memorandum, “Interim Procedure for Discretionary Denials in AIA Post-Grant Proceedings with Parallel District Court Litigation,” 5–7 (June 21, 2022) (“Guidance Memo”). PTAB practitioners use these sources of authority to understand the ins-and-outs of everything from Fintiv to how to calculate the one-year bar for IPRs. See 35 USC. § 315(b).
It was an open question what level of deference each of these sources of authority were due. In Facebook, Inc. v. Windy City Innovations, LLC, No. 18-1400 (Fed. Cir. 2019) the USPTO director argued that Chevron deference should apply to at least POP decisions. While the Federal Circuit declined to decide the issue of deference, the impact of the Court’s ruling in Loper has effectively ended the debate. At most PTAB guidance is now given Skidmore deference. Moreover, many PTAB decisions have not been analyzed under Chevron and therefore it is likely that no “special justification” would be required to challenge them.
For example, in recent years, the rate of Discretionary Denials under 35 USC. § 314 (i.e., Fintiv denials) have gone down. In many ways this can be attributed to Director Vidal’s Guidance Memo, which “clarifies” the Board’s practices with respect to Fintiv and § 314. The Guidance Memo was “issued under the Director’s authority to issue binding agency guidance to govern the PTAB’s implementation of various statutory provisions.” Guidance Memo at 3. One notable provision of the Guidance Memo states that “[t]he plain language of the Fintiv factors is directed to district court litigation and does not apply to parallel US International Trade Commission (ITC) proceedings.” Therefore, the PTAB will not issue a Fintiv denial based on a co-pending ITC action. The Guidance Memo and its provision, as an extension of the Director’s “authority to issue binding agency guidance” stand on less solid ground considering the Court’s decision in Loper, and the agencies interpretation of § 314 is more open to challenge.
That said, the Director’s Guidance Memo may be around to stay. First, PTAB institutions are always discretionary. One can argue that the Guidance Memo merely provides rules for when the Board uses that discretion. Second, “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 USC. § 314(d). Therefore, a party would likely have to undertake a direct challenge of the Director’s authority under the APA to procedurally raise this issue.
In terms of POP decisions, the Board regularly interprets the meaning of statues which can have profound impacts on the outcome of cases. For example, in Motorola Mobility LLC v. Patent of Michael Arnouse, Case IPR2013-00010, Paper 20 (January 30, 2013) the Board interpreted 35 USC. § 315(b). Section 315(b) states that the Board cannot institute an inter partes review if “the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner… is served with a complaint alleging infringement of the patent.” Id. In Motorola Mobility, the Board explained that the one-year statutory bar is triggered based on the service of the summons not the filing of the complaint itself. IPR2013-00010, Paper 20 at 6. The PTAB later designated this decision to be “informative” of the “Board norms on recurring issues.” Therefore, the Board’s decision in Motorola Mobility has informed countless other proceedings before the PTAB.
Based on the Court’s decision in Loper, the Motorola Mobility opinion will be under greater scrutiny. That said, one could argue that the Board’s interpretation of 35 USC. § 315(b) could survive Skidmore deference. The Motorola Mobility opinion included a detailed analysis of statutory text along with the meaning of “served with a complaint” in the statue and decided that “served” must include “service” not merely filling.
In any case, the Guidance from the PTAB is more open to challenge than before the Loper opinion and we are likely to see new arguments in the PTAB and at the Federal Circuit about PTAB statutory interpretations.
Appeal – Hedging Your Bets
As with any shift in law, it will take time for the true impacts of the Loper case to crystallize. But in the coming months and years we can expect more challenges to agency interpretations (including at the PTAB and ITC). It is important to stay vigilant in changes and active challenges to law and agency statutory interpretation. Failure to raise statutory arguments at the ITC and PTAB can waive one’s ability to raise them for the first time on appeal—even if there is a change in law. Kyocera Wireless Corp. v. International Trade Com’n, 545 F.3d 1340, 1352, (Fed. Cir. 2008) (affirming ITC’s determination that accused infringer waived any invalidity defense based on obviousness by failing to raise and support it during the ITC proceedings, and rejecting the argument that the intervening KSR decision excused the accused infringer’s procedural lapse); In re DBC, 545 F.3d 1373, 1380, 89 USP.Q.2d 1123 (Fed. Cir. 2008) (ruling that on appeal of a rejection in a reexamination, patentee waived the argument that the Board’s judgment was void because the BPAI judges deciding the appeal in the PTO had not been properly appointed.) Companies that are often before the PTAB and ITC should actively consider regulatory litigation strategies as a new crucial part of proceedings before these agencies. If a party wishes to challenge agency action based on the agency’s statutory interpretations, it should develop a robust record and clearly lay out its statutory argument before the PTAB and ITC, to ensure the argument is preserved for appeal.
Conclusion
In light of the recent court decisions reinstalling Skidmore deference, it is of paramount importance that clients monitor the changing PTAB and ITC landscapes to ensure they remain apprised on changes and active challenges to agency interpretation. Clients should keep in mind that agencies still do get some level of deference based on “the thoroughness evident in its consideration” of the Statue, and that rulings like Suprema may need a “special justification” to reexamine.
Edred Richardson (White & Case, Associate, Washington, DC) contributed to the development of this publication.
