Vidal Agrees Eligibility Needs More Clarity in Senate Judiciary Committee Questioning of Two IP Nominees

Today, the full Senate Judiciary Committee held a hearing to question two key IP nominees: Judge Leonard Stark of the of the United States District Court for the District of Delaware, who was nominated to replace Judge Kathleen O’Malley on the U.S. Court of Appeals for the Federal Circuit (CAFC); and Katherine Vidal, the nominee for Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office (USPTO). IPWatchdog has previously reported on the qualifications of both candidates and what their appointments might mean for IP law and practice going forward.

While neither nominee made any particularly earth shattering statements, as is often the case in such hearings, Senator Thom Tillis (R-NC), a vocal IP advocate, said he was heartened by Vidal’s acknowledgement that it has become “very difficult to understand the contours of [patent eligibility] law.” Vidal also stated that the current USPTO guidelines on eligibility, which were revised by former USPTO Director Andrei Iancu to provide more clarity, are consistent with the law right now.

Vidal: Yes, 101 Needs Clarity

Vidal was part of a panel of five, with the other four nominees being judicial candidates. While much of the questioning was focused on the judges—particularly the nominee for United States District Judge for the Southern District of New York, Dale Ho, who came under fire for some allegedly partisan tweets he made—Vidal was questioned by a number of senators, with Tillis and Senator Chris Coons (D-DE) reserving all of their questions for her.

“I come here prepared for the challenges we face,” Vidal said in her introduction. “We can build more predictability so that inventors, creators and investors will have more confidence.” Vidal added that she will be guided by three principles if confirmed: 1) to work in the best interests of the United States and to advance U.S. innovation; 2) to further strengthen the patent and trademark system by improving patent quality and the integrity of the trademark register; and 3) to maintain the United States as an innovation world leader by engaging with all stakeholders, Congress, the Commerce Departments, other government agencies and international allies.

Senator Chuck Grassley (R-IA) began the questioning of Vidal by asking her what she sees as  the biggest issues with the current patent system, and specifically, which policies of previous patent office administrations she would keep in place and which she would change?

Vidal acknowledged the widely touted reforms implemented by former USPTO Director Andrei Iancu on patent eligibility guidance for examiners and said that she would continue Iancu’s focus in this area. She explained:

In terms of what happened in the prior administration, I know that there were policies set forth, including on 101, on patent eligibility. I think that’s an area that’s always deserving of attention because the law is not set; every single Federal Circuit judge has said it’s very difficult to understand the contours of the law, so that is something I would certainly always revisit to make sure that any guidelines are consistent with the law—they are right now—and that they’re promoting innovation.

Senator Patrick Leahy (D-VT) next asked Vidal about the pharmaceutical industry’s practice of creating “patent thickets” around biologics drugs to delay entry of biosimilars, which Leahy said the Food and Drug and Administration has been “raising the alarm about” recently. President Biden recently wrote to the USPTO raising several areas of concern on this topic, and Leahy argued that such practices cause higher drug prices for U.S. consumers. Asked if she agreed with the FDA that this is a problem, Vidal said she is aware of all of the concerns about patent abuses and that one thing the USPTO can do is to “ensure we’re always issuing the highest quality patents. What I’ve heard about patent thickets is they involve follow on patents that add marginal value – certainly I’d work on strengthening the value of IP.”

Leahy was also the first to raise the specter of Fintiv discretionary denial practice at the Patent Trial and Appeal Board (PTAB), which has become a hot topic. Leahy said that discretionary denial practice is suspect considering that district court trial dates are delayed 94% of the time. “Part of the problem is the PTO’s willingness to defer to a district court’s incorrect trial date,” Leahy said. “Can you think of any other agency that’s basing decisions on data that’s wrong 94% of the time?”

Vidal responded that she has been on both sides of PTAB proceedings and understands the frustration, but noted that “there is a way to get around Fintiv by stipulating that you’re not going to rely on the same art in district court.” (See Sotera Wireless, Inc. v. Masimo Corporation, Paper 12, IPR2020-01019 (December 1, 2020)). This is something IPWatchdog CEO and Founder Gene Quinn pointed out earlier this week and hoped Vidal would mention in today’s hearing. Ultimately, Vidal said that if confirmed she would want to look at Fintiv more closely and work with Leahy and others to see if more can be done.

Tillis focused his questions solely on Vidal, as did Coons. Tillis told Vidal that he liked her answer to Grassley on the contours of current eligibility jurisprudence, which Tillis characterized as being “in a shambles right now.” Given her acknowledgment of the state of the law, Tillis asked if she would support legislative reforms to patent eligibility law to provide greater clarity, and Vidal again said that she agrees we need more clarity “so inventors will be incentivized to invent and investors will be incentivized to invest.” Whether that comes via legislation or whether the Supreme Court takes a case, “I believe that clarity is warranted,” Vidal added. “It’s a complex issue when it comes to defining things like abstract ideas and it’s an issue I’d like to work with you on.”

Tillis also asked Vidal about changes to PTAB proceedings, saying that the past administration’s reforms “have rebalanced the PTAB so it’s no longer a death squad.” Tillis said his support for Vidal’s nomination is going to be contingent in part on her continuing these policies and asked if she would commit to do so. While she essentially skirted the question, restating her understanding of the issue and her desire to engage on potential reforms, Tillis asked her to follow up more definitively in written responses.

Senator Amy Klobuchar (D-MN) asked Vidal how the PTO can strengthen post grant review while “preventing some well-financed companies from abusing the process to impose cost and delay on small innovators?” Vidal said she is aware that there are “some concerns about how the PTAB is being used” and that small entities need as much access to the PTAB as anyone else. She pointed Klobuchar to the current pro bono pilot for the PTAB that she said “will offset a lot of the cost to these smaller entities.”

Coons spoke expressly to Vidal also, and asked whether she would commit to keeping an open mind as to whether any revisions to the Joint USPTO-NIST 2019 Policy Statement on standard essential patents (SEPs) are warranted, noting that there have been recent efforts to weaken the statement, to which Vidal responded simply “Absolutely.” He also asked about her international experience and whether she would continue the previous administration’s engagement with the World Intellectual Property Organization (WIPO) and other international IP committees on protecting U.S. IP owners from state-sponsored IP theft, particularly from China. Vidal said such activities are “part of the reason I’m here today” and that “there’s a lot of progress to be made on the international front,” adding that her industry experience helped to inform her perspective on the issue: “I’ve represented U.S. industry against counterfeit and infringing goods from other countries and have found it very challenging when the laws are not balanced or fair.”

Stark: Understanding the Context

Senator Thomas Carper (D-DE) introduced Judge Stark, who is the first Delawarean to be nominated to the CAFC, recounting Stark’s professional and academic background. Carper noted that Stark has heard 2,400 patent cases, including 63 that went to trial. Patent law is of particular importance to the Federal Circuit and his expertise makes him particularly suited to the role, Carper said. Stark was confirmed by the full Senate with unanimous consent to the district court in 2010 and only 2% of his 2,100 written opinions have been reversed or affirmed with criticism. Senator Coons (D-DE) also made introductory remarks for Stark, assuring his colleagues that Stark will “hit the ground running” as a judge on one of the busiest patent courts in the country who also has sat by designation on the Federal Circuit and the Third Circuit 54 times already.

Both Senator Dick Durbin (D-IL) and Grassley asked Stark about his approach to deciding cases, which Stark, who has written more than 2,000 opinions, explained involves starting with the text to see if it is “unambiguous,” then moving to binding Supreme Court and Court of Appeals precedent if there is ambiguity. If that still doesn’t answer the questions, Stark said he may look to other non-binding circuits, and even persuasive opinions from district court judges. “If all of that doesn’t answer the question, then I will turn to other canons of statutory construction and that could include consideration of legislative history.”

Turning to IP-specific questions, Leahy asked Stark about the Federal Circuit’s recent trend of  raising the bar to prove Article III standing for IPR petitioners whether Stark agrees that judicial review is important, and that both sides should have a chance to seek judicial review before either can be estopped? Leahy also asked about the Western District of Texas hearing ¼ of the nation’s patent cases and whether it raises any issues for him, but Stark mostly evaded both questions, saying he considers cases as they come before him.

Coons noted that Stark will replace Judge O’Malley, who has district court experience as well, and asked Stark how his background will help him on the CAFC. Stark replied that he will bring with him the recognition of how challenging it is to put together a reviewable record in a patent case. “The technology is always complex, the facts are very challenging. Patent litigators often disagree with each other, so I estimate that in a typical patent case that goes to trial I make many hundreds of decisions, or even more than 1,000, and typically only a handful of those issues get appealed to the Federal Circuit, so I’ll bring an understanding of the context in which those issues arise.”

The Federal Circuit Bar Association filed comments in support of both Stark and Vidal.

Four other nominees were also questioned in today’s hearing. They were:

• Victoria Marie Calvert to be United States District Judge for the Northern District of Georgia
• Jacqueline Scott Corley to be United States District Judge for the Northern District of California
• Sarah Elisabeth Geraghty to be United States District Judge for the Northern District of Georgia
• Dale E. Ho to be United States District Judge for the Southern District of New York