Rule Effort Worthwhile?
Back in November of 2021, the Northern District of California dismissed an APA lawsuit filed by a number of large companies seeking to challenge the PTAB’s NHK-Fintiv practices. At that time, I opined that the Court had overlooked some of the key APA arguments, and that the Federal Circuit would likely offer a more nuanced view. Yesterday, the Court, reversed-in-part and remanded for further consideration of the APA challenge.
Of particular interest, the Federal Circuit found that the APA challenge to the NHK-Fintiv practices (i.e., that such practices were unlawful absent notice and comment rulemaking) should not have been dismissed for lack of standing. While this may have been a very exciting development a year or so back, it is a bit anticlimactic in 2023.
First, NHK-Fintiv denials have fallen off dramatically since the Director’s Memo modifying past practices. Still, they have not been eliminated altogether, and the Director is still refining current practices. So, even if the modified practices of following PTAB precedent and a Director memorandum –not rules– are unlawful as failing to comply with necessary APA rulemaking safeguards, perhaps they will eventually fall altogether as a result of this suit?
As the litigation against NHK-Fintiv practices has remained pending on appeal, the agency has been preparing a Notice of Proposed Rulemaking rule package. This package, while not yet public, is now under review at the Office of Information and Regulatory Review (OIRA). So, that rule package will be noticed in the Federal Register this year, and, if successful, perhaps advancing to final form by the end of the year as well. Absent a quick decision by the NDCA, it would seem that the case has little value in terms of up-ending current practices given the looming rule package would effectively moot the issue. But, the rule package may face some unique challenges going forward.
The intrigue in all of this for me is the characterization by the agency in its OIRA submission that the proposed package is not economically significant (here). OIRA defines “economically significant” as a regulation having:
[A]n annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities(emphasis added)
To my eye, these rules would be economically significant given some of the high dollar (in the billions) verdicts that have resulted from AIA trial petitions that were denied as a matter of discretion under 314(a). I would think that such high dollar value verdicts impact productivity, competition, and particular sectors. But, a reclassification of the rule package greatly complicates and lengthens the review process. Perhaps to the point that the agency wouldn’t believe it worthwhile, and slowing the effort down to allow the court to get out in front.
Of course, the litigation would need to be successful to end the current practices. That said, it is hard to see an argument that current practices (which in some cases can severely curtail the rights of the public) should not have been subject to notice-and-comment rulemaking.
You have to wonder if the effort becomes more complicated whether the agency will find the effort worthwhile given the relative infrequency of agency discretion under existing NHK-Fintiv practices.