527 U.S. 150 (1999), 98-377, Dickinson v. Zurko

Docket Nº:Case No. 98-377
Citation:527 U.S. 150, 119 S.Ct. 1816, 144 L.Ed.2d 143, 67 U.S.L.W. 3683, 67 U.S.L.W. 4445
Party Name:DICKINSON, ACTING COMMISSIONER OF PATENTS AND TRADEMARKS v. ZURKO et al.
Case Date:June 10, 1999
Court:United States Supreme Court
 
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527 U.S. 150 (1999)

119 S.Ct. 1816, 144 L.Ed.2d 143, 67 U.S.L.W. 3683, 67 U.S.L.W. 4445

DICKINSON, ACTING COMMISSIONER OF PATENTS AND TRADEMARKS

v.

ZURKO et al.

Case No. 98-377

United States Supreme Court

June 10, 1999

Argued March 24, 1999

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT

Syllabus

In reviewing a Patent and Trademark Office (PTO) decision to deny respondents' patent application, the Federal Circuit analyzed the PTO's factual finding using a "clearly erroneous" standard of review, which generally governs appellate review of district court findings of fact (court/court review), rather than the less stringent standards set forth in the Administrative Procedure Act (APA), which permit a court to set aside agency findings of fact found to be arbitrary, capricious, an abuse of discretion, or unsupported by substantial evidence (court/agency review), 5 U.S.C. § 706. The court found the PTO's factual finding to be clearly erroneous.

Held:

The Federal Circuit must use the framework set forth in § 706 when reviewing PTO findings of fact. Pp. 154-165.

(a) Absent an exception, a reviewing court must apply the APA's court/agency review standards to agency factual findings. The Federal Circuit bases such an exception on 5 U.S.C. § 559, which provides that the APA does "not limit or repeal additional requirements . . . recognized by law." In its view, at the time the APA was adopted in 1946, the Court of Customs and Patent Appeals (CCPA), a Federal Circuit predecessor, applied a court/court standard that was stricter than ordinary court/agency review standards, and this special tradition of strict review amounted to an "additional requirement" that trumps § 706's requirements. However, a close examination of the CCPA's cases reviewing PTO decisions do not reflect a well-established court/court standard. The presence of the phrases "clear case of error," "clearly wrong," and "manifest error" in those cases does not conclusively signal such review. The relevant linguistic conventions were less firmly established before the APA's adoption than they are today, with courts sometimes using words such as "clearly erroneous" to describe less strict court/agency review and words such as "substantial evidence" to describe stricter court/court review. The absence of the words "substantial evidence" in the CCPA's cases is not especially significant, since standardization of that term began to take hold only after Congress started using it in various federal statutes. Further, not one of the CCPA's opinions actually uses the words "clear error" or "clearly erroneous," which are terms

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of art signaling court/court review. Most of them use "manifest error," which is not now such a term of art. At the same time, this Court's precedent undermines the claim that "clearly wrong" or "manifest error" signal court/court review. Although the Court in Morgan v. Daniels, 153 U.S. 120, used language that could be read as setting forth a court/court standard, the Court's reasoning makes clear that it meant its words to stand for a court/agency standard. The CCPA's cases reveal a similar pattern, using words such as "clearly wrong" and "manifest error" with explanations indicating that they had court/agency, not court/court, review in mind. Pp. 154-161.

(b) Several policy reasons that the Federal Circuit believes militate against using APA review standards—that a change will be disruptive to the bench and bar; that the change will create an anomaly in which a disappointed patent applicant who seeks review directly in the Federal Circuit will be subject to court/agency review, while one who first seeks review in a district court will have any further appeal reviewed under a court/court standard; and that stricter review produces better agency factfinding—are unconvincing. Pp. 161-165.

142 F.3d 1447, reversed and remanded.

Breyer, J., delivered the opinion of the Court, in which Stevens, O'Connor, Scalia, Souter, and Thomas, JJ., joined. Rehnquist, C. J., filed a dissenting opinion, in which Kennedy and Ginsburg, JJ., joined, post, p. 170.

Deputy Solicitor General Wallace argued the cause for petitioner. With him on the briefs were Solicitor General Waxman, Assistant Attorney General Hunger, Edward C. DuMont, William Kanter, Bruce G. Forrest, Albin F. Drost, Karen A. Buchanan, and Kenneth R. Corsello.

Ernest Gellhorn argued the cause for respondents. With him on the brief were Jeffrey S. Lubbers, Ann G. Weymouth, Janice M. Mueller, and Russell Wong. [*]

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Justice Breyer delivered the opinion of the Court.

The Administrative Procedure Act (APA) sets forth standards governing judicial review of findings of fact made by federal administrative agencies. 5 U.S.C. § 706. We must decide whether § 706 applies when the Federal Circuit reviews findings of fact made by the Patent and Trademark Office (PTO). We conclude that it does apply, and the Federal Circuit must use the framework set forth in that section.

I

Section 706, originally enacted in 1946, sets forth standards that govern the "Scope" of court "review" of, e. g., agency factfinding (what we shall call court/agency review). It says that a

"reviewing court shall—

. . . . .

"(2) hold unlawful and set aside agency . . . findings. . . found to be—

"(A) arbitrary, capricious, [or] an abuse of discretion, or . . .

. . . . .

"(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; . . .

. . . . .

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"In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party . . . ."

Federal Rule of Civil Procedure 52(a) sets forth standards that govern appellate court review of findings of fact made by a district court judge (what we shall call court/court review). It says that the appellate court shall set aside those findings only if they are "clearly erroneous." Traditionally, this court/court standard of review has been considered somewhat stricter (i. e., allowing somewhat closer judicial review) than the APA's court/agency standards. 2K. Davis & R. Pierce, Administrative Law Treatise § 11.2,p. 174 (3d ed. 1994) (hereinafter Davis & Pierce).

The Court of Appeals for the Federal Circuit believes that it should apply the "clearly erroneous" standard when it reviews findings of fact made by the PTO. In re Zurko, 142F.3d 1447, 1459 (1998) (case below). The Commissioner of Patents, the PTO's head, believes to the contrary that ordinary APA court/agency standards apply. See, e. g., In re Kemps, 97 F.3d 1427, 1430-1431 (CA Fed. 1996); In re Napier, 55 F.3d 610, 614 (CA Fed. 1995); In re Brana, 51F.3d 1560, 1568-1569 (CA Fed. 1995).

The case before us tests these two competing legal views. Respondents applied for a patent upon a method for increasing computer security. The PTO patent examiner concluded that respondents' method was obvious in light of prior art, and so it denied the application. See 35 U.S.C. § 103 (1994 ed., Supp. III). The PTO's review board (the Board of Patent Appeals and Interferences) upheld the examiner's decision. Respondents sought review in the Federal Circuit, where a panel treated the question of what the prior art teaches as one of fact, and agreed with respondents that the PTO's factual finding was "clearly erroneous." In re Zurko, 111 F.3d 887, 889, and n. 2 (1997).

The Federal Circuit, hoping definitively to resolve the review-standard controversy, then heard the matter en banc.

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After examining relevant precedents, the en banc court concluded that its use of the stricter court/court standard was legally proper. The Solicitor General, representing the Commissioner of Patents, sought certiorari. We granted the writ in order to decide whether the Federal Circuit's review of PTO factfinding must take place within the framework set forth in the APA.

II

The parties agree that the PTO is an "agency" subject to the APA's constraints, that the PTO's finding at issue in this case is one of fact, and that the finding constitutes "agency action." See 5 U.S.C. § 701 (defining "agency" as an "authority of the Government of the United States"); § 706 (applying APA "Scope of review" provisions to "agency action"). Hence a reviewing court must apply the APA's court/agency review standards in the absence of an exception.

The Federal Circuit rests its claim for an exception upon § 559. That section says that the APA does "not limit or repeal additional requirements . . . recognized by law." In the Circuit's view: (1) at the time of the APA's adoption, in 1946, the Court of Customs and Patent Appeals (CCPA), a Federal Circuit predecessor, applied a court/court "clearly erroneous" standard; (2) that standard was stricter than ordinary court/agency review standards; and (3) that special tradition of strict review consequently amounted to an "additional requirement" that under § 559 trumps the requirements imposed by § 706.

Recognizing the importance of maintaining a uniform approach to judicial review of administrative action, see, e. g., Universal Camera Corp. v. NLRB, 340 U.S. 474, 489 (1951); 92 Cong. Rec. 5654 (1946) (statement of Rep. Walter), we have closely examined the Federal Circuit's claim for an exception to that uniformity. In doing so, we believe that respondents must show more than a possibility of a heightened

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standard, and indeed more than even a bare preponderance of evidence in their favor. Existence of the additional requirement must be clear. This is suggested both by the phrase "recognized by law" and by the congressional specification in the APA that "[n]o subsequent legislation shall be held to supersede or modify the provisions of this Act except to the extent that such legislation shall do so expressly." § 12, 60...

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