Supreme Court News
by William Funk^*

The last two weeks of the Supreme Court=s 1998 term ended with a flurry of decisions involving either federalism issues under the Eleventh Amendment or the limits of the Americans with Disabilities Act. Both sets of decisions will occasion further Supreme Court consideration, and indeed among the cases held over to the 1999 term for which certiorari was granted are four federalism cases -- three Eleventh Amendment cases and a Tenth Amendment case.

One other decision, however, was an administrative law decision. In Dickinson v. Zurko, 119 S.Ct. 1916 (1999), the Court in an opinion by Justice Breyer held by a 6-3 vote that appeals of the Patent and Trademark Office=s factual findings are governed by the standard of review contained in the Administrative Procedure Act, not the standard applicable to one court=s review of a lower court=s factual findings.

The Federal Circuit Court of Appeals in a unanimous en banc decision had found that Section 559 of the APA preserved the historical, stricter review standard that a court applies to another court=s factual determination, thereby displacing the normal and more lenient Section 706 standard of arbitrary and capricious (for informal determinations) or substantial evidence (for formal determinations). Section 559, which is hardly known to most practitioners, provides, among other things, that Chapter 7 of the APA (which contains the judicial review provisions of the APA) does Anot limit or repeal additional requirements . . . otherwise recognized by law.@ At the time the APA was adopted, the Court of Customs and Patent Appeals , the court that then reviewed decisions of the Patent and Trademark Office, variously referred to its review standard as Aclear case of error,@ Aclearly wrong,@ or Amanifest error.@ The Federal Circuit interpreted these terms to refer to the type of review currently termed Aclearly erroneous@ and typical of the court/court type of review of factual questions. Because such review would be more rigorous than the APA=s court/agency type of review, the Federal Circuit deemed this history to establish an Aadditional requirement[] otherwise required by law.@Consequently, Section 559 would preserve that standard of review in place of Chapter 7 of the APA.

This was the first time Section 559 had ever been before the Supreme Court, and the Court as an initial matter held that it should be construed narrowly. ARecognizing the importance of maintaining a uniform approach to judicial review of administrative action,@ the Court held that departures from the norm must be clear. Thus, if the evidence in favor of a different review standard was by a Abare preponderance,@ that would not be enough. AExistence of the additional requirement must be clear.@

With this thumb on the scales, the Court then took its own look at the history of judicial review of patent office decisions. While it conceded that the CCPA had used the various terms to describe its standard of review, the Court concluded that at the time of the APA=s adoption there was not such a clear distinction in the terms used to distinguish between court/court type review and court/agency type review. The Court demonstrated many courts, including itself, were inconsistent, sometimes using Aclearly erroneous@ (or something close thereto) to refer to court/agency review and sometimes using Asubstantial evidence@ to refer to court/court review. Thus, the mere use of particular terms did not require a finding that the actual review being used was in fact a court/court type review. Instead, the Court went back to an 1894 Supreme Court case, Morgan v. Daniels, 153 U.S. 120, in which it had explained at some length that an appeal to a court from the patent office was different from an appeal from a court to a court; it was an appeal from an agency of the executive branch entrusted with full power to decide the issue, and the clear implication was that the review standard would be more forgiving than would apply in a court/court type review. Moreover, the Court went on to demonstrate that in many of the cases in which the CCPA used the term Amanifest error@ it explained its review standard as one that recognized that the PTO is an expert body, better able to deal with technically complex subject matter, and deserving of deference. This explanation, the Court noted, is inconsistent with treating Amanifest error@ as the equivalent of court/court type review.

The Federal Circuit had also suggested policy reasons supporting a conclusion that a stricter form of review should apply to judicial review of PTO decisions than should apply to other agency decisions. The first such reason was that the law had been settled for a half century that the APA standard of review did not apply to PTO decisions. To change this settled course might prove needlessly disruptive. The Court had two answers to this argument. First, it declared the law not settled, because the Supreme Court had never addressed Section 559's reach. Second, and more convincingly, the Court indicated that it did not believe the difference between the two standards (court/court type review and court/agency type review) had that much effect. ABut the difference is a subtle one B so fine that (apart from the present case) we have failed to uncover a single instance in which a reviewing court conceded that use of one standard rather than the other would in fact have produced a different outcome.@ And the Court quoted from the late Judge Leventhal=s opinion in which he referred to never having found the Acase dreamed of by law school professors,@ where the agency=s findings, though Aclearly erroneous,@ were Anevertheless@ supported by Asubstantial evidence.@ Indeed, it will be interesting to see if on remand the Federal Circuit does indeed reach a different conclusion as to the validity of the PTO=s decision using an APA standard of review. The possibility that even an APA standard of review might reach the same conclusion as the court/court type of review in patent cases was suggested by the Court:

[W]hen a Federal Circuit judge reviews PTO factfinding, he or she often will examine that finding through the lens of patent-related experience B and properly so, for the Federal Circuit is a specialized court. That comparative expertise, by enabling the Circuit better to understand the basis of for the PTO=s finding of fact, may play a more important role in assuring proper review than would a theoretically somewhat stricter standard.

A final policy argument was that to have a court/agency standard of review when the Federal Circuit reviews a PTO decision would create an anomaly, because an applicant denied a patent can follow either of two avenues B an appeal to the Federal Circuit or by suing in Federal District Court. If a person sued in district court, the Federal Circuit would be using a court/court type of review, but if the person appeals directly to the Federal Circuit, the Circuit would be using the court/agency type of review B different review standards when reviewing the same decision. The Supreme Court was not moved. On the one hand, the Court found no anomaly because in the suit in district court, the applicant could enter new evidence not before the PTO, and this would make the judge a non-expert fact-finder, justifying court/court type review. On the other hand, the Court suggested that the Federal Circuit could change its review standard of federal district court decisions, thereby eliminating the anomaly in that way.

The dissent (Chief Justice Rehnquist, joined by Justices Kennedy and Ginsburg) did not approve of the clear statement rule approach to Section 559, but it also seemed much more impressed with the 50-year history of all persons involved in the process (including the PTO itself) assuming that the APA standard of review did not apply.

The Court=s reluctance to create an exception to the APA=s normal judicial review standards, even in the face of fifty years of patent law practice in which practitioners of all stripes assumed the APA did not apply, is probably the most important lesson from Zurko. It follows the Court=s similar rebuff earlier in the term to the Federal Circuit=s attempt to find the Chevron doctrine not applicable to cases in the Court of International Trade. See United States v. Haggar, 119 S.Ct. 1392 (1999).

Two of the cases for which certiorari was granted last term involve administrative law issues. The highest profile case is Food and Drug Admin. v. Brown & Williamson Tobacco Corp., 153 F.3d 155 (4th Cir. 1998), in which the Fourth Circuit overturned the FDA=s assertion of authority over tobacco products. Although the issue is anything but routine, the administrative law issue C Chevron deference and its limits C is typical.

The other case is Shalala v. Ill. Council on Long Term Care Inc., 143 F.3d 1072 (7th Cir. 1998). It involves the question whether 42 U.S.C. ' 405 (h), which precludes certain challenges to the Secretary=s decisions under the Medicare Act, precludes a pre-enforcement challenge to regulations under the Medicare Act. The Seventh Circuit held it did not, creating a circuit split with the Sixth Circuit, which held that it did.

At the Section of Administrative Law & Regulatory Practice we are always looking for new and better ways to serve our members, the bar and the public. If you have any comments, ideas or features you would like us to incorporate, or if you have difficulties with any of the links in these pages, please contact the Section's Webmaster.