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Target Training International, Ltd. v. Lee

United States District Court, N.D. Iowa, Central Division

March 5, 2014

TARGET TRAINING INTERNATIONAL, LTD., Plaintiff,
v.
MICHELLE K. LEE, [1] Deputy Under Secretary for Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant

For Target Training International, Ltd, Plaintiff: Cory A McAnelly, Edmund J Sease, LEAD ATTORNEYS, R Scott Johnson, McKee, Voorhees & Sease, PLC, Des Moines, IA.

For Michelle K Lee, Deputy Under Secretary for Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, Defendant: Matthew J Cole, LEAD ATTORNEY, U.S. Attorney's Office, Northern District of Iowa, Cedar Rapids, IA.

OPINION

Page 928

MARK W. BENNETT, U.S. DISTRICT COURT JUDGE.

MEMORANDUM OPINION AND ORDER REGARDING DEFENDANT'S MOTIONS TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

TABLE OF CONTENTS

I. INTRODUCTION

A. PTO Proceedings

B. The Action For Judicial Review

II. APPLICABLE STANDARDS

A. Dismissal For Lack Of Subject Matter Jurisdiction Or For Failure To State A Claim?

B. Rule 12(b)(6) Standards For Dismissal For Failure To State A Claim

III. THE DIRECTOR'S MOTIONS TO DISMISS

A. Judicial Review Of The Rule 183 Decision

1. Arguments of the parties

2. The § 701(a)(2) exception

a. Regional or Federal Circuit law?

b. Scope of the exception

c. Applications of the exception

3. Applicability of the § 701(a)(2) exception to a Rule 183 decision

B. TTI's Due Process Claim

1. Arguments of the parties

2. Analysis

IV. CONCLUSION

Page 929

A patent holder has brought this action for judicial review of a determination by the United States Patent and Trademark Office (PTO) that an alleged infringer's inter partes reexamination request was filed on the last day before the statute authorizing such proceedings expired. The patent holder argues that the alleged infringer's inter partes reexamination request was not filed until two days later, when the alleged infringer's " Corrected Certificate of Service" was actually filed with the PTO. The Director of the PTO has moved to dismiss " for lack of subject matter jurisdiction" pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. The Director argues that the PTO's determination of the filing date of the inter partes reexamination request was pursuant to a patent rule allowing the PTO to waive requirements not imposed by statute, but only by agency regulations, " in an extraordinary situation, when justice requires." See 37 C.F.R. § 1.183. The Director argues that a decision pursuant to this rule falls within the exception to judicial review for a decision " committed to agency discretion by law" in 5 U.S.C. § 701(a)(2) of the Administrative Procedures Act (APA).

I. INTRODUCTION

A. PTO Proceedings

Plaintiff Target Training International, Ltd., (TTI), an Iowa corporation with its headquarters and principal place of business in Scottsdale, Arizona, is the assignee and owner of United States Patent No. 7,249,372 (the '372 patent).[2] According to allegations in TTI's Amended Complaint,

Page 930

TTI is embroiled in litigation in the United States District Court for the Southern District of Texas with non-party Extended Disc North America, Inc. (EDNA), a United States company, and EDNA's franchisor, non-party Extended DISC International, Inc. (EDI), a Finnish corporation. In that action, TTI alleges a claim of contributory infringement of the '372 patent by EDNA, and claims of direct and contributory infringement of the '372 patent by EDI.

EDI initiated an ex parte reexamination proceeding concerning the '372 patent with the PTO on April 4, 2011. See, e.g., Amended Complaint (docket no. 8), Exhibit 2 (Decision on Appeal of EDI's ex parte reexamination request). The agency proceeding of interest here, however, is an inter partes reexamination (IPReex) proceeding concerning the '372 patent that EDNA purportedly filed with the PTO on September 14, 2012, and identified in PTO filings as " the '2307 proceeding." TTI argues that EDNA's IPReex Request was actually filed on September 16, 2012, because that was the date that all parts of EDNA's IPReex Request, including an adequate certificate of service, were filed with the PTO. TTI alleges that the actual filing date of EDNA's IPReex Request was one day after the statute authorizing an IPReex proceeding expired and was replaced with a new statutory scheme authorizing an inter partes review (IPR) proceeding.[3]

Page 931

More specifically, TTI alleges that EDNA filed its IPReex Request concerning the '372 patent pursuant to then-existing versions of 35 U.S.C. § § 311 and 312, with a separate " Certificate of Service" stating that service of the Request had been made on TTI by first class mail on September 14, 2012. The Director states, in her brief in support of her original Motion To Dismiss (docket no. 7-1), at 2, the PTO found in administrative proceedings, see Amended Complaint, Exhibit 5 (decision on request for reconsideration at 6), and TTI apparently does not dispute, that EDNA's initial " service" of its IPReex Request was actually by parcel post, but applicable regulations required service by first class mail. TTI alleges that, on September 15, 2012, the PTO's electronic filing system indicated the electronic filing of a " Second Certificate of Service," stating that " a second copy of the Request" had been served by mailing a document (with a stated tracking number) on September 14, 2012. On September 16, 2012, the PTO's electronic filing system indicated the electronic filing of a " Corrected Certificate of Service," stating that copies of EDNA's IPReex Request had been served by first class mail on September 14, 2012. Consequently, TTI alleges that the PTO initially assigned EDNA's IPReex Request a filing date of September 16, 2012.

TTI alleges, however, that, at some point, the PTO unilaterally, without notice, and without explanation adjusted the records regarding EDNA's IPReex Request to reflect a filing date of September 14, 2012, the last day that the IPReex statute was in force. Consequently, on November 14, 2012, TTI filed its first petition (a " Rule 181 Petition," pursuant to 37 C.F.R. § 1.181) requesting that the PTO change the filing date of EDNA's IPReex Request from September 14, 2012, back to September 16, 2012. On November 28, 2012, EDNA filed a petition opposing TTI's " Rule 181 Petition." Amended Complaint, ¶ ¶ 37-40, Exhibit 3 (Decision On Petitions Under 37 CFR 1.181 at 2). On December 7, 2012, while TTI's " Rule 181 Petition" was pending, the PTO issued an order granting IPReex of the '372 patent in the '2307 proceeding. Id. at ¶ 47, Exhibit 3 (Decision On Petitions Under 37 CFR 1.181 at 2). The Director of the PTO's Central Reexamination Unit eventually denied TTI's " Rule 181 Petition" on June 5, 2013. Id. at ¶ 51, Exhibit 3 (Decision On Petitions Under 37 CFR 1.181 at 7).

On June 25, 2013, TTI filed a Request for Reconsideration of the June 5, 2013, denial and decision. Id. at ¶ 55, Exhibit 4. On September 6, 2013, the Director of the Central Reexamination Unit dismissed

Page 932

TTI's Request for Reconsideration and maintained the " reassigned" filing date of September 14, 2012. Id. at ¶ 61, Exhibit 5 (Decision On Petitions Under 37 CFR 1.181 (decision on TTI's Request for Reconsideration)). The " Decision" section of the September 6, 2013, ruling stated the following, in its entirety:

Patent owner (petitioner) requests reinstatement of September 16, 2012 as the filing date of the request. Petitioner disputes affording the Request a filing date of September 14, 2012 because the certificate of service through first class mail was not received by the Office on the same day the service itself was rendered. Petitioner argues that there is no authority in the Rules that Reexamination Request[s] can be filed piecemeal at the Office and obtain a filing date that precedes the last piece or part to be filed. Petitioner supports these arguments with the language of 37 CFR § 1.915 and 37 CFR § 1.919.
It is agreed that Rule 915 requires third party requester to include a certificate of service in the Request and that Rule 919 requires that all parts of the Request must be received by the Office to afford a filing date.
However, it is not agreed that the Office lacks authority to afford the '2307 proceeding a filing date of September 14, 2012. As stated in Rule 183, " [I]n an extraordinary situation, when justice requires, any requirement of the regulations in this part which is not a requirement of the statutes may be suspended or waived by the Director or the Director's designee, sua sponte, or on petition of the interested party." The statue (35 USC 311) governing the filing for inter partes reexamination does not require the filing of a certificate of service with the Request. The filing and the manner of filing the certificate of service are solely required by regulation. As such, these requirements can be suspended or waived under the authority and conditions set forth in Rule 183.
In the instant proceedings, the record is clear that patent owner was serviced [sic], not once but twice, with the Request on September 14, 2012. Specifically, patent owner was initially serviced [sic] by way of parcel post through the USPS (as evidenced by " SECOND CERTIFICATE OF SERVICE" filed September 14, 2012) and served again by way of first class mail through the USPS (as evidenced by " CORRECTED CERTIFICATE OF SERVICE" filed September 16, 2012). As such, the Office deemed, sua sponte, under the authority of Rule 183 that justice required the '2307 proceeding be afforded a filing date of September 14, 2012.
Accordingly, patent owner's petition is dismissed.

Amended Complaint, Exhibit 5 (Decision On Petitions Under 37 CFR 1.181 (decision on TTI's Request for Reconsideration), 5-6 (emphasis in the original)).

B. The Action For Judicial Review

TTI now seeks judicial review, pursuant to the Administrative Procedures Act (APA), 5 U.S.C. § § 701-06, of the PTO's refusal to reinstate a filing date of September 16, 2012, for EDNA's IPReex Request. In both its original Complaint (docket no. 1), filed October 21, 2013, and its Amended Complaint (docket no. 8), filed January 9, 2014, TTI asserts two causes of action. The first part of TTI's first cause of action is for judicial review of the PTO's denial of TTI's " Rule 181 Petition," that is, the September 6, 2013, denial of TTI's petition for reconsideration of the PTO's determination of the filing date of EDNA's IPReex Request. TTI alleges that the PTO's decision to change the filing date of EDNA's IPReex Request from September 16, 2012,

Page 933

to September 14, 2012, without notice to TTI, was contrary to TTI's constitutional right to notice and due process, was unlawful, and should be set aside under the APA, 5 U.S.C. § 706(2)(B). In the second part of its first cause of action, TTI also alleges that the PTO's refusal to reinstate the September 14, 2012, filing date, based on the PTO's authority under " Rule 183," 37 C.F.R. § 1.183, was arbitrary, capricious, an abuse of discretion, and should be set aside under the APA, 5 U.S.C. § 706(2)(A). TTI's second cause of action is for a stay of agency proceedings or decision on EDNA's IPReex proceeding pending review by this court of the PTO's challenged determination of the filing date of EDNA's IPReex Request.

On December 23, 2013, in response to TTI's original Complaint, the Director filed a Motion To Dismiss (docket no. 7) " for lack of subject matter jurisdiction" pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. In that Motion, the Director asserted that this court lacks subject matter jurisdiction over TTI's action for judicial review, because the challenged agency decision is expressly " committed to agency discretion by law" and, thus, unreviewable, pursuant to 5 U.S.C. § 701(a)(2). On January 9, 2014, TTI filed both its Response To Defendant's Motion To Dismiss Pursuant To Federal Rule Of Civil Procedure 12(b)(1) (docket no. 9) and its Amended Complaint (docket no. 8), which TTI filed as a matter of course pursuant to Rule 15(a)(1)(B). On January 16, 2014, the Director filed a Reply (docket no. 10), in further support of its Motion To Dismiss.

Also on January 16, 2014, out of concern that the filing of TTI's Amended Complaint had rendered moot her Motion To Dismiss, the Director filed her Second Motion To Dismiss (docket no. 11). In her Second Motion To Dismiss, the Director opined that the Amended Complaint did not appear to change materially the allegations in TTI's original Complaint and offered nothing in response to the Director's original Motion To Dismiss. Consequently, rather than file a duplicate Motion To Dismiss and supporting brief as her Second Motion To Dismiss, the Director incorporated by reference into her Second Motion To Dismiss her original Motion To Dismiss, supporting brief, and Reply. On January 27, 2014, TTI filed its Opposition To Defendant's Second Motion To Dismiss (docket no. 12). In its Opposition, TTI explained that it had filed its Amended Complaint " to correct certain informalities in citation of statutes and regulations," and expressly agreed with the Director's opinion that the Amended Complaint does not materially change the issues before the court on the Director's Motions To Dismiss. Consequently, TTI also incorporated into its Opposition To Defendant's Second Motion To Dismiss all of the briefing and arguments in TTI's original Response To Defendant's Motion To Dismiss.

In its Response To Defendant's Motion To Dismiss and its Opposition To Defendant's Second Motion To Dismiss, TTI requests oral arguments on the Director's Motions To Dismiss. TTI argues that oral arguments would provide background on the earlier litigation and PTO re-examination, significantly clarify the issues in this case, and be helpful in assisting me in my decision. My crowded schedule does not allow for the timely scheduling of oral arguments on the pending Motions To Dismiss. More importantly, I find that the pertinent issues are narrow legal ones on which oral arguments and additional background on the earlier litigation and PTO re-examination are unlikely to have any benefit. Therefore, the pending Motions To Dismiss are deemed fully submitted on the parties' written submissions.

Page 934

II. APPLICABLE STANDARDS

A. Dismissal For Lack Of Subject Matter Jurisdiction Or For Failure To State A Claim?

As noted above, the Director's Motions To Dismiss seek dismissal " for lack of subject matter jurisdiction." Subject matter jurisdiction is a " threshold question" of law to be determined by the court. Herden v. United States, 726 F.3d 1042, 1046 (8th Cir. 2013). Because federal courts are courts of limited jurisdiction, " [i]t is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction." Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted); Jones v. United States, 727 F.3d 844, 846 (8th Cir. 2013) (noting that the burden of proving subject matter jurisdiction " may not be shifted to another party" ). For the same reason, " parties may not enlarge that jurisdiction by waiver or consent." United States v. Afremov, 611 F.3d 970, 975 (8th Cir. 2010). To the contrary, " [o]nly Congress may determine a lower federal court's subject-matter jurisdiction." Kontrick v. Ryan, 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (citing U.S. Const., art. III, § 1).[4]

The Director seeks dismissal of TTI's action " for judicial review for lack of subject matter jurisdiction" pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, which authorizes such a pre-answer motion. Fed.R.Civ.P. 12(b)(1). The Director contends that this court lacks subject matter jurisdiction, because the PTO's determination to adjust the filing date of EDNA's IPReex Request to September 14, 2012, falls within the exception to judicial review for a decision " committed to agency discretion by law" in 5 U.S.C. § 701(a)(2) of the APA.

The problem with this purported challenge to subject matter jurisdiction--albeit a problem that was not addressed by either TTI or the Director--is that " [t]he APA does not create federal subject matter jurisdiction. Rather, a federal court has federal question jurisdiction under 28 U.S.C. § 1331 over challenges to federal agency action." Iowa League of Cities v. EPA, 711 F.3d 844, 861 n.10 (8th Cir. 2013) (concluding that federal subject matter jurisdiction for the judicial review action in that case required a determination of whether the action for judicial review had been filed within 120 days from the date of " promulgation" of an effluent limitation under the Clean Water Act, as required by 33 U.S.C. § 1369(b)(1), not based on the waiver of sovereign immunity for suits seeking judicial review of agency actions made reviewable by statute in the APA, 5 U.S.C. § 704).

More specifically,

The APA is not an independent jurisdictional provision. Califano v. Sanders, 430 U.S. 99, 105-06, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). The APA is a procedural statute that provides no substantive requirements but merely provides the framework for judicial review of agency action. Preferred Risk Mut. Ins. Co. v. United States, 86 F.3d 789, 792 (8th Cir.1996). The Supreme Court's recent proscription against " drive-by jurisdictional rulings" compels us to make this distinction in the interest of facilitating the clarity sought by the Court. Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 161, 130 S.Ct. 1237, 1244, 176 L.Ed.2d 18 (2010) (quotation

Page 935

omitted); see also Oryszak v. Sullivan, 576 F.3d 522, 524-25, 388 U.S.App. D.C. 64 (D.C.Cir.2009) (explaining that a federal court has jurisdiction under 28 U.S.C. § 1331 to hear a claim under the APA, but because the APA does not apply to agency action committed to agency discretion by law, a plaintiff who challenges such an action cannot state a claim under the APA and the court will properly grant a motion to dismiss the complaint for failure to state a claim). When a plaintiff complains about an action that is committed to agency discretion by law, it does not mean that a court lacks subject matter jurisdiction over the claim. Instead, it means that there is no law to apply because the court has no meaningful standard against which to judge the agency's unfettered exercise of discretion. Heckler v. Chaney, 470 U.S. 821, 830, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985); Oryszak, 576 F.3d at 526.

Ochoa v. Holder, 604 F.3d 546, 549-50 (8th Cir. 2010) (emphasis added). Thus, an agency's motion to dismiss an action for judicial review on the ground that the challenged agency action is " committed to agency discretion by law," and, as such, is excepted from judicial review pursuant to § 701(a)(2) of the APA, is not a Rule 12(b)(1) challenge to subject matter jurisdiction. Rather, it is a challenge to the plaintiff's ability to state a claim upon which relief can be granted. Id. (citing Oryszak, 576 F.3d at 524-25, for this proposition).

The en banc decision of the Eighth Circuit Court of Appeals in Tamenut v. Mukasey, 521 F.3d 1000, 1005 (8th Cir. 2008) (en banc), concerning the effect of § 701(a)(2) on review of agency action--on which both TTI and the Director relied in their briefs--is not to the contrary. As a panel of the court subsequently explained in Ochoa,

In Tamenut v. Mukasey, 521 F.3d 1000, 1005 (8th Cir.2008) (en banc), we held that " the BIA's decision whether to reopen proceedings on its own motion under 8 C.F.R. § 1003.2(a) is committed to agency discretion by law" and is thus unreviewable by an appellate court. In Tamenut, after making this determination we concluded that we " lack[ed] jurisdiction" over Tamenut's challenge to the BIA and we dismissed the petition accordingly. 521 F.3d at 1005. More precisely, the dismissal in Tamenut, while the proper disposition, was due to our inability to review an agency action " committed to agency ...

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