Patent applicants who appeal patent appeals board rulings in federal district court may introduce new evidence, according to a recent en banc ruling of the U.S. Court of Appeals for the Federal Circuit. The decision will likely encourage many applicants to continue to seek district court review rather than appeal to the Federal Circuit.

A 6-1-2 ruling in Hyatt v. Kappos on Nov. 8 called an applicant’s ability to introduce new evidence “the hallmark” of a district court appeal of a Board of Patent Appeals and Interferences decision. The Patent Code allows applicants to appeal patent board decisions to the U.S. District Court for the District of Columbia or to the Federal Circuit.

The majority opinion, authored by Judge Kimberly Moore, held that the Patent Code section allowing such appeals “imposes no limitation on an applicant’s right to introduce new evidence before the district court, apart from the evidentiary limitations applicable to all civil actions….[W]e reject the Director’s proposal that only ‘new evidence that could not reasonably have been provided to the agency in the first instance’ is admissible.”

The majority also concluded that the statutory language and its legislative history “support the admission of new evidence” in such cases.

Chief Judge Randall Rader joined the en banc majority ruling, along with judges William Bryson, Richard Linn, Alan Lourie and Sharon Prost. Judge Pauline Newman wrote a concurring opinion, and judges Timothy Dyk and Arthur Gajarsa dissented.

Plaintiff Gilbert Hyatt is the sole named inventor on a U.S. patent application for “a computerized display system for processing image information.” After the PTO rejected all his claims, he appealed to the patent appeals board. The board reversed most of the rejections, but affirmed at least one rejection. When the board rejected his request for a rehearing, he filed a civil action in the D.C. district court. Hyatt sought to introduce his own written declaration, but the district court excluded it as new evidence, finding that Hyatt “willfully refused to cooperate in the examination process” at the U.S. Patent and Trademark Office.” The district court ultimately found the claims unpatentable.

In August 2009, a three-judge panel of the Federal Circuit upheld the district court’s ruling in the case. Former Chief Judge Paul Michel, who has since retired, authored the 2-1 opinion. Moore offered a dissent.

In the recent en banc decision, the Federal Circuit reversed course, finding that the district court abused its discretion in the underlying case. It vacated the district court’s September 2005 ruling that excluded the plaintiff’s evidence.

The ruling “clarifies a long-running issue in patent law,” said Michael Martinez, a partner at Washington-based Crowell & Moring, who represented Hyatt both in the en banc appeal and his first Federal Circuit appeal of the case.

“It enables plaintiffs who feel they did not have an adequate review by the patent office to truly get their case heard on the merits in the U.S. District Court for the District of Columbia,” he said. “This clarifies that essentially it’s a de novo review in terms of what the district court can look at in reviewing decisions by the PTO.”

The PTO declined to comment.

Dyk’s 37-page dissent, which Gajarsa joined, stated that the majority opinion “reflects a remarkable departure from settled principles of administrative law.”

“Allowing a trial de novo in the district court denigrates the important expertise of the PTO, is contrary to established principles of administrative law, finds no support in the language of the statute, and is contrary to decisions of at least five other circuits,” Dyk wrote. “The majority opinion invites applicants to deliberately withhold evidence from the PTO in favor of a more hospitable district court forum. Today’s decision reflects yet another misguided effort to craft special rules for patent cases that the Supreme Court in other cases has held to be impermissible.”

Dyk cited the Supreme Court’s 2006 ruling in eBay v. MercExchange, which overturned the Federal Circuit’s “special test for issuing permanent injunctions in patent cases.” The eBay ruling outlined four factors for courts to weigh instead of issuing automatic injunctions.

Dyk also cited the 2007 Supreme Court ruling in MedImmune v. Genentech Inc., which rejected the Federal Circuit’s test for declaratory judgments. The MedImmune court held that licensees could bring such cases in order to challenge the underlying patent.

In Newman’s concurring opinion, she agreed with the majority’s holding that patent applicants can bring new evidence to the district court if their case reaches an appeal in that venue. But she dissented from the en banc majority’s finding that, when the litigant doesn’t produce new evidence at the district court, the court should give the PTO’s findings and rulings the same deferential treatment as if the case were an Administrative Procedure Act direct appeal to the Federal Circuit.

Newman wrote that “the statutory plan is designed to differ from such a duplicative procedure, not to create it.”

“No party presented or even contemplated such a redundant procedure, and no amicus discussed it,” Newman wrote. “It is contrary to statute, to precedent, and to almost two centuries of legislative policy.”

Daniel Ravicher, executive director of the Public Patent Foundation at Yeshiva University Benjamin N. Cardozo School of Law, which submitted an amicus brief in the case, raised concerns that echoed those of the dissenters. The majority’s interpretation “encourages manipulation of the application process and incentivizes applicants to withhold key evidence for strategic advantage,” he said.

“What it will do is make the job of the patent office in doing a high-quality review of applications much more difficult and much more burdensome, which will decrease quality and decrease productivity,” Ravicher said. “It will also burden courts by encouraging applicants to appeal to district court rather than the court of appeals.”

Some other organizations, such as the Intellectual Property Owners Association, are pleased with the en banc majority’s decision. IPO’ amicus brief outlined a position similar to the one adopted by the en banc court. “IPO is pleased with the decision, which is generally consistent with the position we urged in our amicus brief,” said IPO executive director Herb Wamsley, in a written statement.

This story originally appeared in The National Law Journal, a Corporate Counsel sibling publication.