[00:00:00] Speaker 02: Our next case is Apple et al. [00:00:03] Speaker 02: versus the Undersecretary of Commerce Squires of 2024, 1864. [00:00:09] Speaker 02: Mr. Fleming, when everyone is seated and wait a moment. [00:00:19] Speaker 02: Please proceed. [00:00:20] Speaker 01: Thank you. [00:00:20] Speaker 01: Good morning, Your Honor, and may it please the Court. [00:00:23] Speaker 01: Mark Fleming from WilmerHale, together with Gary Fox and Alison Zurich on behalf of the Appellants. [00:00:28] Speaker 01: Substantive agency rules are subject to what the DC Circuit has called the general commitment to public notice and participation that Congress implemented through the notice and comment requirement. [00:00:39] Speaker 01: There are two hallmarks of substantive agency rules that are at issue here, and Fintive satisfies both of them. [00:00:45] Speaker 01: First, Fintive produces significant effects on private interests, and second, it's binding on the board. [00:00:52] Speaker 01: Fintive harms the private interests of infringement defendants. [00:00:55] Speaker 01: Can I ask you this question? [00:00:56] Speaker 04: So let me just tell you what I've been focusing on thinking about this. [00:01:00] Speaker 04: So the NHK and Fintive presidential board decisions apply only to the board and not to the director, by their terms. [00:01:09] Speaker 04: Same thing with the June 2022 Vidal memorandum. [00:01:17] Speaker 04: It is the director who is the statutory grantee of the institution authority. [00:01:24] Speaker 04: And as we have said, can, on any grounds she wants, putting aside constitutional issues, which is not here, decide to not institute, which is a classic, maybe even the only, [00:01:44] Speaker 04: classic category of agency decisions committed to agency discretion by law, and also, as it happens, protected by the 314D non-reviewability bar. [00:02:01] Speaker 04: On the binding piece of it, [00:02:04] Speaker 04: When the agency decision maker is not even the subject of the pronouncement and can do anything he or she wants, how does one even clear the threshold of this being binding? [00:02:22] Speaker 04: Whether or not there's discretion left to the board, which is just a delicatete whose decision is not the final agency decision. [00:02:31] Speaker 01: I'm very focused on that, so help me. [00:02:33] Speaker 01: I appreciate the direction, Judge Toronto. [00:02:35] Speaker 01: I'll do my best to answer. [00:02:36] Speaker 01: There's a lot in the question. [00:02:37] Speaker 01: I'll do my best to answer it. [00:02:39] Speaker 01: The fact that it is possible to appeal to the director after the board has issued a non-institution decision by itself does not change the nature of the rule, which is binding on the board itself, which in most of the cases, the delegation is still operative. [00:02:57] Speaker 04: So I was not able to find a case, I think reading 50 or something cases cited by the parties, that involves something like this, where the rule, and I'll call it with a small r rule, because everybody seems to agree this is that. [00:03:16] Speaker 04: applied not to the actual final agency decision maker, but to a mere step one agent. [00:03:31] Speaker 01: So if I may, in most of the cases over the time that Fintive has been operative, the final decision maker has been the board. [00:03:39] Speaker 01: It is certainly true that as in many situations, it is possible to appeal. [00:03:44] Speaker 04: What do you mean it has been? [00:03:45] Speaker 04: It just means that in most instances, the director has not exercised the authority. [00:03:52] Speaker 04: That's not the same thing. [00:03:54] Speaker 01: I didn't mean it to be any different than that. [00:03:58] Speaker 01: It means that the board has been the one that makes the determination whether to institute or not. [00:04:04] Speaker 01: There have been limited situations where the director has reviewed that. [00:04:07] Speaker 01: But when rules are created that bind the ability of the actual decision-maker, regardless of the fact that there may be subsequent appeal or review available, [00:04:20] Speaker 01: I don't know of any case that says that the bare availability of subsequent discretionary review by a cabinet official or by someone like the director is going to change the effect of 553. [00:04:32] Speaker 01: 553 subjects all substantive agency rules [00:04:38] Speaker 01: to the notice and comment requirement. [00:04:41] Speaker 01: And that happens when you're binding the authority of the decision maker, whoever it is, even if subsequently an aggrieved party might have a right of appeal to another official or to an Article III court, which of course this court has held we don't have in the case of a non-institution decision. [00:04:56] Speaker 01: But the Congress didn't distinguish and didn't differentiate the application of 553 based on whether there was the availability of subsequent discretionary review by someone else. [00:05:08] Speaker 04: So why isn't it fair to say that the entire body of case law about a substantive rule is about the [00:05:23] Speaker 04: whether there is something legally binding on the agency, or I'll call it the statutory grantee of the authority at issue, which is not the board. [00:05:41] Speaker 01: I don't know that cases have limited the application of 553 that way. [00:05:46] Speaker 01: Whenever the agency has purported to create rules that bind, confine, [00:05:53] Speaker 01: limit the decision-maker's ability to consider particular factors or arguments, regardless of the fact that ultimately the decision might be reviewable by the cabinet secretary. [00:06:04] Speaker 01: Very often the delegate in these situations is going to be the secretary of labor or the attorney general in the case of immigration cases or something like that. [00:06:12] Speaker 01: There will be an avenue to appeal a decision by an inferior board to a higher official. [00:06:19] Speaker 03: Can you think of a case or two as [00:06:23] Speaker 03: as an example of factors being used and implemented by lower level [00:06:32] Speaker 03: agency decision makers that ultimately you know whatever decision they make will be subject to a higher level review within the agency. [00:06:40] Speaker 01: I assure you Judge Chen we searched for cases that would embrace precisely this situation as Judge Toronto prefigured we didn't find one going either way. [00:06:49] Speaker 01: So we are left with the language of the statute and the way that the APA and the way it's been applied. [00:06:54] Speaker 03: So I mean I guess your observation that there isn't any case going against you doesn't really move the ball very far in terms of [00:07:03] Speaker 03: how this court should think about this very specific issue. [00:07:05] Speaker 01: Well, I think it does move the ball in the sense that if this court were to say that the bare availability of review by a senior official, which is not exercised in every case, it's not exercised in most cases, is enough to escape application of Section 553's notice and comment requirement, that would be [00:07:25] Speaker 01: a new decision, it would be creating new ground, and I don't think is consistent with what this court in the DC Circuit has otherwise said about what kind of binding substantive rule is required to be subject to notice and comment. [00:07:40] Speaker 04: Because, I'm so sorry. [00:07:45] Speaker 04: You, you think that the two October 17th, 2025 pronouncements don't move this case. [00:07:52] Speaker 04: The government is in agreement with you on the first point is. [00:07:57] Speaker 04: a little guarded perhaps on the fact that the board is not making these decisions at all anymore. [00:08:03] Speaker 04: The director is doing it directly. [00:08:05] Speaker 04: Everybody agrees that because it could go back to the board. [00:08:11] Speaker 04: Do you have a view about whether if the proposed rule [00:08:18] Speaker 04: in which the comment period closed just about a month ago. [00:08:22] Speaker 04: First of all, that rule, as I understood the notice of proposed rulemaking, would actually bind the office and therefore the director. [00:08:34] Speaker 04: I don't know whether that was intentional or not, but assuming it is, that's a marked distinction [00:08:43] Speaker 04: from the NHK fintive rule, as you call it. [00:08:47] Speaker 04: Would the adoption of that rule moot this case? [00:08:51] Speaker 01: I don't think it would, Judge Taranto. [00:08:53] Speaker 01: I must confess, I'm not in a position to argue the merits of that. [00:08:57] Speaker 01: But it's not the same as fintive, right? [00:09:01] Speaker 01: I mean, the proposed rule has different requirements that a petitioner would have to meet in order to have it. [00:09:08] Speaker 04: Do you understand enough about the proposed rule? [00:09:10] Speaker 04: I know this is key. [00:09:11] Speaker 04: Oh, no, certainly not. [00:09:12] Speaker 04: Does it purport to displace the NHK fintive regime? [00:09:21] Speaker 01: I don't know that it does. [00:09:22] Speaker 01: There is some overlap. [00:09:25] Speaker 01: There are ways in which it covers some of the same ground. [00:09:27] Speaker 01: There are ways in which it covers different ground. [00:09:29] Speaker 01: I don't think that it is, for instance, a logical outgrowth either way. [00:09:33] Speaker 01: such that they could, based on this notice of proposed rulemaking, then shift gears and say, we're just going to promulgate fintive. [00:09:40] Speaker 03: What would be still remaining in NHK and fintive that hadn't already been subsumed in this rulemaking package, assuming it goes final? [00:09:52] Speaker 01: Well, you would have other factors, I think, the fintive factors that are not expressly mentioned. [00:09:58] Speaker 03: This rule package has other additional considerations. [00:10:01] Speaker 03: But as for the fintive factors themselves, [00:10:04] Speaker 03: I mean, at first blush, it seems to me that everything in Fintive is assumed in this rule package. [00:10:11] Speaker 03: And there isn't something still dangling from the Fintive factors that would be a potential yet additional consideration for institution decision makers to make above and beyond what's already expressed in these regulations, assuming they go final. [00:10:30] Speaker 01: I think that not all of the fintive factors are picked up in here. [00:10:35] Speaker 04: For instance, I don't know whether- Would some of them just become immaterial? [00:10:42] Speaker 04: the rule were in place. [00:10:44] Speaker 04: I mean, you wouldn't need factors that are just made irrelevant by the rest of it. [00:10:50] Speaker 03: Is there something like that? [00:10:51] Speaker 03: For example, if the trial date is set for a time that is before a final written decision would come out, these rules would say, well, that ends the matter. [00:11:02] Speaker 03: The balancing kind of goes away after all that. [00:11:08] Speaker 01: I think the factor about the stay in Fintive might still survive this rule. [00:11:14] Speaker 01: And again, we're assuming for purposes of this discussion that the rule gets through notice and comment and is promulgated in its [00:11:20] Speaker 01: current state which given given the history in this area. [00:11:24] Speaker 03: Let's assume for the moment there's nothing left in Fintive that would still be open to possible evaluation above and beyond the final rule package. [00:11:37] Speaker 03: And so what relief could we give to your client if this rule package were to go final tomorrow? [00:11:46] Speaker 03: Or if it takes the court, say, three, four months to write an opinion, and sometime within that three, four months, this rule package, as is, goes final. [00:11:58] Speaker 03: What relief at that point could we give you if we were to assume that everything and anything that's relevant and material and fintive has, in fact, been subsumed in this rule package? [00:12:11] Speaker 01: There are a lot of ifs in that question, Judge. [00:12:13] Speaker 01: And if you ask me to accept them, I will accept them. [00:12:18] Speaker 01: If we have a promulgated rule that by hypothesis leaves nothing left definitive, then I think there may well be another challenge to that rule. [00:12:27] Speaker 01: Under the APA, it may raise different arguments. [00:12:30] Speaker 03: That would be a new case. [00:12:31] Speaker 03: But as for this appeal, [00:12:33] Speaker 03: This appeal just sort of dissolves away? [00:12:37] Speaker 01: I mean, I'm not in a position to say if I have to accept all the ifs in your question that there be anything left of this case. [00:12:43] Speaker 01: That said, I don't think this court can find this case moot at this point. [00:12:48] Speaker 01: in light of the possibility that this rule would be promulgated in the form in which it's proposed, given the last five years of attempts by the office to promulgate regulations. [00:12:59] Speaker 03: They can open up a new comment period or amend the proposed rules and then have a new rule package set out for comment. [00:13:07] Speaker 01: In order for this court to find this appeal moot, I think the court would need to find that there is no chance. [00:13:13] Speaker 01: It's the government's burden here under the voluntary cessation doctrine. [00:13:17] Speaker 01: to find that it's not going to happen that the board will resume institution decisions treating Fintive as binding as it has for the last five years. [00:13:27] Speaker 01: And they haven't even tried to carry their burden as the question initially indicated. [00:13:31] Speaker 01: They don't argue mootness here. [00:13:32] Speaker 01: So I think the case is live. [00:13:34] Speaker 01: The delegation to the board remains live. [00:13:36] Speaker 01: Fintive remains binding as the government's own letter indicates. [00:13:40] Speaker 01: So I think the case remains right for this court's decision and the court should decide it. [00:13:46] Speaker 01: As we've explained, Fintive is binding on the board as the colloquy, Judge Toronto, I hope I answered your question, indicates that is sufficient to trigger that requirement of notice and comment. [00:13:55] Speaker 01: And it certainly affects the interest of government. [00:13:59] Speaker 04: We haven't talked about this, but the government does have an argument that the room for discretion even under the NHK fintive approach is enough to make it non-substantive for 553 purposes. [00:14:15] Speaker 01: I'd be happy to address that if I may because I don't think that's true at all given how the rule operates in practice. [00:14:22] Speaker 01: And this court and the DC Circuit have made clear that you look at what the agency actually does and not at what the Department of Justice argues as a litigation position. [00:14:31] Speaker 01: And since the beginnings of the fintive days, [00:14:33] Speaker 01: the board has made clear. [00:14:35] Speaker 01: Not only are the factors mandatory, but they direct how they should be weighed. [00:14:40] Speaker 01: And they preclude consideration of arguments suggesting that the factors don't apply or shouldn't be applied in a particular case. [00:14:46] Speaker 04: Can I ask you one other kind of precedent question? [00:14:48] Speaker 04: But put aside the assume that the NHK fintive rule applied to the director. [00:15:01] Speaker 04: What precedent is there for that kind of rule being a substantive rule when the subject of the rule is a unreviewable discretionary decision not to institute a proceeding, a so-called non-enforcement proceeding of the sort that Cuozzo and our Mylan case, and I think [00:15:26] Speaker 04: Footnote 6 in the earlier opinion in this case indicates is something of a class by itself. [00:15:33] Speaker 04: Are there other cases in the 553 context involving that kind of non-enforcement decision? [00:15:43] Speaker 01: I can't think of one specifically in the non-enforcement as you framed it. [00:15:48] Speaker 01: I think ultimately the issue would be if this were simply the director saying, these are the factors I'm going to consider. [00:15:56] Speaker 01: The director then retains the authority to apply them or not apply them in a particular case based on the facts and the arguments that are presented. [00:16:03] Speaker 01: Under Fintive, as has been applied, the board lacks that discretion. [00:16:06] Speaker 01: That's the problem. [00:16:07] Speaker 01: That's why we're here arguing notice and comment. [00:16:09] Speaker 01: If this were just the director saying, here are some things that I'm going to consider, but I leave myself the authority to deviate even abruptly from those factors in an appropriate case, we'd be having a very different conversation. [00:16:22] Speaker 01: But the board can't do that. [00:16:23] Speaker 01: And the board has said repeatedly it can't do that. [00:16:26] Speaker 01: Intel versus Coney like a Phillips, it said it in Apple versus Maxell, and they have no cases to the contrary where the board has ever said, not withstanding the first five factors pointing against institution, we nonetheless have the discretion to institute in light of these other arguments. [00:16:42] Speaker 01: On the contrary, what the board has repeatedly said is they're outside the purview of our ability to consider because Fintive is precedential and binding. [00:16:52] Speaker 03: I'm sorry. [00:16:56] Speaker 03: I've got a couple more questions. [00:16:58] Speaker 03: Proceed. [00:16:59] Speaker 03: A lot of your argument, if I read your briefs correctly, seems to hinge on a belief that these fintive factors affect private interests. [00:17:15] Speaker 03: But it seems like that particular articulation from the DC Circuit has [00:17:22] Speaker 03: has sort of gone away and returned back to more affecting individual rights and obligations, having binding force and effective law on those parties. [00:17:36] Speaker 03: And assuming we don't agree with your affects private interests standard, which is looser, then why isn't this more of a policy statement [00:17:52] Speaker 03: merely explains how the agency will exercise its broad enforcement discretion as opposed to being something that really does have the legal effect of altering a petitioner's right to anything when the petitioner, as we know, has no right to any institution of an IPR proceeding. [00:18:21] Speaker 01: So Judge Chen, in AFL-CIO versus NLRB, it's a decision from 2023, the DC Circuit used the affecting private interests reasoning. [00:18:31] Speaker 01: And it did so because the issue there was whether the union could choose union election observers of its choice and whether the NLRB's imposition of criteria for who could be an election observer was substantive or not. [00:18:45] Speaker 01: There's no right to have a union election observer. [00:18:47] Speaker 01: It's only something that the NLRB made available as what it called a privilege and a courtesy. [00:18:51] Speaker 01: But the DC Circuit said, just barely two years ago, that that affects the interests of the Union, even though there's no right. [00:18:58] Speaker 01: It affects the interests of the Union in having fair elections. [00:19:01] Speaker 01: And so imposing criteria on who can be an election observer is a substantive rule that was subject to notice and comment. [00:19:09] Speaker 01: So that is not an analysis the DC Circuit has thrown away by any means. [00:19:14] Speaker 01: In fact, it referred to Batterton and some of the older cases as the [00:19:17] Speaker 01: concurrent and consistent approach of the DC circuit. [00:19:20] Speaker 01: Similarly in Reeder versus FCC, which is another case like AFL-CIO that the government has no response to in their briefing. [00:19:27] Speaker 01: That was a case that involved a criteria to upgrade radio stations that the FCC had implemented. [00:19:32] Speaker 01: There's no right to upgrade a radio station. [00:19:35] Speaker 01: But the FCC created criteria that foreclosed the petitioner's ability to upgrade their radio station. [00:19:41] Speaker 01: They challenged that, and they won. [00:19:43] Speaker 04: Can you remind me, [00:19:45] Speaker 04: were both of those cases, or either one of them, cases that fall into the seemingly somewhat separate bucket, where even though there had been no previous statutory right, there had been a regulation granting an earlier right. [00:20:07] Speaker 04: And one of the categories for a new pronouncement being substantive [00:20:11] Speaker 04: is an alteration of a pre-existing right. [00:20:20] Speaker 04: Was that what was going on? [00:20:22] Speaker 04: I thought in Reeder there had been a kind of 700 mile or 700 something [00:20:30] Speaker 04: boundary that the FCC was where overlap, a kind of protection against radio station overlaps. [00:20:40] Speaker 04: And the FCC was now going to shrink that, thereby making hundreds of new stations, licenses available. [00:20:51] Speaker 04: And the AFLC, in the NLRB case, there had been, no, this I don't remember [00:21:00] Speaker 04: even as well as I remember the FCC one, the certification, three of the five changes were held to be substantive. [00:21:12] Speaker 04: Two were held not to be, but were the three ones in which there was a specific change of what the union could do in the certification election. [00:21:23] Speaker 01: So I'm looking at AFL-CIO now, because this is not something I had focused on, nor did the DC Circuit focus on it. [00:21:30] Speaker 01: As I look at it here, I don't see any mention of a preceding regulation that created any kind of regulatory right to have union observers. [00:21:39] Speaker 01: What the opinion says is, as the board explained in the 2019 rule, [00:21:44] Speaker 01: The practice of permitting the parties to be represented dates to the earliest days of the Act, even though the Act itself does not make any provision for observers to be present at an election. [00:21:53] Speaker 01: So it's a policy that the agency was applying, but I don't see a reference to a specific regulation. [00:21:58] Speaker 01: But I can check and if that's correct. [00:22:00] Speaker 04: Well, not in the board. [00:22:01] Speaker 04: The NLRB basically doesn't do regulation. [00:22:03] Speaker 04: It just does announcements. [00:22:05] Speaker 01: It did a rule in the Federal Register. [00:22:08] Speaker 01: But yes, that's right. [00:22:10] Speaker 01: But the point is, and this is why I raised it in response to Judge Chen's question, is that the DC Circuit has not discarded this idea that it's enough to assert a private interest that is being affected adversely by the agency action. [00:22:27] Speaker 01: It doesn't need to be a definitive right. [00:22:28] Speaker 03: I wonder if we were to stick with just the classical [00:22:33] Speaker 03: affects the landscape of rights and obligations Binding parties with the force and effect of law and that's the articulation I Think we would still prevail because they don't have a right to Institution of an IPR what what's going on here is not you know altering the substantive standards for adjudicating [00:22:56] Speaker 03: specific rights like the grant of a license or the grant of a patent or trademark registration or release from incarceration. [00:23:06] Speaker 03: This is more about getting access to [00:23:11] Speaker 03: a discretionary government forum proceeding. [00:23:17] Speaker 03: And if it's a discretionary government service, qualitatively, that feels very different from the ultimate determination of whether rights are won or lost. [00:23:33] Speaker 01: I mean, the fact that it is not a final written decision that decides whether a claim is patentable or not doesn't change the fact that it is a substantive rule, as Your Honor said. [00:23:45] Speaker 01: It determines whether a petitioner is going to have access. [00:23:51] Speaker 01: to the ability to challenge claims in validity. [00:23:54] Speaker 03: Right, but that's discretionary. [00:23:55] Speaker 03: It's a discretionary power, the exercise of discretionary power. [00:23:59] Speaker 03: And that's the standard for a general statement of policy. [00:24:07] Speaker 01: I would disagree with that, if I may. [00:24:10] Speaker 01: A general statement of policy announces, as a general matter, what's going to happen. [00:24:15] Speaker 01: But it does not bind. [00:24:16] Speaker 01: the decision-maker. [00:24:18] Speaker 01: The decision-maker, I mean, the DC Circuit said this again in recent decisions, Sinclair versus Shalala, right? [00:24:24] Speaker 01: A general statement of policy is binding on neither the public nor the agency. [00:24:29] Speaker 01: The agency retains the discretion and the authority to change its position even abruptly in a specific case. [00:24:35] Speaker 01: And in National Mining Association, Judge Kavanaugh, as he then was, said that one indicator of a general statement of policy is it does not impose any requirements in order to obtain relief. [00:24:46] Speaker 01: An applicant may ignore the guidance without facing any legal consequence. [00:24:50] Speaker 01: Petitioners here certainly cannot ignore Fintive without legal consequence. [00:24:54] Speaker 01: If they can't meet the factors, they will not be able to get an institution of IPR. [00:24:59] Speaker 01: And that certainly does affect their interests. [00:25:02] Speaker 01: And in that way, it also impacts their legal rights and imposes obligations because it requires them to file a petition much earlier than the one-year statutory deadline. [00:25:13] Speaker 01: It requires them to give up defenses that they would have in district court if they want to get an IPR. [00:25:18] Speaker 01: That certainly affects their obligation in a way. [00:25:21] Speaker 01: And again, I'm not here to say the agency couldn't do it. [00:25:24] Speaker 01: I'm not saying they absolutely can't promulgate this rule. [00:25:27] Speaker 01: But if they're going to do it, they have to go through notice and comment, because it substantively affects private interests, and it is binding on the board as decision maker. [00:25:38] Speaker 02: Judge Janet, you've had the question. [00:25:38] Speaker 02: Thank you very much. [00:25:41] Speaker 02: Mr. Shaw. [00:25:44] Speaker 02: We'll give you 25 minutes if you need. [00:25:47] Speaker 00: Thank you very much. [00:25:50] Speaker 00: May it please the court, Whaley Shaw for Director Squires. [00:25:54] Speaker 00: The question in this case is whether the fintive factors are a general statement of policy, which does not require notice and comment rulemaking, or a legislative rule, which does. [00:26:03] Speaker 00: As Jachin was saying earlier, a general statement of policy advises the public, prospectively, of the manner in which the agency proposes to exercise a discretionary power, which is exactly what the fintive factors do. [00:26:15] Speaker 00: On the other hand, legislative rules alter the landscape of individual rights and obligations binding parties with the force and effect of law. [00:26:23] Speaker 00: And I'll note that that is the definition that this court cited in Cheyenne Metals in 2002. [00:26:29] Speaker 00: And that is the most recent decision that I found in this court distinguishing a general statement of policy from a legislative rule. [00:26:37] Speaker 00: So I would treat that as the binding definition. [00:26:41] Speaker 00: So under that test, definitive factors are not law. [00:26:45] Speaker 00: Everyone must follow the law, including regulated parties, agencies, and the courts, but the fintive factors bind none of those. [00:26:52] Speaker 00: The agency is not bound because, as Judge Toronto recognized, Congress vested the agency's discretionary denial authority in the director, and the director is not bound by the fintive factors or by board precedent generally. [00:27:04] Speaker 00: Of course, the board does have to consider the fint of factors as plaintiffs note, but they do so not because the factors are law, but because the board was instructed to consider those factors by its supervisor, the director. [00:27:18] Speaker 00: When a supervisor gives instructions to subordinates, that is not law. [00:27:22] Speaker 00: It would be exceptionally odd if the law permitted the director to delegate his discretionary authority to the board. [00:27:29] Speaker 00: but prohibited him from instructing the board on what factors to consider in exercising that authority without going through notice and comment rulemaking. [00:27:37] Speaker 04: Why would that be exception only on? [00:27:40] Speaker 00: Because the entire purpose of the delegation would be to enable the director to delegate authority and then have his subordinate exercise that authority in line with his policy preferences. [00:27:55] Speaker 04: And here, in particular, it's a sort of... That was the centerpiece of our earlier decision in this case, but only as to the two substantive challenges. [00:28:04] Speaker 04: not as to the challenge that if the director is going to do that, which the director certainly has to be able to do, any supervisor does, that doesn't answer the question by what process. [00:28:18] Speaker 00: Right. [00:28:18] Speaker 00: And I think it's clear from the AIA and the fact that Congress granted the director unreviewable discretion, specified no statutory criteria for making this discretionary denial decision, that Congress intended the director [00:28:34] Speaker 00: to be able to engage in nimble decision making to adapt the IPR process to the needs of the patent system and the economy at a particular time. [00:28:43] Speaker 00: And so that kind of sort of nimble decision making really is not compatible with the requirement that all instructions to the board regarding how it's to exercise the director's discretion must go through notice and comment rulemaking. [00:28:59] Speaker 03: Can you speak to Mr. Fleming's reference to NLRB and Reader as suggesting that, at least for the DC Circuit, that court still considers the effect in private interests inquiry as being relevant to whether a rule is a substantive rule? [00:29:16] Speaker 03: And if so, then that starts to sound like very [00:29:22] Speaker 03: close to the standard for standing of a legally protected interest, concrete harm, and so forth. [00:29:28] Speaker 03: So you can more easily connect the two things. [00:29:32] Speaker 00: Yeah, I mean, those two standards are absolutely not the same. [00:29:35] Speaker 00: So maybe I could answer that question in two parts. [00:29:38] Speaker 00: First, just to distinguish some of those cases. [00:29:40] Speaker 00: I think in all of the cases that plaintiffs cite, the rule governs how the agency determines legal rights. [00:29:50] Speaker 00: Now, in some cases, perhaps the [00:29:53] Speaker 00: the regulated party doesn't have an actual right to obtain the license or to obtain parole or whatever, but ultimately the agency's action will determine whether a prisoner is released from incarceration, [00:30:09] Speaker 00: whether an applicant for an FCC license actually receives that license. [00:30:14] Speaker 00: So it is actually directly acting on legal rights. [00:30:18] Speaker 00: This case involves something entirely different. [00:30:21] Speaker 03: I'm sorry. [00:30:21] Speaker 03: Mr. Fleming was specifically referring to NLRB and a case called Reader and telling us that in those cases, the DC circuit reaffirmed [00:30:33] Speaker 03: what it had said long ago in Batterton about affecting private interests is enough to make something a substantive rule. [00:30:41] Speaker 03: Could you comment on that? [00:30:42] Speaker 00: Yes, absolutely. [00:30:44] Speaker 00: I would just point out that, first of all, the DC Circuit has not always been consistent in its pronouncements. [00:30:48] Speaker 00: It's said that its decisions in this area have sometimes been difficult and confused. [00:30:54] Speaker 00: But what I can point to are, for example, [00:30:57] Speaker 04: I'm going to exaggerate here, but it seems to me half of the judges in four dozen opinions, including now Justice Kavanaugh and many others, have said the translation of the statutory standard into the next level of verbiage has not been a very successful one because the next level of verbiage still leaves things incredibly murky. [00:31:21] Speaker 04: And somebody ought to do something. [00:31:23] Speaker 04: But there nevertheless is, at some practical level, a distinction between I have an interest in something and I have a right to it. [00:31:35] Speaker 04: And if you're going to provide an answer to whether there is some difference in [00:31:43] Speaker 04: in the formulation or no formulation. [00:31:46] Speaker 04: What are the concrete things here that make this not, and now I'll just state a pure conclusion, a substantive rule? [00:31:55] Speaker 00: Yeah, I think the difference is between the idea that a rule just simply has some significant impact or a substantial effect on parties versus an actual legal effect on parties, which is what I think Judge Kavanaugh relied on in National Mining Association. [00:32:12] Speaker 00: So I can cite a number of cases from the DC Circuit that sort of walk away from this substantial effect test. [00:32:18] Speaker 04: So for example, was there something like that in either Reeder or the LRB case? [00:32:24] Speaker 00: I cannot remember precisely how the analysis in those cases went, but certainly, for example, in the American Hospital Association case, the DC Circuit expressly noted that it had retreated from a substantial impact test. [00:32:39] Speaker 00: In the National Mining Association case, the [00:32:42] Speaker 00: DC Circuit considered a rule or guidance in which EPA had sort of specified the standards that it expected applicants for a mining permit to meet. [00:32:55] Speaker 00: And the applicant sued. [00:32:57] Speaker 00: They said that this was a legislative rule because it effectively spelled out what they needed to do in order to obtain a permit. [00:33:05] Speaker 00: And here is what the DC Circuit said in response. [00:33:12] Speaker 00: an agency action that, I'm sorry, as plaintiffs, the EPA will not issue the permit unless its recommendations are followed. [00:33:21] Speaker 00: But while regulated parties may feel pressure to voluntarily conform their behavior because the writing is on the wall about what will be needed to obtain a permit, there has been no order compelling the regulated entity to do anything. [00:33:35] Speaker 00: And therefore, the court found that [00:33:37] Speaker 00: that the rule was not legislative. [00:33:39] Speaker 00: The court also said that the most important factor in determining whether something is a general statement of policy is the actual legal effect or lack thereof of the agency action in question on regulated entities. [00:33:51] Speaker 00: So again, it's not referring to any practical effect on parties' interests, but on the actual legal effect of the rule on the parties. [00:34:00] Speaker 04: We can also look to these standards [00:34:03] Speaker 04: if not complied with, would mean that a mechanism for canceling a patent is unavailable, where that mechanism provides for easier standards to meet than at least the main alternative mechanism. [00:34:32] Speaker 04: Is that, does that have an effect on legal rights or not? [00:34:37] Speaker 04: And if so, why not? [00:34:38] Speaker 00: No, it is not in effect on legal rights because the institution of an IPR, again, as Your Honor's noted, no party has a right to an IPR. [00:34:49] Speaker 00: An IPR is an entirely discretionary and optional proceeding in which the USPTO chooses to dedicate its resources to reconsidering a prior patent grant. [00:35:01] Speaker 00: That is a decision that falls within the same kind of [00:35:04] Speaker 00: classic unreviewable discretion as the decision to initiate a prosecution or to initiate an enforcement proceeding. [00:35:13] Speaker 00: So that is simply not the kind of direct effect on a party's legal interests I think that that National Mining Association was referring to. [00:35:20] Speaker 00: I would also cite cases outside the DC Circuit, for example, the Madaluna case from the Ninth Circuit, which expressly rejected the idea that a substantial impact on parties is sufficient to [00:35:36] Speaker 00: create a binding legal effect. [00:35:37] Speaker 00: And it specifically noted that a diminished likelihood of obtaining some benefit to which the applicant has no right is not the kind of binding legal effect that makes something a legislative rule. [00:35:55] Speaker 04: Do you have a view about whether this case will be moot if the proposed rule is adopted by the director? [00:36:11] Speaker 00: It's a little bit hard to say because there is substantial overlap between the proposed rule and the NHK and Fintive decisions. [00:36:20] Speaker 00: However, [00:36:21] Speaker 00: The proposed rule does not expressly note what the ongoing status of the NHK and FNTIP decisions will be. [00:36:31] Speaker 00: And I know that that's an issue. [00:36:33] Speaker 00: I think that's been raised in some of the comments. [00:36:35] Speaker 00: So it's not absolutely clear to me. [00:36:37] Speaker 04: How would we think about that with this question? [00:36:45] Speaker 04: Certainly, I think this is certain. [00:36:47] Speaker 04: There are cases in which the Supreme Court, while a case is pending, [00:36:52] Speaker 04: is told the state law that was challenged here has just been replaced by another one. [00:37:01] Speaker 04: And the Supreme Court has, I guess I'm thinking of one of the second amendment cases a few years ago. [00:37:08] Speaker 04: And the Supreme Court over dissent said, we think that the challenge to the old law is moot. [00:37:16] Speaker 04: send it back, look at the new law. [00:37:19] Speaker 04: Even though, I'm not quite sure what the analysis was, but I guess I vaguely recall if there was analysis at all, it is something to do with the fact that there may be overlap in the legal issues, but we don't just decide legal issues. [00:37:38] Speaker 04: In fact, the particular nature of the new [00:37:43] Speaker 04: regime may call for a different legal analysis. [00:37:48] Speaker 04: So why would we go through the process of doing the legal analysis on the now outmoded regime? [00:37:55] Speaker 04: Why wouldn't something like that apply here? [00:37:59] Speaker 04: Because we're talking about how much discretion is there, how much effect is there. [00:38:04] Speaker 04: Maybe the new regime would mean that it would be extremely rare for there to be a ground for non-instituting [00:38:13] Speaker 04: under the fintive precedent that's not already covered by the new rule, and maybe that affects the analysis. [00:38:27] Speaker 04: How do we think about the question, which may well come up in the next few months? [00:38:31] Speaker 04: I don't know. [00:38:34] Speaker 04: I know you're going to say, we'll brief it then when we get to it. [00:38:38] Speaker 04: How should we be thinking about that? [00:38:40] Speaker 00: To be honest, I'm not familiar with the Supreme Court decision that Your Honor is referring to. [00:38:45] Speaker 00: I certainly agree that the recent developments. [00:38:48] Speaker 04: Carrying in public? [00:38:49] Speaker 00: No? [00:38:50] Speaker 00: I'm sorry. [00:38:51] Speaker 00: But I certainly agree that the recent developments have substantially changed the operation of the IPR system and have diminished the ongoing practical significance of the issues in this case. [00:39:01] Speaker 00: We have not tried to meet the burden of showing that this conduct is unlikely to occur as would be required under voluntary cessation doctrine. [00:39:15] Speaker 00: But certainly if this court feels that the case is moot or that there's no longer an ongoing controversy here, we would not object. [00:39:22] Speaker 03: to the dismissal of the case. [00:39:23] Speaker 03: Well, we don't know the agency's position on whether these proposed rules, as they stand, completely subsume or render irrelevant the existing fintive factors. [00:39:37] Speaker 03: I mean, certainly nobody more than the agency would know the answer to that question. [00:39:42] Speaker 00: Unfortunately, I think the answer is that the agency does not [00:39:46] Speaker 00: They don't know. [00:39:46] Speaker 00: They don't know. [00:39:55] Speaker 03: Does the agency know when it might go final? [00:39:59] Speaker 03: I have to ask. [00:39:59] Speaker 03: I know your answer. [00:40:01] Speaker 00: I'm sorry, I don't have any information. [00:40:02] Speaker 03: You're in a bit of a race, you see. [00:40:03] Speaker 03: I mean, the agency's a busy department. [00:40:07] Speaker 03: We're a busy court. [00:40:09] Speaker 03: We have to be tasked with writing an opinion. [00:40:13] Speaker 03: I don't think we can get it out in just a matter of days or weeks. [00:40:17] Speaker 03: But at the same time, courts don't like to waste their time. [00:40:22] Speaker 00: I'm sorry. [00:40:23] Speaker 00: I don't have a solution to offer to the court on that dilemma. [00:40:27] Speaker 00: Unfortunately, I just don't have any further information that I can provide about the MPRM and what's likely to occur there. [00:40:35] Speaker 04: Do you know was either NHK or Fintive or the June 22 memo [00:40:43] Speaker 04: published in the Federal Register. [00:40:45] Speaker 04: And I'm assuming not, or I would have seen a citation. [00:40:48] Speaker 04: And if not, why not under 552? [00:40:51] Speaker 04: This is not an issue here. [00:40:53] Speaker 04: I realize that. [00:40:55] Speaker 04: But do you happen to know? [00:40:56] Speaker 04: If it's a general policy, 552, at least as a general matter, requires publication in the Federal Register? [00:41:05] Speaker 00: Unfortunately, I do not know the answer to that question. [00:41:09] Speaker 00: If I could, I'm sorry, I just want to briefly make the point that [00:41:17] Speaker 00: You know, the Finti factors are a multi-factor test. [00:41:21] Speaker 00: And I think plaintiffs would have it that having a test means establishing, or really a multi-factor standard for evaluating these kinds of cases. [00:41:30] Speaker 00: And I think plaintiffs would have it that having any multi-factor standard means establishing some bar that all applicants must meet and therefore establishes a legal rule of some sort. [00:41:41] Speaker 00: And that's just not the case. [00:41:42] Speaker 03: If their argument is that when you look at the implementation, [00:41:45] Speaker 03: And that can be a relevant inquiry. [00:41:49] Speaker 03: You will see that these factors really do hardwire outcomes in many, many different ways. [00:41:57] Speaker 03: And even if the director retains some authority to, or just straight up authority to review any institution or non-institution decision, [00:42:10] Speaker 03: Again, as a practical matter, we know from the numbers that none of those non-institution decisions get flipped by a director on review. [00:42:22] Speaker 03: So what we have is, functionally speaking, practically speaking, a very outcome-determinative, pretty rigid set of factors. [00:42:32] Speaker 03: And if all that were true, then can we really ignore all that and just look at [00:42:38] Speaker 03: the language of the factors alone and the statutory right the secretary theoretically holds to take a look at any institution or non-institution decision? [00:42:51] Speaker 00: I think there are multiple reasons why that is not enough to establish, why that argument does not establish that definitive factors are a legislative rule. [00:42:59] Speaker 00: First, as Your Honor pointed out, [00:43:01] Speaker 00: The director is the ultimate decision maker for the agency, as it really has been confirmed by the recent guidance in which the director has taken on that decision himself and is making those decisions personally. [00:43:16] Speaker 00: But second, I think that there is no difference between the wording of the factors [00:43:22] Speaker 00: And the way in which they've been implemented So we cite a number of decisions in our case in which I'm sorry a number of decisions in our brief in which the board has taken a very holistic in fact specific Approach to applying the fintive factor. [00:43:38] Speaker 04: So for example, we aren't there You know that there were a lot of cases to read here. [00:43:44] Speaker 04: It's a little more than a little hard to for me to retain [00:43:49] Speaker 04: my memory of them. [00:43:50] Speaker 04: I thought that there were a number of cases that say it's true that the practical effect is not 100%, but it's strong enough that we are going to find 553, notice and comment rulemaking, required. [00:44:14] Speaker 00: Is that? [00:44:15] Speaker 00: There are some cases in which [00:44:18] Speaker 00: some courts have found that because the agency treated a rule as effectively binding and requiring certain results based on the finding of certain facts that that was enough to establish [00:44:35] Speaker 00: a legislative rule. [00:44:36] Speaker 00: So for example, in the Mataluna case, the Ninth Circuit said that if a rule so fills out the statutory scheme that once you find a certain fact, then a certain outcome must follow. [00:44:51] Speaker 04: I guess I'm thinking that there are cases. [00:44:57] Speaker 04: I was thinking of a different group of cases, though I can't give you any names, in which [00:45:03] Speaker 04: The government says, oh, look, there's this residual discretion. [00:45:07] Speaker 04: It's never particularly binding. [00:45:09] Speaker 04: And the court says that's just not enough. [00:45:13] Speaker 04: In the real world, as implemented, these factors have, we can tell, [00:45:18] Speaker 04: been consistently decisive. [00:45:23] Speaker 00: Yes. [00:45:24] Speaker 00: I think there are some cases to that effect. [00:45:27] Speaker 00: So for example, plaintiffs cite the Pickes decision in which there was sort of an extremely formulaic. [00:45:34] Speaker 00: It's the parole. [00:45:35] Speaker 00: That's the parole decision in which there was an extremely formulaic rule that dictated how many months of imprisonment a particular prisoner must go through. [00:45:46] Speaker 00: And there was some formula that involved calculating a score, and then once you have the score, you would know how many months they have to be in prison for. [00:45:53] Speaker 00: And so there are some cases to that effect. [00:45:57] Speaker 00: I certainly don't agree that any of those cases would apply here. [00:46:01] Speaker 00: In practice, if we do look to what the board actually did, the board has looked to other factors. [00:46:06] Speaker 04: By the way, just on the Pickett's decision. [00:46:10] Speaker 04: It would be very odd to call that a non-enforcement decision, although language being what it is. [00:46:15] Speaker 04: I can imagine somebody saying it, but the fact is it's a decision for the United States government to keep somebody in jail. [00:46:22] Speaker 04: That's not just a non-initiation of proceeding. [00:46:25] Speaker 04: That was also not a matter where there was unreviewable discretion, because parole decisions were in fact reviewed at least through habeas. [00:46:35] Speaker 04: Is that right? [00:46:36] Speaker 00: I'm not sure about the last point, but I would certainly agree with the point that... And the reason I mention that is that the DC Circuit opinion in that case says we're not going to decide whether [00:46:48] Speaker 04: that parole decision is committed to agency discretion by law. [00:46:53] Speaker 04: So that led me to think, well, really, parole decisions? [00:46:56] Speaker 04: I think it was pretty standard law that, as you would expect, that habeas is a remedy for an unlawful parole decision, with all kinds of deference, of course. [00:47:07] Speaker 04: But it wasn't unreviewable. [00:47:09] Speaker 00: I'm not entirely familiar with that scheme. [00:47:11] Speaker 00: But what I can say is that, in addition to the factors that Your Honor noted in distinguishing PICUS, that it's also true that, again, the ultimate agency decision acted on a particular regulated party's right. [00:47:27] Speaker 00: So again, if you were granted parole, you were released from prison. [00:47:30] Speaker 00: And if you were not, then you had to stay in prison. [00:47:33] Speaker 00: And that is not the kind of regime you're in. [00:47:35] Speaker 04: Now you're just playing with the word right. [00:47:38] Speaker 04: Nobody had a right to parole. [00:47:39] Speaker 00: Right. [00:47:41] Speaker 00: No, I'm not contending that there was a right to parole. [00:47:44] Speaker 00: What I'm saying, I'm trying to distinguish the Pickus regime from this case in the sense that in Pickus, there was direct action on a, the agency directly acted on a regulated parties, on a prisoner's right to be free from incarceration. [00:48:01] Speaker 00: Whereas in this case, the fint of factors do not act on patent rights. [00:48:05] Speaker 00: All they do [00:48:06] Speaker 00: is they govern whether the agency chooses to allocate its resources to an entirely discretionary proceeding to reconsider a grant of patent rights. [00:48:21] Speaker 00: And so that in itself, Fintive doesn't specify any standards for either upholding or striking down a patent claim. [00:48:29] Speaker 00: All it does is govern the initiation of an agency proceeding that, again, a decision that's [00:48:34] Speaker 00: entirely allocated to the discretion of the director and is unreviewable. [00:48:40] Speaker 02: Anything further, counsel? [00:48:42] Speaker 00: Yes. [00:48:43] Speaker 00: If I may, just to return to the point that Judge Toronto started with, I don't think it would be creating new ground, as plaintiffs have said, to recognize that this case is different from others in that the director is the ultimate [00:49:04] Speaker 00: Wielder of the discretionary denial authority and then this guidance only acts upon the board and in fact this court's decisions and explain and coalition for common sense all support that All support that proposition and I would also point to the Ninth Circuit's [00:49:21] Speaker 00: decision in Arringer, where the Ninth Circuit recognized as a factor weighing against recognizing something as a legislative rule the fact that the rule in question only acted upon the lower levels of the Medicare decision-making process and did not ultimately bind [00:49:43] Speaker 00: the agency. [00:49:44] Speaker 00: And so I think those all support the proposition that where a lower-level agency decision-maker only has to follow the guidance of a supervisor, the one who actually wields the authority, that that is not the kind of binding legal effect that makes a particular rule or makes guidance a legislative rule. [00:50:06] Speaker 02: Thank you, counsel. [00:50:07] Speaker 02: Mr. Fleming, three minutes for a bottle. [00:50:17] Speaker 01: Thank you, Your Honor. [00:50:18] Speaker 01: Judge Toronto, I don't know if you were thinking of this case in particular, but General Electric versus EPA talks about the situation where you have a rule that might have some exceptions to it, but the fact that a substantive rule that governs the standard cases might have some exceptions doesn't make it any less [00:50:37] Speaker 01: substantive, and besides although Mr. Shaw didn't come out and say it, the only exceptions they've come up with where the board doesn't have to non-institute, doesn't have to, has the discretion to institute when the five fintive factors point the other way, is in cases of compelling merits or a sotera stipulation, neither of which is operative anymore, but even still those are just minor exceptions that don't change the fact that it is a substantive rule. [00:51:03] Speaker 01: Mr. Shaw didn't read the language from AFL-CIO, Judge Chen, in response to your question, so I want to make sure that I give it to you. [00:51:10] Speaker 01: This is on page... [00:51:13] Speaker 01: 1041 of the opinion. [00:51:15] Speaker 01: It matters not that the board has so characterized its policy of allowing election observers because we examine how the rule affects not only the rights of aggrieved parties but their interests as well. [00:51:25] Speaker 01: The rules affect unregulated parties' substantive interests in choosing their own election observers suffices to remove it from the category of procedural rules under the APA and therefore subject to notice and comment. [00:51:36] Speaker 01: The National Mining Association case and the Mata Luna case that the Department of Justice relies on, the reason that the agency actions in those cases were not subject to notice and comment is because they weren't binding on the agency. [00:51:49] Speaker 01: Then Judge Kavanaugh, now Justice Kavanaugh, referred to the EPA rule in National Mining Association as meaningless. [00:51:57] Speaker 01: You didn't have to observe it when you were filing your materials with the EPA. [00:52:01] Speaker 01: Same thing with Madaluna. [00:52:02] Speaker 01: The district director's authority in deferred action cases was completely unfettered by the guidance. [00:52:07] Speaker 01: That is not the case with respect to Fintive. [00:52:10] Speaker 01: You only have to look at the cases that we cite, which Mr. Shaw did not address. [00:52:13] Speaker 01: Cases like Supercell v. Gree, Intel v. Koenig-Leinke-Phillips. [00:52:18] Speaker 01: There were all kinds of arguments made, including by parties that are repellents in this case, that definitive factors should not be applied because of the particular circumstances in those cases. [00:52:27] Speaker 01: The board repeatedly said it could not countenance those arguments. [00:52:31] Speaker 01: It would not address them. [00:52:32] Speaker 01: The policy issues raised by Petitioner are not within our purview to consider. [00:52:36] Speaker 01: in light of binding precedent. [00:52:38] Speaker 01: And I would just say as a matter of conclusion, it's particularly in situations like this that notice and comment procedures are critically important. [00:52:46] Speaker 01: This court has held that the federal courts lack jurisdiction over our claims that Fintive is contrary to law and is arbitrary and capricious. [00:52:55] Speaker 01: Congress's check on agency action through public comment is the only check left and the only thing holding the agency accountable. [00:53:02] Speaker 01: Unless the court thinks that it is just a matter of [00:53:05] Speaker 01: bureaucracy and time before a rule could emerge from notice and comment, whether we're talking about putting the fintive rule through notice and comment or the new rule where the comment period has just closed. [00:53:15] Speaker 01: Let's remember that the PTO is not the only organ of the executive branch here. [00:53:20] Speaker 01: There has to be consultation with the rest of the executive branch that also upholds the public interest, and it is far from a foregone conclusion. [00:53:26] Speaker 01: that the Office of Information and Regulatory Affairs, for instance, is going to approve of this. [00:53:31] Speaker 01: So I don't think the court can assume that fintive would make it through notice and comment. [00:53:34] Speaker 01: I don't think the court can assume that the current proposed rule will make it through notice and comment and be promulgated. [00:53:39] Speaker 01: And I think the court should decide the case, which Mr. Shaw does not contend is moot, as it has been presented, find that the fintive factors do indeed bind the board, they affect private interests, and therefore they must have been promulgated through notice and comment, and because they were not, [00:53:54] Speaker 01: They should be set aside and the district court's judgment should be reversed. [00:53:57] Speaker 02: I thank the court very much for its attention.