Constitutional Challenge to Administrative Patent Challenges – Part III

By Dennis Crouch

Consumer Watchdog v. Wisconsin Alumni Research Foundation (WARF) (Fed. Cir. 2013)

A major limitation on judicial power comes from the doctrine of standing. A U.S. court has no power to hear a dispute between parties unless the plaintiff has or imminently will suffer injury-in-fact caused by the challenged action of the defendant that is redressable by a favorable court decision. This limitation has been derived from Article III of the U.S. Constitution that states "The Judicial Power shall extend to all Cases . . .[and] to Controversies . . ." To be clear, this limitation on power is placed on Article III courts at the district, appellate, and supreme court level. However, the limitation has not been applied to adjudicative processes that take place within administrative agencies since the government's authority to perform those activities is not seated in Article III. The conflicting approach to standing between these two adjudicative regimes regularly comes into conflict when parties appeal adverse agency decisions to an Article III court. The general rule for resolving this conflict is Constitutional supremacy – i.e., an Article III court cannot hear a case unless the standing requirement is met.

In the patent world, this issue is most focused in the area of post-issuance administrative patent challenges, particularly including inter partes review, post-grant review, covered-business-method review, and inter partes reexamination. In those regimes, any third party can administratively challenge a patent. Under the statute, the third-party then has a right to appeal an adverse decision to the Court of Appeals for the Federal Circuit. One question on appeal in the Consumer Watchdog case is whether there is standing for the appeal. Here, Consumer Watchdog is a public interest group that has not claimed any direct impact due to the WARF stem-cell patent, but certainly had standing to file its inter partes reexamination. I discussed this issue in some detail here:

The parties have now briefed the issue of standing and the court holds oral arguments on Monday, December 2.

Consumer Watchdog's brief does a nice job of drawing a parallel between the post-issuance challenges and Freedom-of-Information-Act (FOIA) requests. In each case, the relevant statute has no standing requirement but authorizes appeal to Federal Courts.

The Supreme Court has described FOIA as a "judicially enforceable public right" (EPA v. Mink, 410 U.S. 73, 80 (1973)) and made clear that no injury is required of a person who seeks to enforce that right. NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214, 221 (1978).

The essential idea here that the statute goes a long way toward creating standing by (1) creating a right to petition and then (2) granting a right to appeal to unsuccessful petitioners. And then, the injury-in-fact or "concrete injury" is completed at least when the PTO finds against the petitioner. At that point, the only party with a right of appeal is the petitioner. This particularization before getting to court helps to distinguish the present case from the leading Supreme Court case of Lujan where a statute provided that "any person" could file suit in federal court.

Idea of a patent challenge as a "judicially enforceable public right" also has precedential support. See Lear v. Adkins, 395 U.S. 653 (1969)

Consumer Watchdog also makes an important point here, that the PTO should be a party to the appeal and that the Federal Circuit should at least invite briefing from the US Government on the issue of standing.

For its part WARF relies heavily on Lujan:

To satisfy Article III standing, Watchdog, a nonprofit taxpayer and consumer-rights organization, must establish an injury in fact—i.e., an actual and imminent, concrete and particularized invasion of a legally protected interest—caused by WARF. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). But Watchdog does not and has not claimed to make, use, or sell the patented invention; has not and could not be threatened with suit; and has not named another real party in interest, either in this appeal or before the PTO. Watchdog therefore cannot establish standing, and Watchdog's appeal should be dismissed.

The result then is that WARF here is inherently arguing that the statute providing for a right to appeal is unconstitutionally broad. The question then is the extent that this crumbles the regime even further. [Updated to clarify that WARF does not explicitly argue the statute is unconstitutional.]

43 thoughts on “Constitutional Challenge to Administrative Patent Challenges – Part III

  1. If the Federal Circuit finds lack of standing here, and actually requires that there be some threat of an infringement action (akin to what you would need to declaratory judgment jurisdiction), this is likely to have serious implications on the entire AIA statutory structure. People often forget that under the original inter partes reexamination statute enacted in 1999, only the patent owner could appeal an adverse finding. In other words, the patent owner could appeal if the claims were rejected, but the challenger could not appeal if the claims were confirmed. The result was that almost no one used the procedure until 2002, when Congress amended the statute to make the right of appeal apply to both sides. The numbers during those early years were pathetic.The inability to seek appellate review is going to deter a lot of people from using this procedure. A lot of operating companies out there (not just officious inter-meddlers like Consumer Watchdog that file crappy petitions to get a quick press bump, to drive their funding efforts) will be reluctant to use post-grant review and inter partes review unless they’ve actually been threatened with suit for fear that they will may have no right of appeal if the PTAB confirms the claims. It seems bizarre, but WARF’s position seems to almost suggest you’d need the kind of injury-in-fact necessary to bring a declaratory judgment action (e.g. some justified threat or fear of an infringement suit). If anything approaching that actually comes to pass, the consequences will be huge, because it could allow a patent owner to effectively control availability of challenger appellate review by refraining from aggressive conduct toward others for periods of time. The AIA post grant review (PGR) procedure could be eviscerated because any such challenge must be filed within the first nine months after issuance. A patent owner could just stay calm for the first nine months, sue no one and threaten no one, and competitors may not want to file for fear that they’ll have no appellate standing if they bring a challenge and lose before the PTAB. Once the ninth months pass, the PGR window is closed.

  2. Recall that some big companies appear to IPR numbers if not all the patents of smaller companies. The ability to do that is an artifact of no requirement for standing. The new IPR then shares the same defect of the scire facias writ (that was repealed for patents in the US in 1836) — lack of standing. This from Janis, Mark D. “Patent Abolitionism.” Berkeley Tech. LJ 17 (2002): 899 (link to heinonlinebackup.com…§ion=51), at footnote 20:”Scire facias actions might be likened to declaratory judgment actions in form, but scire facias actions were not constrained by jurisdictional limitations that characterize modern declaratory judgment actions. Accordingly, they could readily be used to harass patentees. In response, a “Patentees’ Association” formed in the late 1700’s [in England] to resist “opulent manufacturers” who “have agreed to use very beneficial patent inventions [without authorization] and have subscribed large sums to attack the same by writ of Scire facias.”What happened in England in the late 1700′s appears to be happening here. “Public interest” orgs, funded by coalitions of the big boys, might systematically target the patents of people who they call “trolls.” Is this good or bad? Clearly, to me, it is an abuse of a legitimate process.We repealed scire facias for patents once and for a reason.

    1. I’m wondering of Richie v. Simpson is the most on point case here. A Federal Circuit case allowing for outraged public to have a moral objection to a trademark, but a two prong test for standing that requires theopponent to show both a “real interest” in the proceeding and a reasonable basis for his belief that he will bedamaged (170 F.3d at 1095).

      1. Ted, Richie makes clear that standing to oppose a trademark registration is a requirement of the statue: 15 USC § 1063. There is no statutory requirement for standing filing and prosecuting an IPR.Thus, an IPR is exactly like a writ of scire facias which draws its standing from the alleged harm to the King (I.e., the public at large). The nature of the writ is (was) qui tam. IPRs are structured the same way, thus allowing public interest orgs to bring them with no more standing than they represent the King, or here, the American people.

        1. I read Richie as applying Sierra Club and Lujan requirements for constitutional injury in fact. My interpretation was this is required by FEC v. Akins applying Article III standing to Article I courts ( 524 US 11). I’m going from a law review paper I wrote about three years ago on this issue, where I agree that IPR open standing is a problem as we’re basically stealing the EPO’s post-grant proceedings without thinking about the moral objections. I admit I haven’t paid attention to the current cases.The prong I focus on is how there’s possibly no way to have article III redress for cases where the IPR is brought for a moral objection to the Technology (akin to the moral opposition in Richie). The example is less what you’re citing where ‘public interest groups’ are opposed to a patent because of it blocking an industry. Rather, cases popped up in the EPO where the opposition were in opposition to the entire technology. Since we’re dealing with published patents, the cat’s out of the bag and suppressing the technology is not possible. With Richie, I was hoping it could provide guidance to craft a constitutional standard. I admit though I’m running on half remembered points I haven’t touched in 3 years.

          1. Ted, Akins held that a group of voters had standing to challenge “in court” the FEC’s determination that American Israel Public Affairs Committee was not a political organization so that the organization would not have to disclose their membership and contributions, etc. Who these “voters” were was not described, but their interests were in protecting a fundamental right, the right to vote and the failure to disclose allegedly harmed that fundamental right.So I see a couple of problems with Akins:1. The standing there was regarding an injury to a fundamental right that was not abstract.2. Akins does not apply to bringing IPRs. It might apply to bringing an appeal.Query, if one does not have standing to “appeal,” does one have standing to “bring?”

            1. I know at least one other case dealing with the matter in the 5th circuit, which also found Article I courts must obey standing,Ecee, Inc. v. Federal Energy RegulatoryCommission, 645 F.2d 339, 349–350 (5th Cir. 1981).And as for the standing to appeal, the DC circuit found that even if you lack the admin standing, you can appeal (which is the opposite to what you asked)”Participants in an agency action have an undeniable interest in seeing to it that theprocedural rights guaranteed them by law are respected”Gardner v. F.C.C., 530 F.2d 1086,1090–1091 (D.C. Cir. 1976).At the time I wrote the paper I couldn’t find anything that stated for sure whether Article I courts are required to apply Article III constitutionality, merely dicta and suggestions. Richie seemed like the best bet at the time on a model for FC decision making for when this issue came up.

              1. Bootstrapping. Imagine that one could have standing to appeal in a case where there was no standing to bring just because the law grants a generic right to appeal? What nonsense is this?

              2. “>What nonsense is this?”The statutory one?Although attenuated, I see what is being served by Ted.This then goes to the somewhat line-smudging aspect that the legislature can define what a ‘concrete’ injury is when they write statutes. With Trademarks, however, the protection of the public is at a different level than with patents, and thus the case cited does is not persuasive on the issue (let’s not forget that patents and trademarks arise under different constitutional settings).

  3. “The result then is that WARF here is inherently arguing… Updated to clarify that WARF does not explicitly”I don’t think the inherent/explicit dichotomy is as apt as the permissive/mandatory dichotomy.CW’s position is that the legislative ‘may’ is equivalent to a ‘must’ have standing, while WARF differentiates that the may is NOT a ‘must.’WARF’s position is much better, as the mandatory version removes the discretion from the judicial branch.

  4. Dennis, I think you are being cute by citing Lear v. Adkins on “public right.” The most recent case is Stern v. Marshall, 131 S. Ct. 2594, 564 U.S. 2, 180 L. Ed. 2d 475 (2011). Under Marshall, patent validity cannot be a public right as patent validity was tried in the courts of England prior to 1789.

    1. The net effect of Marshall is that IPRs are simply a waste of time as they cannot have any legal effect on an issued patent.

    2. I concur – Reasoning along the lines of Freedom of Information seems inapposite.Further, Ned, the mere naming as Article III judges will not suffice (you cover some of it) – but there is a lot more – a LOT more that would need to happen, and if so happening, would only replicate the article III system we already have (for which the IPR was devised to be an alternative to). The problem is that the ‘fix’ is fatally flawed.Further, Ned – think structure: the PTAB has a boss. That boss is in the executive branch, not the judicial branch.Ned – where does it say that a bifurcated proceeding must have the same jury? Would two trials with two different juries be permissible?

      1. anon, a little more on why the fix would not work would be appreciated. I thought the whole idea was to get validity into the hands of expert judges and out of the hands of the jury. That is why I also think we really need to answer the unanswered question left hanging when the SC vacated In re Lockwood: is there a 7th Amendment right to a jury trial for validity.The answer to that question is like asking whether one can try liability separately from damages with two different juries. One cannot under the SC jurisprudence. I think that guides the answer. One cannot try infringement and validity separately if there is a jury.

      2. I can look it up, but there are recent cases, I think even by the Federal Circuit, that hold when an appeals court orders a retrial because of an error in a damages award, the new trial must include liability as well else there would be a violation of the jury trial right.

      3. Obviously, the trial part of the PTAB will no longer be part of the executive branch if organized as an Art. III trial court. But that is exactly why, I think, the PTO will fight. It does not want to lose control over patent reexaminations.

      4. “Reasoning along the lines of Freedom of Information seems inapposite”Why? A FOIA request feels much closer to a patent reexam request than a state-law-based tort or breach of contract.

    3. It is observed that Congress could fix IPRs by making the APJs Art. III judges. Then they would be Art. III courts. As such, one would have to have real standing to bring an IPR. That would solve a host of problems. But what realistic chance is there that Congress would do this? As described in Stern v. Marshall, Congress responded to Northern Pipeline by simply requiring that the Court of Appeals to appoint bankruptcy judges as if that would fix the Article III problem identified. It did not. The Court said in Marshall that merely providing that a decision of a bankruptcy judge could be appealed to an Article III court was not at all sufficient given that the scope of review must give some credit the findings of fact by the bankruptcy court. It is observed that in the Crowell decision, the findings of fact of a administrative agency were found constitutional because the District Court could conduct a de novo review. Since that is not available with IPRs, the mere fact that an appellant may appeal to the Federal Circuit is not sufficient under Marshall.Congress has to make that portion of the PTAB that handles issued patents into an Art. III court.

    4. Under Marshall, patent validity cannot be a public right as patent validity was tried in the courts of England prior to 1789.Did Marshall expressly overturn or address Lear? Sounds like an interesting case, albeit one with an arbitrary holding (assuming you’ve got the holding correct).

      1. Stern v. Marshall is all about the public rights doctrine and has vintage back to an 1856 case called Murray’s Lessee. It is controlling law on this issue, not Lear.

        1. vintage back to an 1856 case called Murray’s Lessee.That sounds about right. Like I said: arbitrary. A doctrine from ancient times, which made little sense then and makes even less sense now.

    5. Ned, thanks for this reply. I agree that the Stern case is important, although I do not think it so clearly forecloses arguments for jurisdiction derived from the public rights theory. One important element here is that Consumer Watchdog sees its true opponent as the USPTO who wrongly issued the patent. As you know, a reexamination is not an invalidity proceeding but rather a new administrative examination of the patent. Returning to Stern, I don’t think we can say that a second administrative examination of a patent was “the stuff of the traditional actions at common law.” Also, thanks for calling me “cute.” I don’t get that much these days.link to casetext.com

      1. 1) conflating re-exam (voluntary surrender) and review again… (my bad – thought it was conflating between re-issue and review)2) If – as supposed here – the true opponent is the USPTO, then CW needed to have named them.They did not – the brief by WARF clearly states that CW has not named any viable party.3) Further – you cannot merely claim the patent was wrongly issued. You may disagree with the USPTO (who for the second time states the patent was NOT wrongly issued), but the point of the matter is that the agency has said otherwise.4) Further still, the question of ‘whose common law” was never answered on the previous threads. Here, Prof. Crouch raises the point (albeit subtly) with ” I don’t think we can say that a second administrative examination of a patent was ‘the stuff of the traditional actions at common law’” in reply to Ned attempting to import English common law.Previously, I thought a weak point was the notion that one can simply impute a foreign jurisdiction’s common law without thinking. US jurisprudence is a little different when it comes to patent law since our constitution expressly designates authority (and it is not common law).added: As I mentioned in our prior discussion – this is a minor point (and one in which I found the author’s position a bit tenuous).More to the point, Congress delineated the patent right as having the characteristics of personal property, which moots the discussion. .Ned, more added: That’s just it, Ned – why would a doctrine cross jurisdictional lines like you keep on emphasizing? Why England? That’s where you are in fact “importing” just as you try to deny it. That just does not make sense to me. If you are importing – and you are – you need to be able to explain that.5) Having now refreshed my reading of Lear v. Adkins, I cannot see how that decision can broaden any sense of standing, as the proponents in that case would meet the case and controversy requirements of standing. Quite, in fact, an underlying theme in removing licensee estoppel was that the parties involved would be the ones most so affected.6) ‘Randy Merlin’…? Hmm, a bit suspicious that Malcolm’s previous moniker featuring the not-too-subtle ’69′ has transformed (yet again) magically to this nom de plume. Seeing as he was the only person ever under the old system to provide a hyperlink to a place within a thread (requiring access within the thread), and the latest, um, technical difficulties with posting…

        1. Anon – I think I’m missing something on point (1). Is there a relevant difference between inter partes reexam and inter partes review?

          1. My bad – see above…[modified:] However, [both] reexam and reviews suffer from murky due process and separation of powers issues…[In both, it is NOT], the patent holder who decides to relinquish his property.(intersects with the notion of “a grant by ‘error’ is still a grant that has all of the legal power” discussion on previous threads)Added: “The result then is that WARF here is inherently arguing… Updated to clarify that WARF does not explicitly”I don’t think the inherent/explicit dichotomy is as apt as the permissive/mandatory dichotomy.CW’s position is that the legislative ‘may’ is equivalent to a ‘must’ have standing, while WARF differentiates that the may is NOT a ‘must.’ I find the ‘logic’ of CW’s argument to be contradictory. Page 1, immediately after stating the legal proposition of the importance of standing as critical to maintaining a separation of powers, CW would have the Congress or President capable of abdicating that separation by fiat and forcing the judiciary to recognize standing merely because another branch requests the court to here a case. That’s the opposite of maintaining separation of powers.WARF’s position is much better, as the non-mandatory version maintains the discretion within the judicial branch.

        2. anon, the point of the “public rights” doctrine is to determine whether there was any analogous action in the courts of England. This includes Kings Bench, Chancery and Admiralty. If so, by definition, the right involved is not a public right that can be wholly removed from the courts because it is a new right created by Congress that had no analog in the courts of England.I am not trying to “import” British common law. Besides, common law is hardly the issue at all. It is what causes of action were litigated in England. These included patents that even then were not the stuff of common law, but statutory, just as in the US.

          1. Ned,As I mentioned in our prior discussion – this is a minor point (and one in which I found the author’s position a bit tenuous).More to the point, Congress delineated the patent right as having the characteristics of personal property, which moots the discussion.

          2. As I mentioned in our prior discussion – this is a minor point (and one in which I found the author’s position a bit tenuous).More to the point, Congress delineated the patent right as having the characteristics of personal property, which moots the discussion.

          3. That’s just it, Ned – why would a doctrine cross jurisdictional lines like you keep on emphasizing? Why England? That’s where you are in fact “importing” just as you try to deny it. That just does not make sense to me. If you are importing – and you are – you need to be able to explain that.

        3. Further – you cannot merely claim the patent was wrongly issued.Nobody is “merely” claiming that, as far as I can tell. Rather, my understanding is that CW has a reasonable and good faith argument supporting their belief that the patent was wrongly issued and that the administration was not properly following the law.If – as supposed here – the true opponent is the USPTO, then CW needed to have named themThat’s easily fixed.Congress delineated the patent right as having the characteristics of personal property, which moots the discussionWhat?

      2. Dennis, a reexamination is like the writ of scire facias, where the private party challenged the patent as wrongly issued. He did so in the name of the King, so his action was Qui Tam in nature. The remedy was revocation.U.S. v. Am. Bell Tel., 128 US 315, 359-363 (1888)The writ was, as described by the Supreme Court, returnable in either Kings Bench or in Chancery.So, it is true that there was a direct analog to reexaminations in England prior to 1789. They were tried either in the common law courts or in the courts of equity. The adverse party was the patent holder. Appeal was to the House of Lords.When one appeals a pro-patentee ruling of the PTO in a reexamination, the patentee still is an adverse party. However, I have difficulty with standing based on Qui Tam if the government itself is no longer complaining.But circling back to Stern v. Marshall, I cannot see how reexaminations did not have an analog in the courts of England prior to 1789. They did.

  5. just called AIA Help Desk and they are already closed for the holidays — 3 pm — sorry, that is inexcusable

  6. This might be a good time to discuss Ned’s earlier comment concerning the AIA’s IPR estoppel provisions, since it didn’t really attract any commentary in the previous two threads on this topic: if the IPR petitioner lacks standing to appeal an adverse result now, they would nevertheless be estopped from raising those grounds in court, even though no court had ever reviewed those grounds.

    1. APoTU, this would be interesting, would it not? Take Big C. It choose to challenge all patents issuing to rival Upstart that is not complying with its request for a cross license. (Think Apple vs. Nokia). It loses on many, if not most challenges. Later, Upstart sues for infringement. Is Big C stripped of its validity defenses if it could not appeal its losses at the IPR stage?

    2. APoTU, did you know that ITC rulings on validity have no effect on patent validity, not even collateral estoppel? There is a reason for that. Think Art. III.

      1. Appellee. Though obviously I can understand where the appellant is coming from as well. I just think it seems right to have an injury-in-fact underpinning having a court get involved. I likewise see no problem with folks that have no reason to fear an injury being barred from being able to appeal in such instances. Indeed, if congress up and clarified the matter tomorrow it wouldn’t bother me.

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