by Dennis Crouch
The America Invents Act (AIA) created a set of new administrative review procedures (IPR, PGR, CPR) that allow third-parties to challenge already issued patents. This new approach takes a power that was previously held by courts and gives it instead to the USPTO. From a separation-of-powers perspective, the new law shifts power from the Article III courts in favor of the Article I executive-controlled agency.
After losing on the merits of the inter partes review brought by HP, patentee MCM has now appealed to the Federal Circuit — asking the court to find the inter partes review statute unconstitutional for violation of the Seventh Amendment right to a jury trial.
Question Presented:
Whether actions to cancel or revoke a patent must be tried in Article III Courts with access to a jury under the Seventh Amendment to the United States Constitution.
Ned Heller, author of the brief, reaches back to Marbury v. Madison, 5 U.S. 137 (1803), for the standard and accepted principle that “the question whether a property right may be revoked lies within the exclusive province of the Courts.” In 1893 the court explained further that:
The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.
McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898).
The largest hurdle for MCM is that the Federal Circuit decided the parallel issue with regard to reexaminations in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985). In Patlex, the Federal Circuit found that rexaminations did not violate Seventh Amendment. In response, MCM argues (1) Patlex is wrongly decided; and (2) Patlex was effectively overruled by the Supreme Court in Stern v. Marshall, 564 U.S. 2 (2011) (although bankruptcy judge had statutory authority, it lacked Constitutional authority).
Notes:
- Read the Brief: MCMBrief
- In the Alternative: MCM also argues its case on the merits of obviousness and that the case is time–barred under 35 U.S.C. 315(b) since one of HP’s affiliates (Pandigital) was served with an infringement complaint more than one year before the IPR request was filed. Thus, it is possible that the court will rule in MCM’s favor without reaching the Constitutional question.
- The patent at issue is US Patent No. 7,162,549 that broadly claims a controller chip for interfacing with a flash memory card used in many devices, such as digital photo frames. More than 100 companies have been sued for infringement over the past six years, but no court has yet found the claims invalid.
OK Ned, here is another question. Was not the 35 USC 145 civil action appeal option eliminated for reexaminations, IPRs and other post-grant proceedings back on September 16, 2012? Why does that not under your theory of unconstitutionality for PTO [non-Article III-court] fact-finding absent 35 USC 145 or 146 availability, make all the hundreds of claims rejected by the PTO since then, in all subsequently decided ex parte reexaminations, IPRs and CBMs, invalid claim rejections that sprint all those claims back to life?
Not even to mention that we are talking about a government-granted right being reexamined by the same agency that grants those rights. An intangible property right which is solely a right to sue and others for patent infringement, if there is any.
P.S. Ned, I’m doing you a favor here, as you are asking this Court to do something that Courts are extremely reluctant to do – to hold a validly enacted statute, passed by a large bi-partisan vote, unconstitutional.
Telling a judge asking you questions like this in your oral argument to “go read my brief” is not an option. You will need very short and effective answers.
Paul, the Federal Circuit judges will have read the briefs. All that I ask is that you do so as well.
Paul appears to be more than just a bit confused.
I think that he is beginning to realize the danger that the AIA is facing (He has been one of the strongest singers of praise of the post grant procedures).
Paul, may I suggest that you head to one of the few lifeboats…
“Not even to mention that we are talking about a government-granted right being reexamined by the same agency that grants those rights. An intangible property right which is solely a right to sue and others for patent infringement, if there is any.”
And why do we have a 7th Amendment? A: It is a structural safeguard. It prevents one commissioner from granting a right, having an election and having a new commissioner decide – he does not like certain of the old grants to his political opposition – so he argues ‘administrative mistake’ and revokes the prior grants – and thereby rewards and friends and punishes his foes. Here, under the AIA, see 35 USC sect 6 (who sits on the Art I ‘court’), the political appointees of the President can do exactly that.
Re: “having a new commissioner decide – he does not like certain of the old grants to his political opposition – so he argues ‘administrative mistake’ and revokes the prior grants.”
However that is of course not what happens in an IPR, where “administrative mistake” is not an allegation and claims get rejected only after a trial by APJs on new prior art patents or publications – prior art that was never considered by any examiner in the application stage – and any alleged arbitrariness would get rejected by the Fed. Cir. on appeal.
Paul, if something can be abused, it will be abused. Moreover, the Supreme Court itself has already decided that the PTO has no constitutional authority to reexamine patents. Just how the Federal Circuit could overrule the Supreme Court without a constitutional amendment is just a bit bizarre, don’t you think?
But the issue here is not reexaminations, but IPRs.
“… The Director, the Deputy Director, the Commissioner for Patents, the Commissioner for Trademarks, and the administrative patent judges shall constitute the Patent Trial and Appeal Board…” 35 USC Sect 6.
It is called a facial challenge – the statute is unconstitutional on its face – and it does not need to be abused to be unlawful. The AIA should have been challenged in the same jurisdictional posture as Patlex – years ago.
Frankly, its disturbing you don’t see the issue with a statute like this.
In the construction of the good ship AIA, someone thought “Hey, maybe we should put in bulkhead dividers, you know, if we strike an iceberg and develop a hole below the waterline.” Someone else shot back “No, we will make this thing so big that no one would dare try to sink it.”
Oops.
Paul,
1. One needs standing to challenge IPRs on constitutional grounds. As far as I know, we are the first party having standing to challenge the constitutionality of IPRs. The fact that this is 2015 and not 2012 is of no consequence to the argument.
2. As to prior patents having their claims cancelled without their raising the issue of constitutional jurisdiction, their objections on this ground may be deemed waived. They voluntarily consented to jurisdiction and reexamination, and the cancellation of their claims stands. Cf., McCormick which noted this distinction. To the same effect, Stern v. Marshall where it is noted that one can waive their constitutional rights if not asserted.
3. That said, they might argue that their claims are restored even though they did not object. That is an issue that does not have to be decided now.
4. As to pending IPRs, congress can provide a fix if they they follow Stern v. Marshall and Executive Benefits. The FWD does not result in revocation until a district court decides, unless the patent owner waives his right to trial in an Article III court and appeals directly to the Federal Circuit.
Also, Paul, consistent with the waiver argument, any patent owner who had not, to date, raised constitutional objections, has arguably waived their constitutional rights and will be bound, per Stern v. Marshall, by the outcome regardless of what happens in MCM’s appeal.
Waiver as means for curing a separation of powers defect has never received the complete blessing of the SCOTUS. Scalia joined the majority only in part for this express reason. This notion is discussed in Schor – the private litigant cannot be expected to protect institutional safeguards (i.e., separation of powers).
Good point.
qwerty, good point there. From a constitutional point of view, there is a difference between having a real choice of forum (Schor) and having no choice, but not asserting a defense (waiver).
qwerty, what do you make of fn. 4 from Executive Benefits, 134 S. Ct. 2165 (2014)?
“Because we conclude that EBIA received the de novo review and entry of judgment to which it claims constitutional entitlement, see Part IV-B, infra, this case does not require us to address whether EBIA in fact consented to the Bankruptcy Court’s adjudication of a Stern claim and whether Article III permits a bankruptcy court, with the consent of the parties, to enter final judgment on a Stern claim. We reserve that question for another day.”
Ned,
Without reading the case – and perhaps I’m not understanding it correctly – this quote appears to comport with preexisting public rights jurisprudence – that is, de novo review of the art I judgment spares the Court from determining whether an individual claim may be resolved by an art I tribunal where the individual consents to the art I tribunal’s jurisdiction.
This dovetails with traditional notions governing when an art I tribunal may assist an art iii court – i.e., as a limited fact finding adjunct subject with findings subject to de novo review.
One of the unique attributes of stern v marshall is that only 4 of the 5 majority justices identified waiver as a means of curing sep of powers defects. As mentioned, Scalia joined in part to expressly note that perhaps historical practice allowed for the consideration of defamation before the art I bankruptcy court. The justices are deathly afraid of any potential bright line rules in this area of the law.
The reason I bring it up, qwerty, was because of our discussion of whether prior participants in reexaminations and IPRs who did not object to jurisdiction waived their rights to implicitly consent to adjudication and final judgment of an Article I court such that it is binding on the parties regardless that the statute is later declared unconstitutional.
Well this appears to be very close to the question reserved in Executive Benefits.
I see. In terms of whether it would cure any potential retroactive effect of a reclassification of patent validity / public rights, I have no idea.
On the “policy argument,” IPRs are not reexaminations, but validity trials.
The IPR judges are not Article III judges. They are people with legal AND scientific expertise. Nothing more.
Congress could require that Article III judges handling patent cases have an engineering or science degree.
Great brief Ned. Hope you and your client prevail.
Aren’t CBMs and PGRs unconstitutional for the same reasons?
Zack O, probably.
The form of action is hardly the point — it is the result: the revoking of the patent that the Executive does not have the constitutional power to do.
Can you imagine the Supreme Court saying that Marbury v. Madison was wrongly decided? Hardly.
Although IPL associations and academics do not seem to be taking this case* very seriously, should it not at least draw an amicus brief response?
*MCM Portfolio Company v. Hewlett Packard Company – Fed. Cir. Case No. 15-1091 filed 1/21/15
There is always a small risk that two Fed. Cir. judges hostile to IPRs and reexaminations (like Judge Newman) might be on the panel. Most importantly, this same alleged unconstitutionality basis for all IPRs would equally apply to all past, as well as present, PTO interferences and reexaminations which have removed thousands of issued patent claims. [The alleged lack of a requisite Article III court decisions for all those patent claims is jurisdictional, and thus presumably retroactive.] That would lead to an economic Armageddon of thousands of formerly dead patent claims arising from the grave, an issue conveniently ignored by these Appellants which needs to be pointed out. [Not even to mention various other federal agency administrative decisions, including the ITC, impacting alleged property rights.]
Paul
Paul, check post 2.2.2.
The Supreme Court has approved of access to trial de novo in district courts as a way of rescuing so-called “Stern claims.”
Until the AIA, reexaminations were subject to trial a trial de novo.
Interferences are also subject to a trial de novo.
The potential remedy is at hand. All one has to do is follow Stern v. Marshall. That means, I suggest, that people trying to rescue the situation actually read that case and follow it.
Thanks Ned, I appreciate that explanation of your argument, but doesn’t that mean you are arguing that no federal agency can make any fact findings affecting anyone’s property unless the losing party is provided with a de novo trial in a D.C.?
Paul, that is hardly the argument. You might want to start by reading the brief and Stern v. Marshall.
Paul, let me explain further. I think the courts will look to see if the cause of action, or an analogous cause of action, was tried in the courts of England prior to 1789. If it was, then it must be tried in Article III courts today. Further, if the cause of action required a trial by jury with respect to disputed facts, it must be tried to a jury.
This basically is the analysis of Granfinaciera.
Paul the ITC does not affect either the right of the respondent, or of the patent holder, to his day in court by reason of their decisions having no collateral estoppel effect.
Re: court of claims. If its judgments on validity were to have an effect in Article I courts by collateral estoppel, then the patent owner would have a right in the first place to access to a court and a jury.
The simple remedy there would be to deny collateral estoppel effect.
Re: Hatch Waxman, invalidity counterclaims clearly have a constitutional right to a trial by jury because they would have collateral estoppel effect.
The brief requests, and thus seems to effectively concede, that Patlex Corp. v. Mossinghoff would have to be overruled. But the stare decisis rules of the Fed. Cir. do not allow a panel to overrule a prior panel decision. Thus, unless the majority that is on this panel ignores that, it would require an en banc decision.
P.S. Is not the Sup. Ct. In re Zurko decision also relevant here? That decision directly supports fact-findings by the PTAB. If that was actually unconstitutional [for not being done by an Article III court as argued here] it should have controlled that case, because judicial jurisdictional issues are not waived.
Paul, Zurko was a appeal from an ex parte examination. All such appeals have a right to a trial de novo and therefor do not have an obvious constitutional problem.
Crowell v. Benson set forth the blueprint – as limited by Stern. Provide a trial de novo and the right of access to an Article III court is partially solved. There then is the question of whether there is a trial by jury, but that might be considered later.
Ned can correct me, but I believe that his view is that subsequent decisions to Patlex do allow this panel to over rule the prior panel decision, and thus an en banc panel is not required.
Also – it not mere fact finding that is implicated in the Teva/Zurko exchange – but the type of fact finding (extrinsic-intrinsic).
According to Troy v. Samson, a panel can decide that a prior decision of its own circuit has been overruled by intervening controlling authority.
It does appear that you have not read the brief.
You see Ned – sometimes we do agree.
Now if I can ‘cure’ you of your dogmatic curse-ades against business methods and software…
anon, you might say something on that score that eventually I might agree with. But do not hold your breadth.
But it does appear that you have read the brief and have understood it. Paul obviously has not read the brief.
Under what standard are the PTAB findings involving questions of fact reviewed by the CAFC? Are they reviewed like a JMOL by a district court, or with deference to the PTAB?
Zurko controls.
FOF are reviewed for substantial evidence — just like the findings of a jury.
By the AIA statute per the Sup. Ct. In re Zurko decision.
Ned,
I haven’t completely digested all the sources cited in your brief yet. But, I’m assuming that you are right, and IPRs are unconstitutional because fact issues in a 102/103 analysis have to be decided by a jury under the 7th Amendment.
How about for covered business method reviews that find a patent invalid, say under section 112 for being indefinite? I think you might be able to argue that under the Supreme Court’s analysis in Markman, juries didn’t decide the issue of indefiniteness in 1791 because there were no claims in patents at the time. Then if you go through the Markman analysis, I would think the same analysis would apply since claim construction and indefiniteness are arguably two sides of the same coin.
Probably messing up this analysis somewhere. I guess it would have an even bigger effect on litigation.
Anonymous, you might want to read the brief a second or third time. It may take some time to sink in. As anon noted below, the PTO’s entire house of cards depends on patents being public rights, otherwise the PTO has no “constitutional” jurisdiction to revoke a patent for any reason.
“the PTO’s entire house of cards depends on patents being public rights, ”
Nah bro, the entire house of cards depends on the right to bring an IPR being a public right. There’s a difference.
That’s an interesting angle, 6.
But a bit of a red herring, given as no one has even brought up the “right of petitioning the government for redress” in ANY of the discussion points being advanced.
The “what” of your point – however – does remain constrained by the “how” of the enactment. This is analogous to the “takings” discussion in Constitutional law, in that the government is not forbidden to undertake a takings (the “what”), but is constrained as to the “how” with certain legislative acts having been deemed unconstitutional in that the legislated “how” was insufficient.
That determination on insufficiency very much reached back to the discussion points at hand that you are trying NOT to address.
So, “Bro,” even as you cannot help yourself from saying “Bro,” you also appear not to be able to help yourself get to the underlying point of law pertinent to the discussion here. Very much like “that” Rob Lowe talking about “that” picture (self portrait on the wall) and “that” sound (lunkhead grunt).
Somebody seriously lacks a sense of humor here.
Well, 6, not a soul that has opined on the topic has ever suggested that Patlex held anything else than that a patent was a public right. Its premise was that the “right,” the patent, could only be created by statute.
“The Congress shall have power…To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries”
Patents are thus limited in time, and Congress has authority to decide when patents expire. Here, Congress has decided that a patent’s time is up when an administrative agency tasked with the job finds it invalid.
I don’t see the Constitutional issue here.
Of course not.
It is easy not to see anything with eyes so tightly clenched.
Maybe you want to study the law a bit and understand a bit before you trip over that soapbox (again).
Mulling over what arguments might find a purchase, and thinking about universal natural justice rather than US-specific Constitutional issues, how about “legitimate expectations” and “making law retrospectively” and “changing the position of the goal, part way through the game”. What I mean is, that if I had known that my claims, post-issue, would be liable to validity challenge on an evidence preponderance basis, I would have drafted different claims to go to issue.
But I didn’t know that, and couldn’t have known that. So I took to issue claims without a thought that they will need to be able to survive validity challenges brought on a preponderance basis. And now it’s too late to do anything to shift my legal position, making the claims more robust against validity challenges, to take account of the new law.
That is making law retrospectively and depriving me of the legitimate expectations I had, that the claims I took to issue would see off all attacks on their validity.
Presumably, the answer is that the petition as it stands already includes my lines of argument (or that they are futile).
Max, the argument is not about justice. It is about law.
Can I ask, is the distinction between “fairness” and “law” well understood in Europe?
In soviet Europe law is fairness.
Would it be a fair rejoinder then to say that in Islamic nations that law (sharia) is morality?
But, in commie land, the party is boss, and the law.
the claims I took to issue would see off all attacks on their validity.
But at the same time it’s perfectly constitutional for you to recognize mistakes that you made when you wrote/prosecuted your self-serving mini-statute and ask the PTO for a do-over that screws over everybody else. Because … freedom! Or something.
“for a do-over that screws over everybody else. Because … freedom! Or something.”
Or something indeed.
You need to get a better meme.
The Thomas “analogy” was pitiful when he used it and upon further scrutiny only gets worse.
Think about it. The analogy would permit individuals (inventors or their assigns through their representative) to WRITE law, that the Executive branch (not the Legislative branch) would then deliberate, shape, and enact. Then we have you spinning and twisting it one more step further…
That’s just a horrible analogy. Or something.
The following law review article has an in-depth review of a lot of these concepts:
link to ncjolt.org
Steve, true. But the author did not appreciated the role of scire facias actions in the present constitutional issue. Lemely’s article thoroughly discussed scire facias actions, that they were filed on the common law side of chancery, and enjoyed a right to a trial by jury for disputed facts. (All historical authority discussing scire facias actions are to the same effect.)
The importance is that scire facias actions were to revoke a patent because of fraud or invalidity. They began as a petition to the government, who then, if there was merit, brought the action in the name of the King. The petitioner at that time was merely an third party participant. A third form permitted the patent holder to sue to revoke a patent on the same invention issued later to another. This form did not require the government. According to our Supreme Court in Mowry v. Whitney, the first two forms of action required the government to participate to avoid harassment of the patent owner.
Because scire facias actions were well known in the early days of our country, Congress provided by statute an action to repeal a patent. The Supreme Court in ex parte Wood held the statutory action to be in the nature of an action scire facias and ordered a trial by jury for disputed facts.
All this is pertinent to the Art. III question because if an action has a right to a trial by jury, it must be tried in an Art. III court and cannot be assigned to an Art. I court. Granfinanciera.
Ned I appreciate you laying out your views that you’ve already laid out for us in other threads. But considering this litigatin be pending it might be an excellent time to remain a tad mum.
I mean, unless your client expressly doesn’t mind or is wanting you to rouse a rabble. I do see you calling for amicus.
6, don’t worry. My client does not mind a bit of rabble rousing.
All, supportive amicus briefs are due today. FRAP 29.
Merits aside, I think the reasoning offered gives the Federal Circuit an excellent opportunity to kick Congress in the nads for the huge onslaught of PTAB appellate work headed their way. If I was a Fed. Cir. judge, I would be tempted to find for the patent owner here, just so I would not have to hear the huge number of IPR appeals that Congress did nothing to facilitate my ability to manage. I imagine the backlog is growing pretty fast.
I guess that is one more reason why I am not a Fed. Cir. judge.
Go get em Ned! Really, gl bro. I mean, I’m totally on board with the position and the quotes but it just seems like they’re quotes from a time when power wasn’t vested in the executive to do these things. At least the ones D quoted you as bringing up.
Still, gl!
Same from me. I may disagree from Ned’s position from both a policy perspective and a legal perspective, but I’m glad that such an important case is being argued by someone I both like and respect.
I can certainly second that, apotu!
Thanks to you both. I really appreciate it.
Setting aside for the moment the dubious merits of the underlying patent, these sort of hail mary/atom bomb type attacks on key features of the U.S. patent system inevitably raise other important questions about the patent system.
For argument purposes, let’s assume that the atom bomb here is not a dud and re-examinations and inter-parties review of patents are deemed “unconstitutional”.
It seems more than a bit strange (not to mention, corrupt) to have an administrative agency which, in exchange for money, (1) teams up with private self-interested entities to promulgate what are, in effect, statutes that affect the rights of every citizen in the country, without any Congressional review of those statutes; and (2) deny the agency the right to re-evaluate its own actions when a member of the public has identified a flaw in the agency’s approach.
According to the theory of the case, is the agency also precluded from issuing advisory opinions and/or detailed apologies and explanations for its mistakes that judges could routinely adopt as their own? Or is it “constitutionally” required to sit on its hands and say nothing?
Is a “presumption of validity” for granted patents constitutionally viable under such circumstances? What would be the rational basis for such a presumption if/when the agency that issued the patent has publically acknowledged that it screwed up and “if it were permitted by the constitution to have another chance” would reach the opposite conclusion?
Again, I don’t think this case has legs for any number of reasons (many of which have been articulated by commenters below). I am simply curious about whether the supporters of the argument have given thought as to the ramifications of what their proposing and what “fixes” are permitted in the absence of a Constitutional amendment (because those “fixes” are inevitable and necessary, absent some other correspondingly massive change to the existing patent system). Could, for example, a statute be passed permitting a court to quickly make a finding that the patent needs to be re-reviewed by the agency?
All good questions MM. But it is congress that went through with the tomfoolery of making patents supposedly have the properties of “property”.
tomfoolery…
supposedly…
Odd characterizations of black letter law.
6: it is congress that went through with the tomfoolery of making patents supposedly have the properties of “property”.
Right. An obvious question to be asked is whether that aspect of the patent system (to the extent it is taken seriously) is any more “constitutional” than the establishment of IPR’s.
Let’s face it: the similarities between your statutory right to sue me for, e.g., thinking about a correlation because “the PTO said you had this right even though it realizes now that it made a huge mistake”, on one hand, and your statutory right to sue me for, e.g., burning down your grocery store, on the other hand, are pretty slim indeed.
…because “sue me for some ‘pure thinking’ thing isn’t a ridiculous strawman at all…
Oh wait, it IS a ridiculous strawman…
…because “sue me for some ‘pure thinking’ thing isn’t a ridiculous
There is no non-ridiculous distinction to be drawn between sueing someone for “pure thinking” and sueing someone for “pure thinking about data obtained using public domain methodology.” This is not only logically plain as day, it’s also the straightforward application of Mayo v. Prometheus, a 9-0 decision that will never be overturned.