Customedia Tech v. Dish Network (Fed. Cir. 2019)

Customedia … submits a notice of supplemental authority identifying this court’s recent decision in Arthrex, Inc. v. Smith & Nephew, Inc., No. 2018-2140 (Fed. Cir. Oct. 31, 2019). That decision vacated and remanded for the matter to be decided by a new panel of Administrative Patent Judges (“APJs”) at the Patent Trial and Appeal Board after this court concluded that the APJs’ appointments violated the Appointments Clause. Customedia’s letters seek to assert the same challenge here, which the court construes as a motion to vacate the Board decisions here and remand in accordance with Arthrex.

We conclude that Customedia has forfeited its  Appointments Clause challenges. . . .  Customedia did not raise any semblance of an Appointments Clause challenge in its opening briefs or raise this challenge in a motion filed prior to its opening briefs. Consequently, we must treat that argument as forfeited in these appeals.

One of the topics to be discussed at tomorrow’s PPAC meeting is USPTO operations following the Supreme Court’s 2021 Arthrex decision.  In Arthrex, the Supreme Court created an additional layer of review by the PTO Director in Inter Partes Review (IPR) proceedings following a PTAB final written decision.  PTO Acting Director Drew Hirshfeld has considered the first two request for Director Review, and denied both requests. (IPR2020-00081 and IPR2020-00320).  It appears that the Director personally considered both cases rather than delegating the decision back to the PTAB or another Official.  Neither decision reach the merits but rather perfunctorily state:

It is ORDERED that the request for Director review is denied; and FURTHER ORDERED that the Patent Trial and Appeal Board’s Final Written Decision in this case is the final decision of the agency.

I expect that this approach will be the standard for almost all cases going forward.

by Dennis Crouch

United States v. Arthrex, Inc. (Supreme Court 2021)

1. Whether, for purposes of the Appointments Clause, U.S. Const. Art. II, § 2, Cl. 2, administrative patent judges of the U.S. Patent and Trademark Office are principal officers who must be appointed by the President with the Senate’s advice and consent, or “inferior Officers” whose appointment Congress has permissibly vested in a department head.
2. Whether, if administrative patent judges are principal officers, the court of appeals properly cured any Appointments Clause defect in the current statutory scheme prospectively by severing the application of 5 U.S.C. 7513(a) to those judges.

On Monday, March 1, 2021, the Supreme Court will hear oral arguments in this important case focusing on administrative power of the USPTO Patent Trial & Appeal Board.  PTAB judges have cancelled thousands of issued patents — that judicial role (with little direct control guidance from the USPTO Director) suggests that the PTAB judges are “Officers of the United States” that must be appointed by the President.  Although PTAB decisions are not directly reviewable by the USPTO Director, the director has substantial authority in controlling panel selection, rules of practice, and job performance.  All those suggest that perhaps the judges are “inferior Officers” that may be appointed by a Head of Department – such as the Secretary of Commerce.  If the Principal Officer theory prevails, the potential result is that a substantial number of PTAB Decisions will be rendered void.

The Federal Circuit decision in the case was a bit quirky, to be mild. The appellate court agreed with the patentee that the judges were Principal Officers that should have been appointed by the President.  However, the court also purported to “save” the appointments by eliminating some of the statutory rights provided to the Judges under the APA via judicial fiat. That severing, according to the court, was sufficient to reduce the judges once again to Inferior officers.

None of the parties were satisfied with this result, and each petitioned for writ of certiorari.  The Supreme Court granted the writ (as to the two questions above) and consolidated the cases.

I contacted my Mizzou Colleague and Constitutional Law Scholar Prof. Tommy Bennett for his take on the case.  Bennett agrees that the parties have presented differing theories of authority and power.  If you focus only on decisional authority, then Arthrex has a case that these are Officers requiring presidential appointment.  However, the staffing and organizational authority lies with the PTO Director who can “appoint, assign, and re-assign any APJ for any reason [and] set the rules and procedures by which PTAB proceedings are conducted.”  Prof. Bennett explained to me: “Which of these two views of authority prevails will, I think, determine how the case turns out.”

I also contacted Mark Perry for some commentary. Perry is arguing on behalf of the patent challenger Smith & Nephew and provided the following statement.

The PTO Director is charged by statute with providing policy direction and management supervision to the Office, including the Board.  APJs can’t start work without his approval, they have to follow his procedural and substantive guidance while working, and he has a variety of means to review their work.  Moreover, only the Director confirms or cancels patent claims at the conclusion of IPR proceedings, and thus he bears political accountability for final decisions. APJs are inferior Officers under the Appointments Clause, just as their predecessors have been since the Patent Office was created in 1836.

I’ll note here that the 1952 Patent Act required that the PTAB Judges (formerly Chief Examiners) be “appointed by the President, by and with the advice and consent of the Senate.” 35 U.S.C. 3 (1952). This does not mean that it was required, but suggests a close case.  The requirement of presidential appointment ended in 1975 when the duty of appointments was pushed-down to the Secretary of Commerce.  Appointments were later pushed-down further to the USPTO Director until Prof. John Duffy suggested that approach was unconstitutional.

March 1 Oral arguments are set to be divided as follows:

• 15 minutes for US Gov’t Intervenor
• 15 minutes for the patent challenger Smith & Nephew
• 30 minutes for the patentee Arthrex

Deputy Solicitor General Malcolm Stewart will represent the U.S. at oral arguments.  Stewart has been part of the case from the beginning. Although his bosses have changed, I don’t believe that the Gov’t position has substantively wavered.  Mark Perry of Gibson Dunn will argue on behalf of Smith & Nephew; and Jeff Lamkin of MoloLamkin for the patentee.

At the briefing stage, the US Gov’t presented an additional waiver challenge — arguing that the patentee had not preserved its right to appeal on the appointments challenge. SCOTUS declined to hear that issue in this case. However, the issue is central to a parallel appointments challenge in Carr v. Saul.  That case is looking at whether administrative law judges deciding cases under the Social Security Act should have been appointed by the President

Whether a claimant seeking disability benefits under the SSA forfeits an appointments-clause challenge to the appointment of an administrative law judge by failing to present that challenge during administrative proceedings.

Docket.  Carr v. Saul is set for oral arguments on March 3, 2021.  I expect opinions in the cases will be released together later this term.

Cienna Corp. v. Oyster Optics, LLC and Andrei Iancu (Fed. Cir. 2020)

In this case, the Federal Circuit held that an IPR petitioner did not have a right to raise the Arthrex appointments issue on appeal unless the issue was first raised before the PTAB. The court’s basic reasoning is actual and equitable waiver.

The problem with Ciena’s request is that, unlike the patent owner in Arthrex, Ciena requested that the Board adjudicate its petition. It, thus, affirmatively sought a ruling from the Board members, regardless of how they were appointed. Ciena was content to have the assigned Board judges adjudicate its invalidity challenges until the Board ruled against it. Under those circumstances, we find that Ciena has forfeited its Appointments Clause challenge. . . .

In this case, Ciena not only consented to adjudication by the Board, but it affirmatively sought to delay any consideration of its patent challenges by seeking a stay of the district court litigation initiated by Oyster. Any constitutional concern regarding the appointment of the Board judges in this case is negated by Ciena’s forfeiture.

This decision was originally released in January 2020 as a non-precedential opinion. However, on petition from the USPTO, the court has now re-designated the decision as precedential.

In its petition for redesignation, the PTO explained that losing petitioners “continue to raise the same argument [on appeal]. A precedential opinion would reduce that motions practice and save the Court time.”  Examples of pending cases:

• Moderna Therapeutics v. Protiva Biotherapeutics, Nos. 20-1184, -1186, ECF No. 37 (Fed. Cir. motion filed Mar. 6, 2020);
• Valve Corporation v. Ironburg Inventions, Nos. 20-1315, -1379, ECF No. 24 (Fed. Cir. motion filed Feb. 28, 2020);
• Valve Corporation v. Ironburg Inventions, No. 20-1316, ECF No. 22 (Fed. Cir. motion filed Feb. 22, 2020);
• Palo Alto Networks, Inc. v. Finjan, Inc., No. 19-2151, ECF No. 56, at 4, 32, 49 (Fed. Cir. blue brief filed Nov. 27, 2019);
• United Fire Protection Corp. v. Engineered Corrosion Solutions, No. 20-1272, ECF No. 16 (Fed. Cir. motion filed Jan. 9, 2020);
• Comcast Cable Comm. v. Promptu Sys. Corp., No. 19-1947, -1948, ECF No. 26, at 66 (Fed. Cir. blue brief filed Nov. 15, 2019);
• Comcast Cable Comm. v. Promptu Sys. Corp., No. 19-2287, -2288, ECF No. 18, at 66 (Fed. Cir. blue brief filed Nov. 15, 2019);
• Baby Trend, Inc. v. Wonderland Nurserygoods, No. 19-2309, ECF No. 28, at 65-66 (Fed. Cir. corrected blue brief filed Feb. 24, 2020).

by Dennis Crouch

The USPTO has published a notice of proposed rulemaking (NPRM) to formalize the process for Director Review of PTAB decisions. These proposed rules come in response to the Supreme Court’s decision in United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), which underscored the necessity for the USPTO Director to have the ability to review PTAB decisions to comply with the Appointments Clause of the U.S. Constitution.  Of course, the USPTO has been operating under an interim procedure for Director Review that began soon after Arthrex, but has been updated a couple of times.  The NPRM closely follows the most recent version of the interim rules. (more…)

By Dennis Crouch

I have been repeating this mantra for quite a while – patents are political. In US v. Arthrex, the Supreme Court added an exclamation point.  By design, the US governmental system places presidential political appointees at the top of each executive agency, including the US Patent & Trademark Office so that the US President can then be held directly accountable for the successes and failures.  Note here that the accountability we’re talking about is political accountability.

The Federalist Papers (Hamilton) repeatedly focused on this issue, albeit not in the patent context: “The blame of a bad nomination would fall upon the President singly and absolutely.”  Federalist 77, for example.  Now, in the words of the Supreme Court, the Presidentially Appointed USPTO Director “is the boss.”

(more…)

by Dennis Crouch

Here is a rundown of what’s happening with US Supreme Court cases:

Decided: The court recently decided Google LLC v. Oracle America, Inc., holding that Google’s use of Oracle’s Java API was a fair use and therefore not copyright infringement.  The court made no determination as to whether the API was actually copyrightable in the first place. The case does not expressly decide any patent law issues, but does provide some guidance as to how courts should approach mixed questions of law and fact (such as claim construction) and the right to a jury trial. The jury trial issue was interesting.  Although a number of juries were given fair use questions pre-1791, the court held that our current version of fair use claims its ancestry from the equity rather than common law. Thus, no right to a jury trial on the question of fair use under the Seventh Amendment. “In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.”

Argued: On March 1, 2021, the court heard oral arguments in US v. Arthrex regarding  it is proper for the Secretary of Commerce to appoint the PTAB judges as inferior officers of the United States. Or, instead, are they principal officers of the United States that must be appointed by the US President and confirmed by the Senate (as we do with Article III judges).  Nobody likes the Federal Circuit’s decision, and the question really is which way it should fall. (My guess is that these judges will be seen as inferior officers).  I expect that part of the majority decision (whichever way it goes) will involve interpreting the role and involvement of the PTO Director in PTAB decisions.  An inferior officer decision will interpret the statute as providing the PTO director with substantial authority; a principal officer decision will downplay the role of the PTO director.  Decision should be released by Mid-June 2021.

Argument Pending: One final case is set to be argued this term: Minerva Surgical, Inc. v. Hologic, Inc., focusing on the issue of assignor estoppel.  Can a prior owner of a patent right (such as an inventor) who transfers title to another (typically the employer) later assert in court that the patent is invalid?  In this case, the employee started his own competing company and was sued for patent infringement.  The lower court barred an invalidity defense. Now the question presented:

Whether a defendant in a patent infringement action who assigned the patent, or is in privity with an assignor of the patent, may have a defense of invalidity heard on the merits.

Oral arguments are set for April 21, 2021 with a decision by Mid-June 2021.

Other pending petitions:

Arthrex Issues: There are a large set of pending petitions awaiting the outcome of Arthrex. Some of these raise interesting additional issues, but most of them are pure follow-on cases : Iancu v. Luoma, et al., No. 20-74; Polaris Innovations Limited v. Kingston Technology Company, Inc., et al., No. 19-1459; Comcast Cable Communications, LLC v. Promptu Systems Corporation, et al., No. 20-92; Vilox Technologies, LLC v. Iancu, No. 20-271; Rovi Guides, Inc. v. Comcast Cable Communications, LLC, et al., No. 20-414; RPM International Inc., et al. v. Stuart, No. 20-314; Fredman Bros. Furniture Company, Inc. v. Bedgear, LLC, No. 20-408; Micron Technology, Inc. v. North Star Innovations, Inc., No. 20-679; Iancu v. Fall Line Patents, LLC, et al., No. 20-853; Immunex Corporation v. Sanofi-Aventis U.S. LLC, et al., No. 20-1285; Comcast Cable Communications, LLC v. Promptu Systems Corporation, No. 20-1220; Wi-LAN, Inc., et al. v. Hirshfeld, No. 20-1261

Patent Eligibility: Of the pending eligibility cases, I find American Axle and Ariosa the most interesting:  American Axle & Manufacturing, Inc. v. Neapco Holdings LLC, et al., No. 20-891; NetSoc, LLC v. Match Group, LLC, et al., No. 20-1412; NetScout Systems, Inc. v. Packet Intelligence LLC, No. 20-1289; Ariosa Diagnostics, Inc., et al. v. Illumina, Inc., et al., No. 20-892.

Inventorship & Ownership: Ono Pharmaceutical Co., Ltd., et al. v. Dana-Farber Cancer Institute, Inc., No. 20-1258; In re Martillo, No. 20-1126 (suit to quiet title).

Obviousness: Amarin Pharma, Inc., et al. v. Hikma Pharmaceuticals USA Inc., et al., No. 20-1119 (secondary indicia); Sandoz Inc., et al. v. Immunex Corporation, et al., No. 20-1110 (obviousness type double patenting).

Willful Infringement: NetScout Systems, Inc. v. Packet Intelligence LLC, No. 20-1289 (this case also raises an eligibility question).

Procedure: Ericsson Inc., et al. v. TCL Communication Technology Holdings Limited, et al., No. 20-1130 (is pre-trial denial of summary judgment appealable absent post-trial JMOL); Warsaw Orthopedic, Inc., et al. v. Rick C. Sasso, No. 20-1284 (abstaining in favor of state court jurisdiction); PersonalWeb Technologies, LLC v. Patreon, Inc., et al., No. 20-1394 (preclusion under the Kessler doctrine); Tormasi v. Western Digital Corp., No. 20-1396 (does a convicted state inmate have standing to sue for patent infringement).

Retroactive Application of IPRs: Security People, Inc. v. Hirshfeld, No. 20-1380.

by Dennis Crouch

United States v. Arthrex, — S.Ct. — (2021)

The Supreme Court has confirmed that PTAB Judges yield unreviewable authority during inter partes review and therefore acting as Principal Officers under the US Constitution. Therefore the APJs should have been nominated by the President and confirmed by the Senate.

BUT, the Court solved the problem in a new way–by making PTAB determinations reviewable by the USPTO Director.  This leaves the PTAB system in-place, but will place major insider political pressure on the PTO Director (and current Acting Director).

https://www.supremecourt.gov/opinions/20pdf/19-1434_ancf.pdf

= = = =

One irony here is that the person with new political accountability is Drew Hirshfeld.  Although he is sitting in the Director’s seat, Hirshfeld was not appointed as PTO Director by anyone. Although the Supreme Court refers to him as “Acting Director,” the administration has taken pains to clearly state that he is not the acting director. Rather, Hirshfeld’s title is a person “Performing the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director of the USPTO.”

= = =

Chief Justice Roberts wrote the Majority Opinion.

• Parts I and II Concludes that APJs were acting as Principal Officers.  This portion was joined by Justices Alito, Gorsuch, Kavanaugh, and Barrett. (5 Justices)
• Part III provides a judicial remedy by rewriting the statute to give the USPTO Director power to directly review PTAB decisions. That portion was only joined by Justices Alito, Kavanaugh, and Barrett. (only 4 Justices).  However, Justice Breyer, Sotomayor and Kagan agreed in a separate opinion that the remedy was proper (although they disagreed about whether it was needed at all).

Justice Gorsuch disagreed with the remedy — He would have simply set-aside the PTAB decisions and let Congress fix the problem.

Justice Thomas dissented from the whole majority approach – finding that Congress expressly identified APJs as inferior officers and that they are two steps below the president (i.e., pretty far down on the chain).  “For the very first time, this Court holds that Congress violated the Constitution by vesting the appointment of a federal officer in the head of a department.”  In addition, Justice Thomas argued that the remedy is inappropriate: “If the Court truly believed administrative patent judges are principal officers, then the Court would need to vacate the Board’s decision.”

= = =

It is telling that Chief Justice Roberts opinion does not begin with a discussion of “rights” but rather Congressional intent to create “a workable patent system.” Here, the court attempts to keep the train on the tracks, but does create real potential trouble by placing the USPTO Director in the political cross-hairs.

This case focuses on Inter Partes Revew proceedings that are decided by the Patent Trial and Appeal Board (PTAB) whose Administrative Patent Judges (APJs) are appointed by the Secretary of Commerce.  This setup though has a Constitutional problem because APJs issue opinions on behalf of the U.S. Government in cases involving private property interests potentially worth billions of dollars. An individual with that power is an Officer of the United States and must generally be appointed by the US President and Confirmed by the Senate, just like is done with Federal Judges and heads of office.  We obviously have some big due process problems when improperly appointed judges issue opinions deciding rights.

Regarding the Appointments Clause, Hamilton wrote that the President should appoint the officers so that the President can be held directly accountable for the good and the bad. “[S]ole and undivided responsibility of one man will naturally beget a livelier sense of duty and a more exact regard to reputation.” The Federalist No. 77.

In its opinion, the Federal Circuit found that APJ’s were improperly appointed, but then issued a savings-severance.  The appellate court invalidated the tenure protections for APJs guaranteed by statute and concluded that was enough to reduce APJs to inferior officers who did not need presidential appointment.  On reflection, the Supreme Court wrote “This satisfied no one.”

Edmond v. United States, 520 U. S. 651 (1997), is Supreme Court’s key case-on-point regarding principal-officer vs inferior-officer vs no-officer-at-all.  Here, the court applied Edmond – finding that the PTO Director has substantial authority over APJs – finding that “he is the boss” in most ways.  BUT, there is one big exception, the PTAB director does not have authority to review the actual APJ decisions.

He is the boss, except when it comes to the one thing that makes the APJs officers exercising “significant authority” in the first place—their power to issue decisions on patentability.

Slip Op.  The Appointments Clause requires politically accountable individuals be responsible in a way that leads directly to the President, and the current setup does not allow for that result. “[T]he public can only wonder ‘on whom the blame or the punishment of a pernicious measure, or series of pernicious measures ought really to fall.'” Slip Op., quoting The Federalist No. 70.  The court also looked to the history of the U.S. Patent System:

When it comes to the patent system in particular, adjudication has followed the traditional rule that a principal officer, if not the President himself, makes the final decision on how to exercise executive power. Recall that officers in President Washington’s Cabinet formed the first Patent Board in 1790. 1 Stat. 109–110. The initial determination of patentability was then relegated to the courts in 1793, but when the Executive Branch reassumed authority in 1836, it was the Commissioner of Patents appointed by the President with the advice and consent of the Senate—who exercised control over the issuance of a patent. The patent system, for nearly the next hundred years, remained accountable to the President through the Commissioner, who directed the work of his subordinates by, for example, hearing appeals from decisions by examiners-in-chief, the forebears of today’s APJs.

Slip Op. All of this leads to the conclusion that APJs are acting like principal officers:

We hold that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office.

Note here that the court does not exactly state that “APJs are principal officers” but only that they are acting as such when deciding IPRs.  Regardless, it is improper for them to act-as-such because they are not principal officers.

For a solution, the court rejecting the Federal Circuit’s approach because it does not solve the unreviewability problem.  The Supreme Court offers its own solution: “Decisions by APJs must be subject to review by the Director.”  Here is what the court tells us: Once the PTAB makes its decision, the PTO Director then has the power to review the case and “reach his own decision.” The PTO director’s decision is then reviewable in court.

When reviewing such a decision by the Director, a court must decide the case “conformably to the constitution, disregarding the law” placing restrictions on his review authority in violation of Article II. Marbury v. Madison, 1 Cranch 137, 178 (1803).

Slip Op. The Supreme Court also makes clear that its decision only directly applies to IPR proceedings. “We do not address the Director’s supervision over other types of adjudications conducted by the PTAB, such as the examination process for which the Director has claimed unilateral authority to issue a patent.”

On remand, the Supreme Court is not requiring the PTAB to rehear any of the prior decisions. But, the PTO Director will need to issue decisions in each case indicating whether or not the office will be rehearing the case.

In deciding the cases, the PTO Director should be careful to avoid calling it a rehearing since “Only the Patent Trial and Appeal Board may grant rehearings.” 35 U.S.C. 6.

= = = =

Big questions for the patent system going forward: how does this Director-Review work and how much political lobbying is appropriate?

= = = =

I noted above that Part III – the remedy portion – of Chief Justice Robert’s opinion only garnered four votes. Not a majority.  However, Justice Breyer wrote a separate opinion joined by two others that “agree with its remedial holding.”  I have not parsed through how this statement differs from simply joining Part III.

 = = = = =

The court notes and the Thompson v. Haight decision from Judge Van Ness that I quoted a couple of weeks ago:

Judge William Van Ness—who before taking the bench had served as second to Aaron Burr in his duel with Alexander Hamilton—lamented that Congress had left the door “open and unguarded” for imposters to secure patents, with the consequences of “litigation and endless trouble, if not total ruin, to the true inventor.” Thompson v. Haight, 23 F. Cas. 1040, 1041–1042 (No. 13,957) (CC SDNY 1826). Congress heeded such concerns by returning the initial determination of patentability to the Executive Branch, see 5 Stat. 117–118, where it remains today.

Slip Op.

= = = = =

One interesting bit I saw in the opinion was the note that the Court of Customs and Patent Appeals (CCPA) was “an entity within the Executive branch until 1958.”  In Ex parte Bakelite Corp., 279 U. S. 438 (1929), the Supreme Court called the CCPA a “legislative court and not a constitutional court.” As such, there was no standing requirement under Article III of the Constitution. “Even if the  proceeding is not such a case or controversy, the Court of Customs Appeals, being a legislative court, may be invested with jurisdiction of it.”  In 1958, Congress overturned that decision with a statement that the CCPA “is hereby declared to be a court established under article III of the Constitution
of the United States.”  72 Stat. 848.

Dali Wireless Inc. v. CommScope Techs. LLC, No. 20-1045 (Fed. Cir. Sept. 6, 2023).

Federal Circuit’s decision in Dali Wireless parallels the issues that I recently discussed in an analysis of the court’s September 1 decision in Sisvel International v. Sierra Wireless. Both cases grapple with claim construction and the tension between construing claims broadly versus importing limitations from the specification.

In Sisvel, the Federal Circuit affirmed the PTAB’s broad construction of “connection rejection message” over the mobile-network patentee’s arguments that the term should be limited to GSM/UMTS networks. Although the disclosed embodiments all focused on GSM/UMTS networks, the claims were drafted broadly without a clear disclaimer or redefinition.

Similarly, in Dali Wireless, the patentee argued for a narrow construction of the claim term “any” in the claims as sending signals to only a specific remote unit. US9531473. Once again the Federal Circuit upheld the PTAB’s broader construction. Despite embodiments showing selective sending, the court declined to import limitations absent clear intent to limit claim scope.  Under a broad construction, the prior art clearly taught the limitations and therefore rendered the claims unpatentable.

Both cases demonstrate the Federal Circuit’s reluctance to confine claims to specification embodiments when the language can support a broader plain meaning. Again, one take-away for patent prosecutors is to look closely to the described embodiments and consider express limitations that cover only those embodiments.

The decision also rejected an appointments challenge under United States v. Arthrex, 141 S.Ct. 1970 (2021), which held that APJs were improperly appointed principal officers. Dali raised an Appointments Clause challenge to decisions made by Commissioner Hirshfeld who was acting as PTO Director.  The Federal Circuit summarily rejected that challenge as already decided in Arthrex, Inc. v. Smith & Nephew, Inc., 35 F.4th 1328 (Fed. Cir. 2022), cert denied, 143 S.Ct. 2493 (2023).

Opinion by Judge Linn, joined by Judges Hughes and Stark.

CustomPlay, LLC v. Amazon.com, Inc. (Supreme Court 2022)

New challenge to inter partes review. In this case, the patentee argues: (1) anti-delegation and (2) due process. Questions:

1. Whether the Patent and Trademark Office (PTO) violated the statutory text and legislative intent of the America Invents Act (AIA) by delegating the PTO Director’s responsibility to determine whether to institute inter partes review (IPR) of issued patents to the Patent Trial and Appeal Board (PTAB), which is the entity that the AIA directs to render final decisions in instituted proceedings.
2. Whether the PTO’s administration of IPR proceedings violates a patent owner’s constitutional right to due process by having the same decisionmaker, the PTAB, render both the institution decision and the final decision.

On question 1, remember that the statutory language calls for the USPTO “Director” to decide whether to institute an IPR, and then for the “Patent Trial and Appeal Board” to actually conduct the review.  35 U.S.C. 314, 316.  But, in its rulemaking, the USPTO gave authority to the PTAB to both institute and review.

https://www.supremecourt.gov/DocketPDF/21/21-1527/225545/20220516181434359_21-Petition.pdf

Fall Line Patents, LLC v. Unified Patents, LLC (Fed. Cir. 2020) [FallLine]

In this case, the court begins with a lamentation that a Federal Circuit panel is “bound by the determinations of a prior panel, unless relieved of that obligation by an en banc order of the court or a decision of the Supreme Court.” Quoting Deckers Corp. v. United States, 752 F.3d 949 (Fed. Cir. 2014).*

Here, Fall Line appealed against the PTAB’s real party-in-interest determinations. That argument was recently foreclosed in ESIP Series 2, LLC v. Puzhen Life USA, LLC, 958 F.3d 1378 (Fed. Cir. 2020).  Fall Line attempted to skirt the decision by asking the court to use its “mandamus jurisdiction” to hear the case.  On appeal, the Federal Circuit concluded that would be improper in this case. Although mandamus may be proper to review “institution decisions that implicate constitutional or jurisdictional violations” — mandamus is not proper for an “ordinary dispute” over the construction of an “institution-related statute.”  Fall Line’s argument would have carried more weight – but for Thryv.

While we [previously held] that statutory prerequisites to the Director’s authority to institute an IPR were not related to institution within the meaning of § 314(d), the Supreme
Court disagreed with that conclusion in Thryv.

Slip Op.

Fall Line also argued that the Arthrex severance was inadequate to cure the appointments clause problem with PTAB judges. Here, the court concluded that argument was considered and rejected in the Arthrex decision itself. “As a panel, we are bound.”

Still, Fall Line will get a new trial at the PTAB under Arthrex.

= = = =

Note here that the opening line of the case doesn’t actually apply to this decision because it was issued with the following caveat: “This disposition is nonprecedential.”

By Jason Rantanen

In re ESIP (Panel: O’Malley, Reyna, Chen) (link to decision: In re ESIP SERIES 2)

This is a short nonprecedential decision in a petition for a writ of mandamus that was issued today but that isn’t on the Federal Circuit’s website.  (I don’t see why the Federal Circuit doesn’t just put all dispositive orders on its website; it already puts Rule 36’s and many orders in petitions for writs of mandamus on the site.)   The petitioner, ESIP, was the patent owner of a patent that was the subject of an inter partes review proceeding at the PTO.  The PTO initiated review over ESIP’s objection, and subsequently concluded that the claims were obvious.  ESIP appealed.  The Federal Circuit affirmed the obviousness determination and held that it was barred from reviewing the institution decision because that decision is nonreviewable under 35 U.S.C. 314(d).  The Supreme Court subsequently denied cert and the PTO issued a certificate of cancellation.

After the Supreme Court issued its Arthrex decision, ESIP filed a petition for Director review in the IPR proceeding in light of Arthrex.  The PTO sent an email saying that the petition was untimely.  ESIP petitioned the FEderal Circuit for a writ of mandamus.

The Federal Circuit denied the petition, ruling that (1) under the circumstances ESIP cannot directly appeal from the PTO’s email, and (2) mandamus is inappropriate here.  “ESIP could have raised an Appointments Clause challenge and sought rehearing in its prior appeal. Moreover, ESIP has not pointed to any clear and indisputable authority that the PTO violated in refusing to reopen and rehear this particular matter, which is subject to a final judgment and cancellation certificate.”

Petition denied.

Update: The Order is now available on the court’s website: http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/21-164.ORDER.10-14-2021_1848936.pdf 

by Dennis Crouch

The high-stakes patent dispute between VirnetX and Apple continues with VirnetX’s new petition asking the Supreme Court to review two important Federal Circuit rulings. The VirnetX petition focuses on the Federal Circuit’s interpretation of the inter partes review (“IPR”) joinder provisions and the requirements of the Federal Vacancies Reform Act (“FVRA”).

The AIA Question: IPR Joinder Time Limits

Under the AIA, parties sued for patent infringement generally must seek inter partes review within one year of being served with the complaint. 35 U.S.C. § 315(b). But the provision goes on to permit joinder to an already-instituted IPR proceeding, stating that the one-year time limit “shall not apply to a request for joinder” under § 315(c). VirnetX argues that while the one-year limit does not apply to the joinder request itself, a party still must have “properly file[d] a petition”—including within the one-year period—to be eligible for joinder.  This argument stems from the text of Section 315(c) that permits the Director to join a party “who properly files a petition…”

In the litigation below, VirnetX sued Apple for infringing patents on secure communications technology. Apple sought to challenge the patents’ validity through IPR, but its petitions were filed more than a year after VirnetX’s complaint and thus denied as untimely. Apple then joined IPRs filed by other challengers, and the Patent Trial and Appeal Board (“PTAB”) allowed that joinder despite the time-bar. VirnetX contends this contravenes § 315(b)’s time limit, as Apple never “properly file[d] a petition” within the statutory window.

The Federal Circuit upheld Apple’s joinder, construing § 315(b)’s time limit as inapplicable to a joinder request. VirnetX argues this nullifies § 315(b)’s clear time bar, allows defendants to evade the limit through improper joinder requests, and facilitates serial attacks on patents already upheld in court.

(b)Patent Owner’s Action.— An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement of the patent. The time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c).

(c)Joinder.— If the Director institutes an inter partes review, the Director … may join as a party to that inter partes review any person who properly files a petition under section 311 …

In addition to the direct statutory interpretation, VirnetX argues that the joinder work-around improperly enables Apple—with vast resources—to take control of the challengers’ invalidity case. It also contravenes the AIA’s purpose of providing an efficient and streamlined alternative to litigation. VirnetX contends the Federal Circuit’s reading warrants review given the importance of properly construing the AIA’s protections for patent owners.

The FVRA Question: Acting PTAB Officials

The second question concerns the Federal Circuit’s interpretation of the Federal Vacancies Reform Act, which governs temporary appointments to vacancies in Senate-confirmed offices. The FVRA establishes exclusive mechanisms for designating acting officials. 5 U.S.C. §§ 3345, 3347.

When VirnetX requested Director review of the PTAB’s decisions invalidating its patents, as required by Arthrex, Inc. v. Smith & Nephew, Inc., 141 S. Ct. 1970 (2021), the Director position was vacant. VirnetX’s request was denied by the Commissioner of Patents purportedly exercising the Director’s authority based on an agency succession order.  However, at the time the Commissioner was neither the Director nor even the Acting Director.  The FVRA includes a mechanism for the President to put into place a temporary officer, but that was not done. Rather, the PTO itself had created a succession plan authorizing the Commissioner to act.  The problem with this approach is that it violates the FVRA on its terms.

In order to cut the knot, the Federal Circuit interpreted the FVRA to allow temporary performance of a Senate-confirmed officer’s duties if those duties could have been delegated by a USPTO Director.  An example of this might be Section 132 that requires the Director to “notify the applicant” of any rejection or objection to a pending application.

VirnetX argues that the Federal Circuit’s interpretation construes FVRA into virtual nonexistence, since nearly all agency heads’ duties are delegable. It also undermines the Appointments Clause by allowing agencies to bypass the FVRA’s exclusive temporary appointment mechanisms.

VirnetX contends the Federal Circuit misread the FVRA’s text and precedent by importing a limited definition of “function or duty” from one FVRA provision into the entire statute. This important Appointments Clause issue, which arises frequently during presidential transitions, merits the Supreme Court’s review.

The petition notes that this has been growing across the Federal Government for more than a decade and these “fake” acting heads of agencies have been used ever more frequently in the past two administrations.

Further reading:

1. Arthrex, Inc. v. Smith & Nephew, Inc., 35 F.4th 1328 (Fed. Cir. 2022), cert. denied, 143 S. Ct. 2493 (2023).  This is the case that most extensively discusses the FVRA issue.
2. Anne Joseph O’Connell, Actings, 120 Colum. L. Rev. 613 (2020).  Outside of the patent context, this article provides substantial background on vacancies in Senate-confirmed offices and acting appointments.
3. H. Comm. on Oversight & Reform, 116th Cong., Policy and Supporting Positions (Comm. Print 2020).

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Counsel of record Naveen Modi of Paul Hastings LLP represents VirnetX.

Most respondents have already waived their right to respond to VirnetX’s petition.  The PTO Director, has waived her right to respond through DOJ counsel. Apple likewise waived response through counsel Mark Fleming of WilmerHale. And respondent Mangrove Partners Master Fund waived response through counsel James Bailey.

Only Black Swamp IP, LLC, which the PTAB allowed to join one of the IPR proceedings as an additional challenger to VirnetX’s patents, has not yet indicated whether it will file a response before the October 27 deadline.