by Dennis Crouch
In a precedential opinion, the Federal Circuit has rejected MCM’s foundational challenges against the Inter Partes Review (IPR) system implemented as a result of the America Invents Act of 2011 (AIA).
MCM Portfolio v. HP (Fed. Cir. 2015) (MCM.decision)
In particular, the court held that the IPR system does not violate Article III of the U.S. Constitution nor does it violate the Seventh Amendment of the U.S. Constitution. On the merits, the court then affirmed the PTAB’s decision cancelling MCM’s challenged claims as obvious. The court writes:
The teachings of the Supreme Court in Thomas, Schor, and Stern compel the conclusion that assigning review of patent validity to the PTO is consistent with Article III. . . . . [Furthermore we] are bound by prior Federal Circuit precedent. . . . We see no basis to distinguish the reexamination proceeding in Patlex from inter partes review. . . .
Because patent rights are public rights, and their validity susceptible to review by an administrative agency, the Seventh Amendment poses no barrier to agency adjudication without a jury.
The decision here also essentially forecloses Carl Cooper’s parallel proceedings. However, both parties are likely to request rehearing en banc followed by petitions for writ of certiorari.
Chief Justice Roberts, writing for the Court, noted the long history of private property being secured against uncompensated takings by the government, beginning with the Magna Carta some 800 years ago. In further support, Roberts cited a Supreme Court opinion from the late nineteenth century:
Nothing in this history suggests that personal property was any less protected against physical appropriation than real property. As this Court summed up in James v. Campbell, 104 U.S. 356, 358 (1882), a case concerning the alleged appropriation of a patent by the Government:
The Federal Circuit case you cite has been preempted by the U.S. Supreme Court’s Horne v Department of Agriculture
See link to supremecourt.gov
Chief Justice Roberts, writing for the Court, noted the long history of private property being secured against uncompensated takings by the government, beginning with the Magna Carta some 800 years ago. In further support, Roberts cited a Supreme Court opinion from the late nineteenth century:
“[A patent] confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more than it can appropriate or use without compensation land which has been patented to a private purchaser.”
C.J. Roberts, on the behalf of an 8-1 Court, I might add.
Ray, the holding that a patent is property is seeming undisputed. This alone should be enough to spike the Federal Circuit’s idea that a patent is a public right. But it did not, which means that the Federal Circuit does not see the conflict.
But the more cynical view is that it is fully aware of the conflict.
Ned,
I do not see ANY views that do not pose some extremely serious questions as to the judicial actions.
(Do you remember one of my initial comments to your oral argument? that you left out the property aspect?)
I argued Marbury at oral argument. That was all about legal rights — property.
The determination of their validity is a judicial functional, one for the courts.
Taking is a different issue. The patent is valid, but is used by the government for governmental purposes. This is known as a taking by the government; and the Supreme Court has held many types that such taking must be compensated under the Constitution.
A regulatory taking includes the removal of sticks out of the bundle of property rights.
Guess what the AIA does at the initiation of the IPR…
anon, but now you are talking about limiting the legal remedies. There is a difference between remedy and validity.
I am doing no such thing Ned.
And while there is a difference between remedy and validity, I am talking about sticks in the bundle of property rights that a granted patent has.
This is not difficult to follow along with.
All you boys and girls just remember that the might Night Writer predicted another outcome correctly. Again, and again, I have predicted the outcomes of these cases.
With all due respect, this outcome was not very difficult to predict if you had been reading modern case law and weren’t financially invested in the case directly or indirectly.
(Sticky y key).
I agree. I am merely taunting the other commentators. They regularly refuse to predict the outcome of the cases and compete with me. To my mind the ultimate test is your ability to predict the outcome of these cases.
I’ve been doing it for years and haven’t missed one yet. The others refuse to compete (except 6.)
It is no secret that the CAFC is wed to the interests of the USPTO. My guess is the litigants did not expect relief before the CAFC – hence Cooper’s attempt to stick this into the 4th Circuit.
This challenge has likely always been SCOTUS or bust.
If certiorari is granted, watch out. The MCM decision didn’t even come close to articulating the relevant rule, let alone harmonizing this delegation of power with it.
And, I predict no en banc rehearing and no Certiorari. The SCOTUS can sit on it and pick it up in 10 years if they feel like it.
(See, I put my rep out on the line with real predictions.)
Doesn’t the supreme court have a ton of death penatly cases pending cert?
Just a little perspective here.
Ryan,
How many jaywalking cases do they have?
In other words, your attempt at “perspective” itself lacks perspective.
If you want to discuss things other than patent law, there are plenty of places that you can go to.
Anon. I am just saying that among the other issues the court is dealing with, this is probably not high on the list.
It should be.
True, this is not a “life and death” matter, but when you consider the implications here and compare them to the implications in a mere Justice of the Peace commission case, well, this does seem a mite important, eh?
What implications?
The implications of eliminating IPRs and all reexaminations since the 80s are far worse than refusing to tear the system down via judicial edict.
Ryan,
There are several important implications.
Implications for patent law.
Implications for the relative power of the three branches of government.
It is NOT so much the parade of horribles of eliminating IPRs and all reexamiantions as you would have it.
The government IS allowed to engage in takings – think eminent domain.
It is that such takings MUST still comport with constitutional limitations.
Further, the notion that “refusing to tear the system down via judicial edict” is a false one, as you would seem to imply that the tearing down is a whimsical one based on nothing more than what a judge (or Justice – in appropriate numbers) would “feel” like doing, as opposed to a more directed reasoning that some aspect is just NOT in accord with our constitution, and MUST be stopped.
You seem to seek options where no options exist.
Those “implications” sound fairly academic.
Academic…?
I have no idea what you mean (or what you think that you mean) with the phrase in this context.
Maybe I can get a grant from Google and Microsoft, and write an “academic” paper on that…
Ryan, not all, only those since 2011 when de novo review was removed and then only for those who actually asserted their jury trial and Article III rights. See, Wellness v Sharif.
That brings it down to just 3, MCM, Cooper and one other.
The Supreme Court might be very interested in Congress streamlining civil litigation by shunting a certain amount of the work to Article I courts instead of Article III courts. That patent is the subject matter of the first bite on that apple is coincidence. Like the well-pleaded complaint rule. It just happened to be a patent case, but the importance was not about patent law.
Erik, indeed. If IPRs were had only an insignificant impact, they could ignore the issue. But IPRs were designed to replace validity litigation, and in that, they have been very successful.
David,
You are not getting any argument from me on this (so your crack below with the Malcolm conflation sticks out as you holding some odd sort of grudge), but I do draw your attention to a select group of (regular) contributors here only F A R too eager to think the decision here to be a “great” piece of jurisprudence when it is so obviously not.
The Ends by whatever Means mindset so displayed is – I put to you – just as, if not more so, “bad” than the poor jurisprudence itself.
Night,
On the one hand, you are certainly playing the odds. On the other, we are talking about an astronomical delegation of Article III power where the authorizing Court of Appeals aggressively declined to either address or apply the governing legal standard. Additionally, that same Court of Appeals mischaracterized the SCOTUS precedent precluding the precise thing that IPR does today.
Further, that same Court of Appeals made very clear to the nation in a precedential opinion that per the designation as a public right, the patent validity cause of action may be removed entirely from the Article III courts. In other words, per this holding, a vested property right may be resolved exclusively by an Article I administrator susceptible to the whims of the legislative branch. Of course, this is not the current law, but it could be after this ruling – which, to put it bluntly, is simply just un-American.
Where the SCOTUS at times remarks that one of its loftiness responsibilities is to enforce and to protect the separation of powers, this case seems destined to end up before it. Of course, these predictions are hard to make.
Anon – I see your point. However, if certiorari is granted, the pragmatics v rule of law argument will toothless.
David, I am not playing the odds (nice slight.) I am playing the politics. The SCOTUS is not going to touch this with a 12 foot pole right now because it would so disruptive. There are many excuses they could give, e.g. not ripe enough, let other circuits look at this issue or similar issues, etc.
I think there is merit to your arguments, but the SCOTUS can just put this one away for 5 or 10 years before dealing with it, and the Fed. Cir. is —like or not—been appointed with the consent of Google. They are not going to hear this en banc.
I think an interesting thing to do would be to assert Alice arguments in an IPR. Get the IPR instituted but the 101 argument (some claims would have to survive) dismissed by the PTAB. Then appeal to the Fed. Cir. saying that a Constitutional issue can be raised at the PTAB and the holding of Alice is that the grant of the claims was Unconstitutional.
Might work.
David, I assume you are on board for an amicus brief (at least). Let me know privately. I really appreciate your support here.
Also, please contact me privately if you or your client would like to support further court review in some fashion (en banc, cert).
Ned,
If resources are low, you should contemplate supporting Cooper as amicus in whatever he does next.
Ryan,
Your “reading modern case law” ig nores the fact that the scoreboard is broken.
That’s a rather important (and hence recurring) theme.
What do you mean when you say “the scoreboard is broken”?
The “scoreboard is broken” message has to do with the mistaken (and dangerously so) notion that the Supreme Court simply “cannot” be wrong when it comes to constitutional matters.
It is pernicious notion that the Supreme Court itself is somehow above the law and has no real checks and balances when it comes to our tri-partitie form of government.
It also is directly tied to EVERY attorney and EACH attorney’s state oath, which is NOT geared to unrelenting fealty to the Court, but rather, to the Constitution. It is absolutely critical to understand and recognize that this distinction necessarily means that the Court is NEITHER “the weakest branch” NOR has unlimited power to mould the law to its desired Ends.
I would recommend you to read the Federalist and anti-federalist exchange between Publius and Brutus and realize that the power balance between the branches is NOT static. The danger of giving too much power to any one branch is a very real and imminent danger.
This all sounds extremely academic and divorced from any sort of real world harms.
Can you point out one human consequence?
Twice in short order you have used that word, and both times you have decided to actually NOT talk directly to the point that I provided.
Seems like a code word of yours for evasion.
Whether or not you “feel” this is “academic” is entirely besides the point of the discussion.
I invite you to stop evading and to return to that discussion.
…or if I were to join you in your diversion, perhaps you and Prof. Contreras might offer some “insight” as to why the Executive Office STILL has not addressed the propaganda nature of the “TR011” issue that Ron Katznelson has requested (maybe that’s “human” enough for you…).
Ryan, but see the remarks of JCD who actually read the cases.
Ned,
I read all the cases. I read your brief and the reply brief. I read the decision.
Just because somebody disagrees does not mean that they don’t understand.
Have you ever considered that you may just be wrong on this issue?
Ryan, of course.
But there are a significant number of people who disagree with the Federal Circuit on this issue. It is not just me.
Anybody of importance?
Yes, me.
😉
I doubt you are of any importance anon.
I doubt that you have a c1ue, Ryan.
But hey, thanks for playing.
MM writes:
* I personally am tired of puzzling through office actions that are incomprehensible because the examiner does not have sufficient command of English.
Sorry, I meant the following.
MM writes:
Logically we should assume that it will simply do a shoddy job in revoking patents. Until the rotten apples among the examiners and the APJs are terminated,* a special Article III tribunal needs to tasked with cleaning up the patent mess if the existing Article III tribunals are not sufficient.
* I personally am tired of puzzling through office actions that are incomprehensible because the examiner does not have sufficient command of English.
JM: If the PTO has been doing such a shoddy job in issuing patents, the last way to fix the resulting problem is giving it the opportunity to reevaluate its own work and to revoke patents.
Except that this time around there is a third party holding the PTO’s hand. That’s an important difference.
Logically we should assume that it will simply do a shoddy job in revoking patents.
See above. Logically, instead of making an assumption, you should look to see what patents are actually being invalidated in IPR proceedings and how/why that’s occurring.. What you’ll find is that the system is fair and its working. If you’ve got evidence to the contrary, let’s hear it.
Listen to the oral arguments of cases arising out of IPRs sometime. Most of the cases being appealed to the CAFC from the PTO aren’t even close (and, as far as I can tell, most result in Rule 36 affirmances). That should tell you something about the cases that aren’t being appealed.
It tells me that there is an utter lack of faith in the CAFC to perform its role as watchdog of the federal bureaucracy.
I hope the FBI and the SEC are monitoring very closely.
Even more important the current laws and the organization of the PTO are a setup for a major corruption scandal far worse than Teapot Dome. (I have consulted off and on for a long time in the financial industry.)
I think we all remember the RIM NTP litigation in which there were ex parte discussions between the RIM legal team and examiners or possibly other PTO officials in violation of 37 CFR 1.560(a) [“requests that reexamination requesters participate in interviews with examiners will not be granted”] and of 37 CFR 1.955 [“interviews prohibited in inter partes reexamination proceedings”].
Was this case the first such incident? Is such behavior ongoing?
With the combination of:
post-GATT patent application publication and patent term rules,
AIA IPRs,
secret “QA” programs like SAWS or Second Look,
the revolving door between the PTO and big corporations,
the opening of satellite PTO offices in major tech centers,
the tremendous transfers of money that can hinge on granting, stalling, or canceling patents,
the uncertainties created by two different claim construction procedures,
the ease of checking patents or patent applications online, and
the statutory limitations on relief from PTO abuses,
I would surprised if there is not already secret black market on revoking claims or on stalling patent prosecution.
The financial disaster that was occasioned by the repeal of Glass Steagall was an object lesson that if it’s possible to make money by criminal behavior, some will try.
Decisions to institute IPRs, forthcoming claim cancellations, rejections of patent application claims, efforts to slow down prosecutions under a secret “quality assurance” program like SAWS or Second Look are all valuable insider info that can affect equity value. If private entities are receiving ex parte access to such info, it is a violation of insider trading law because such information gives tremendous advantages in timing when to sell or to hold various financial instruments.
Section 9 (b) of the STOCK act — unfortunately passed after the above incident — is quite clear that executive branch employees are subject to the same strictures on passing insider information as those in private industry.
Those APJs, examiners, and other PTO personnel involved in the conspiracy to pass insider info to RIM really belong in jail with Wall Street crooks.
BTW, it is not impossible that the issuance of crap patents was encouraged in a long term plan by a few insiders to use the PTO as a money machine by peddling revocations or prosecution stalling. Strategies comparable to the preceding hypothesis are executed all the time on Wall Street (e.g., Goldman Sachs and Paul Johnson). If Wall Streeters like Kyle Bass can come up with legal plans to use the PTO to make money in securities trading, why can’t insiders at the PTO come up with illegal plans to do exactly the same thing?
why can’t insiders at the PTO come up with illegal plans to do exactly the same thing?
Have you heard of this guy Dave Kappos?
Didn’t he start righting the ship by eliminating “Reject Reject Reject”
😉
LOL – Malcolm and his “third party”…..
Sort of like Mr. Bass….
Oops, wait, he’s one of those prime G-g-grifters, isn’t he?
Malcolm and his “third party”….. Sort of like Mr. Bass….
Sort of. If Mr. Bass is actually helping to remove improvidently granted patents from the system, good for him.
If he’s just playing games because he’s a greedy rich entitled pile of toxic waste, then I hope he gets his comeuppance soon.
More one way editing…
Time and time again, the one way C R P is the outcome of the editing here.
And the good prof wonders why he has an ec(h)osystem issue….
Does a patent benefit the inventor or the public?
The CAFC vests further control over the deteriorating US position as a technology leader in the hands of an unelected board of practitioners who, until they accepted positions that pay 25% of what a skilled practitioner might otherwise make, were routinely wrong 90% of the time in the eyes of the CAFC, and who instantaneously switch to being right 90% of the time once they cross over to the other side of the PTAB bar. Not only that, but these same unelected bureaucrats can regulate their own workload by rejecting expensive petitions, and those decisions cannot be reviewed. Not that it would matter, because as we have seen they are right 90% of the time. Its a good thing that we have the CAFC watching closely over this patent star chamber.
Grinch: who instantaneously switch to being right 90% of the time once they cross over to the other side of the PTAB bar.
You’ve conveniently forgotten that a third party is very actively assisting the PTO in an IPR proceeding. Huge difference.
…and you’ve forgotten that the Ends do not justify the Means.
A little off point, but have you considered that the holding in Alice is that it was unconstitutional to grant the claims. I know that is not verbatim what they said, but that is the holding.
That means that Alice attacks should be able to be made in an IPR. (Not that I like this, but I think it is a real argument.)
Curious re the argument that Alice was a Constitutional holding. Not from the Alice case itself. Where can one get that from the long history of defining what is patentable subject matter that Alice relies on? E.g., the Supreme Court many years earlier in Diamond v. Chakrabarty specifically stated that: “This is not to suggest that § 101 has no limits or that it embraces every discovery. The laws of nature, physical phenomena, and abstract ideas have been held not patentable. See Parker v. Flook, 437 U.S. 584, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978); Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 255, 34 L.Ed.2d 273 (1972); Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 68 S.Ct. 440, 441, 92 L.Ed. 588 (1948); O’Reilly v. Morse, 15 How. 62, 112-121, 14 L.Ed. 601 (1854); Le Roy v. Tatham, 14 How. 156, 175, 14 L.Ed. 367 (1853). ”
Did any of those earlier Sup.Ct. decisions rely on limitations in the patent clause of the Constitution?
Post 1952 cases carefully tied themselves to the non-constitutional statutory text.
That is why we talk about exceptions to 101 (as opposed to a better fit with 112, least wise in some aspects).
At first the Court was more careful because there was a greater awareness that Congress had revoked a previously granted common law power to set the meaning of the word “invention.”
That changed in 1952, of course.
There is – and should be abundantly well understood – a clear difference between statutory and common law.
Further, the constitutional portion that you all wish to “reach” to was merely the grant of proper authority as to which branch. There was NO substantive patent law (with the particularity say of statutory categories) in that constitutional grant from which the Court could even attempt to use for its own re-write.
ANY such “law” is ultra vires and truly without force.
Why wasn’t the 5th Amendment/Takings issue raised or considered?? Has his issue been raised in the 4th Circuit appeal by Carl Cooper? Does anyone know??
Fed. Circuit: Fifth Amendment Doesn’t Apply To Patents
link to law360.com
SCOTUS, June 2015:
“Nothing in this history suggests that personal property was any less protected against physical appropriation than real property. As this Court summed up in James v. Campbell, 104 U.S. 356, 358 (1882), a case concerning the alleged appropriation of a patent by the Government:
‘[A patent] confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more than it can it can appropriate or use without compensation land which has been patented by a private purchaser.'”
B-b-but that’s an apple and not an orange. And that apple is red….
/off sardonic bemusement
MM writes:
If the PTO has been doing such a shoddy job in issuing patents, the last way to fix the resulting problem is giving it the opportunity to reevaluate its own work and to revoke patents.
Logically we should assume that it will simply do a shoddy job in revoking patents. Until the rotten apples among the examiners and the APJs are terminated,* a special Article III tribunal needs to tasked with cleaning up the patent mess if the existing Article III tribunals are not sufficient.
Even more important the current laws and the organization of the PTO are a setup for a major corruption scandal far worse than Teapot Dome. (I have consulted off and on for a long time in the financial industry.)
I think we all remember the RIM NTP litigation. Here is a description (from Wiki) of the violation that took place.
Was this case the first such incident? Are such incidents ongoing?
With the combination of:
post-GATT patent application publication and patent term rules,
AIA IPRs,
secret “QA” programs like SAWS or Second Look,
the revolving door between the PTO and big corporations,
the opening of satellite PTO offices in major tech centers,
the tremendous transfers of money that can hinge on granting, stalling, or canceling patents,
the uncertainties created by two different claim construction procedures,
the ease of checking patents or patent applications online, and
the statutory limitations on relief from PTO abuses,
I would surprised if there is not already secret black market on revoking claims or on stalling patent prosecution.
The financial disaster that was occasioned by the repeal of Glass Steagall was an object lesson that if it’s possible to make money by criminal behavior, some will try.
Decisions to institute IPRs, forthcoming claim cancellations, rejections of patent application claims, efforts to slow down prosecutions under a secret “quality assurance” program like SAWS or Second Look are all valuable insider info that can affect equity value. If private entities are receiving ex parte access to such info, it is a violation of insider trading law, for such information gives tremendous advantages in timing when to sell or to hold various financial instruments.
Section 9 (b) of the STOCK act — unfortunately passed after the above incident — is quite clear that executive branch employees are subject to the same strictures on passing insider information as those in private industry.
Those APJs, examiners, and other PTO personnel involved in the conspiracy to pass insider info to RIM really belong in jail with the Wall Street crooks.
BTW, it is not impossible that the issuance of crap patents was encouraged in a long term plan by a few insiders to use the PTO as a money machine by peddling revocations or prosecution stalling. It happens all the time on Wall Street (e.g., Goldman Sachs and Paul Johnson). If Wall Streeters like Kyle Bass can come up with legal plans to use the PTO to make money in securities trading, why can’t insiders at the PTO come up with illegal plans to do exactly the same thing?
As I have observed previously, the SAWS documents were actually quite brazen that public trading status info should be passed up the chain of command.
* I personally am tired of puzzling through office actions that are incomprehensible because the examiner does not have sufficient command of English.
“The financial disaster that was occasioned by the repeal of Glass Steagall was an object lesson that if it’s possible to make money by criminal behavior, some will try.”
Some of those “G-g-grifters” caught up in the ensuing scandals…?
Ivy League academics.
Go Figure.
Larry Summers may have had his head in the clouds, but I doubt Bob Rubin did.
BTW, you might find it interesting to look at the biography of Summer’s protégé Andrei Shleifer and then revisit my comment on Glass-Steagall. It applies to academics as much as to Wall Streeters.
I’m pretty sure that Ned isn’t part of this quest, but there can be no question that there is a tiny but loud group of “patent monetizers” out there who dream primarily of two things: (1) eliminating agency review/modification/revocation of defective patents; (2) reversal of Prometheus v. Mayo; (3) reversal of KSR.
With respect to (1) and (2) the CAFC indicated pretty plainly today that they don’t wish to play a significant part in seeing this dream become a reality. Good for them.