By Jason Rantanen
Celgene Corp. v. Peter (Fed. Cir 2019)18-1167.Opinion.7-30-2019
Panel: Prost (author), Bryson, Reyna
While Oil States v. Greene’s Energy, 138 S.Ct. 1365 (2018), answered the question of whether inter partes review proceedings were unconstitutional generally, it left unanswered the question of whether application of inter partes review proceedings to patents granted prior to the America Invents Act constituted a taking under the 5th Amendment. Here, the Federal Circuit directly addresses that question, concluding that it is not.
Constitutional challenges like this one can be challenging to raise effectively on appeal. While usually, the issues are brought up in a footnote or single sentence, this was not one of those instances: Celgene devoted 8 pages of its principal brief to its takings argument, making a serious go at it. Still, Celgene had not raised the argument before the Board and requests to address an argument for the first time on appeal are granted only in exceptional circumstances. However, given the circumstances–Celgene’s raising of an issue not directly resolved by Oil States, the growing number of retroactivity challenges following Oil States, and the thoroughness of the briefing on the issue, among other considerations–the court concluded that “this is one of those exceptional circumstances in which our discretion is appropriately exercised to hear Celgene’s constitutional challenge even though it was not raised below.” Slip Op. at 25.
Celgene’s argument on the merits rested on a regulatory takings theory. It contended that “subjecting its pre-AIA patents to IPR, a procedure that did not exist at the time its patents issued, unfairly interferes with its reasonable investment-backed expectations without just compensations.” Id. at 26. In response, the PTO argued that (1) the patent owner never had a valid property right because the patent was erroneously issued in the first instance,” and (2) “patents have been subject to reconsideration and cancellation by the USPTO in administrative proceedings for nearly four decades, and Celgene’s own patent[s were] issued subject to this administrative revocation authority,” and that “the AIA did not alter patent holders’ substantive rights.” Id. at 26, 27 (internal quotation marks omitted).
The Court’s analysis focused on the degree of the change: “specifically whether IPRs differ from the pre-AIA review mechanisms significantly enough, substantively or procedurally, to effectuate a taking.” Id. at 27. The court concluded that they were not, a conclusion that was also in line with its precedent rejecting “constitutional challenges to retroactive application of the pre-AIA ex parte reexamination mechanism.” Id. The money quote:
The validity of patents has always been subject to challenge in district court. And for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO. As explained below, IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.
The bulk of the court’s remaining discussion walks through the various administrative revocation procedures in place over the past few decades, comparing and contrasting them with IPRs. While the court recognized differences between ex parte and inter partes reexaminations, on the one hand, and inter partes review proceedings on the other, it viewed the similarities as “far more significant.” Id. at 30. The substantive grounds for review are the same (anticipation and obviousness, based on the same categories of prior art, the same evidentiary standard applies (preponderance of the evidence), the same claim construction standard applies (broadest reasonable interpretation applied in this set of IPRs), in both cases the Director has discretion to initiate the proceeding, and serve essentially the same purpose.
In the end, “Although differences exist between IPRs and their reexamination predecessors, those differences do not outweigh the similarities of purpose and substance and, at least for that reason, do not effectuate a taking of Celgene’s patents.” Slip. Op. at 36.
The court also affirmed the PTAB’s decisions finding the appealed claims obvious.