Collabo: v. Sony: Due Process Violation and a Takings

by Dennis Crouch

Collabo Innovations, Inc. v. Sony Corporation (Supreme Court 2019)

Everyone will admit that a lot has changed in patent law since Collabo’s U.S. Patent 5,952,714 issued in September 1999.  Although ex parte reexamination was available, the American Inventors Protection Act (AIPA) authorizing inter partes reexamination was not enacted until November 1999. However, inter partes reexamination only applied to patents issued from applications filed after November 1999. Pub. L. 106–113 Then, in 2011, Congress created inter partes review — and this time made it retroactive.

After Collabo sued Sony for infringement, Sony responded with petitions for inter partes review.  The PTO instituted review and found the claims unpatentable by a preponderance of the evidence and the Federal Circuit affirmed.  With regard to Collabo’s due process and takings claim, the court found itself bound by a parallel decision in Celgene Corp. v. Peter, 931 F.3d 1342 (Fed. Cir. 2019).  Celgene is pending petition for en banc rehearing on the question:

Whether retroactive application of inter partes review (“IPR”), to patent claims issued before the America Invents Act (“AIA”), constitutes an unconstitutional taking?

[Celgene Petition Rehearing].  I’ll note here a fact difference between these cases is that Collabo’s patents were never subject to Inter Partes Reexamination while Celgene’s patents were.

In its new petition, Collabo asks the following two questions:

1. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA violate the Takings Clause of the Fifth Amendment?

2. Does the retroactive application of inter partes review to a patent that issued before the passage of the AIA violate the Due Process Clause of the Fifth Amendment?

In Oil States (2018), the Supreme Court upheld AIA Review proceedings — finding that the process did not violate requirements of either Article III or Seventh Amendment.  However, the Supreme Court expressly left-open the potential for future challenges on grounds of takings and due process:

We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only. . . . [W]e address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.

Oil States.

The basic setup here is that the AIA makes it easier to invalidate patents with its lower presumption; lower standard of proof; and (until recently) broader interpretation of patent scope.  It is also true, in my opinion, that no one has a constitutional right to assert an invalid patent.  The deeper question then is whether AIA review is merely a procedural change to more efficiently get to the validity question, or does it unduly undermine the ‘vested rights’ of patent holders.

53 thoughts on “Collabo: v. Sony: Due Process Violation and a Takings

  1. 11

    Dennis: “no one has a constitutional right to assert an invalid patent.”

    I believe that everyone except those who place financial gain and / or market control above honesty and integrity agree.

    The real challenge and fundamental questions is — and will always be — whether or not a given patent (its claims) is indeed invalid.

  2. 10

    We know from the Scotus’s statements that they are going to take a cert on a case like this. The question is whether the issue is ripe and this is a good case.

    1. 10.1

      They may just let these issues sit around for 10 years. They may be waiting to see if Congress enacts new laws.

  3. 9

    On additional thoughts- the petitioner may want to focus on the requirement of explicit Congressional language to give a civil legislation retroactive effect. In Landgraf v. USI Film Products, 511 U.S. 244 (1994), the Court said, “Elementary considerations of fairness dictate that individuals should have an opportunity
    to know what the law is and to conform their conduct accordingly.” In light of those concerns, the USSC has declined to construe statutes to apply retroactively absent clear evidence of congressional intent/statutory language. Accordingly and based on USSC case law, if Congress intends civil legislation to have retroactive effect, it must clearly state that the law applies retroactively and should specify the period of retroactivity.

    1. 9.1

      Total b.s.

      There was never any suggestion that the inter partes provisions of the AIA were applicable only to patents granted after enactment of the statute. That would be absurd.

      The entire point of the AIA was to address the huge bolus of j-u-n-k patents (mainly do-it-on-a-computer grbge) that the PTO had dumped on the public.

      1. 9.1.1

        Cite please (otherwise, your feelings are noted).

        1. 9.1.1.1

          Note the express date scope limitations of PGRs and several other parts of the AIA vs IPRs, and the IPR replacement for inter partes reexaminations.

          1. 9.1.1.1.1

            Noted.

            So…? How does that lend credence to Malcolm’s feelings?

            1. 9.1.1.1.1.1

              Pull your head out. You think inter partes exam was passed in a vacuum?

              Some of us were alive and conscious when it was proposed and passed.

    2. 9.2

      “Elementary considerations of fairness dictate that individuals should have an opportunity to know what the law is and to conform their conduct accordingly.”

      How would this apply here? The AIA does not create an avoidable liability. The only decisions that would have been affected by the AIA would be the sales price of vulnerable patents.

    3. 9.3

      The petitioner may want to focus on the requirement of explicit Congressional language to give a civil legislation retroactive effect. In Landgraf … Accordingly and based on USSC case law, if Congress intends civil legislation to have retroactive effect, it must clearly state that the law applies retroactively and should specify the period of retroactivity.

      See page 14 of the petition, which says the following:

      Critically, unlike inter partes reexamination, Congress chose to make inter partes review apply retroactively to all patents. AIA, Pub. L. 112–29, 125 Stat. 304, §6(b) (“The amendments made by subsection (a) shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act and shall apply to any patent issued before, on, or after that effective date.”)

      This comment seems like it’s either testing AI or just trolling.

  4. 8

    The focus on the Fifth Amendment’s Takings Clause is a smart move because the Fifth prohibits the taking of private property for public use without just compensation. A retroactive law that deprives a person of a vested property right may constitute a taking. The leading case is Eastern Enterprises v. Apfel, 524 U.S. 498 (1998). In Eastern Enterprises a plurality of the Court noted that the Takings Clause offers a safeguard against retrospective laws affecting property
    rights that is similar to the protection the Ex Post Facto Clause provides in the realm of criminal law. The analysis of a retroactive civil law overlaps some-what under the Due Process Clause and the Takings Clause. In Eastern Enterprises, the plurality concluded that a 1992 law requiring a company that had ceased coal
    mining operations in 1965 to pay millions of dollars into a miners’ pension fund violated the Takings Clause because the statute “improperly places a severe, disproportionate, and extremely retroactive burden on Eastern.” In Nichols v. Coolidge, 274 U.S. 531 (1927), Justice Reynolds writing for an unanimous Court struck down a tax that applied to a transaction that occurred only 12 years before the statute was enacted, observing that Congress may legislate “to prevent evasion and give practical effect to the exercise of admitted power, but the right is limited by the necessity.”

    1. 8.1

      There’s nothing severe or inappropriate about inter partes exam.

      Got any other worthless hand waving to toss around? Check the stalls at the Ferderalist S-u-c-ksiety headquarters maybe.

    2. 8.2

      This raises the interesting question of whether or not patents are private property at all. Oil States said they aren’t. It called them “public franchises” and cites back to Seymour from 1871. The statute (35 USC 261) then says that patents have “attributes of personal property” which implies they aren’t personal property but have some characteristics thereof. Which characteristics of personal property do they have and which ones don’t they have. Considering that a patent only allows the owner to prevent others from practicing the subject matter rather than allowing themselves to practice it, that’s a rather large hole in the rights the owner has. To me that suggests that the attributes of personal property are extremely limited. Try applying that right to someone’s new car. Yes, you own it, but you can’t drive it. You can only prevent other people from driving it. If they aren’t personal property, does the 5th Amendment even apply?

      As for the Due Process Challenge, wouldn’t Matthews v Eldridge be the leading case there? It states that, at least in an administrative context, due process only requires notice and the opportunity to be heard in a meaningful manner. It doesn’t require a specific procedure nor does it mean the procedure can’t change over time as long as the basic requirements are met.

      Consider that the Court would have to overrule specific aspects of these cases, or work hard to distinguish them, how likely are they to accept this petition? They’ve already made it clear that patent cases aren’t any different than other cases and should be treated like any other civil case whenever possible.

      1. 8.2.1

        You raise some interesting points DVan.

      2. 8.2.2

        One quick distinction for your consideration, DVan, Greg DeLassus has made the point that the label of “Public Franchise” does not change the personal property nature of patents. His view is that a Franchise (public or otherwise) is still an item of property, and that item is still personal (as in, the item is still considered “owned” by a ‘person.’

      3. 8.2.3

        Your analogy with a car is an excellent one, DVan, but I think that your questions as to “what level of attributes” must be settled in favor of all legal attributes given the otherwise known “negative right” of exclusivity that patents carry.

        It is not as if that negative right nature was unknown at the time of the founding of the nation (and the then likely comparison would have been to one’s horse instead).

        Rather than write a law that must leave one guessing and completely in the dark, the nature of the patent right is the context in which that personal property is to be understood. One cannot leap from “attributes” to negating entirely the designation of “property.”

        1. 8.2.3.1

          Is not “..a law that must leave one guessing and completely in the dark,..” [as to the property value of a patent] what one have always had until one gets a check in the mail after a final infringement suit judgment, or license negotiation, or increased sales and profits from reduced product competition?

          1. 8.2.3.1.1

            You inclusion of “[ ]” is a diversion , Paul.

            I am talking about the scope of the legal attribute (the legal effect related to the legal principle), NOT their market value or other non-legal effect unconnected with the legal principle.

      4. 8.2.4

        This raises the interesting question of whether or not patents are private property at all. Oil States said they aren’t. It called them “public franchises” and cites back to Seymour from 1871.

        This is a common mistake, but a mistake nonetheless. There is no necessary contradiction between the categories of “private property” and “public franchise.”

        A “franchise” is “[a] special privilege conferred by government on individual or corporation, and which does not belong to citizens of country generally of common right” (Blacks Law Dictionary, 4th ed). Franchises are a species of private, intangible property. Norris v. Norris, 731 S.W.2d 844, 845 (Mo. 1987) (“Personal property can be either tangible or intangible… [I]ntangible personal property is that which… is merely the representative or evidence of value, such as certificates of stock, bonds, promissory notes, and franchises,” emphases added); accord, In re Estate of Berman, 187 N.E.2d 541, 544 (Ill. App. 1963); In re Estate of Macfarlane, 459 A.2d 1289, 1291 (Pa. 1983); Schmidt v. Indiana Dept. of Rev., 81 N.E.3d 705, 709 (Ind. 2017) (“Indiana Code § 6-3-2-2 defines the term ‘adjusted gross income derived from sources within Indiana’ as… income from stocks, bonds, notes, bank deposits, patents, copyrights, secret processes and formulas, good will, trademarks, trade brands, franchises, and other intangible personal property if the receipt from the intangible is attributable to Indiana…”).

        In other words, just because the Court described patents (accurately) as “public franchises” does not imply that the Court meant to take away from their (equally accurate) characterization as private property. Remember, the same Court that characterized patents as “public franchises” in Seymour v. Osborne, 78 U.S. 516, 533 (1871) also characterized patents—less than two decades later—as “private property” in Brown v. Duchesne, 60 U.S. 183, 197 (1857). This is not because the Court was loopy or forgetful, but because there is no contradiction between the two characterizations.

        1. 8.2.4.1

          less than two decades later…

          The Court may not be loopy and forgetful, but evidently I am. Needless to say, I meant “fewer than two decades earlier.” Mea culpa.

        2. 8.2.4.2

          +1

    3. 8.3

      The problem with the Fifth Amendment Takings argument is that the arguments are not precise as to what, when, and how. If the “taking” is simply making existing patents subject to an inter partes review, that happened when the AIA was passed. One could argue that simply being subject to an additional means of invalidation lowered the value of all patents. Under this theory, Congress took from patentees the marginal difference in value between their patents before and after the AIA went into effect. Although this would be almost impossible to prove, it could be subject to just compensation. However, if the “taking” is the cancellation of patent claims, this won’t happen, if at all, until the PTAB issues a final written decision. Because in theory only invalid claims are cancelled, most patentees don’t lose anything. The only exception are for claims that would survive the clear and convincing standard (which existed before the AIA) but not the preponderance standard. The issue of retroactivity would only apply to these claims.

      1. 8.3.1

        [I]f the “taking” is the cancellation of patent claims, this won’t happen, if at all, until the PTAB issues a final written decision.

        By which point the patentee will—by necessity—have had due process of law, which is all that the fifth amendment requires (Amdt V, “ [n]o person shall be… deprived of life, liberty, or property, without due process of law…”).

      2. 8.3.2

        The Federal Circuit should have looked to the Court’s decision in Fernandez-Vargas v. Gonzales, 548 U.S. 30 (2006) (8:1) (Souter, J. joined by Roberts, C.J., Scalia, Kennedy, Thomas, Ginsburg, Breyer, Alito, JJ.), which provides a “three-step process for determining whether a statute should be retroactively applied to affect some allegedly vested right that existed prior to a statute’s enactment or to impose some new burden.” Fernandez-Vargas, 548 U.S. at 37-38. Step one requires a determination as to “whether Congress has expressly prescribed the statute’s proper reach.” Fernandez-Vargas, 548 U.S. at 37. If the answer is no, the court moves to step two, deciding “whether applying the statute to the person objecting would have a retroactive consequence in the disfavored sense of affecting substantive rights, liabilities, or duties on the basis of conduct arising before its enactment.” Id. “If the answer is yes, [the court] then appl[ies] the presumption against retroactivity by construing the statute as inapplicable to the event or act in question owing to the absence of a clear indication from Congress that it intended such a result.” Id. at 37-38. Based on Fernandez-Vargas it appears the retroactive application/(invalidation) of the AIA statute to pre-AIA patents is improper. But there are very good arguments against it too; see for example, Thorpe and Bradley.

        1. 8.3.2.1

          Some person or algorithm is dumping a law school outline into the comments of this post. I regret responding to the Landgraf comment.

          1. 8.3.2.1.1

            Landgraf?

  5. 7

    It can’t be pointed out often enough but appeals to freedom and “due process” in service of maximizing the number of junk patents out there which diminish EVERYBODYs freedom (everybody except for the owner of the junk patent) are … bizarre, to say the least.

    But this is the world we live in. The rich want to get richer and they want everyone else to be poorer. Dirt poor, if possible.

    link to lawyersgunsmoneyblog.com

    1. 7.1

      Sir Thomas More called looking to suggest that you get a handle on your emotions.

    2. 7.2

      “The rich want to get richer and they want everyone else to be poorer. Dirt poor, if possible.”

      That’s a very small subset of the rich people in the world that are involved in payday lending bro. Richer people can pay more $$$ into the banksters pockets (which are just the generic category to which payday/title loan lenders belong). In general the banksters would prefer to have richer-than poor people who still take loans and pay more and more $$$ in interest/fees.

  6. 6

    This is a well written petition for en banc rehearing; it makes some good points; civil legislation with retroactive effect – although disfavored – is proper here. Nevertheless, there is conflicting USSC case law and thus I predict that the related cert petition could be granted, if the timing is right and the Court’s docket is not already full for the next term.

  7. 5

    I predict cert. denied (which is—I grant—a fairly uninteresting prediction, given that >95% of cert. petitions are denied).

    1. 5.1

      Cert petitions aren’t granted at random, so the fact that > 95% are denied doesn’t help predict the outcome of a specific petition. (Although, a good bit of luck is involved in getting a petition granted.) Given that SCOTUS basically invited a petition on this issue, it has better odds than most.

      1. 5.1.1

        Well, good, that makes my prediction here a little bit less trivial. I am sticking to the prediction of cert. denied.

  8. 4

    From the Statement of the Case: “In September 1999, the Patent Act authorized only one administrative procedure by which the U.S. Patent and Trademark Office (“PTO”) could reconsider and cancel patent claims: ex parte reexamination.”
    Wrong, there were reissues and interferences. [The sort of thing that might lead a judge to wonder if they made other overbroad assertions? ]
    The number of patents filed before November 1999 and still enforceable must be declining?
    Even if otherwise valid on the merits prior inter partes invalidity decisions were to be held procedurally invalid on constitutional grounds, how likely would a D.C. suit and appeal on those same claims be successful?

  9. 3

    As I remember, over 20 years ago, an examiner got hold of his SPEs stamp to approve allowance of many applications that later issued as patents. Several of the patents should not have issued. After the USPTO knew about the situation, the USPTO put the patents into reexam at by order of the Commissioner of the USPTO [now, Director], 35 USC 304. Does this change the analysis of Collabo?

    1. 3.1

      Good observation. 35 USC 304 – Director ordered Reexamination – was enacted 12/12/80.

  10. 2

    It is also true, in my opinion, that no one has a constitutional right to assert an invalid patent

    OK, seems reasonable.

    The deeper question then…..does the AIA…. unduly undermine the ‘vested rights’ of patent holders.

    Lost me. What right that could be asserted is being undermined, since the right to assert an invalid patent cannot be maintained?

    1. 2.1

      There isn’t any, Martin.

      These people are l-i-a-rs and completely high on their own supply.

      Maybe not quite as bad as Steve Calabresi but still execrable excuses for attorneys.

  11. 1

    It is also true, in my opinion, that no one has a constitutional right to assert an invalid patent.

    Notably, the AIA did not amend or change the presence and level of the presumption of validity.

    Your question then, evades a key point in any patent assertion in a court of law, and the state that forms the foundation of your presumption cannot be reached unless — and until — that portion of a granted patent right is removed.

    Thus your statement, while certainly indicative of your feelings, carries no legal weight on its face.

    The question then may become: under what proper conditions is this aspect of a granted patent rescinded?

    Note that in the AIA provided law (as written by Congress), this rescission of an aspect of a granted property right is removed at the institution decision point prior to any adjudication on the merits.

    As seen as recently in the Trademark context, just because the correct branch has written an (IP) law, does not mean that that law is fully copacetic with other protections afforded by the Constitution.

    Life, liberty, and property are the three main thrusts of when other protections need be remembered.

    (not even Oil States removed the “property” nature of a granted patent, even as it turned “Private Personal” into a “Public Right.”

    1. 1.1

      … ask i4i how much value there was in the presence and level of the presumption of validity. What did the Court say there?

      1. 1.1.1

        To save time, why don’t you just tell us what the Court said?

        1. 1.1.1.1

          There are far more important things than saving time.

          Especially in cases in which one party uses that line in a disingenuous manner.

    2. 1.2

      Get over yourself, Bildo. You aren’t fooling anybody with your glibertarian horsesh-t.

      1. 1.2.1

        Your feelings are noted.

        As is the total lack of you responding on point.

        1. 1.2.1.1

          Telling you and every other glibertarian sewage pile to blow off is always appropriate and always on point, Bildo.

          1. 1.2.1.1.1

            Wow, that you may actually believe that is just so Trump of you.

            1. 1.2.1.1.1.1

              “Derp derp you Trump derp I’m just a glibertarian sewage pile who doesn’t like it when derp people criticize glibertarian derp sewage piles DERP!”

              1. 1.2.1.1.1.1.1

                Yay, Malcolm Derp Dance!

    3. 1.3

      Life, liberty and …. instructions for computing machines! Just as the Founders dreamed.

      Oh and don’t forget the human slaves and the subjugation of women. Those were the best times, before those darn liberals showed up with their inter partes exam and other commie plots.

      1. 1.3.1

        ?

        You are quite evidently one-bucketing again…

        1. 1.3.1.1

          Equating IPRs with slavery? MM has reached new lows.

          MM’s post made me laugh.

          1. 1.3.1.1.1

            Clowns are good at making people laugh…

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