Editorial Note: The author, Robert Greenspoon, represents a client challenging the constitutionality of inter partes review at the Fourth Circuit. He is available to discuss the case in more depth if anyone is interested in filing or joining an amicus brief.
In 2011, Congress passed legislation diverting patent validity litigation into an administrative agency tribunal. Inter partes review (IPR) makes it harder for new firms to enter and compete in markets. James E. Daily and F. Scott Kieff, Benefits of Patent Jury Trials for Commercializing Innovation, 21 Geo. Mason L. Rev. 865, 878-79 (2014) (“One reason for this is that larger firms generally are thought to be more effective at bringing political influence to bear in agency determinations.”). The administration personnel who now replace juries and judges for such matters quickly gained a reputation as “patent death squads.” Statistics show that, at least at the beginning, 95% of adjudicated patent claims were being invalidated through these proceedings.
In Cooper v. Lee, our clients asked the Eastern District of Virginia to rule IPRs unconstitutional. Instead, on February 18, 2015, the district court ruling held that our clients must “exhaust administrative remedies,” even though the PTAB does not appear to have the power to grant the remedy our clients requested. Our clients have appealed to the Fourth Circuit, which is the appropriate venue because our claims do not arise “under” the patent laws. The nature of the district court’s “exhaustion” decision makes it necessary for the reviewing court to reach the core constitutional questions.
Inter partes review proceedings unconstitutionally assign to an Article I executive branch tribunal matters reserved for Article III Judges that make up the Federal Judiciary. This is in violation of Separation of Powers principles, which is particularly problematic given that we are talking about property rights being stripped from patent owners by administrative law judges in a proceeding designed to be a district court alternative. These administrative tribunals also adjudicate patent validity without a jury, in violation of patentees’ Seventh Amendment rights.
While these claims may at first sound a bit extreme, Supreme Court precedent clearly establishes the Separation of Powers violation presented by Patent Office administrative tribunals. A patent, upon issuance, is not subject to revocation or cancellation by any executive agent, including by any part of the USPTO. McCormick Harvesting Mach. Co. v. Aultman, 169 U.S. 606, 609 (1898). The Executive branch invades the province of Article III courts to cancel a patent as invalid during any kind of post-grant proceedings. Id. at 612. The Supreme Court explained:
[W]hen a patent has received the signature of the Secretary of the Interior, countersigned by the Commissioner of Patents, and has had affixed to it the seal of the Patent Office, it has passed beyond the control and jurisdiction of that office, and is not subject to be revoked or cancelled by the President, or any other officer of the Government. It has become the property of the patentee, and as such is entitled to the same legal protection as other property.
Id. at 608-09 (emphasis added, citations omitted). The Supreme Court went on to say: “The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” Id.
The Seventh Amendment violation is clear from In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995), which confirms the jury trial right in cases where there is a previous claim for damages against the invalidity petitioner.
Because inter partes review does to patents what the Supreme Court says cannot be done, it is clearly unconstitutional. Clear unconstitutionality means two things. It negates the district court’s application of administrative exhaustion, and entitles Appellants to substantive relief on the underlying claim.
The district court found otherwise by applying precedent that approved of a different Patent Office procedure (ex parte reexamination). But our brief will explain why ex parte reexamination passed muster only because it lacked the very things that inter partes review contains — a contest between private adversaries in front of a panel of judges. In fact, the courts created a new legal fiction to save ex parte reexamination that does not apply to inter partes review, namely that the former is just a re-do of the “grant” or “issuance” examination process.
There are those who, like the district court, would equate IPRs with ex parte reexamination and assert that there are no constitutionally significant differences. But the PTAB itself has bristled at any suggestion that it performs “examination” – a task reserved to the technologically trained (and largely non-attorney) USPTO examination corps. As the PTAB admits, “[a]n inter partes review is not original examination, continued examination, or reexamination of the involved patent. Rather, it is a trial, adjudicatory in nature and constituting litigation.” ScentAir Tech., Inc. v. Prolitec, Inc., IPR2013-00179, Paper 9, at 4 (PTAB April 16, 2013). The PTAB has made this point more than once: “An inter partes review is more adjudicatory than examinational in nature.” Idle Free Sys., Inc. v. Bergstrom, Inc., IPR2012-00027, Paper 26, at 6 (PTAB June 11, 2013) (citing Abbott Labs v. Cordis Corp., 710 F.3d 1318, 1326 (Fed. Cir. 2013) (“The purpose . . . was to convert inter partes reexamination from an examinational to an adjudicative proceeding . . . .”)). The Federal Circuit also recognizes its adjudicatory nature. See In re Cuozzo Speed Techs., LLC, No. 14-1301, __ F.3d __, 2015 U.S. App. LEXIS 1699, at *20-21 (Fed. Cir. Feb. 4, 2015) (majority opinion acknowledging “adjudicatory” nature of inter partes review, and stating “Congress in enacting the AIA was aware of these differences in terms of amendments and adjudication . . . .”); Id. at *34 (Newman, J., dissenting) (“[Congress] provid[ed] a new adjudicatory proceeding in the administrative agency, the Patent and Trademark Office, in the Department of Commerce, whereby a newly formed Patent Trial and Appeal Board (PTAB) serves as a surrogate for district court litigation of patent validity.”).
Whether or not IPR and ex parte reexamination share similarities, no court, including the district court in Cooper v. Lee, has ever tested IPRs against the clear prohibitions of McCormick Harvesting. Our clients will ask the Fourth Circuit to follow unambiguous Supreme Court law. If you are concerned with breadth and scope of PTAB post grant proceedings you might consider filing a friend-of-the-court brief in support of our client’s pending federal appeal – Fourth Circuit App. No. 15-1205. Whatever the proceeding affecting a patentee’s interests (IPR, CBM, PGR), patentees can be heard by properly filing an amicus curiae brief (either via consent or motion for leave).
Contact me to learn more about the case, our arguments and the deadlines if you are interested in filing or joining an amicus brief.