Does the USPTO have authority to address patent eligibility in Covered Business Method review?

Supreme Court review of the Obama Administration’s abuse of Congressional limits over handling of patent rights may come sooner than anyone previously thought. On November 5, 2015, patent owner Retirement Capital Access Management Company LLC filed the most important cert petition this term. This bold effort squarely presents a question circling around academic circles for years: whether the USPTO has the authority to address section 101 (subject matter eligibility) within Covered Business Method (CBM) reviews.

To the untrained eye, this issue might sound wonky, jargony, technical and narrow. It is instead profound. If granted, the petition might help restore much needed certainty to the innovation ecosystem.

The petition asserts that CBMs might properly reach issues such as anticipation (section 102), obviousness (section 103) or disclosure-sufficiency (section 112). But hands-off when it comes to subject matter eligibility (i.e., Bilski/Mayo/Alice analyses under section 101). The USPTO has no agency authority over that issue.

The rationale is elegant and simple. Congress used rare precision to set out the boundaries of the USPTO’s CBM authority. It limited the grounds of review solely to conditions for patentability specified in section 282(2) and (3) of the Patent Act. As I and others have previously observed (see my “Murky Morass” post from 3 years ago), nowhere does section 282 specify subject matter eligibility.

The petition arises from a CBM review in which subject matter eligibility was the only ground used by the USPTO. The USPTO invalidated the patent. It also rejected explicitly the Congressional-authority argument. On appeal, the Federal Circuit affirmed without opinion, effectively adopting the reasoning of the administration. Thus, this case is a perfect vehicle for Supreme Court review.

If review is granted, the ramifications will extend far beyond administrative law. Namely, the scope of section 282 affects every patent litigation. The provisions that Congress piggybacked to define USPTO authority sit within the statute that Congress originally passed in 1952 to limit the range of defenses that an accused infringer may raise. Limiting the USPTO will have the near-certain effect of drawing to a close the use of Alice defenses in patent litigation. It would restore needed certainty to the patent system, particularly for the benefit of innovative software and financial companies. Siding with the petitioner in this case would restrict section 101 inquiries to their proper use: initial examination decisions at the USPTO.

There are those who will contend that such jurisdictional review is dead on arrival. After all, Mayo and Alice came to the Supreme Court in the posture of section 101 being used as a litigation defense, and the Supreme Court did not hesitate to declare the invalidity of the relevant patents. But that is not how the Supreme Court looks at things. When it implicitly assumes without deciding that it has jurisdiction over a question, that does not bar later inquiry into whether it had jurisdiction in the first place. NASA v. Nelson, 131 S. Ct. 746, 766 (2011) (Scalia, J., concurring) (“The Court’s sole justification for its decision to ‘assume, without deciding’ is that the Court made the same mistake before. . . . But stare decisis is simply irrelevant when the pertinent precedent assumed, without deciding, the existence of a constitutional right”); FEC v. NRA Political Victory Fund, 513 U.S. 88, 97 (1994) (“The jurisdiction of this Court was challenged in none of these actions, and therefore the question is an open one before us.”); Brecht v. Abrahamson, 507 U.S. 619, 631 (1993) (reaffirming longstanding rule that if a decision does not “squarely address [an] issue,” a court remains “free to address the issue on the merits” in a subsequent case); Will v. Mich. Dept. of State Police, 491 U.S. 58, 63 (1989), citing Hagans v. Lavine, 415 U.S. 528, 535, n. 5 (1974) (“[T]his Court has never considered itself bound by [prior sub silentio holdings] when a subsequent case finally brings the jurisdictional issue before us.”); United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 38 (1952) (“[T]his Court has followed the lead of Chief Justice Marshall who held that this Court is not bound by a prior exercise of jurisdiction in a case where it was not questioned and it was passed sub silentio.”); United States ex rel. Turner v. Williams, 194 U.S. 279 (1904) (“The rule of stare decisis only arises in respect of decisions directly upon the points at issue.”); United States v. More, 7 U.S. 159 (1805) (Marshall, C.J.) (“No question was made, in that case, as to the jurisdiction. It passed sub silentio, and the court does not consider itself as bound by that case.”); Special Devices, Inc. v. DEA, Inc., 269 F.3d 1340, 1346 (Fed. Cir. 2001) (Although a prior decision of this court ruling on an issue may have implied that the lower court issued a final decision with respect to the issue, the question of “finality . . . was raised neither by the parties nor sua sponte by [this] court. Because [the prior decision] did not confront and decide the same issue, it is not precedent on the question before us.”).

Amicus briefs in support of the petition would be due around December 5. Though I am not involved in the case, I have been asked if my clients might support an amicus filing. I recommend that others who represent patent owners speak with their clients about the advisability of filing or joining an amicus brief. This matter is too important not to take a stand.

If you or your clients are interested in having the latest information on possible possible amicus filings, please feel contact me.