Cooper and MCM—Beyond the Constitutionality of Article I Final Adjudication, an Opportunity for the Court to Clarify Stern?

Supreme Court of the United StatesCooper and MCM have submitted Petitions for Writ of Certiorari to the Supreme Court of the United States, asking it to consider the constitutionality of Article I final adjudication of issued patent claims, subject only to Article III appellate review.  Importantly, the resolution of this question turns on the determination of (1) whether the claim of patent invalidity is a public or private right, and (2) if a private right, whether the claim may be delegated to an Article I tribunal for (a) advisory determination, requiring (b) enforcement by a federal district court, where (c) legal conclusions are reviewed de novo, and (d) factual conclusions are reviewed for substantial evidence.  As revealed during briefing by litigants and amici, in addition to the Court of Appeals for the Federal Circuit’s (“CAFC”) precedential MCM opinion, ambiguity in the Court’s Stern decision has led to confusion, and the analysis required for question (2) has been improperly applied to the resolution of question (1).  In light of this confusion—and the merits of the constitutional question aside—Cooper and MCM present the Court with a rare opportunity to clarify that questions (1) and (2) are in fact separate, and require, per its own decisional law, distinct modes of analysis.

In its decision upholding the classification of patent validity as a public right, the CAFC in MCM primarily cited to, and quoted from, the Court’s Schor, Crowell, Thomas, and Stern decisions.[i]     Stern is the Court’s most recent public rights case, and there the Court sought to determine whether the claim of tortious interference was a public or private right.  In concluding that the claim was private, C.J. Roberts, writing on the behalf of the majority, provided a comprehensive review of the various public rights cases, including Crowell and Schor.  However, neither Crowell nor Schor sought to determine whether a particular claim was public or private.  In fact, much of the Crowell opinion addressed the Due Process Clause of the Fifth Amendment, not the public rights exception.  Additionally, both cases operated under the assumption that the claim was private, and established criteria governing when advisory adjudication may occur per the Article I administrator, without offending Article III of the U.S. Constitution.

Specifically, in Crowell, a question of fact relating to a private right maritime claim was resolved by an Article I administrator.  The federal district court granted a hearing de novo, concluding that the maritime Act would be “invalid if not construed to permit such a hearing.” The Court agreed.  Given that “finality as to facts [often] becomes in effect finality in law,” any delegation of fact-finding power (regarding a private right) providing for final adjudication “would be to sap the judicial power as it exists under the Federal Constitution, and to establish a government of a bureaucratic character alien to our system.” Under the Act in question, however, the federal district court retained the power “to deny effect to any administrative finding [of fact] which is without evidence, or contrary to the indisputable character of the evidence.” Thus, the factual determinations were “essentially of an advisory nature” (analogizing to the role of masters and commissioners in cases of equity or admiralty), and “the reservation of full authority to the [district] court to deal with matters of law . . . [further avoids] constitutional obstacles.”

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Similarly, the Court in Schor sought to determine whether a private right question of law may be delegated to an Article I administrator for advisory determination.  Given that Article I orders (under the relevant statute) “are enforceable only by order of the district court,” factual determinations are reviewed under the weight of the evidence standard, and “legal rulings . . . like the legal determinations of the agency in Crowell, are subject to de novo [district court] review,” Article III was not offended.Additionally, “the decision to invoke [the administrative tribunal] is left entirely to the parties and the power of the federal judiciary to take jurisdiction of these matters is unaffected.”Therefore, the administrative tribunal merely helped render effective a “specific and limited federal regulatory scheme” without unconstitutionally “allocating jurisdiction among federal tribunals.” The Schor Court identified other factors, such as “congressional purpose,” that it could consider only where evaluating the constitutionality of the advisory administrative adjudication of private right questions of law, subject to federal district court enforcement and de novo review.

Thus, and the summary in Stern aside, it is unclear why Crowell and Schor were relied upon in the CAFC’s MCM opinion—which sought to determine whether the validity of an issued patent for intellectual property is a public or private right.  In addition to Schor and Crowell, however, the CAFC relied upon ThomasThomas, unlike those decisions, was a private right versus public right case.  J. O’Connor, on the behalf of the majority in Thomas, clearly identified a public right versus private right test distinct from the private right-advisory test later articulated in Schor, an opinion she also authored.  Specifically, the Thomas test relied upon the more familiar elements of the public rights exception, including a review of “the origin of the [statutory] right at issue.” For example, the Court reasoned, given that “the statute in Crowell displaced a traditional cause of action [at admiralty] . . . it [thus] clearly fell within the range of matters reserved to Article III courts.” The “data-consideration provision of the Federal Insecticide, Fungicide, and Rodenticide Act [ at issue in Thomas],” conversely, constituted a right that “could be conclusively determined by the Executive and Legislative branches,” and thus was a public right.

The Thomas Court also held where those requirements were met, a court could also look to factors—such as “public purpose,” the role of the claim in a “complex regulatory scheme,” and the consent of the participants—in confirming whether a particular cause of action is a public or private right.  Interestingly, only the latter half of the Thomas test appeared in the MCM opinion, identifying “valid legislative purpose,” and “public regulatory scheme.” The Thomas Court, however, expressly established a two-part test—i.e., “[g]iven [1] the nature of the right at issue and [2] the concerns motivating the Legislature, we do not think this system threatens the independent role of the Judiciary in our constitutional scheme.”

As these challenges reveal, the Court’s Stern decision has created ambiguity regarding the legal standard governing its public rights exception.  The Cooper and MCM petitions present the Court with a rare opportunity to not only address a critically important constitutional question, but also to clarify its complex public rights rule of law, this time in the expert agency context.

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[i] The cases discussed in this article are:  Stern v. Marshall, 564 U.S. 462 (2011); Commodity Futures Trading Comm’n v. Schor, 478 U.S. 839 (1986); Thomas v. Union Carbide Agric. Prods., 473 U.S. 568 (1985); Crowell v. Benson, 285 U.S. 22 (1932); MCM Portfolio LLC v. Hewlett-Packard Co., 812 F. 3d 1284 (Fed. Cir. 2015).

The Author

Michael I. Rothwell

Michael I. Rothwell is an intellectual property attorney Los Angeles, California. In addition to his practice as an intellectual property attorney, Mr. Rothwell is General Counsel for the R4 Property Group, LLC (USA), an affiliate of the Winten Property Group.

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Discuss this

There are currently 3 Comments comments.

  1. Night Writer June 29, 2016 7:53 am

    There is a lot of merit in the arguments, but in our post Constitutional court will they care? My guess is that at most 3 will vote for cert and so it will remain unresolved.

  2. Edward Heller June 29, 2016 10:54 am

    Mike, thanks for your observations. But I think “regulatory schemes” primarily relate to regulations of commerce enacted under the commerce clause, or to regulations enacted under the general police powers in areas such as the District of Columbia or Territories. The patent clause is entirely different, authorizing Congress to “secure” to who authors and inventors “exclusive rights.” Such is no grant of power to regulate, but only a power to secure.

    Moreover, I fully agree with your analysis of the MCM Opinion by the Federal Circuit. I am not sure the court fully understood the issue before it. Any one reading the opinion and the cases it cited for support would not understand how the court could have said what it said in that case. Particularly the discussion of McCormick Harvesting was, let us say, a bit of a stretch.

    Regarding the advisory opinion aspects, I know Cooper was raising that argument from the very beginning. But that issue is not decided in MCM, nor was expressly addressed by any lower courts in Cooper as far as I know. This I do not know how the Supreme Court is going to address that issue when it was not litigated and decided below.

    From the Supreme Court point of view, the issue presented by MCM is a form that is more easily decided in that because patent validity was litigated at common law in the common law courts and to a jury, there remains a seventh amendment right to a trial by jury. The Supreme Court has already ruled in cases like Granfinanciera that Congress is without the power to deny the right to a trial by jury on an issue by assigning the litigation of that issue either to a court of equity or to an administrative tribunal that does not provide jury trials.

  3. Anon June 29, 2016 11:07 am

    Where does the “advisory nature” item come from?

    I cannot find that anywhere in the AIA.

    In other words, are we confusing an alternate reality in which – perhaps – the “remedy” offered by Cooper has some basis in the actual AIA as written?

    The section in particular that to me jumps off the page as out of place here is:

    Importantly, the resolution of this question turns on the determination of (1) whether the claim of patent invalidity is a public or private right, and (2) if a private right, whether the claim may be delegated to an Article I tribunal for (a) advisory determination, requiring (b) enforcement by a federal district court, where (c) legal conclusions are reviewed de novo, and (d) factual conclusions are reviewed for substantial evidence.

    I have no doubt that such a re-writing of the AIA to effect such a remedy is well beyond the authority of any court in the United States.