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

Cooper 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 Thomas.  Thomas, 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).