“Immediately upon affirming the PTAB cancellation, the same Federal Circuit panel wiped out Chrimar’s second final judgment against ALE…. The Federal Circuit identified no error by the judge or jury. Yet the PTAB unwound the verdict.”
Yesterday, the Federal Circuit once again breached a fundamental boundary of our American system of law. This particular transgression has occurred only a handful of times, but each is more ominous than the last. If this is allowed to stand, we can no longer be considered a democratic republic, but will have become a banana republic. What is rapidly becoming routine to the patent litigation industry will create shockwaves throughout the other 12 circuit courts, upend the rule of law, and damage our nation.
The PTAB is Undermining the Judiciary
In Chrimar Systems, Inc. v. ALE USA, Inc. FKA Alcatel-Lucent Enterprise USA, Inc. (Fed. Circ. Case No. 18-2420), the Federal Circuit allowed the Patent Trial and Appeal Board (PTAB) to overrule an Article III court and jury. That is, the Executive Branch of government directly and unequivocally has overruled the Judicial Branch, including a jury.
My friend and fellow inventor John Austermann invented a technology to send power over ethernet cable in the late 1990s. At that time, sending power over the ethernet required dedicating one of the four twisted pairs in a CAT5 cable to carry the power, meaning it could not be used for data. John figured out how to send the power over the same line that was carrying data so there was no need to sacrifice bandwidth and there was no harm to the sensitive data circuits on either end of the line. His company, Chrimar, was awarded several patents, including U.S. patent No. 8,942,107 for A Piece of Ethernet Terminal Equipment.
A jury verdict was entered October 7, 2016 finding the ‘107 patent valid and infringed by ALE. The Federal Circuit affirmed the jury verdict with respect to validity on May 8, 2018. The ‘107 patent was and is valid according to the Article III court.
However, the case was remanded because the Federal Circuit identified an error in claim construction on a different patent. This is an all too frequent occurrence wherein multiple issues are re-litigated on appeal and the Federal Circuit forces the inventors to battle though multiple trials and appeals spanning most of a decade. In my own case, I had to endure 14 appeals before the infringer finally surrendered.
Chrimar had to go back to the trial court, strike the patent found to have been wrongly construed, and obtain a second final judgment on the ‘107 patent. Then ALE appealed, again.
Meanwhile, a different company persuaded the PTAB to determine that the ‘107 patent was obvious. It was typical claim construction and hindsight nonsense that inventors suffer at the PTAB. For example, they accused John of claiming to have invented the technology that causes a 1930s era telephone to ring, called “phantom power”. Of course, that was not his invention and the examiner would never have awarded him a patent for such an outrageous claim. The real judges and juries understood this, but PTAB technocrats are not bound by common sense.
Entering the Upside Down
Here, the merits are not relevant to the point of this article, which concerns a much, much bigger issue. There is still work to be done to demonstrate how the PTAB administrative patent judges are a far cry from the technical and legal experts they are advertised to be. But the threat to our society posed by yesterday’s decision exists even when the PTAB is correct.
Setting aside the merits of the PTAB procedures and their decision to invalidate the ‘107 patent, Chrimar had already won against ALE—an award of $324,000 plus costs and interest. ALE refused to pay. They delayed and they appealed. That was their entire strategy. They figured they could lose their case and still win. And they did.
Yesterday, the Federal Circuit issued a Rule 36 affirmance of the PTAB cancellation of the ‘107 patent. Then the terrible, perilous, republic-rattling event occurred. Immediately upon affirming the PTAB cancellation, the same Federal Circuit panel wiped out Chrimar’s second final judgment against ALE. Even though the decision was indisputably correct. They nullified it. The PTAB nullified it. The political special interest-infected court in the Executive Branch agency overturned an Article III judge, jury, and appellate court! There was no error. Years of litigation, hundreds of briefs, weeks of hearings, depositions, a week-long trial, tens of thousands of hours of legal work, judge, jury, and appeal ending with a 100% correct judgment in favor of Chrimar. The Federal Circuit identified no error by the judge or jury. Yet the PTAB unwound the verdict.
The Federal Circuit said it was as if the patent never existed. How? It was a real patent. It has a ribbon on it, and it is signed by former USPTO Director Michelle Lee. I saw it with my own eyes. ALE said it wasn’t a real patent under Section 282, and they lost. The judge said it was a real patent. The jury said it was a real patent. The first Federal Circuit panel said it was a real patent. Yesterday morning it was a real patent. But today it never existed?
A Mockery and a Threat
This stuff only happens in banana republics—societies that have no rule of law. We are supposed to have the seventh amendment and an independent judiciary. This decision yesterday makes a mockery of our legal system. Worse than that, it is a huge threat to our entire society. This is not just about patents. This is fundamental. If the USPTO has this power to take away your property and overturn a court of law, then so do the IRS, EPA, DEA, FBI, ICE, FDA, SEC, and all the rest. Whatever you think about those agencies, they must not be allowed to overturn a court of law that has upheld the rights of a citizen. In fact, this is completely upside down. When an agency like the PTAB loses its way, we need courts and juries to vindicate our rights. This ruling yesterday is completely backward.
This must not be allowed to happen to our country. Not in America. We must fight for our rights. This decision must be overturned, and the balance of powers and rule of law restored. Our heritage, our rights, our freedom, and our prosperity are too precious to squander.
Following is the statement of ALE’s counsel, Chris Cravey and Leisa Talbert Peschel of Jackson Walker:
“We are pleased with the Federal Circuit’s decision to vacate the judgment of the district court and dismiss the case. The decision is consistent with Supreme Court and Federal Circuit precedent. This case dates back to 2015 and required two appeals to the Federal Circuit. It’s gratifying to end this long-running dispute with such a favorable result for our client.”