Federal Circuit Affirms District Court Dismissal of Administrative Procedure Act Suit Appealing PTAB Decision

By Rebecca Tapscott
August 25, 2020

“The Federal Circuit explained that the ‘core question [of the finality of agency action] is whether the agency has completed its decision-making process, and whether the result of that process is one that will directly affect the parties’ and noted that the USPTO’s decision-making process is complete after the issuance of a final written decision.”

Federal CircuitOn August 20, the United States Court of Appeals for the Federal Circuit (CAFC) affirmed a district court’s dismissal of an appeal from the United States Patent and Trademark Office’s (USPTO) Patent Trial Background Appeal Board (PTAB) in Security People, Inc. v. Iancu. In particular, the CAFC held that the district court’s dismissal of the suit was correct because Congress “foreclosed the possibility of collateral APA [Administrative Procedure Act] review of inter partes review decisions by district courts, and because Security People [could not] bring an APA challenge when the statutory scheme separately establishe[d] an adequate remedy in a court for its constitutional challenge.”

Security People owns U.S. Patent No. 6,655,180, which is directed to an electronic lock device. In 2015, a competitor petitioned for inter partes review (IPR) of certain claims of the ’180 patent after being sued for infringement by Security People. The PTAB instituted review on one claim and issued a final decision finding the claim unpatentable. Security People appealed the decision of unpatentability to the CAFC and the CAFC affirmed the PTAB decision. Security People petitioned the Supreme Court for certiorari, but the Court denied. Shortly thereafter, Security People filed suit in the United States District Court for the Northern District of California. The USPTO moved to dismiss the suit on three grounds, the first of which was that “the district court lacked subject matter jurisdiction because Congress established a specific means for judicial review of IPR decisions, rendering collateral APA suits in district court inappropriate.” The district court agreed with the USPTO on the first ground and dismissed the suit for lack of jurisdiction. Security People appealed to the CAFC.

Elgin Remains Instructive

Reviewing the district court’s dismissal de novo, the CAFC considered two arguments presented by Security People on appeal. First, Security People argued that the PTAB lacked authority to consider constitutional claims and “that it could not then assert a constitutional challenge for the first time on appeal because retroactivity challenges raise issues requiring factual resolution.” The CAFC explained that, regardless of whether there are disputed factual questions in a case, Elgin v. Dep’t of Treasury remains instructive. The CAFC noted that the Supreme Court in Elgin rejected the petitioner’s argument that even if the CAFC could consider their claims in the first instance, the resolution of claims required a factual record that the Federal Circuit could not create. Instead, the Supreme Court held that the statutory review scheme at issue in the case provided the CAFC exclusive jurisdiction to review Merit Systems Protection Board (MSPB) decisions and “fully accommodates an [appellant’s] potential need to establish facts relevant to [its] constitutional challenge to a federal statute.” Likening the MSPB to the PTAB, the CAFC further explained that the Supreme Court in Elgin noted that the CAFC may take judicial notice of facts relevant to a constitutional question even without fact-finding capabilities.

Final Written Decision = Final

The second argument Security People presented was that “its as-applied challenge was not yet ripe until cancellation of its patent claims, which required affirmance of the Board’s decision by this court, and that it had to exhaust those non-constitutional claims before raising its constitutional claims.”

But the CAFC explained that Security People was “misapprehend[ing] the law defining when an agency action becomes final for judicial review” in asserting in its Fifth Amendment Due process claim that “no deprivation of property had occurred until after the PTO issued the certificate cancelling its patent claim.” Citing Franklin v. Massachusetts, the CAFC explained that the “core question [of the finality of agency action] is whether the agency has completed its decisionmaking process, and whether the result of that process is one that will directly affect the parties” and noted that the USPTO’s decision-making process is complete after the issuance of a final written decision.

Congress’ Intent

With respect to Security People’s argument that the doctrine of administrative exhaustion prevented Security People from raising its constitutional claims directly to the CAFC, the CAFC noted that the doctrine “provides that judicial relief is not available for a supposed or threatened injury until the prescriptive administrative remedy has been exhausted.” The CAFC explained that if the PTAB lacked authority to consider Security People’s arguments, “then no administrative remedy exists and Security People faced no obstacle to judicial relief of its constitutional claims on direct appeal from the final written decision.” Alternatively, if the PTAB did have authority to hear Security People’s constitutional claims, then Security People’s failure to raise those claims before the PTAB would result in forfeiture of those claims, rather than “it gaining the ability to raise those claims in district court under the APA.”

The CAFC also agreed with the district court that “the statutes providing for exclusive review of the Board’s final written decisions in this court preclude district courts from exercising APA jurisdiction over claims challenging the constitutionality of a final written decision.” In particular, the CAFC pointed out that 35 U.S.C. § 141(c) clarifies “Congress’s intent to preclude district court judicial review of IPR final written decisions” by stating a that a party to an inter partes review “may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.” Thus, the CAFC affirmed the district court’s dismissal of Security People’s suit.

The Author

Rebecca Tapscott

Rebecca Tapscott is an intellectual property attorney who has joined IPWatchdog as our Staff Writer. She received her Bachelor of Science degree in chemistry from the University of Central Florida and received her Juris Doctorate in 2002 from the George Mason School of Law in Arlington, VA.

Prior to joining IPWatchdog, Rebecca has worked as a senior associate attorney for the Bilicki Law Firm and Diederiks & Whitelaw, PLC. Her practice has involved intellectual property litigation, the preparation and prosecution of patent applications in the chemical, mechanical arts, and electrical arts, strategic alliance and development agreements, and trademark prosecution and opposition matters. In addition, she is admitted to the Virginia State Bar and is a registered patent attorney with the United States Patent and Trademark Office. She is also a member of the American Bar Association and the American Intellectual Property Law Association.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 3 Comments comments. Join the discussion.

  1. Anon August 25, 2020 3:08 pm

    Would love to hear David Boundy’s take on this case.

  2. ipguy August 25, 2020 4:31 pm

    Given the US Supreme Court’s apparent love of slapping the Federal Circuit on the wrist, will a cert petition be accepted? Inquiring minds want to know!

  3. TFCFM August 26, 2020 11:36 am

    The Federal Circuit’s opinion in this case could (and probably should) have been much much shorter. In fact, it should have read, in its entirety as follows:

    Appellant sought to appeal a final written decision of the Patent Trial and Appeal Board to a federal district court. The district dismissed the appeal, and Appellant appeals that dismissal here.

    35 USC 141(c) reads: “A party to an inter partes review …who is dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) or 328(a) (as the case may be) may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.” (emphasis added)

    Section 141(c) means what it says. The district court’s dismissal is affirmed.

    Costs to Appellee.

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