“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.”
On 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.
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.