“Should [Hoyle and B.E. Tech’s] suit survive the motion to dismiss, it could create a very interesting discovery process surrounding many of the obscure and highly criticized aspects of the USPTO’s operation of the PTAB.”
On January 21, inventor Martin David Hoyle and his company B.E. Technology filed a response in opposition to a consolidated motion to dismiss that was filed last November by defendants Michelle K. Lee, former Director of the U.S. Patent and Trademark Office (USPTO), a pair of officials at the Patent Trial and Appeal Board (PTAB) and three administrative patent judges (APJs) who sat on PTAB panels invalidating Hoyle’s patent claims. Hoyle and B.E. Tech’s response brief argues that the motion to dismiss filed by the former and current USPTO employees is based on factual disputes that are inappropriate to decide on a motion to dismiss, and that plaintiffs have made out a sufficient due process claim under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics (1971).
Bivens Suit Should Survive Because Mathews Test Points to Due Process Violations
In their motion to dismiss, counsel for former Director Lee and other PTAB defendants argued that the Western District of Tennessee did not have proper jurisdiction over the defendants, none of which live in or committed any challenged acts in Tennessee. They also argued that Hoyle and B.E. Tech’s claims should be barred by the one-year Tennessee statute of limitations for state tort claims, as most of the challenged policies, like panel stacking and the Sensitive Application Warning System (SAWS), were publicly disclosed by that time, and that plaintiffs were improperly extending U.S. Supreme Court precedent from Bivens, which recognized tort claims for money damages against U.S. government officials for violations of constitutional rights.
Hoyle and B.E. Tech’s complaint absolutely alleges violations of constitutional due process by several named officials of the USPTO. Should the suit survive the motion to dismiss, it could create a very interesting discovery process surrounding many of the obscure and highly criticized aspects of the USPTO’s operation of the PTAB, including stacking APJ panels to achieve certain policy outcomes while deciding on the validity of private property rights, financial bonuses to APJs that arguably induce a higher rate of institution and invalidations during patent validity trials, and the PTAB’s policy of discouraging dissenting opinions by preventing APJs from earning work credit for writing dissents. These allegations are made even sharper by former Director Lee’s time as Head of Patents and Patent Strategy at Google, one of several companies sued for infringing Hoyle’s patent claims covering targeted advertising via search engines, just prior to joining the USPTO as Director of the Silicon Valley Regional Office in 2012.
Part of the reason the Bivens action should survive the motion to dismiss, Hoyle and B.E. Tech argue, is because plaintiffs have demonstrated both a challenged action attributable to a person under color of federal law, and conduct depriving plaintiffs of a constitutionally protected interest. As Hoyle and B.E. Tech’s allegations are premised on violations of procedural due process, the three-factor balancing test for constitutional due process under the Supreme Court’s 1976 decision in Mathews v. Eldridge should be applied to the allegations, and plaintiffs argue that all three factors weigh in favor of their constitutional argument.
As for the private interest affected, plaintiffs argue that the Supreme Court’s decision in Oil States Energy Services v. Greene’s Energy Group (2018) re-established that patents were property for purposes of Fifth Amendment due process challenges. The second Mathews factor, which examines the risk of an erroneous deprivation of property, should also lean in plaintiffs favor, they argue, because of the lack of a neutral decision maker in PTAB proceedings caused by undue influence from agency supervisors and the substantial pecuniary incentive for APJs to institute patent validity trials. In assessing the government interest at stake, the third Mathews factor, plaintiffs argue that the government has a substantial interest in a properly functioning patent system that doesn’t deprive patent owners of property rights without due process of law. Hoyle and B.E. Tech also downplay defendants’ reliance on last October’s Federal Circuit decision in Mobility Workx v. Unified Patents, which they argue was deciding a narrower due process issue within the context of the financial operations of the PTAB during 2021, much later than the period of Director Lee’s tenure when the challenged actions occurred.
No Post-Deprivation Process to Restore Erroneously Invalidated Patent Claims
While the government official defendants argued that the district court should not apply Bivens doctrine, which requires analysis of any special factors counseling against extending the doctrine when applied in a new context, Hoyle and B.E. Tech note that other Supreme Court decisions in the Bivens line of cases recognize an implied constitutional cause of action under Bivens for alleged violations of Fifth Amendment due process. The plaintiffs argue that their case is factually analogous to Schweiker v. Chilicky (1988), in which the U.S. Supreme Court analyzed Bivens claims from plaintiffs alleging that they were deprived of Social Security disability benefits without due process of law by Social Security Administration officials who implemented a continuing disability review program. While the Supreme Court denied damages relief under Bivens in that decision, in large part because of mechanisms under the Social Security Act for challenging and reinstating benefits that were erroneously denied, Hoyle and B.E. Tech argue that there is no similar post-deprivation process to restore their constitutionally protected interest in the canceled patents in light of the due process violations alleged.
Hoyle and B.E. Tech also pushed back against arguments that APJs Sally Medley, Kalyan Desphande and Lynne Pettigrew, who sat on the allegedly stacked panels that invalidated B.E. Tech patent claims threatening billions of dollars of revenues accrued by Director Lee’s former employer Google, were absolutely immune from the Bivens suit by reason of their judicial duties at the PTAB. While the constitutional problems in the APJ appointment process noted by the Supreme Court in United States v. Arthrex (2021) don’t require a retroactive inquiry into every inter partes review (IPR) proceeding decided by the PTAB, the plaintiffs argue that Arthrex raises questions as to whether APJs had proper jurisdiction to decide the IPRs, precluding judicial immunity from this suit. All defendants in the case also pressed a qualified immunity defense, but Hoyle and B.E. Tech argue that such a defense is premised on factual disputes, such as the level of Michelle Lee’s personal involvement in the B.E. Tech IPRs, that are inappropriate to decide at the motion to dismiss stage. Further, a qualified immunity defense fails on the merits according to plaintiffs because the allegations in the complaint create a reasonable inference that the defendants were well-aware of how their treatment of the IPRs was inconsistent with basic due process requirements, and that the defendants were at least indifferent to the unconstitutional deprivation of property those IPRs caused.
Finally, Hoyle and B.E. Tech contend that several affirmative defenses raised by the motion to dismiss also fail. While Hoyle’s patents have been assigned to B.E. Tech, Hoyle argues that he still suffered an independent injury as the owner of B.E. Tech which gives rise to Article III standing for Hoyle to remain a plaintiff. The plaintiffs argue that Western Tennessee has personal jurisdiction over the defendants because their intentional acts caused harms that were directed towards Tennessee, where B.E. Tech was incorporated, has been doing business and where it filed several patent infringement actions asserting the wrongfully invalidated patents. Further, even if the one-year Tennessee statute of limitations for tort claims applies, Hoyle and B.E. Tech note that they only became aware of factual basis for the due process violations by last July’s publication of a report by Ron Katznelson on APJ bonus awards and empirical analysis showing the impact of those bonuses on America Invents Act (AIA) patent validity trial decisions and the existence of an AIA Review Committee conducting secret extra-panel review of PTAB decisions.
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