Patents - April 03, 2016

Inter partes review 2: Constitutional

The United States Court of Appeals for the Federal Circuit decided that inter partes review does not violate sections of the U.S. Constitution. MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015).

Hewlett Packard Co. petitioned for inter partes review of claims 7, 11, 19, and 21 of MCM’s U.S. patent 7,162,549 under 35 U.S.C. § 311, asserting that those claims were anticipated by, or obvious over, five prior art references.  The Patent Trial and Appeal Board (Board or PTAB) decided that these patent claims were obvious over the prior art and therefore invalid.

The Federal Circuit refused to review the Director’s decision to grant inter partes review.  The court followed its case law interpreting 35 U.S.C. § 314(d)(“[t]he determination . . . whether to institute an inter partes review under this section shall be final and nonappealable”).  The court observed that “[w]e have held that a patent owner cannot appeal the Board’s decision to institute inter partes review, even after a final decision is issued.  In re Cuozzo Speed Techs., 793 F.3d 1268, 1273–74 (Fed. Cir. 2015).”  The court specifically relied on Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015), in which “we held that ‘§ 314(d) prohibits this court from reviewing the Board’s determination to initiate inter partes review proceedings based on its assessment of the time-bar of § 315(b).’”  Thus, Achates controls and “review of whether the PTO properly instituted inter partes review is forbidden by § 314(d).”

The Federal Circuit did review MCM’s claims that inter partes reviews violated the U.S. Constitution.  MCM’s position was that “any action revoking a patent must be tried in an Article III court with the protections of the Seventh Amendment.“  The court disagreed.

The court reviewed the Supreme Court’s and the court’s own case law and concluded that Congress has the power to delegate disputes over “public rights” to non-Article III courts, such as the PTAB.  Patents are “public rights” because they derive from a federal regulatory scheme, and resolution of disputes concerning them by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.  The court observed that “[t]here is notably no suggestion that Congress lacked authority to delegate to the PTO the power to issue patents in the first instance.  It would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”

The right to a jury established by the Seventh Amendment does not apply to administrative agencies.  “Here, when Congress created the new statutory right to inter partes review, it did not violate the Seventh Amendment by assigning its adjudication to an administrative agency.”  The court concluded that “[b]ecause patent rights are public rights, and their validity susceptible to review by an administrative agency, the Seventh Amendment poses no barrier to agency adjudication without a jury.”  Accordingly, “we reject MCM’s argument that inter partes review violates Article III and the Seventh Amendment, and we affirm the Board’s decision that claims 7, 11, 19, and 21 of the ‘549 patent would have been obvious over the prior art.”