The AIA Inter Partes Review System is Constitutional

The Federal Circuit issued a precedential opinion today in MCM Portfolio v. Hewlett-Packard Co. (Fed. Cir. 2015) (“MCM” and “HP” respectively), holding that the Inter Partes Review (“IPR”) system does not violate Article III or the Seventh Amendment of the U.S. Constitution.

MCM is the owner of U.S. Patent No. 7,162,549 (“the ’549 patent”), which discloses a controller chip and method for coupling a computer system with a flash storage system. On March 27, 2013, HP filed a petition under 35 U.S.C. § 311 with the United States Patent and Trademark Office (“USPTO”) requesting Inter Partes Review (“IPR”) of claims 7, 11, 19, and 21 of the ’549 patent. The Patent Trial and Appeal Board (“PTAB”) determined that HP’s petition demonstrated a reasonable likelihood that the challenged claims of the ’549 patent were invalid as obvious and instituted an IPR on September 10, 2013. At the conclusion of the proceedings, the PTAB issued its final written decision on August 6, 2014,  holding that HP had shown by a preponderance of evidence that claims 7, 11, 19, and 21 of the ‘549 patent would have been obvious over a combination of U.S. Patent No. 6,199,122 to Kobayashi, and International Patent Publication No. WO 98/03915 by Kikuchi. MCM appealed that decision to the Federal Circuit.

Among other things, MCM argued “that inter partes review is unconstitutional because any action revoking a patent must be tried in an Article III court with the protections of the Seventh Amendment.” In particular, the court held “[o]n the merits, 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.”

Addressing the Article III question, Judge Dyk, writing for a unanimous three judge panel, said:

We are bound by prior Federal Circuit precedent “unless relieved of that obligation by an en banc order of the court or a decision of the Supreme Court.” Deckers Corp. v. United States, 752 F.3d 949, 959 (Fed. Cir. 2014). We see no basis to distinguish the reexamination proceeding in Patlex1 from inter partes review. Indeed, Congress viewed inter partes review as “amend[ing] ex parte and inter partes reexamination,” and as a descendant of an experiment began “[n]early 30 years ago, [when] Congress created the administrative ‘reexamination’ process, through which the USPTO could review the validity of already-issued patents on the request of either the patent holder or a third party, in the expectation that it would serve as an effective and efficient alternative to often costly and protracted district court litigation.” H.R. Rep. No. 112–98, at 45. Supreme Court authority after Patlex and Joy Technologies [] casts no doubt on those cases. Rather, it confirms their correctness. Governing Supreme Court and Federal Circuit authority require rejection of MCM’s argument that inter partes review violates Article III.

Addressing MCM’s Seventh Amendment arguments, Judge Dyk once again cited the Joy Technologies and Patlex decisions, along with Supreme Court precedent, discussing the court’s reasoning for holding:

Because 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.

MCM will likely appeal the decision. At oral arguments, Chief Judge Prost and Judge Hughes suggested that, at a minimum, it would take an en banc panel of the court to grant MCM the relief they sought.

The complete opinion can be viewed here.

U.S. Patent No. 7,162,549 can be viewed here.

Image courtesy of 'cafc.uscourts.gov' available here.

 

1 The Federal Circuit considered the constitutionality of the ex parte reexamination statute under Article III in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), modified on other grounds on reh’g, 771 F.2d 480 (Fed. Cir. 1985), and upheld the statute. The court followed Supreme Court precedent that affirmed “the constitutionality of legislative courts and administrative agencies created by Congress to adjudicate cases involving ‘public rights.’” Id. at 604 (quotation marks omitted). In particular, the court found that “the grant of a patent is primarily a public concern. Validity is often brought into question in disputes between private parties, but the threshold question usually is whether the PTO, under the authority assigned to it by Congress, properly granted the patent. At issue is a right that can only be conferred by the government.” Patlex, 758 F.3d at 604 (citing Crowell, 285 U.S. at 50).

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