Federal Circuit Reinforces Patent Rights as a Public Concern of a Regulatory Framework

The constitutionality of USPTO's Inter Partes Review (IPR) mechanism has been challenged in a few district court cases over the past year. The challenge typically argues that the Patent Trial & Appeal Board (PTAB) cannot abrogate the jurisdiction of an Article III court in assessing patent validity, and/or that the PTAB prevents the 7th amendment right to a jury trial. I have largely refrained from discussing these recent cases as I found the arguments to be a bit too "creative."  This is because the very same arguments failed decades ago when patent reexamination was first introduced in the 1980s.  Patlex Corp v. Mossinghoff (CAFC 1985) 

The recent constitutionality arguments hoped to distinguish the earlier precedent on the basis that, unlike patent reexamination, which is examination based,  IPR is adjudicative.  I always found this position odd given that an unfavorable reexamination may be appealed to several adjudicative bodies, and IPR was a replacement for inter partes patent reexamination (which was also adversarial).

Today, in MCM Portfolio LLC v. Hewlett-Packard Company, the CAFC agreed, reinforcing the Patlex precedent of the 1980s. 

The CAFC explained that the 1880s Supreme Court precedent seemingly preventing the USPTO from revoking patents (McCormick Harvesting Machine Co. v. Aultman; "McCormick II") became inapplicable once Congress granted the USPTO authority to revoke patents, starting with the patent reexamination statutes (here):

McCormick II did not address Article III and certainly did not forbid Congress from granting the PTO the authority to correct or cancel an issued patent. Congress has since done so by creating the ex parte reexamination proceeding in 1980; the inter partes reexamination procedure in 1999; and inter partes review, post-grant review, and Covered Business Method patent review in 2011. 

Next, the CAFC explained that the Supreme Court has recognized the power of Congress to delegate disputes over "public rights' to non-Article III courts, even disputes between private entities regarding public rights. The CAFC emphasized the important role of expert agencies in resolving disputes between private parties in adversarial proceedings:

More recently, the Court expounded on the public rights doctrine in Stern v. Marshall, 131 S. Ct. 2594 (2011). Stern explained that the Court continued to apply the public rights doctrine to disputes between private parties in “cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority. . . . [W]hat makes a right ‘public’ rather than private is that the right is integrally related to particular federal government action.”     .       .        .Our conclusion that the inter partes review provisions do not violate Article III also finds support in our own precedent. We had occasion to consider the constitutionality, under Article III, of the ex parte reexamination statute in Patlex Corp. v. Mossinghoff .   .     .

Finally the CAFC noted:

There 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 Board’s involvement is thus a quintessential situation in which the agency is adjudicating issues under federal law, Congress having devised an expert and inexpensive method for dealing with a class of questions of fact which are particularly suited to examination and determination by an administrative agency specially assigned to that task.’   .        .        .          .A defectively examined and therefore erroneously granted patent must yield to the reasonable Congressional purpose of facilitating the correction of governmental mistakes.

(internal quotes omitted)