With patent assertion entities (PAE’s) on the defensive in recent months, one such company has launched an unlikely counterattack: a claim that Inter Partes Review (IPR) proceedings are unconstitutional.
In 2013, a PAE called eCharge sued Square Inc., the maker of smartphone-enabled credit-card payment dongles, in the Northern District of Illinois. Square countered earlier this year by filing an IPR request before the Patent Trial and Appeals Board (PTAB) and successfully moved the district court to stay the litigation pending resolution of the IPR.
In response, eCharge and its principal, an inventor named Carl Cooper, filed suit earlier this month in the Eastern District of Virginia against Michelle Lee, Deputy Director of the Patent Office, seeking a declaratory judgment of unconstitutionality of the statute authorizing IPR.
eCharge alleged that “Plaintiffs have, without their consent, had the issue of patent validity with respect to Square, Inc. removed from Article III courts, where they elected to file their lawsuit for patent infringement…and placed before an Article I tribunal that has no authority to conduct such proceedings.”
In the complaint, eCharge contended that the PTAB operates—improperly and unconstitutionally, in its view—as a judicial body endowed by Congress with adjudicatory powers and that the IPR proceeding, complete with discovery, depositions, and a trial, “very closely resembles an Article III proceeding.” eCharge also asserted that “PTAB proceedings, once initiated, effectively replace federal court litigation concerning validity over prior art of allegedly infringed patents” because parallel district court litigation is so often stayed when IPR is granted.
But this approach, creative as it is, doesn’t appear likely to prevail.
For one thing, Victor Johnson, an attorney at Dykema in Dallas and a former Fish lawyer, told World Intellectual Property Review that “challenges like this one are based on the misconception that a patent is a vested right, which once granted may not be taken away by the agency that granted it.” In fact, patent rights are “public” rights that “can be conferred only by the government” and whose “extent, duration and validity must be determined by the legislative branch,” according to Johnson.
In addition, nothing in the Constitution requires patent validity to be determined by the judicial branch; our founding document states simply that Congress—not the judiciary—is empowered “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”
Finally, the Federal Circuit in Fresenius v. Baxter recently rejected the argument that Article III courts deserve primacy over the administrative branch with respect to issues of patent validity when it held that the Patent Office’s cancellation during reexamination of claims not proven invalid in district court litigation extinguished the patentee’s right to seek damages in district court. The Supreme Court’s decision to deny certiorari in that case does not bode well for eCharge’s theory.
Still, give eCharge credit for trying. It will be interesting to see how its case plays out.