In a 10–2 decision that included two concurrences and two dissents, the US Court of Appeals for the Federal Circuit denied a patent owner’s petition to hear part of its appeal en banc in order to resolve whether a patent right is a public right. Cascades Projection LLC v. Epson America, Inc., Case No. 17-1517; -1518 (Fed. Cir., May 11, 2017) (per curiam) (Newman, J, concurring) (Dyk, J, concurring, joined by Prost, CJ, and Hughes, J) (O’Malley, J, dissenting) (Reyna, J, dissenting).
In its petition for an en banc hearing, Cascades Projection argued that a patent right is not a public right and that therefore an administrative agency such as the US Patent and Trademark Office (PTO) cannot lawfully revoke a patent right, because doing so amounts to the exercise of judicial power. Cascade requested that the Federal Circuit initially hear part of its appeal en banc to resolve whether a patent right is a public right. Although the Court declined the petition to initially hear this issue en banc, Judges Newman and Dyk filed concurrences, and Judges O’Malley and Reyna filed dissents, providing some insight into this decision.
Judge Newman concurred in the denial, noting that a patent right is a property right with the attributes of personal property under 35 USC § 261. Newman identified the real issue in this case as “whether the statutory scheme created by the America Invents Act, in which the [Patent] Office is given an enlarged opportunity to correct its errors in granting a patent, with its decision subject to review by the Federal Circuit, meets the constitutional requirements of due process in disposition of property.” She concluded that the matter should be resolved only after full opportunity for panel consideration.
In his concurrence, Judge Dyk, joined by Chief Judge Prost and Judge Hughes, addressed the application of the 2015 Federal Circuit decision in MCM Portfolio v. Hewlett-Packard (IP Update, Vol. 19, No. 1), to the present petition. Judge Dyk noted that MCM—which held that adjudication of patent rights by the PTO in an inter partes review does not conflict with Article III of the Constitution—was correctly decided. The concurrence noted that MCM was consistent with Federal Circuit and Supreme Court of the United States precedent; the Supreme Court has repeatedly recognized that patent rights are public rights flowing from congressional legislation and that such public rights may be adjudicated by an administrative agency.
In dissent, Judge O’Malley argued that the issue of whether patent rights are public rights warrants consideration en banc because the issue is complex and could have far-reaching consequences. Citing the 1898 Supreme Court decision in McCormick Harvesting Mach. C. v. Aultman, O’Malley indicated that MCM may be at odds with long-standing Supreme Court precedent suggesting that the PTO does not have the authority to invalidate issued patents through IPR proceedings and that Article III adjudication is required.
Also in dissent, Judge Reyna argued that the state of the current law compels en banc review. Reyna included a detailed account of the initial drafting of the Patent Clause (US Const. Art. I, § 8, cl. 8), including an examination of patents as property rights, and a detailed account of relevant case law. In his case law analysis, Reyna pointed out that the Federal Circuit has twice considered McCormick and twice declined to follow it for two distinct reasons, creating a conflict that compels en banc review. Reyna emphasized that Cascades’ petition raises important issues of both separation of powers and the private-versus-public right distinction as it relates to patents, both of which require the Court to review the IPR process in the context of the constitutional role of Article III courts.
Practice Note: On June 12, 2017, the Supreme Court granted certiorari in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC (IP Update, current issue) and therefore will address essentially this same issue, notwithstanding the PTO’s urging the Supreme Court not to do so.