Welcome
IP Law

Creative Lawyering Puts Patent Tribunal to Constitutional Test

Sept. 14, 2020, 9:45 AM

The constitutionality of the Patent Trial and Appeal Board, already tested with a barrage of legal challenges, will face more tests as creative lawyers find new lines of attack.

Only one argument, over the way PTAB judges are appointed, has connected so far, although the case may get a U.S. Supreme Court review. The low success rate still isn’t stopping people from mulling fresh ideas to fight the board and its review proceedings.

Landing some of these arguments could force certain changes at the board. One that’s being tested in court may, if successful, require revamping the board’s fee system or manner of grading judges’ performance. It’s unlikely that any would be a fatal blow, however.

“Despite all of the constitutional challenges that have been raised against IPR proceedings, like it or not IPR proceedings are here to stay,” Michelle Armond, a founding partner at Armond Wilson LLP in California, said, referring to the widely used inter partes review. “Maybe there will be some modifications, but IPRs are not going anywhere.”

Among the arguments that have already been tried, drug companies said their property rights were unconstitutionally taken in the PTAB’s patent review proceedings. An energy company said the reviews violate the right to a jury trial. Others have taken issue with the way the board’s judges are assigned cases.

Challenges to the U.S. Patent and Trademark Office tribunal, which reviews the validity of issued patents, were expected after it was created as part of the 2011 America Invents Act. But the volume, and variety, of constitutional attacks has surprised some attorneys.

Brent Babcock, an attorney at Womble Bond Dickinson in Southern California, said the PTAB never struck him as “a system that is rife with constitutional problems.”

Looming Challenges

The U.S. Supreme Court in the coming weeks will decide whether to review a case involving Arthrex Inc. and Smith & Nephew Inc., in which the Federal Circuit found PTAB judges’ appointments were unconstitutional. To fix the problem, the appeals court stripped patent judges of firing protections.

There have been a chorus of calls for the justices to take the case, which Ropes & Gray LLP partner Matthew Rizzolo said is “all but a lock.”

Arthrex, which is among those calling for review, has argued the Federal Circuit correctly identified a constitutional problem but the fix is better left to Congress, which would have a range of options. One, it said, could be to abandon IPR altogether.

Two recently filed Federal Circuit cases separately argue the structure of the PTAB, including a system for awarding judges performance bonuses, incentivizes judges to agree to patent reviews. New Vision Gaming & Development Inc. and Mobility Workx LLC argue that is a due process violation.

Apple Inc. also has cited due process in its ongoing appeal of a PTAB review. The iPhone maker has alleged a “campaign of intimidation” from the patent owner, in the form of a series of letters to various government officials, including patent office leadership.

Supreme Court Invitation

The Supreme Court has waded into PTAB constitutional questions once before, with its 2018 ruling in Oil States v. Greene’s Energy.

The justices rejected arguments that inter partes reviews at the PTAB violate Article III of the Constitution and the Seventh Amendment right to a jury trial. But the court emphasized the ruling addressed only the “precise constitutional challenges” presented in the case.

“Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued,” Justice Clarence Thomas wrote for the majority in the 7-2 ruling. “Nor has Oil States raised a due process challenge.”

“Finally, Thomas added, “our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”

Rubén Muñoz, who leads the Philadelphia office of Akin Gump Strauss Hauer & Feld LLP, said that “immediately after Oil States people raised their antennas regarding due process and takings.” The Fifth Amendment’s takings clause says private property can’t be taken by the government without “just compensation.”

Due Process, Takings

Those two clauses have been the focus of a number of the challenges so far, perhaps fueled in part by Oil States.

The U.S. Court of Appeals for the Federal Circuit Aug. 24 upheld a lower court’s decision to throw out a proposed class action from Oklahoma company Christy Inc., arguing the invalidation of its patent was an unconstitutional taking. Canceling patent claims in inter partes review at the PTAB isn’t a taking, the court said.

Christy’s argument tracked ones that were made by companies like Celgene Corp., Genentech Inc., Collabo Innovations Inc., and Enzo Life Sciences Inc. Collabo also argued subjecting patents that were issued before the AIA to IPR was a violation of due process.

The Federal Circuit in another case held the Constitution doesn’t preclude the same judges that decided to review a patent from making the final validity determination.

Others have argued that “panel stacking,” where additional PTAB judges are added to the typical three-judge panel in a particular case, raises due process concerns. The PTAB has largely abandoned the practice under patent office director, Andrei Iancu.

The Supreme Court has passed on several invitations to wade back into the constitutional questions. The justices earlier this year declined to review a case involving the University of Minnesota, which argued state sovereign immunity reflected in the 11th Amendment should shield its patents from PTAB review.

While the case wasn’t a direct attack on the PTAB, the Federal Circuit in a ruling rejecting the school’s argument noted the potential for “manipulation,” whereby patent owners could transfer their patents to state entities and potentially undermine the PTAB process.

Creative Lawyering

One issue that hasn’t been cleanly raised yet but could be another line of challenge, attorneys say, is whether the retroactive application of the PTAB’s covered business method (CBM) review program to pre-AIA patents is constitutional. CBM reviews were another patent review program created under the AIA.

Within the context of IPRs, the Federal Circuit said patent owners for decades have known their patents could be subject to reexamination by the PTO and emphasized similarities between IPRs and review programs that predated them, like inter partes reexamination.

But CBM reviews are different from IPRs, allowing challengers to make additional types of arguments, including that a patent is invalid because it covers ineligible subject matter. Inter partes reexamination also limited the arguments that could be made.

“Maybe at the end of the day, a court looks at it and says that’s not enough of a difference,” Rizzolo, who is based in Washington, said. “But that’s certainly a fairly significant difference in my mind because the grounds that you can invalidate the patent on is something that a prospective applicant might take into account.”

There might also be a due process argument that when the PTAB invalidates a patent based on one ground, without addressing others in the petition, and the Federal Circuit reverses, the court shouldn’t send the case back to the board to decide those other grounds. Other constitutional arguments could be coming as well.

“We’ll see a lot of creative lawyering,” said Babcock, who heads Womble Bond’s PTAB trials practice group, although there will probably be a lot of “swings and misses.”

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.