Welcome

Divided Fed. Circuit Panel Rejects Patent Board Bias Attacks (1)

Oct. 13, 2021, 4:36 PMUpdated: Oct. 13, 2021, 8:36 PM

The Federal Circuit accepted patent owner Mobility Workx LLC’s argument that its case should be sent back to the patent office for director review in light of a recent U.S. Supreme Court case finding administrative patent judges were unconstitutionally appointed.

In a precedential opinion, the U.S. Court of Appeals for the Federal Circuit remanded Unified Patents LLC’s challenge to Mobility’s wireless patent under United States v. Arthrex, which gave the patent office director the power to overturn decisions the Patent Trial and Appeal Board makes in the inter partes review process.

Two judges of the three-member appellate panel rejected Mobility’s broader arguments that the board is structured in a way that creates due process concerns for patent owners.

Judge Pauline Newman was sympathetic to those arguments, particularly to Mobility’s concerns that the agency’s decisions to institute inter partes review are “duplicative, expensive, delaying, and subject to bias” because institution is decided by the same panel that ultimately rules on a patent’s validity.

“These aspects require more attention than my colleagues have accorded them, and raise new constitutional concerns” after Arthrex, she said in a partial dissent.

The patent office welcomed “the Federal Circuit’s decision holding that the asserted constitutional challenges pertaining to the Patent Trial and Appeal Board (PTAB) are without merit and rejecting the argument that PTAB judges have a financial interest in instituting reviews of challenges to patent claims,” an agency spokesperson said in an email.

This is the second case recently to raise concerns that the PTAB is constitutionally flawed because its process for starting patent reviews is based on incentives that create the appearance of bias.

In the earlier case, New Vision Gaming v. SG Gaming, the court ordered Arthrex remand without engaging with the bias arguments. Here the majority addressed the arguments but remained unswayed by them.

Counsel for New Vision, Matthew Dowd of Dowd Scheffel PLLC in Washington, said he’s still hopeful.

“New Vision’s case remains pending in view of Arthrex, and we await our outcome,” Dowd said in an email. “While Mobility Workx did later adopt many of the same arguments that we first raised for New Vision, our due process argument is important enough to warrant further consideration if New Vision’s panel addresses the due process issue and reaches a different result or invokes different reasoning.”

‘No Merit’

Unified challenged Mobility’s U.S. Patent No. 8,213,417 on methods for proactive allocation of wireless resources after Mobility sued Unified members T-Mobile and Verizon Wireless for infringement. The board held most of the challenged claims of the patent invalid as obvious.

On appeal, Mobility raised constitutional challenges to the agency’s structure for the first time. It said administrative patent judges have impermissible financial interest in instituting review proceedings.

The Federal Circuit found “no merit” to Mobility’s argument that the fee-generating structure of the America Invents Act creates a temptation for the board to institute review to collect post-institution fees to fund the agency.

The APJs’ role in budgeting is “too remote to constitute a due process violation” because they aren’t responsible for the agency’s finances and Congress controls the agency’s budget.

The majority also rejected Mobility’s argument that individual APJs have a personal interest in instituting review to increase their performance bonuses. There are other ways to earn a bonus, the court said.

The court noted a statistical study “purportedly showing that there are more meritorious institution decisions in September (at the end of the APJ performance review year) than in October (at the beginning of the performance review evaluation period)” presented by amicus curiae US Inventor Inc. The court said in a footnote that the study “hardly establishes” that APJs institute reviews to earn larger bonuses.

Robert Greenspoon of Dunlap Bennett & Ludwig PLLC, who represented US Inventor, called the court’s dismissal of the analysis “a regrettable error.” The study actually showed a “consistently higher ratio of questionable institutions in October,” he said in an email.

“The point about ratios is that it controls for everything except judging results,” Greenspoon said. “We linked a bias in judging to the precise time when salary performance metrics reset.”

The court did agree with Mobility that remand is required under Arthrex to allow the director to review the board’s decision below under new agency procedures. It gave Mobility 30 days to request rehearing.

Judge Timothy B. Dyk wrote the opinion, joined by Judge Alvin A. Schall.

‘Perfunctory Ratification’

Newman agreed with the majority’s decision to remand the case for director review. But she dissented from her “colleagues’ endorsement of the status quo” regarding Mobility’s other constitutional arguments.

The Arthrex decision raises another potential appointments clause concern because the decision to institute patent review has been delegated from the director to the same panel of inferior officers that ultimately decide the fate of the patent, she said.

“The issue is not whether PTAB members have the skill to make the institution decision and to do so impartially, as the PTO argues,” she said. “The issue is whether this final nonappealable decision requires the authority of a principal officer.”

She argued the majority erred in its “perfunctory ratification of the current practice,” rather than restoring the institution decision to the director to resolve the constitutional problems.

Hackler Daghighian Martino & Novak represented Mobility. Erise IP PA represented Unified.

The case is Mobility Workx, LLC v. Unified Patents, LLC, Fed. Cir., No. 20-1441, 10/13/21.

(Updated with comments.)

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bloomberglaw.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloombergindustry.com

To read more articles log in.

Learn more about a Bloomberg Law subscription.