Federal Circuit Deems IPR Constitutional: The Patent Office Can Correct Its Own Mistakes

Yesterday the Federal Circuit ruled in MCM Portfolio LLC v. Hewlett-Packard Company (here) that vesting the Patent Office with power to take back previously-conferred patent rights through inter partes review does not violate Article III or the Seventh Amendment. According to Judge Dyk:

“Congress created the PTO … and saw powerful reasons to utilize [its] expertise … for an important public purpose—to correct the agency’s own errors in issuing patents in the first place. Reacting to ‘a growing sense that questionable patents are too easily obtained and are too difficult to challenge,’ Congress sought to ‘provide a more efficient system for challenging patents that should not have been issued’ and to ‘establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.’… It would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”

The Court noted that ex parte reexamination by the Patent Office was deemed constitutional in the Patlex decision and found no reason to distinguish such proceedings from inter partes review (IPR): “Congress viewed inter partes review as ‘amending ex parte and inter partes reexamination,’ and as a descendant of an experiment began ‘nearly 30 years ago … through which the USPTO could review the validity of already-issued patents … as an effective and efficient alternative’” to costly litigation.

The MCM Court also held that IPR does not violate the Seventh Amendment right to a trial by jury. Judge Dyk explained that when Congress creates new statutory public rights it has the authority to assign their adjudication to an administrative agency with which a jury trial would be incompatible: “Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with special competence in the relevant field.” The Court noted in particular that the grant of a valid patent is a public concern that involves a right conferred only by the government, even though validity often is disputed between private parties. “Because patent rights are public rights, and their validity susceptible to review by an administrative agency, the Seventh Amendment poses no barrier to agency adjudication without a jury.”

Along with these constitutional issues, the Court addressed whether the Board’s decision to institute IPR was barred by 35 U.S.C. § 315(b) and whether the claims-at-issue would have been obvious over the prior art. Consistent with its holding in In re Cuozzo SpeedTechs., 793 F.3d 1268 (Fed. Cir. 2015), the Court reiterated that it lacks jurisdiction to review any Board decision to institute an IPR. As to obviousness, the Federal Circuit affirmed the Board’s conclusions that the challenged claims were unpatentable over a combination of prior art references.

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