On December 2, the Court of Appeals for the Federal Circuit issued an opinion upholding the constitutionality of administrative inter partes review (IPR) by the United States Patent and Trademark Office (USPTO). Citing Federal Circuit and United States Supreme Court precedent, the Federal Circuit rejected the argument that Article III of the United States Constitution, and the Seventh Amendment right to a jury trial, require judicial proceedings to invalidate patent claims.
The dispute involved a patent owned by MCM Portfolio LLC (MCM) covering a method and system for coupling flash memory cards to a computer using an error-correcting controller chip. Hewlett-Packard Co. filed an IPR petition against MCM, challenging the validity of four claims of MCM’s patent. The Patent Trial and Appeal Board granted the IPR petition and invalidated all four claims as obvious over prior art in the field.
MCM appealed, claiming that the administrative IPR procedure itself violates Article III of the United States Constitution and the Seventh Amendment. MCM cited McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898), in which the United States Supreme Court stated: “[t]he only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” McCormick at 609.
The Federal Circuit Court of Appeals rejected MCM’s constitutional argument, finding that IPR procedures do not violate any protections the Constitution extends to public rights specifically—such as patent rights. Article III and the Seventh Amendment do not bar Congress from granting the USPTO authority to correct or cancel an issued patent. Citing a long history permitting a federal agency to administer public rights created by federal law, the Court held that the USPTO’s IPR system was an appropriate exercise of Congressional authority. “McCormick did not address Article III and certainly did not forbid Congress from granting the PTO the authority to correct or cancel an issued patent.” Slip op. at 9.
In the recent Cooper v. Lee, 86 F.Supp.3d 480 (E.D. Va. 2015), plaintiff Cooper alleged constitutional arguments similar to MCM’s. The Eastern District of Virginia granted summary judgment against Cooper and avoided the Constitutional issues by concluding Cooper had not exhausted administrative remedies before seeking judicial relief. Unless the Fourth Circuit reaches a different result on Cooper’s current appeal (thus creating a conflict in the Circuits), the Supreme Court now seems less likely to weigh in on this issue. The discord between the powerful language of McCormick and the modern practices of the USPTO may continue without reconciliation for now.