US Court Of Appeals For The Federal Circuit Rejects Argument That Inter Partes Review Is Unconstitutional

Keywords: intellectual property, PTAB, USPTO, patent, MCM Portfolio LLC,

On December 2, 2015, the United States Court of Appeals for the Federal Circuit affirmed the final written decision of the Patent Trial and Appeal Board (Board) of the US Patent & Trademark Office (USPTO) in an inter partes review proceeding, cancelling four claims of US Patent No. 7,162,549, owned by MCM Portfolio LLC (MCM).1 In affirming the Board, the court held that Article III and the Seventh Amendment of the US Constitution do not bar Congress from giving an expert agency the authority to cancel issued patents through administrative proceedings and without a jury trial. The court also reaffirmed that it lacks jurisdiction to review decisions to institute on appeal, even where those decisions are challenged on the basis that the petition was time-barred under 35 U.S.C. § 315(b) and held that the Board's determination of obviousness was supported by substantial evidence.

In MCM Portfolio LLC v. Hewlett-Packard Co., MCM appealed the Board's cancellation of claims 7, 11, 19 and 21 of MCM's patent on the grounds they were obvious. MCM argued, in part, that inter partes review proceedings violate Article III and the Seventh Amendment. According to MCM, the Supreme Court's decision in McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898), vested the power to cancel issued patents in Article III courts.

The Federal Circuit rejected MCM's interpretation of Supreme Court precedent and held that the cancellation of patent rights by an administrative agency was proper under the "public rights" doctrine. McCormick, the Federal Circuit explained, dealt with reissue proceedings, the authority of the USPTO and the timing of when a patent owner surrenders the original patent in reissue. It "did not address Article III and certainly did not forbid Congress from granting the [USPTO] the authority to correct or cancel an issued patent."

The court explained that "Congress has the power to delegate disputes over public rights to non-Article III courts." After setting forth a brief history of the public rights exception to the power of Article III courts, the Federal Circuit compared the statutory scheme authorizing the USPTO to conduct inter partes review proceedings with the regimes in three recent Supreme Court cases: Stern v. Marshall, 131 S. Ct. 2594 (2011) (bankruptcy courts), Commodity Futures Trading Commission v. Schor, 478 U.S. 833 (1986) (adversary proceedings...