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Attorney Tests PTAB Power to 'Annihilate' Patents

Scott Graham | The Recorder

SAN FRANCISCO — A Chicago patent attorney and his client are trying to shut down inter partes review, arguing that the procedure that has reshaped U.S. patent litigation is unconstitutional.

Robert Greenspoon of Flachsbart & Greenspoon is asking the U.S. Court of Appeals for the Fourth Circuit to rule that once the U.S. Patent and Trademark Office issues a valid patent, only an Article III court—and not an administrative court like the Patent Trial and Appeal Board—can take it away.

The PTO asked the Fourth Circuit a month ago to transfer the case to the Federal Circuit. Binding precedent there will send the case to a swift doom, the PTO says. But the Fourth Circuit hasn't addressed the motion yet, and Greenspoon filed his opening brief on the merits Monday. He quotes an 1898 Supreme Court decision that says the only authority for revoking a patent "is vested in the courts of the United States, and not in the department which issued the patent."

That decision may be 117 years old, but it hasn't been overruled, Greenspoon argues. And just last month, two Supreme Court justices asserted a similar concern in the trademark context. "Because federal administrative agencies are part of the executive branch, it is not clear that they have power to adjudicate claims involving core private rights," dissenting Justice Clarence Thomas wrote in B&B Hardware v. Hargis Industries.

Persuading a court to declare a statute unconstitutional is always an uphill battle. Shutting down inter partes review and its cousin, covered business method review, would be extraordinarily disruptive, given the time, money and human resources invested in the procedure to date.

But the Fourth Circuit has shown a willingness to upset the apple cart on occasion. Two years ago it joined the D.C. Circuit in declaring that the National Labor Relations Board overstepped its authority by requiring employers to display right-to-organize posters. And last year the appellate court outlawed North Carolina's "choose life" license plates on First Amendment grounds, an issue now pending at the Supreme Court.

Greenspoon's client J. Carl Cooper—an inventor and longtime target of criticism from patent reformers—hasn't had much luck so far. After Cooper and his company eCharge sued Square Inc. for patent infringement, Square petitioned for inter partes review of Cooper's patents, which the PTAB granted. While the case was still pending at the PTAB, Cooper brought his constitutional challenge in Virginia district court. U.S. District Judge Gerald Lee ruled the challenge was not likely to succeed, and in any event that Cooper had not yet exhausted his administrative remedies at the PTAB.

Earlier this year, the PTO addressed a similar constitutional attack that's already pending before the Federal Circuit. DOJ attorney William Havemann argues in that case that a patent is a public right, not a private one. Therefore, the PTO is well within its authority to correct its own mistakes and "remove patents that should never have been granted," he writes, citing Federal Circuit decisions from 1985 and 1992.

Cooper v. Lee, 15-1205, should be in the Federal Circuit too, Havemann argues in a motion to transfer filed with the Fourth Circuit on March 16. Cases arising under the patent laws are appealable only to the Federal Circuit, he points out. The Federal Circuit just last year claimed jurisdiction over a constitutional challenge to a different portion of the AIA, in MadStad Engineering v. United States. Greenspoon and his client should first litigate their case at the PTAB, and if they lose, then they can raise the constitutional issue in their appeal to the Federal Circuit, Havemann argued. Greenspoon responded two days later. "The Federal Circuit hears appeals only in cases 'arising under' an act of Congress relating to patents," he writes. In contrast, his case "arises over" the patent laws. "This case arises under the U.S. Constitution itself." Unlike in MadStad, the court is not being asked to interpret any disputed terms in the Patent Act.

Havemann replied March 20.

The Fourth Circuit hadn't ruled on the motion by Monday when Greenspoon filed his opening merits brief.

The Supreme Court's "public rights" exception was already established when the high court explicitly forbade the executive branch from adjudicating patent rights, he argues. While the Federal Circuit made an exception in 1985 for ex parte reexaminations, the court relied on the notion that patent examiners were merely restarting the examination process, working hand-in-hand with patent holders. That's certainly not the case with inter partes review, which is "a court-like trial between adversaries without the protections enjoyed by Article III courts."

Rather than enjoying life tenure, PTAB judges serve at the whim of the executive branch, and signs of "agency capture" are already apparent, Greenspoon writes.
Ex parte reexamination was "designed it to help patentees salvage their claims from prospective in-court invalidation," Greenspoon writes, "unlike inter partes review which Congress intended as a streamlined way to annihilate them."

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