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Cascades Challenges Constitutionality of Inter Partes Review

Ross Todd | The AM Law Litigation Daily

A subsidiary of patent licensing firm Cascades Ventures Inc. filed a lawsuit on Thursday challenging the constitutionality of the inter partes review provisions of the America Invents Act.

ECharge Licensing LLC, along with Nevada inventor J. Carl Cooper, filed the suit against the U.S. Patent and Trademark Office and deputy director Michele Lee in the Eastern District of Virginia. In their nine-page complaint, eCharge and Cooper claim that inter partes review—the administrative process for challenging patent validity created by the 2011 patent reform bill—violates the Seventh Amendment by taking the question of whether three patents issued to Cooper are valid out of the hands of a jury.

The plaintiffs claim that inter partes review proceedings amount to the executive branch asserting judicial power, violating constitutional principals of separation of powers. "Mr. Cooper's rights have become subject to nullification without trial by jury," the complaint says. The plaintiffs are asking for a declaratory judgment that the process is unconstitutional.

The review that prompted eCharge's lawsuit was initiated by mobile payment company Square Inc. ECharge, which holds the rights to license Cooper's patents, filed suit against Square in federal court in Chicago in September 2013, claiming that the company infringes three patents covering credit card and payment technology. Two months later, Square filed a petition with the PTO calling for an inter partes review. In January the judge overseeing the federal court litigation, U.S. District Judge Edmond Chang, granted a motion to stay the case pending the outcome of the inter partes review. The PTO gave the green light for the review to move forward last month.

In Thursday's complaint, eCharge's lawyers at Flaschbart & Greenspoon and BrigaliaHundley note that almost all inter partes reviews completed to date have invalidated patent claims. The Wall Street Journal reported in March that of the PTO's first 25 written decisions, claims with challenged patents had been upheld in just one.

"It's basically where patents go to die," Cascades founder and CEO Anthony Brown told us in a phone interview Friday. "The patent office, as part of the executive branch, is reflecting the antipatent bias of the executive branch."

Brown, a former Jenner & Block partner, was dubbed the "original patent troll" in IP Law & Business magazine along with his lawyer Raymond Niro back when he ran TechSearch LLC, a patent licensing and enforcement company Brown sold to Acacia Technology Research in 2005. Notably, Brown and Niro have reunited to press antitrust claims against defensive patent aggregator RPX Corporation—a lawsuit that survived a motion to dismiss—in December.

We reached out to Square's counsel at K&L Gates, Sanjay K. Murthy. Murthy pointed us to a company spokesperson, who didn't get back to us by the time of this post.