Wednesday, January 28, 2015

A Constitutional Challenge to Inter Partes Review


Dennis Crouch's Patently-O: 2 new topics, including “A Constitutional Challenge to Inter Partes Review”

Link to Patently-O » Patent
Posted: 27 Jan 2015 08:42 PM PST
by Dennis Crouch
The America Invents Act (AIA) created a set of new administrative review procedures (IPR, PGR, CPR) that allow third-parties to challenge already issued patents.  This new approach takes a power that was previously held by courts and gives it instead to the USPTO. From a separation-of-powers perspective, the new law shifts power from the Article III courts in favor of the Article I executive-controlled agency.
After losing on the merits of the inter partes review brought by HP, patentee MCM has now appealed to the Federal Circuit — asking the court to find the inter partes review statute unconstitutional for violation of the Seventh Amendment right to a jury trial.
Question Presented:
Whether actions to cancel or revoke a patent must be tried in Article III Courts with access to a jury under the Seventh Amendment to the United States Constitution.
Ned Heller, author of the brief, reaches back to Marbury v. Madison, 5 U.S. 137 (1803), for the standard and accepted principle that “the question whether a property right may be revoked lies within the exclusive province of the Courts.” In 1893 the court explained further that:
The 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 Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898).
The largest hurdle for MCM is that the Federal Circuit decided the parallel issue with regard to reexaminations in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985). In Patlex, the Federal Circuit found that rexaminations did not violate Seventh Amendment.  In response, MCM argues (1) Patlex is wrongly decided; and (2) Patlex was effectively overruled by the Supreme Court in Stern v. Marshall, 564 U.S. 2 (2011) (although bankruptcy judge had statutory authority, it lacked Constitutional authority).
Notes:
  • Read the Brief: MCMBrief
  • In the Alternative: MCM also argues its case on the merits of obviousness and that the case is time–barred under 35 U.S.C. 315(b) since one of HP’s affiliates (Pandigital) was served with an infringement complaint more than one year before the IPR request was filed. Thus, it is possible that the court will rule in MCM’s favor without reaching the Constitutional question.
  • The patent at issue is US Patent No. 7,162,549 that broadly claims a controller chip for interfacing with a flash memory card used in many devices, such as digital photo frames.  More than 100 companies have been sued for infringement over the past six years, but no court has yet found the claims invalid.
Posted: 27 Jan 2015 09:23 AM PST
by Dennis Crouch
Plas-Pak Indus v Sulzer Mixpac (Fed. Cir. 2015) (non-precedential)
In 2011, Plas-Pak requested an inter partes reexamination of Sulzer’s paint-mixing Patent No. 7,815,384.  After considering the prior art, the examiner refused to issue the proposed obviousness rejection and that determination was affirmed by the PTAB. The proposed obviousness rejection involved two prior patents: Fukuta and Morris (inter alia).  Although the two references taught all of the Sulzer claim limitations the USPTO found that it would be improper to combine the references in an obviousness rejection.  In particular, the PTO found that the central feature of Fukuta involved the prevention of back-flow and the proposed combination with Morris would eliminate that core feature.  That required “substantial reconstruction” that so greatly impacts the “principle of operation” led to the Board’s conclusion that the combination would not have been obvious to one of ordinary skill in the art.
In most cases USPTO does not appeal an adverse PTAB decision. Here, however, the third party requester has appellate standing.
Under the rules of administrative procedure, factual findings made by the PTAB are reviewed by the Federal Circuit for “substantial evidence.” Under that low standard, the Federal Circuit will affirm factual conclusions so long as the evidence is sufficient such that “a reasonable mind might accept” that the conclusion is supported by the evidence.  Legal conclusions, on the other hand, are reviewed de novo by the Federal Circuit.
As with many areas of patent law, obviousness involves mixed questions of law and fact. On point here, questions of fact include (1) what a reference teaches; and (2) whether a proposed combination of references would impact a reference’s “principle of operation” while the ultimate conclusion as to whether an invention is obvious is seen as a question of law.  Of course another fundamental question of law is interpretation of the statute and precedent.
At first cut, the Federal Circuit appeared to follow these rules of review and gave deference to the PTAB’s principle of operation ruling. And, as a consequence affirmed the refusal to reject.
I see some error in the Federal Circuit’s approach.  In particular, the challenger’s argument here was not simply that the PTAB erred in reading the prior art to discover its principle of operation.  Rather, Plas-Pak argued that the PTAB erred by ruling that a prior art’s principle of operation should be limited to its innovative contribution to the art.  That general question of “how do we define a principle of operation” is a question of law and should be reviewed de novo by the court.  In its brief, Plas-Pak argued this particular point – that the appeal is focused on whether the Board applied the correct legal definition of a “principle of operation” — particularly “that a reference’s principle of operation is not equivalent or limited to its alleged contribution to the art.”
The decision here was authored by Judge Lourie and joined by Judges Moore and Reyna. However, because it was non-precedential, the standard operating procedures of the Federal Circuit do not require that it be first distributed to the other appellate judges prior to release.
Posted: 27 Jan 2015 07:30 AM PST
by Dennis Crouch
A bedrock of U.S. legal practice is attorney-client privilege that allows a party to keep certain communications secret.  This is an important exception to the broad discovery that is ordinarily permitted in U.S. civil litigation.
In U.S. patent prosecution, a number of privilege issues have arisen – particularly when the communication is not between a client and a U.S. attorney, but rather with a non-lawyer patent agent or a non-U.S. legal service provider.
The USPTO is considering whether to provide a set of best practices as advice to U.S. courts.  Taking the first step in that direction, the USPTO has published a Federal Register notice asking for comment on the following questions:
Whether and to what extent U.S. courts should recognize privilege for communications between foreign patent practitioners and their clients; the extent to which communications between U.S. patent applicants and their non-attorney U.S. patent agents should be privileged in U.S. courts; and whether and to what extent communications between U.S. patent practitioners and their clients should receive privilege in foreign jurisdictions.
A Roundtable will be held on February 18, 2015 and written comments can be submitted to ACPrivilege@uspto.gov by February 25, 2015.
LINK: http://www.gpo.gov/fdsys/pkg/FR-2015-01-26/pdf/2015-01241.pdf
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