brown gavel and open book on a wooden table of the law in the courtroom

The Federal Circuit rejected a patentee’s appeal arguing that inter partes review is unconstitutional for violating Article III and the Seventh Amendment right to a jury trial.  MCM Portfolio LLC v. Hewlett-Packard Co., No. 2015-1091 (Fed. Cir. December 2, 2015).  The precedential decision affirms the PTAB’s authority to adjudicate the validity of issued patents.

HP petitioned for inter partes review of various claims of MCM’s U.S. Patent No. 7,162,549, directed to methods and systems for coupling flash memory cards to a computer system.  The petition was granted, and the PTAB ultimately issued a final decision holding that MCM’s claims were invalid under 35 U.S.C. § 103.  MCM appealed the final decision on various grounds, including challenging the constitutionality of IPR proceedings.

The court relied heavily on Supreme Court and Federal Circuit precedents in rendering its decision.  In deciding the Article III issue, the court cited the Supreme Court’s decisions in Thomas, Schor, and Stern, which acknowledge that Congress has the power to delegate disputes over public rights, such as patent rights, to administrative agencies.  This “public rights doctrine” applies to disputes deriving from “a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.”  IPR derives from such a “federal regulatory scheme,” and the USPTO is such an executive agency with specific authority and special expertise to decide issues of patent law.

MCM’s argument that IPR proceedings violate the Seventh Amendment’s guarantee of a jury trial also was not persuasive.  Here, the court relied upon the Supreme Court’s decisions in Curtis, Atlas Roofing, and Granfinanciera, which establish that the Seventh Amendment does not generally apply in administrative proceedings where “jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with [the agency’s] role in the statutory scheme.”

Because patent rights are public rights and their validity susceptible to review by an administrative agency, the Seventh Amendment poses no barrier to agency adjudication without a jury

The court concluded that Congress did not violate the Seventh Amendment by creating the statutory right to inter partes review, noting that its analysis with respect to both the Article III and the Seventh Amendment issues is supported by its decisions in Patlex and Joy Techs relating to ex parte reexamination.

The panel clearly felt bound by Supreme Court and Federal Circuit precedent; indeed, the tone of the decision suggests that the constitutionality questions were not difficult to decide.  On a more practical note, the court also stressed that, once Congress establishes a statutory public right and corresponding administrative agency, it is logical for the administrative agency to have the power to “correct its own errors.”  In this regard, Judge Dyk offered “There is notably no suggestion that Congress lacked the authority to delegate to the PTO the power to issue patents in the first place.  It would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”