United States Constitution and gavel with brass ring.

Two petitions for certiorari are pending before the Supreme Court in which the aggrieved patent owners in MCM Portfolio LLC. v. Hewlett-Packard Co. and Cooper v. Lee are challenging the constitutionality of AIA trials.  The Federal Circuit in MCM Portfolio upheld the PTAB’s authority to adjudicate the validity of issued patents, determining that IPR proceedings are not unconstitutional under Article III or the Seventh Amendment right to a jury trial.  MCM Portfolio LLC. v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015).  In Cooper, the district court granted summary judgment against Cooper on administrative exhaustion grounds and the Federal Circuit summarily affirmed. Cooper v. Lee, 86 F.Supp.3d 480 (2015);  Cooper v. Lee, Nos. 2015-1483, 2016-1071 (Fed. Cir. 2016).  The Government filed briefs in opposition to both petitions – the Cooper opposition brief was filed in April, and the MCM opposition brief was filed in June.  A decision on the petitions is expected at the beginning of the Supreme Court’s October 2016 term.

In both briefs, the Government argued that while Article III generally prevents Congress from withdrawing from Article III courts any matter involving the exercise of judicial power, the Court has long recognized qualifications to the general rule, particularly for adjudication of a public right.  The Government argued that a patent is a “quintessential public right,” which exists only by virtue of statue and relied on prior Supreme Court decisions in Stern v. Marshall, 131 S.Ct. 2594 (2011), Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), and Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964), to support its position that the IPR procedure is the sort of mechanism that Congress may permissibly create to administer a public-right scheme. “A dispute between private parties may implicate public rights if ‘the claim at issue derives from a federal regulatory scheme,’ or if ‘resolution of the claim by an expert Government agency is deemed essential to a limited regulatory objective within the agency’s authority.”

A dispute between private parties may implicate public rights if ‘the claim at issue derives from a federal regulatory scheme,’ or if ‘resolution of the claim by an expert Government agency is deemed essential to a limited regulatory objective within the agency’s authority.

Both petitioners argued that 19th century Supreme Court decisions in McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1897), and United States v. American Bell Tel. Co., 128 U.S. 315 (1888), stand for the proposition that patent rights must be adjudicated in Article III courts. In both of its opposition briefs, the Government distinguished these cases. Reliance on McCormick, the Government argued, was misplaced because the Court there only held that the PTO had no basis for canceling an original patent based on the rejection of a later reissue application and the Court did not address Article III.  Similarly, the Government argued that American Bell was limited to holding that the Patent Act in its then-current form did not authorize the Executive Branch to cancel a previously issued patent.  Neither case addressed the ability of Congress to authorize the Patent Office or any other administrative body to reconsider the validity of previously issued patents.

In the MCM opposition brief, the Government argued that the fact that a dispute may implicate a property right does not mean that those rights are private rights that must be adjudicated in court.  The MCM opposition brief further drew corollaries to English practice, noting that the patent monopoly did not exist at common law. Instead, patents were awarded and enforced pursuant to the Statue of Monopolies, and actions seeking annulment or cancellations of patents were decided by courts of equity.

The Cooper opposition brief further argued that despite the determination in Stern that Congress had violated Article III by authorizing the bankruptcy court to adjudicate a state-law counterclaim for tortious interference, the Court’s reasoning underscores the conclusion that patents are a public and not a private right as they exist only by virtue of a federal statutory scheme.

While the Cooper opposition brief addressed the merits of Cooper’s arguments, the brief primarily focused on arguing that the case was an unsuitable vehicle to address the constitutionality questions because the challenge was appropriately rejected by the lower court on procedural grounds.  The district court held that Cooper failed to properly litigate through the procedures established by the AIA, which requires patent litigants utilize PTAB proceedings before obtaining judicial review.  The Government further argued that Cooper’s direct appeals from the PTAB decisions in the IPRs are pending before the Federal Circuit, and the constitutionality arguments will be rendered moot if those appeals are resolved in Cooper’s favor.

The Supreme Court’s decision on the petitions in both cases is expected at the beginning of October 2016 term.