Patent Owner Calls IPR Process Unconstitutional At Fed. Circ.

Law 360, Washington – September 11, 2015, by Jimmy Hoover – The owner of a now-invalid patent claiming the Patent Trial and Appeals Board’s inter partes review process is unconstitutional argued to a Federal Circuit panel Friday that patents are property rights that must be adjudicated in court rather than in administrative agencies.

MCM Portfolio LLC, which is suing Hewlett-Packard Co. for infringing its late flash memory patent, stressed to the panel that individuals whose property rights are challenged by a third party are entitled to a jury trial in a court established by Article III of the U.S. Constitution: a right neglected by the IPR process established by the America Invents Act.

Under the AIA, which Congress passed in 2011, third parties, typically those who have been targeted in an infringement action by a patent owner, can petition PTAB to review a patent for validity on a timeline far more efficient than in federal district court where such validity findings took place before.

According to MCM’s attorney, Edward P. Heller of Alliacense Limited LLC, cases litigated in common law courts “are inherently Article III cases and cannot be remanded by Congress and given to an administrative tribunal.” Otherwise, said Heller, “there would be a constitutional violation of Article III of the structure of our government.”

Heller cited a 2011 high court decision in Stern v. Marshall, a bankruptcy case involving the estate of late model Anna Nicole Smith, which he said affirmed that argument.

According to William Havemann, a lawyer representing the U.S. Patent and Trademark Office, “Congress did not take away any right” through the AIA, but rather provided an alternative route for patent adjudication by an “expert government agency,” citing a 1995 Federal Circuit decision in Patlex Corp. v. Mossinghoff that upheld the agency’s authority to conduct patent re-examinations. That case, Havemann said, correctly deemed patents “public rights” that can only be conferred by the USPTO.

“A patent is a creature of Congress … a monopoly that operates against the public at large,” Havemann told the panel.

Heller blasted the notion, saying public rights cannot be adjudicated in Article III courts, calling the two concepts “mutually exclusive.” To find otherwise, Heller said, would be to overrule three governing Supreme Court decisions on the issue.

While Heller spent nearly his entire argument on the constitutionality question Friday, MCM has hedged its bets in the case, arguing in its January brief to the appeals court that the board erred since HP lacked standing to challenge the patent in the first place because its petition was untimely.

MCM maintains that an HP affiliate, Pandigital Inc., was served with a complaint more than a year before the petition was filed, thus violating the AIA’s time-bar.

On Friday, HP blasted the argument, saying MCM has effectively challenged the board’s institution decision, which under the AIA, is “not appealable.”

That argument closely mirrors a similar one made by Apple Inc. last month before the Federal Circuit in a bid to hold in place the PTAB’s invalidity finding of software patents Achates Reference Publishing Inc.

During that case, Judge Prost appeared more concerned with the AIA’s one-year, post-lawsuit deadline than the more nebulous bar to institution appeals, which many have argued does not apply to jurisdictional claims, but rather the merits of the institution decision.

U.S. Circuit Judges Timothy B. Dyk, Sharon Prost and Todd Hughes sat on the panel.

The patent-in-suit is U.S. Patent Number 7,162,549.

MCM is represented by Susan Anhalt of Fountainhead IP LP and attorney Edward Heller.

USPTO is represented by in-house counsel William E. Havemann, Mark R. Freeman, Nathan K. Kelley and Scott Weidenfeller.

HP is represented by Marcia H. Sundeen, Robert L. Hails Jr., Adeel Haroon, Rose Cordero Prey and T. Cy Walker of Kenyon & Kenyon LLP.

The case is MCM Portfolio LLC v. Hewlett-Packard Co., case number 15-1091, in the U.S. Court of Appeals for the Federal Circuit.

—Additional reporting by Ryan Davis. Editing by Ben Guilfoy.


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