MOBILITY WORKX, LLC, Appellant v. UNIFIED PATENTS, LLC, Appellee ANDREW HIRSHFELD, PERFORMING THE FUNCTIONS AND DUTIES OF THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Intervenor
2020-1441
United States Court of Appeals for the Federal Circuit
October 13, 2021
Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2018-01150.
DAVID A. RANDALL, Hackler Daghighian Martino & Novak, Los Angeles, CA, argued for appellant. Also represented by MICHAEL MACHAT, Law Offices of Michael Machat, PC, West Hollywood, CA.
JASON R. MUDD, Erise IP, P.A., Overland Park, KS, argued for appellee. Also represented by ERIC ALLAN BURESH; ASHRAF FAWZY, JONATHAN RUDOLPH KOMINEK STROUD, Unified Patents, LLC, Washington, DC.
DANA KAERSVANG, Civil Division, Appellate Staff, United States Department of Justice, Washington, DC, argued for intervenor. Also represented by MELISSA N. PATTERSON; KAKOLI CAPRIHAN, SARAH E. CRAVEN, THOMAS W. KRAUSE, FARHEENA YASMEEN RASHEED, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA.
ROBERT GREENSPOON, Dunlap, Bennett, & Ludwig, PLLC, Chicago, IL, for amicus curiae US Inventor, Inc.
Before NEWMAN, SCHALL, and DYK, Circuit Judges.
Opinion for the court filed by Circuit Judge DYK.
Opinion concurring in part and dissenting in part filed by Circuit Judge NEWMAN.
Mobility Workx (“Mobility“) appeals a decision of the Patent Trial and Appeal Board (“Board“) determining that claims 1, 2, 4, 5, and 7 of U.S. Patent No. 8,213,417 (the “‘417 patent“) were unpatentable as obvious. In addition to requesting a remand under United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), and challenging the merits of the Board‘s decision, Mobility raises for the first time on appeal several additional constitutional challenges, including a challenge to the structure of the Board. We first address these other constitutional challenges because a determination that the Board is unconstitutionally structured or that the proceedings are otherwise unconstitutional would dispose of the case and make consideration of the Arthrex issue or the merits unnecessary.
We conclude that Mobility‘s constitutional arguments are without merit. Without reaching the merits of the Board‘s decision, in light of Arthrex, we remand to the Acting Director to determine whether to grant rehearing.
BACKGROUND
I
The Background section of the ‘417 patent explains that mobile communication systems are typically composed of mobile nodes (e.g., cell phones) that communicate with one another through a series of base stations. Base stations serve different zones or cells, such that when a mobile node moves from one cell to another, it must connect to a new base station. When a mobile node has connected to a new base station, i.e., when it is moving, it must let other mobile nodes know where it can be reached. This can be accomplished by having a mobile node register with a “home agent so that the home agent can remain a contact point for other nodes that wish to exchange messages . . . with the mobile node as it moves from one location to another.” ‘417 patent col. 1 ll. 39-44.
This system allows a mobile node to “use two IP addresses, one being a fixed home address and the other being a care-of
The ‘417 patent attempts to prevent these delays and data losses by using a ghost foreign agent and a ghost mobile node that “can be configured to register the mobile node and allocate resources for communicating with the mobile node according to a predicted future state of the mobile node.” ‘417 patent col. 2 ll. 44-61. In other words, the ghost mobile node operates by “signaling the foreign agent before the mobile node arrives in the foreign agent‘s physical region of coverage, based upon the predicted future state of the mobile node.” Appellant‘s Br. 9. This, in turn, increases the speed with which a mobile node can connect to a new network, reducing delays and avoiding information losses.
In 2017, Mobility brought suit for infringement of the ‘417 patent against T-Mobile and Verizon Wireless in the Eastern District of Texas (one of these proceedings has settled, and the other is stayed pending resolution of this appeal). On June 1, 2018, Unified Patents filed a petition seeking inter partes review of claims 1-7 of the ‘417 patent on the theory that those claims would have been obvious over U.S. Patent No. 5,825,759 in combination with several other references. On December 2, 2019, the Board issued its final written decision, determining that claims 1, 2, 4, 5, and 7 were unpatentable as obvious, but that claims 3 and 6 were not shown to be unpatentable. Mobility appeals. We have jurisdiction under
DISCUSSION
I
For the first time on appeal, Mobility raises constitutional challenges to the USPTO‘s structure under the Leahy-Smith America Invents Act (“AIA“), Pub. L. No. 112-29, 125 Stat. 284 (2011). Mobility argues that Board members have an impermissible financial interest in instituting AIA proceedings under the standard articulated in Tumey v. Ohio, 273 U.S. 510 (1927). Mobility‘s Tumey challenge has two parts. First, Mobility contends that Board members have an interest in instituting AIA proceedings to generate fees to fund the agency and ensure future job stability. Second, Mobility contends that individual administrative patent judges (“APJs“) have a personal financial interest in instituting AIA proceedings in order to earn better performance reviews and bonuses.
A
Unified Patents and the government argue that Mobility forfeited these challenges because Mobility did not raise these theories before the Board.
Under Supreme Court and circuit precedent, agencies generally do not have authority to declare a statue unconstitutional. See Oestereich v. Selective Serv. Sys. Local Bd. No. 11, 393 U.S. 233, 242 (1968) (Harlan, J., concurring in result) (“Adjudication of the constitutionality of congressional enactments has generally been thought beyond
In any event, we have discretion to consider new arguments for the first time on appeal. See Singleton v. Wulff, 428 U.S. 106, 121 (1976) (“The matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases.“); Golden Bridge Tech., Inc. v. Nokia, Inc., 527 F.3d 1318, 1322-23 (Fed. Cir. 2008) (“[A]ppellate courts are given the discretion to decide” whether to consider arguments raised for the first time on appeal). Thus, we have “discretion to review a constitutional challenge not timely raised before the lower tribunal.” In re DBC, 545 F.3d 1373, 1380 (Fed. Cir. 2008).
The government nonetheless argues that we should not address these arguments because they are dependent on the resolution of factual issues that should be presented to the PTAB in the first instance. Mobility did not in its opening brief request a remand to develop a more comprehensive record. We conclude that considering Mobility‘s constitutional challenges is appropriate because addressing these arguments does not require resolution of any disputed factual issues. See Celgene, 931 F.3d at 1357.
Mobility‘s challenge is based on various agency documents that Mobility argues can be judicially noticed. Under the Federal Rules of Evidence, “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”
Here, many of the proffered documents were published in the Federal Register or on the USPTO‘s website. Other agency documents were obtained through a Freedom of Information Act (“FOIA“) request. One document is a report from the Congressional Research Service. These types of government documents are capable of being “accurately and readily determined from sources whose accuracy cannot reasonably be questioned.”
Because, as explained below, we determine that Mobility‘s documents, even considered in isolation, do not establish a due process violation, neither the government nor Unified Patents is prejudiced by our decision to take judicial notice of these documents and to resolve the issues to which they pertain without a remand.2 We therefore grant Mobility‘s motion for judicial notice and address the due process issues.
II
Mobility argues that the structure and funding of the Board violates due process. Three Supreme Court cases define the scope of due process in this area. The first of these cases is Tumey v. Ohio, 273 U.S. 510 (1927).
In Tumey, the Supreme Court held that a defendant‘s conviction in a mayor‘s court violated due process because a convicted defendant was required to pay fees, and the mayor presiding over the proceedings received compensation if the defendant was convicted, but received no such compensation if the defendant was acquitted. Id. at 531-32. The Court additionally determined that the structure of the mayor‘s court violated due process because the fees paid by convicted parties also funded the village itself, and the mayor as “the chief executive of the village . . . [wa]s charged with the business of looking after the finances of the village.” Id. at 533. The Court explained that
[e]very procedure which would offer a possible temptation to the average man as a judge to forget the burden of proof required to convict the defendant, or which might lead him not to hold the balance nice, clear, and true between the state and the accused denies the latter due process of law.
The Court again addressed the constitutionality of a mayor‘s court in Dugan v. Ohio, 277 U.S. 61 (1928). In Dugan, the city had a “commission form of government, with five
The Supreme Court determined that this structure did not violate due process, distinguishing Tumey. Id. at 63-64. The Court emphasized that, unlike the mayor in Tumey, the Dugan mayor did not receive fees from the conviction of defendants but instead received a fixed salary. Id. at 65. The Court explained that while the mayor‘s salary “[wa]s paid out of a fund to which fines accumulated from his court under all laws contribute, it [wa]s a general fund” and that the mayor “receive[d] a salary in any event, whether he convicts or acquits.” Id. The Court therefore concluded that the mayor did not have an impermissible personal financial interest in convictions.
The Court additionally determined that the mayor did not have an impermissible interest in generating revenue for the city. Id. The Court distinguished Tumey as involving a mayor who served as “chief executive . . . responsible for the financial condition of the village” and “who by his interest as mayor might be tempted to accumulate from heavy fines a large fund by which the running expenses of a small village could be paid, improvements might be made, and taxes reduced.” Id. By contrast, the Dugan mayor was “one of five members of the city commission” and thus had only a “remote” relation “to the fund contributed to by his fines as judge, or to the executive or financial policy of the city.” Id.
Finally, in Ward v. Monroeville, the Supreme Court examined a mayor‘s court in which fines paid by convicted defendants were paid to the village and not to the mayor himself. 409 U.S. 57, 60 (1972). The Court again found a due process violation because the mayor had “executive responsibilities for village finances” that might “make him partisan to maintain the high level of contribution from the mayor‘s court.” Id.
A
Mobility first argues that “the fee-generating structure of AIA review[] creates a temptation” for the Board to institute AIA proceedings in order to collect post-institution fees (fees for the merits stage of the AIA proceedings) and fund the agency. Appellant‘s Br. 45. Mobility contends that the agency generates substantial revenue from these fees, calculating that “24% of the PTAB‘s collections [are] dependent on instituting” AIA proceedings. Appellant‘s Br. 18-19.
Mobility contends that the Chief APJ, Deputy Chief APJ, and Vice Chief APJs participate in AIA review proceedings and “provide policy direction and ensure the quality and consistency of AIA decisions,” id. at 33, while also “oversee[ing] fiscal planning and expenditures” of the Board, id. at 34.3 Thus, Mobility contends that these leadership APJs perform the “untenable dual role of managing the [Board‘s] finances in a ‘business-like sense’ and deciding AIA petitions solely on the merits.” Id. Mobility concludes that this “impermissible mixing of judicial and administrative/executive
Unlike the mayors in Tumey and Ward, the Chief APJ, Deputy Chief APJ, and Vice Chief APJs do not have responsibility for the agency‘s finances. While these leadership APJs assist the Director by preparing budget requests and executing the operating budget, “the Director, not the APJs, has responsibility for USPTO‘s budgetary request to the Office of Management and Budget, in consultation with the USPTO Public Advisory Committees.” Intervenor‘s Br. 28. The leadership APJs’ role in budgeting is therefore too remote to constitute a due process violation. See Dugan, 277 U.S. at 65; see also Doolin Sec. Sav. Bank, F.S.B. v. FDIC, 53 F.3d 1395, 1407 (4th Cir. 1995).4 The role of other APJs in the budgetary process is even more remote, and even less a due process problem.
More fundamentally, the USPTO is a fee-funded agency for “which Congress annually appropriates funds . . . based on annual USPTO fee collection estimates.” Intervenor‘s Br. 3. The agency‘s fees for institution and post-institution work on AIA proceedings do not automatically become available to the agency. See Pub. L. No. 116-93, div. B, 133 Stat. 2317, 2389 (2019). Mobility contends that the reality is otherwise because “[i]n the last few years, Congress has appropriated to USPTO all the money [the USPTO] collects” and that the “Director effectively knows that the [US]PTO can set fees at the level it wants and retain all the fees it collects this year.” Appellant‘s Reply Br. 9-10 (quoting Intervenor‘s Br. 4). Mobility also points out that the AIA created the Patent and Trademark Fee Reserve Fund for fees “collected in excess of the appropriated amount,” arguing that such a fund creates an improper incentive to collect fees. Appellant‘s Br. 16-17 (citing
Mobility‘s challenge cannot succeed. The President, not the USPTO, submits the budget, and Congress ultimately sets the USPTO budget. Congress similarly controls whether the USPTO has access to the surplus funds
collected in the Patent Trademark Fee Reserve Fund. See
Other courts of appeals have held that similar congressional control over an agency‘s budget eliminates any argument under Tumey. In Delaware Riverkeeper Network v. Federal Energy Regulatory Commission, 895 F.3d 102 (D.C. Cir. 2018), the D.C. Circuit concluded that the funding structure of the Federal Energy Regulatory Commission (“FERC“), which required FERC to recover its annual operating costs from fees and charges paid by regulated entities, did not violate due
In United States v. Benitez-Villafuerte, the Fifth Circuit similarly concluded that “[a]lthough the INS‘s congressional funding depends to some extent on its statistical workload in apprehending and deporting illegal aliens, this fact provides too tenuous an influence” to violate due process. 186 F.3d 651, 660 (5th Cir. 1999).
Significantly, we rejected a similar challenge to the fee structure for reexamination proceedings, which at the time granted applicants “a refund of $1,200” if “the Commissioner decide[d] not to institute a reexamination proceeding.” Patlex Corp. v. Mossinghoff, 771 F.2d 480, 487-88 (Fed. Cir. 1985) (rejecting argument that this fee structure “unlawfully weight[ed] the [US]PTO‘s initial decision in favor of granting reexamination, because only if reexamination [wa]s granted w[ould] the PTO avoid refunding $1,200 of the $1,500 fee for reexamination“). We found no due process violation, distinguishing Tumey and Ward because “in those cases the fines were discretionary and were levied at the initiative of those benefiting from the income; in the case of the [US]PTO the fees are set by Congress, and are paid by those members of the public who seek the benefits of the service.” Id. at 487.
Here, as in Delaware Riverkeeper, Benitez-Villafuerte, and Patlex, congressional control of the USPTO‘s budget renders any agency interest in fee generation too tenuous to constitute a due process violation under Tumey.5
B
Mobility alternatively argues that individual APJs have an unconstitutional interest in instituting AIA proceedings because their own compensation in the form of performance bonuses is favorably affected.
APJ compensation is governed by statute and regulation, and APJs recover a fixed salary.
Mobility makes a similar argument with respect to APJ salary increases, which are conditioned on performance reviews. Mobility contends that an “APJ‘s salary can be increased, up to five percent, depending on the APJ‘s numerical rating and final Performance Rating.” Id.
Even accepting Mobility‘s characterization of APJ compensation, however, we conclude that APJs do not have a significant financial interest in instituting AIA proceedings to earn a bonus. Initially, we note that the number of decisional units earned by an APJ “is based upon the number of decisions authored” and “does not depend on the outcomes of those decisions.” Intervenor‘s Br. 38. This stands in sharp contrast to Tumey and Ward, which involved fees that were only collected upon conviction of the defendants. See Tumey, 273 U.S. at 531; Ward, 409 U.S. at 58; see also Dugan, 277 U.S. at 65 (explaining that the mayor “receive[d] a salary which [wa]s not dependent on whether he convict[ed] in any case or not“).
Even though an APJ will earn decisional units for a follow-on merits decision if he or she issues a decision instituting an AIA proceeding, there has been no showing that APJs institute AIA proceedings to earn sufficient decisional units to qualify for a bonus. Decisional units can be earned by participation in non-AIA proceedings, and there is a significant backlog of ex parte appeals. While APJs are generally assigned to specific jurisdictions of the Board (e.g., AIA proceedings or ex parte appeals), APJs are free to “request ex parte appeals to be added to his or her docket.” J.A. 4355. Mobility does not dispute that APJs have access to non-AIA work or that there is sufficient non-AIA work for APJs to meet the 84 decisional unit threshold for additional compensation. Thus, even if there were an incentive to institute AIA proceedings to earn decisional units, any interest APJs have in instituting AIA proceedings to earn decisional units would be too remote to constitute a due process violation.6 See, e.g., Del. Riverkeeper, 895 F.3d at 112 (rejecting due process challenge directed at agency‘s interest in “seek[ing] larger appropriations from Congress in the future“); see also Van Harken v. City of Chicago, 103 F.3d 1346, 1353 (7th Cir. 1997).
Mobility has therefore failed to establish that APJs have an unconstitutional financial interest in instituting AIA proceedings.7
Mobility raises several additional constitutional challenges not raised before the agency that have been previously rejected by this court in other cases.
Mobility argues that the Director‘s delegation of his authority to institute AIA proceedings violates due process and the Administrative Procedure Act because the Director has delegated the initial institution decision to “the exact same panel of Judges that ultimately hears the case.” Appellant‘s Br. 46. We have previously rejected a nearly identical challenge. See Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023, 1033 (Fed. Cir. 2016) (“[B]oth as a matter of inherent authority and general rulemaking authority, the Director had authority to delegate the institution decision to the Board. There is nothing in the Constitution or the statute that precludes the same Board panel from making the decision to institute and then rendering the final decision.“).
Mobility additionally argues that subjecting a pre-AIA patent to AIA review proceedings “constitutes an unlawful taking of property.” Appellant‘s Br. 4. Again, we have previously rejected a nearly identical challenge. See Celgene Corp. v. Peter, 931 F.3d 1342, 1360 (Fed. Cir. 2019) (“In this case it suffices for us to decide that IPRs do not differ sufficiently from the PTO reconsideration avenues available when the patents here were issued to constitute a Fifth Amendment taking.“), cert. denied, 141 S. Ct. 132 (2020).
V
Finally, Mobility raises an Appointments Clause challenge. We agree that a remand is required under the Supreme Court‘s decision in Arthrex to allow the Acting Director to review the final written decision of the APJ panel pursuant to newly established USPTO procedures. See https://www.uspto.gov/patents/patent-trial-and-appeal-board/procedures/uspto-implementation-interim-director-review (June 29, 2021); https://www.uspto.gov/sites/default/files/documents/20210701-PTAB-BoardsideChat-Arthrexfinal.pdf (July 1, 2021). However, Mobility now argues that it is entitled to more than a remand. Following the Supreme Court‘s decision in Arthrex, Mobility argued, for the first time, that we should instruct the Acting Director “to issue a certificate under [35 U.S.C.] § 318(b) confirming the challenged claims, or, in the alternative, dismissing [Unified Patent‘s] petition for failing to reach a final determination within the” 12-month statutory period for final determination in an inter partes review under
We therefore remand to the Board for the limited purpose of allowing Mobility the opportunity to request Director rehearing of the final written decision. Mobility must file any such request for rehearing within 30 days from the date of this decision. We will retain jurisdiction over this appeal during this limited remand. Within 14 days of a decision granting rehearing, the government shall inform this court of that decision and make any request to remand the case in full or continue the stay of proceedings. The government‘s request shall include a statement of consent or opposition. We decline to reach Mobility‘s merits challenge until the Acting Director has determined whether rehearing is warranted.
REMANDED
COSTS
No costs.
MOBILITY WORKX, LLC, Appellant v. UNIFIED PATENTS, LLC, Appellee ANDREW HIRSHFELD, PERFORMING THE FUNCTIONS AND DUTIES OF THE UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY AND DIRECTOR OF THE UNITED STATES PATENT AND TRADEMARK OFFICE, Intervenor
2020-1441
Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. IPR2018-01150.
NEWMAN, Circuit Judge, concurring in part, dissenting in part.
I agree with the decision to remand this case to the Director of the U.S. Patent and Trademark Office for review of the final decision of the Patent Trial & Appeal Board (PTAB or “Board“). This remand implements the Supreme
Court‘s decision in United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), as a way to achieve compliance with the Appointments Clause of the Constitution, for the Court observed that “the source of the constitutional violation is the restraint on the review authority of the Director, rather than the appointment of the APJs by the Secretary . . . .” Id. at 1988. The Court achieved constitutional compliance by authorizing the Director to review the PTAB‘s decisions.
The Court in Arthrex did not discuss any other aspect of this new (since 2012) system whereby issued patents are subject to review and cancellation by the Patent and Trademark Office (PTO). Mobility Workx raises several issues concerning this system, including constitutional issues. In addition, the Court‘s Arthrex decision now raises another possible Appointments Clause concern, stemming from the PTO‘s conduct of the procedure of “institution.”
From my colleagues’ endorsement of the status quo, I respectfully dissent.
DISCUSSION
New technologies are the drivers of today‘s economy and the source of our national strength. New technologies present new complexities of law, science, and societal impact, with fresh issues of public and private interest. In the
During the gestation of the
The procedure called “institution” was established by the
Among the most important protections for patent owners added by the present bill are its elevated thresholds for instituting inter partes and post-grant reviews. The present bill dispenses with the test of “substantial new question of patentability,” a standard that currently allows 95% of all requests to be granted. It instead imposes thresholds that require petitioners to present information that creates serious doubts about the patent‘s validity. Under section 314(a), inter partes review will employ a reasonable-likelihood-of-success threshold . . . .
Id. The House Report at enactment similarly stated that the
Mobility states that these promises have not been kept. Mobility states that the PTO‘s institution procedures are duplicative, expensive, delaying, and subject to bias. These aspects require more attention than my colleagues have accorded them, and raise new constitutional concerns.
The institution decision is final and nonappealable and its conduct raises Appointments Clause issues
Guided by the Supreme Court‘s recent decision in Arthrex, the procedure of institution appears likely to violate the Appointments Clause, for institution, as it is currently conducted by the PTAB, is a final decision of an inferior officer, without supervision or control or review by a principal officer of the agency. Mobility also states that the institution procedure, as it is conducted by the PTAB, does not apply the elevated standard of the legislative purpose, and simply increases the burden on inventors and patent owners and the system of innovation.
The PTO‘s brief as Intervenor describes the conduct of institution as follows:
AIA proceedings, including inter partes review, have two stages. First, the Board decides whether to institute proceedings. This decision is “final and nonappealable,”
35 U.S.C. §§ 314(d) ,324(e) . If the agency decides to institute proceedings, the Board‘s final written decision as to patentability is subject to judicial review in this Court. See id.§§ 318(a) ,319 ,328(a) ,329 .
PTO Br. 8 (footnote omitted).
As the PTO brief states, “the Board decides whether to institute proceedings.” Id. However, the
35 U.S.C. § 314 — Institution of inter partes review(a) Threshold.—The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.
Thus the Director decides whether a requested inter partes review will be conducted; the statute sets the timing for this decision:
§ 314(b) Timing.—The Director shall determine whether to institute an inter partes review under this chapter pursuant to a petition filed under section 311 and any response filed within 3 months after— (1) receiving a preliminary response. . . ; or (2) . . . the last date on which such response may be filed.
The Director‘s decision whether to institute review is final and is not appealable:
§ 314(d) No Appeal.—The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.
The Supreme Court referred to the nonappealability of institution, in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016):
[W]here a patent holder merely challenges the Patent Office‘s “determin[ation] that the information presented in the petition . . . shows that there is a reasonable likelihood” of success “with respect to at least one of the claims challenged,”
§ 314(a) , or where a patent holder grounds its claim in a statute closely related to that decision to institute inter partes review,§ 314(d) bars judicial review.
Id. at 2142 (alterations in original). The Court was not concerned in Cuozzo with the identity or appointment of the decision-maker.
Although the
The authorities to determine whether to institute a trial and conduct a trial have been delegated to a Board member or employee acting with the authority of the Board.
Id. at 48647.
The removal of institution from the Director and assignment to the PTAB eliminated the legislative design whereby separate entities conduct separate determinations, as would also conform to the
Because it articulates a limiting principle, the Appointments Clause does not always serve the Executive‘s interests. For example, the Clause forbids Congress to grant the appointment power to inappropriate members of the Executive Branch. Neither Congress nor the Executive can agree to waive this structural protection. . . . The structural interests protected by the Appointments Clause are not those of any one branch of Government but of the entire Republic.
Id. at 880. The Court also pointed out that the right to raise a constitutional concern cannot be forfeited or waived. Id. at 879.
In Arthrex the PTO argued, as it does here, that the Director controls everything that happens in the PTO, to which the Court stated:
[T]he unchecked exercise of executive power by an officer buried many layers beneath the President poses more, not less, of a constitutional problem.
141 S. Ct. at 1983. The issue is not whether PTAB members have the skill to make the institution decision and to do so impartially, as the PTO argues. The issue is whether this final nonappealable decision requires the authority of a principal officer.
This aspect is now before us, but it could benefit from further briefing in view of Arthrex. It cannot, after Arthrex, be dispatched as a non-issue, as the Federal Circuit held in Ethicon Endo-Surgery, Inc. v. Covidien LP, 812 F.3d 1023 (Fed. Cir. 2016) (“There is nothing in the Constitution or the statute that precludes the same Board panel from making the decision to institute and then rendering the final decision.“). The Court in Arthrex confirmed the flaw in this reasoning, ruling that “[o]nly an officer properly appointed to a principal office may issue a final decision binding the Executive Branch in the proceeding before us.” 141 S. Ct. at 1985. The Court stated:
We hold that the unreviewable authority wielded by APJs during inter partes review is incompatible with their appointment by the Secretary to an inferior office. . . . Only an officer properly appointed to a principal office may issue a final decision binding the Executive Branch in the proceeding before us.
Id.
The PTAB‘s institution decision, whether for or against post-issuance review, binds the parties and is not appealable to the Director or to any court. The
The status of the “institution” decision in light of Arthrex requires resolution, with application of the Court‘s ruling that PTAB final decisions must be controlled by a principal officer:
Given the insulation of PTAB decisions from any executive review, the President can neither oversee the PTAB himself nor “attribute the Board‘s failings to those whom he can oversee.” APJs accordingly exercise power that conflicts with the design of the Appointments Clause “to preserve political accountability.”
Arthrex, 141 S. Ct. at 1982 (quoting Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 496 (2010) and Edmond v. United States, 520 U.S. 651, 663 (1997)).
This court should consider whether the removal of institution from the Director is in accordance with law and the Constitution.
Mobility and amicus curiae US Inventor also argue that the current conduct of institution raises Due Process issues, as I next outline.
Bias or the appearance of bias in the conduct of institution
Mobility raises issues of both pre-judgment bias and structural bias. Mobility states that pre-judgment bias or the appearance of pre-judgment bias arises when the decision of unpatentability is made by the same APJs who made the decision for institution. Mobility further states that structural bias or the appearance of structural bias arises when the APJs charged with adjudication also control their workload via institution and administer a compensation structure based on a system that favors subjecting issued patents to agency
The decision to seek a patent is fundamentally a decision to invest. To conceive of a new invention and reduce it to practice often requires a massive dedication of time, capital, and human effort. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480 (1974) (“The patent laws promote this progress by offering a right of exclusion for a limited period as an incentive to inventors to risk the often enormous costs in terms of time, research, and development.“).
Mobility Br. 54.
Mobility states that the post-issue proceedings of the
Prejudging bias and the appearance of bias
The appearance of bias is as important as actual bias, for confidence in the objectivity of adjudication is critical to a nation ruled by law. Prejudging bias is a recognized concern in adjudication. The concern here is the current conduct of institution, where the same panel of APJs decides whether to institute review, and then conducts the trial and finally decides the question. The
5 U.S.C. § 554(d)(2) [¶ 2]. An employee or agent engaged in the performance of investigative or prosecuting functions for an agency in a case may not, in that or a factually related case, participate or advise in the decision, recommended decision, or agency review . . . except as witness or counsel in public proceedings.
Despite this stricture, the PTO combined the investigative and adjudicative functions, as discussed ante with respect to the Appointments Clause. When the PTO requested public comments on the shift of the institution function from the Director to the PTAB, the patent bar expressed concern about the actual or perceived bias against the patent owner because the administrative patent judges are put in the position of defending their prior decisions to institute the review. AIPLA, Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial and Appeal Board, 20 (October 16, 2014), http://www.uspto.gov/ip/boards/bpai/aipla_20141016.pdf.
The Pharmaceutical Researchers and Manufacturers of America stated similar concerns:
The AIA thus separates the responsibility for instituting an IPR or PGR from the responsibility for conducting an instituted IPR or PGR. The PTAB‘s role under the AIA is specifically limited to “conduct[ing]” a review that was already “instituted.” Separating the decision to institute on IPR or PGR from the PTAB‘s decision on the merits would increase patent owners’ due process protections, reduce perceptions of bias, and more fully meet the requirements of the AIA.
Pharm. Researchers & Mfrs. of Am., Comments on Trial Proceedings Under the America Invents Act Before the Patent Trial and Appeal Board, 14 (October 16, 2014), https://www.uspto.gov/sites/default/files/ip/boards/bpai/phrma_20141016.pdf (alterations in original).
The PTO responded to these concerns by rejecting the possibility of prejudging bias on the part of PTO employees:
The Office believes that the panel deciding whether to institute an AIA proceeding is not predisposed to rule in favor of any party, whether the petitioner or patent owner, and that each panel applies the appropriate legal standard to make a fair and unbiased decision based upon the evidence and arguments of record.
Amendments to the Rules of Practice for Trials Before the Patent Trial and Appeal Board, 80 Fed. Reg. 50720-01, 50740 (Aug. 20, 2015).
Scholars of cognition are not so sanguine, and “have repeatedly documented the tendency for people to justify past conduct, especially when that conduct casts doubt on their competence or integrity and is public knowledge,” reporting that: “Accountable subjects had a harder time than unaccountable subjects in writing off ‘sunk costs’ and in acknowledging that they had made a mistake.” Philip E. Tetlock, Linda Skitka & Richard Boettger, Social and Cognitive Strategies for Coping with Accountability: Conformity, Complexity, and Bolstering, 57 J. Personality & Soc. Psychol. 632, 633 (1989).
The Court has remarked, in connection with the growth of quasi-adjudicative functions in administrative agency activity, that:
[L]egislators and others concerned with the operations of administrative agencies have given much attention to whether and to what extent distinctive administrative functions should be performed by the same persons.
Withrow v. Larkin, 421 U.S. 35, 51 (1975) (discussing Congress’ various approaches to the problems of investigative bias, stating: “For the generality of agencies, Congress has been content with § 5 of the Administrative Procedure Act,
The concern is not only the possibility of bias, including unconscious bias, but also the appearance of bias. The
Bias is not a simple concept, and may be unconscious, as the Court observed in Williams v. Pennsylvania, 136 S. Ct. 1899, 1905 (2016), where the Court referred to the:
risk that the judge “would be so psychologically wedded” to his or her previous position as a prosecutor that the “judge would consciously or unconsciously avoid the appearance of having erred or changed position.”
Id. at 1906 (quoting Withrow, 421 U.S. at 57). The Court observed that bias may not be recognized by the biased person, and imposed the rule that “under the Due Process Clause there is an impermissible risk of actual bias when a judge earlier had significant, personal involvement as a prosecutor in a critical decision regarding the defendant‘s case.” Id. See Caperton v. A.T. Massey Coal Co., 556 U.S. 868 (2009):
The judge‘s own inquiry into actual bias, then, is not one that the law can easily superintend or review, though actual bias, if disclosed, no doubt would be grounds for appropriate relief. In lieu of exclusive reliance on that personal inquiry, or on appellate review of the judge‘s determination respecting actual bias, the Due Process Clause has been implemented by objective standards that do not require proof of actual bias.
Id. at 883. The Court has stressed that “any tribunal permitted by law to try cases and controversies not only must be unbiased but also must avoid even the appearance of bias.” Commonwealth Coatings Corp. v. Cont‘l Cas. Co., 393 U.S. 145, 150 (1968). The Court stated:
To establish an enforceable and working framework, the Court‘s precedents apply an objective standard that, in the usual case, avoids having to determine whether actual bias is present.
In sum, there must be confidence in objective adjudication in any contested proceeding that is entrusted to government. An administrative agency performing adjudicative functions is no less subject to these concerns. See Gibson v. Berryhill, 411 U.S. 564, 579 (1973) (“It has also come to be the prevailing view that ‘[m]ost of the law concerning disqualification because of interest applies with equal force to . . . administrative adjudicators.’ ” (quoting Kenneth Culp Davis, ADMINISTRATIVE LAW § 12.04, p. 250 (1972) (alterations in original))).
The
Structural bias and the appearance of bias
Mobility also raises issues of structural bias, based on the PTAB‘s fee and compensation structures. Data and statistical analysis have been submitted by amicus curiae US Inventor. Mobility cites Esso Standard Oil Co. v. Lopez-Freytes, 522 F.3d 136 (1st Cir. 2008), for the proposition
The PTO defends its objectivity, and my colleagues give scant weight to Mobility‘s charge. However, there is no “feeling, so important to a popular government, that justice has been done.” Marshall v. Jerrico, Inc., 446 U.S. 238, 242 (1980) (quoting Joint Anti-Fascist Refugee Comm. v. McGrath, 341 U.S. 123, 172 (1951) (Frankfurter, J., concurring)).
In Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), this court considered the newly enacted system of inter partes reexamination, and stated:
The Commissioner reminds us of the complex structure of modern government through administrative agencies, and we agree that such delegation of administrative functions, often including quasi-judicial functions, is now beyond facial challenge—provided that constitutional safeguards are respected. The massive body of jurisprudence that suffered the evolution of administrative agencies in the federal government insisted on fair opportunity for judicial review and full respect for due process.
Id. at 604. Mobility flags this “respect for due process,” in asking this court to assure that the PTO and its tribunal are adequately scrupulous in their avoidance of bias and the appearance of bias. “[J]ustice must satisfy the appearance of justice,” Offutt v. United States, 348 U.S. 11, 14 (1954). This is our responsibility. From my colleagues’ facile endorsement of the present system, although these due process concerns are not resolved, I respectfully dissent.