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IP Alert
IP Alert: Federal Circuit Confirms Constitutionality of Inter Partes Review

December 3. 2015

As previously reported, on December 2, 2015, a panel of the Court of Appeals for the Federal Circuit held in MCM Portfolio LLC v. Hewlett-Packard Co. that inter partes review (IPR) proceedings created by the America Invents Act (AIA) do not violate Article III or the Seventh Amendment right to a jury trial.

The case originated from an IPR petition (IPR2013-00217) filed by Hewlett-Packard challenging the validity of MCM Portfolio’s patent related to coupling a computer system with a flash memory storage system. The Patent Trial and Appeal Board (PTAB) instituted trial and found each of the challenged claims invalid as obvious in a final decision. MCM appealed, challenging not only the substantive obviousness determination, but also the constitutionality of the statutory scheme that allows for inter partes review.  

On appeal, MCM argued that the U.S. Supreme Court’s 1898 decision in McCormick Harvesting Machine Co. v. Aultman dictates that only federal Article III courts may invalidate patents, barring the U.S. Patent and Trademark Office (USPTO) from invalidating patents in IPRs. The Federal Circuit disagreed, noting that McCormick was silent about Article III and does not forbid Congress from granting the USPTO authority to correct or cancel issued patents. The court further noted that Congress had since granted the USPTO such authority in other proceedings, such as ex parte reexamination, the now-eliminated inter partes reexamination, as well as the new IPR proceedings, post-grant review, and covered business method review.

The court then reasoned that analogous Supreme Court and Federal Circuit precedent support the USPTO’s authority to review patent validity in IPRs. In particular, the Federal Circuit previously decided in Patlex Corp. v. Mossinghoff (1985) and Joy Technologies v. Manbeck (1992) that ex parte reexamination proceedings do not violate Article III, and the court found no basis to distinguish IPR proceedings from ex parte reexamination. From this, the court held that IPR proceedings do not violate Article III.

With regard to MCM’s argument that IPR proceedings abridge the right to a jury trial under the Seventh Amendment, the court noted that this same question had been addressed with regard to ex parte reexamination in Patlex and Joy Technologies. Accordingly, the court held “[b]ecause 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.”

After concluding that the statutory scheme for inter partes review passes constitutional muster, the court went on to uphold the PTAB’s determination of obviousness.

For more information about this decision, please contact Fitch Even attorneys Nicholas T. Peters or Fitch Even attorney Paul B. Henkelmann, the author of this alert.

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