Supreme Court Takes Pass on Considering IPR Constitutionality

By Kevin E. Noonan --

There is little rhyme nor reason in the cases the Supreme Court decides to review.  But the Court has patterns in its case selection that do (to some degree) probe what the Justices think are important questions.  One pattern that has been evident in the past few years is that the Court believed it important to set the contours of the post-grant review provisions of the Leahy-Smith America Invents Act, particularly with regard to inter partes review proceedings.  Thus, the Court held in Cuozzo Speed Technologies LLC v. Lee (2016) that the USPTO properly applied the "broadest reasonable interpretation" standard for claim construction for IPRs and that the statute mandated that the decision to institute an IPR was not subject to judicial review.  Two years later, the Court handed down two IPR-related decisions.  In SAS Institute Inc. v. Iancu (2018), the Court challenged the PTAB's practice of partial IPR institution and held that the U.S. Patent and Trademark Office was compelled to render a Final Written Decision (FWD) on all claims challenged by a petitioner in its IPR petition.  And in Oil States Energy Services, LLC. v. Greene's Energy Group, LLC (2018), the Court held that IPRs do not violate Article III or the Seventh Amendment of the Constitution.  Last year, in Return Mail, Inc. v. United States Postal Service (2019), the Court's decision precluded federal government agencies from availing  themselves of post-grant proceedings under the AIA, and earlier this year in Thryv, Inc. v. Click-to-Call Technologies, LP (2020), the Court mandated that the provisions of 35 U.S.C. § 315(b), which preclude a petitioner from filing an IPR petition more than one year after being served with a complaint alleging infringement, are barred from judicial review under 35 U.S.C. § 314(d).

The Court's decisions have ranged from the (relative) minutiae of statutory construction and administrative implementation thereof to questions of constitutionality.  But the Oil States decision was perhaps the Court's most explicit reservation of judgment on whether Congress (or the PTO) had (or might) overstep its Constitutional moorings under certain circumstances.  The Court noted that it was not determining whether IPR proceedings raise due process concerns, and stressed that the holding should not be misconstrued to suggest that other constitutional challenges could not be made, for example challenges related to the Due Process Clause or the Takings Clause.  The Court seemed content to await these issues (should they arise) to come before it in future cases.

This week, the Court announced that that future is not now, in denying petitions for certiorari in two cases, Celgene Corp v Peter and Enzo Life Sciences, Inc. v. Becton, Dickinson & Co.  Both cases involved Constitutional challenges against retroactive application of IPR challenges on patents that were filed before enactment of the AIA.  These challenges were addressed expressly by the Federal Circuit, and in both cases the Court denied those challenges.

In Celgene, in an opinion by Chief Judge Prost, joined by Judges Bryson and Reyna, the Court based its decision that IPRs are not unconstitutional on the history, beginning in 1980, of Patent Office review of previously granted patents, which at least put patentees on notice that the Office could reconsider the validity of the patent grant.  This history made that grant contingent on there not being a successful post-grant challenge, and thus an IPR is nothing more than the latest iteration of such proceedings.  Characterizing IPRs in this way removed much of the force of the retroactivity argument, without which the constitutional challenge fell.  It is also consistent with the Court's decisions in Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), and Joy Technologies, Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992), where the Court rejected similar challenges to ex parte reexamination.  According to the opinion, "Celgene's pre-AIA patents were therefore granted subject to existing judicial and administrative avenues for reconsidering their validity" and "[f]or several decades [prior to Celgene applying for its patents], the Patent Office also possessed the authority to reexamine—and perhaps cancel—a patent claim that it had previously allowed."

The Office also persuasively argued that invalidation of a patent is not an unconstitutional taking because "the patent owner 'never had a valid property right because the patent was erroneously issued in the first instance.'"  And the panel noted that "[t]he validity of patents has always been subject to challenge in district court," although there is (or should be) a distinction between the agency reversing itself within its own sphere of expertise and a court deciding that the agency had erred.

In view of the similarities between IPRs and these earlier types of post-grant review proceedings, the panel stated that:

[I]t 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.  Celgene identifies a number of differences between reexaminations and IPRs, including that IPRs are adjudicative and have discovery, briefing, and an oral hearing, . . . but as explained below [where the panel recites the many similarities between IPRs and earlier post-grant review proceedings], these differences are not sufficiently substantive or significant to constitute a taking.

The Court's reticence to grant certiorari is perhaps more understandable in Enzo.  There, in an opinion by Judge Lourie joined by Judges O'Malley and Chen, the Federal Circuit dealt summarily with Enzo's argument that subjecting patents granted prior to enactment of the AIA to the IPR provisions of the AIA was unconstitutional:

We recently addressed this issue in Celgene Corp. v. Peter, No. 18-1167, 2019 WL 3418549, at *12–16 (Fed. Cir. July 30, 2019), which is now precedent that governs this case.  Celgene held that "retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment."  Accordingly, we hold that the retroactive application of IPR proceedings to the '197 patent, which issued before the enactment of the AIA, is not an unconstitutional taking under the Fifth Amendment.

It is unlikely that the Court has much stomach for considering arguments against the constitutionality of the post-grant proceedings set forth in the AIA.  Perhaps this is simply that a majority of the members of the Court believe (against likelihood or at least recent experience) that the Federal Circuit is correct and the patent bar's acquiescence, and settled case law, to earlier post-grant review regimes (the ex parte reexamination statute in 1980 and the inter partes reexamination statute in 1999) creates sufficient precedent that Congress's latest foray in providing a remedy to Patent Office misadventure in improvidently granting "bad patents."  This history suggests that a successful constitutional challenge in these grounds might be presented will take the type of inordinate exercise in cleverness by patent practitioners that the Court has warned against.  Until then (or until the patent winds in Congress change), the AIA's post-grant review regime appears to be here to stay.

Comments

[Greg DeLassus]

The problem with both Celgene & Enzo (and this is an entirely sufficient reason for the Court to take a pass on both, quite regardless of what the Court thinks of the merits of the Takings challenge) is that neither case is really in the right procedural posture to support an examination of the Takings issue.

The V amendment does not forbid the government taking property. In fact, the V amendment has historically been read to *allow* the government to take private property, *so long as* just compensation is paid. In other words, if Celgene and Enzo really believed that their property had been taken, then the appropriate next step would have been for them to seek just compensation (presumably in a suit against the government in the Court of Federal Claims). Neither appellant ever brought such a suit, however. Therefore, the Takings case that they purport to be making is not yet ripe.

No sense in the Court wasting its time taking the appeal where the appellant cannot even be troubled to take the steps necessary to make their case ripe for appellate review.

[Paul F. Morgan]

The prior Sup. Ct. decisions on AIA constitutionality challenges did not any "pass" on that issue. Nor was it ever very likely that the Sup. Ct. will strike down the most important parts of major legislation passed by Congress on a broad bi-partisan basis after six years of consideration. They traditionally, for good reasons, avoid such direct confrontations with the clear will of Congress. Nor are many of the the latest constitutional cert challenges providing appealing facts. So yes, after all these years it is time to face the reality that "the AIA's post-grant review regime appears to be here to stay" as Kevin concludes.

[Greg DeLassus]

Just to be clear, I agree with Paul Morgan that the merits of this challenge are weak. AIA trials are not likely to succumb to *any* constitutional challenge, because they are constitutionally supportable.

Even if, however, the SCotUS wanted to end all doubt on this score by taking the appeal and affirming the circuit court, the SCotUS would presumably not want to take one of *these* cases. These cases have the problem of being unripe, even setting aside the weakness on the merits of the Takings argument. That makes it harder for the SCotUS to reach the merits and really settle the issue once and for all (if the SCotUS wished so to do).

[skeptical]

Mr. DeLassus,

Your position is simply not correct. I do not have the case at my fingertips, but I am fully aware that not only has it been mentioned multiple times over several patent blogs, but was presented directly on point to an earlier comment of yours in exactly the same vein.

Mr. Morgan,

Your words run into direct conflict with the admonitions of the Oil States case.

Maybe the both of you should 'cheerlead' less.

Of that, well, I remain: