IP Law Daily Constitutional challenges rejected after PTAB’s cancellation of locker lock patent
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Thursday, August 20, 2020

Constitutional challenges rejected after PTAB’s cancellation of locker lock patent

By Brian Craig, J.D.

Exclusive judicial review of Board decisions by the Federal Circuit precluding district court review does not violate due process rights.

In affirming a district court’s dismissal of an Administrative Procedure Act suit challenging the constitutionality of the cancellation of Security People, Inc.’s patent for a locker lock in an inter partes review (IPR) proceeding, the U.S. Court of Appeals for the Federal Circuit has held that exclusive review of final PTAB decisions by the Federal Circuit does not violate due process rights. In rejecting the constitutional arguments, the Federal Circuit recognized that Congress precluded review of IPR decisions by district courts and established exclusive review of the Board’s final written decisions in the Federal Circuit. The Federal Circuit held that it can meaningfully address constitutional questions on direct appeal of final Board decisions (Security People, Inc. v. Iancu, August 20, 2020, Hughes, T.).

Security People, Inc. obtained U.S. Patent No. 6,655,180 (the ’180 Patent) entitled "Locker Lock with Adjustable Bolt." The Board instituted an IPR proceeding and issued a final written decision concluding the sole instituted claim is unpatentable. Security People appealed the Board’s decision to the Federal Circuit raising only issues related to the patentability of the ’180 patent and failed to raise any constitutional challenges. The Federal Circuit affirmed the Board’s decision. The U.S. Supreme Court then denied Security People’s petition for certiorari.

Security People subsequently filed an Administrative Procedure Act (APA) suit in a California federal district court, challenging the constitutionality of the cancellation of its patent in the IPR proceeding. Specifically, Security People sought a declaratory judgment that the retroactive application of an IPR proceeding to cancel claims of its patent violated its constitutional rights, based on its Fifth Amendment due process right. The district court dismissed the suit holding that it lacked subject matter jurisdiction. Security People appealed to the Federal Circuit raising constitutional challenges.

Constitutional challenges. The Federal Circuit held that the statutory scheme providing for exclusive review of constitutional challenges by the Board in IPR proceedings does not violate due process rights. The appeals court rejected Security People’s argument that because the Board purportedly lacks the authority to decide constitutional claims, constitutional questions raised by an IPR final written decision must be reviewable in district court under the APA. The U.S. Supreme Court rejected this argument in a similar statutory review scheme under the Civil Service Reform Act, which provides the Federal Circuit with exclusive jurisdiction to review Merit Systems Protection Board (MSPB) decisions. Even without factfinding capabilities, the Federal Circuit may take judicial notice of facts relevant to the constitutional question. On rare occasions when a constitutional claim requires the development of facts beyond those facts where the court can take judicial notice, the Board can take evidence and find facts for Federal Circuit review of constitutional issues. The Federal Circuit held that it canmeaningfully address constitutional questions on appeal.

Final decision. The Federal Circuit held that the exclusive vehicle for bringing challenges to the lawfulness of the Board’s final written decision, including on constitutional bases, is a direct appeal to the Federal Circuit from the final written decision. The Federal Circuit rejected Security People’s argument that the constitutional challenge was not yet ripe until cancellation of the patent claims. This assertion misapprehends the law defining when an agency action becomes final for judicial review. The decision-making process in an IPR is complete after issuance of the final written decision. The final written decision serves as the agency action that will directly affect the parties. The certificate of cancellation is irrelevant to the finality of the agency’s action, as no agency decision-making is involved in deciding to issue the certificate. Furthermore, the doctrine of administrative exhaustion did not prevent Security People from raising its constitutional claims on direct appeal to the Federal Circuit.

Exclusive review. Finally, the Federal Circuit held that the statutes providing for exclusive review of the Board’s final written decisions in the Federal Circuit preclude district courts from exercising APA jurisdiction over claims challenging the constitutionality of a final written decision. Congress established exclusive review of the Board’s final written decisions by the Federal Circuit. The agency action here—the final written decision of an IPR—is reviewable exclusively in the Federal Circuit, not in an APA-based collateral attack in a district court. Direct appeal to the Federal Circuit of the Board’s final written decision provides an adequate remedy for any meritorious constitutional claims. Therefore, the Federal Circuit affirmed the district court’s dismissal.

This case is No. 19-2118.

Attorneys: Frear Stephen Schmid (Frear Stephen Schmid Attorney at Law) for Security People, Inc. Leif Eric Overvold, U.S. Department of Justice, for Andrei Iancu.

Companies: Security People, Inc.

MainStory: TopStory Patent FedCirNews GCNNews

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