Federal Circuit Rejects Arguments That The USPTO Is Unconstitutionally Structured
IP Litigation
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  • Federal Circuit Rejects Arguments That The USPTO Is Unconstitutionally Structured

    On October 13, 2021, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued an opinion rejecting a patentee’s arguments challenging the constitutionality of the U.S. Patent and Trademark Office’s (USPTO’s) structure based on its purported financial interest in instituting inter partes reviews (IPRs).  Mobility Workx, LLC v. Unified Patents, LLC, --- F.3d --- (Fed. Cir. Oct. 13, 2021).  The CAFC found that the financial interests of the Patent Trial and Appeal Board (PTAB) leadership and of individual administrative patent judges (APJs) were too remote to violate due process under the U.S. Supreme Court’s decision in Tumey v. Ohio.

    Mobility Workx, LLC (Appellant) is the owner of a patent directed to the allocation of communication resources in a communications network.  Appellant asserted its patent against several telecommunications companies in 2017.  In June 2018 Unified Patents, LLC filed a petition for inter partes review (IPR) of the patent.  In December 2019, the PTAB issued a final written decision finding that several claims of the patent were unpatentable as obvious.  Appellant appealed and during the appeal raised for the first time two arguments challenging the constitutionality of the USPTO structure under the 2011 Leahy-Smith America Invents Act (AIA).  The CAFC rejected both arguments.

    First, Appellant argued that the PTAB leadership has an impermissible interest in instituting AIA proceedings (including IPRs) to generate fees for the USPTO and ensure job stability.  The CAFC disagreed, finding that the PTAB leadership’s financial role was limited to assisting the Director of the USPTO prepare budget requests and executing budgets, a role too remote to violate due process under Tumey.  Moreover, unlike the mayor’s court in Tumey and like many other executive agencies, the USPTO does not directly receive the fees it collects.  Instead, Congress sets the USPTO’s budget based on annual fee collection estimates and controls the disbursement of any surplus fees.  As a result, the USPTO’s interest in fee generation is also too tenuous to constitute a due process violation.

    Second, Patentee also argued that individual administrative patent judges (APJs) have an impermissible financial interest because their institution of AIA proceedings favorably impacts their performance and, in turn, their compensation.  The CAFC again disagreed, noting that an APJ’s performance review depends on the number of decisions and not the outcome of such decisions, and that APJs are free to participate in non-AIA proceedings that have the same impact on their performance.  As a result, individual APJs’ incentive to institute AIA proceedings is too remote to violate due process.

    Judge Newman dissented, arguing that comingling of investigative and decisional functions in the PTAB raises concerns about the possibility of bias and the appearance of bias, and that it was the CAFC’s responsibility to ensure that the USPTO was scrupulous in avoiding both.