Latest Federal Court Cases - October 2021 #3

Schwabe, Williamson & Wyatt PC
Contact

Schwabe, Williamson & Wyatt PC

Mobility Workx, LLC v. Unified Patents, LLC, Appeal No. 2020-1441 (Fed. Cir. Oct. 13, 2021)

In this week’s Case of the Week, a panel of the Court of Appeals for the Federal Circuit considered, and rejected, new constitutional challenges to the structure and funding of the Patent Trial and Appeal Board (the “Board”). Judge Newman concurred with the majority that the Board’s decision should be remanded for Director approval under United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), but authored a lengthy dissent against the majority’s rejection of Mobility Workx’s constitutional challenges, what Judge Newman referred to as her “colleagues’ endorsement of the status quo” of America Invents Act (“AIA”) proceedings. 

Mobility Workx‎ appealed a final written decision that several claims of its patent were invalid and unpatentable. Before the Federal Circuit, Mobility Workx (1) challenged the merits of the Board’s decision and requested a remand to the Director of the United States Patent and Trademark Office (the “USPTO”) under Arthrex; and (2) raised a number of constitutional challenges, including that the means of funding the Board and paying Administrative Patent Judges (“APJs”) created the possibility of bias in favor of instituting AIA proceedings (and invalidating patents) and violated the Constitution’s Due Process Clause. The USPTO intervened, arguing against Mobility Workx.

The Federal Circuit began by dealing with the argument by Unified Patents and the government that Mobility Workx forfeited its constitutional challenges by failing to raise them before the Board. The Federal Circuit responded that (1) agencies generally do not have the authority to declare a statute unconstitutional, and therefore constitutional challenges to the statute under which an agency operates do not need to be raised before the agency; and (2) the court has discretion to consider new arguments on appeal.

The government also argued that the Federal Circuit should not hear Mobility Workx’s constitutional challenges because those challenges relied on factual issues that first needed to be resolved by the Board. The Federal Circuit explained that the documents on which Mobility Workx relied (documents published in the Federal Register or on the USPTO website, other agency documents received via the Freedom of Information Act, and a report from the Congressional Research Service) are the types of government documents capable of being “accurately and readily determined from sources whose accuracy cannot reasonably be questioned,” and of which the court could therefore take judicial notice. Fed. R. Evid. 201(b)(2).

Turning to Mobility Workx’s constitutional challenges, Mobility Workx used two theories to argue that the structure and funding of the Board violated due process. Three old Supreme Court cases define the framework for considering due process in this area.

In Tumey v. Ohio, 273 U.S. 510 (1927), a mayor’s court was determined to violate due process because (1) the mayor, who presided over proceedings, received compensation if a defendant was guilty, but not if they were found innocent; and (2) convicted defendants paid fees that funded the village, and the mayor was the chief executive of the village, charged with looking after its finances. Id. at 533. The Supreme Court in Tumey explained that where there is a chance for bias to affect the weighing of evidence that there may be a due process violation:

[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.

Id. at 532.

In Dugan v. Ohio, 277 U.S. 61 (1928), another mayor’s court was determined not to violate due process. In Dugan, the presiding mayor received a fixed salary, not one contingent on convictions. Id. at 63–64. The mayor in Dugan shared executive functions with four other city commissioners, and therefore had less direct control over or responsibility for the city’s finances to which conviction fines contributed. Id.

In Ward v. Monroeville, 409 U.S. 57, 60 (1972), a mayor’s court in which fines paid by convicted defendants went to the village was determined to violate due process. Although the mayor in Ward did not receive compensation for convictions like the mayor in Tumey, the mayor in Ward was the chief executive for the village. As the chief executive, the mayor in Ward had a direct interest in convictions, because the fines generated by convictions contributed to the economic viability of the village for which the mayor was solely responsible.

Mobility Workx first argued that APJs have an impermissible financial interest in deciding to institute an AIA proceeding. Mobility Workx argued that because (1) the USPTO generates substantial revenue from post-institution fees in AIA proceedings, and (2) the Chief, Deputy Chief, and Vice Chief APJs not only participate in AIA proceedings but also oversee the Board’s finances, this creates an “untenable dual role of managing the [Board’s] finances … and deciding AIA petitions solely on the merits,” similar to the mayors in Tumey and Ward. The Federal Circuit found this argument uncompelling for two reasons. First, while APJ leadership helps in preparing budget requests and executing the operating budget, the USPTO Director is ultimately responsible for overseeing the agency’s budget. Thus, the Federal Circuit determined that APJs have too remote a relationship to the USPTO’s budgeting for there to be a conflict of interest. The Federal Circuit went on to explain that the President, not the USPTO, submits the agency’s budget for allocation, and it is up to Congress to ultimately decide whether to allocate the budget to the USPTO. While fees generated by post-institution AIA proceedings can be re-allocated to the USPTO by Congress, and often in fact are so re-allocated, this allocation is up to Congress. The Federal Circuit concluded that the “congressional control of the USPTO’s budget renders any agency interest in fee generation too tenuous to constitute a due process violation under Tumey.”

Mobility Workx’s second argument was that APJs have unconstitutional interests in instituting AIA proceedings because instituting AIA proceedings could increase an APJ’s salary and bonus. APJs can earn bonuses and salary increases if they earn a certain number of “decisional units” in a year. One way to earn decisional units is by authoring decisions, which Mobility Workx argues creates an unconstitutional incentive to institute AIA proceedings. The Federal Circuit responded that decisional units are granted for authoring a decision regardless of outcome, so that a decision not to institute a proceeding is just as good as a decision to institute a proceeding from a decisional unit perspective. The Federal Circuit also pointed out that decisional units could be earned from decisions in ex parte appeals, of which there was a significant backlog, so that APJs do not have an incentive to author AIA decisions at all. The Federal Circuit therefore concluded that APJs have too remote an interest in instituting AIA proceedings, if there is any interest at all, to constitute a due process violation.

Mobility Workx raised two other constitutional challenges that the Federal Circuit had already resolved in other cases: (1) delegation of the Director’s authority to institute an AIA proceeding to APJs does not violate the Due Process Clause or the Administrative Procedure Act; and (2) subjecting a pre-AIA patent to an AIA proceeding does not constitute an unlawful taking of property.

Thus, the Federal Circuit dismissed Mobility Workx’s constitutional challenges, but did grant remand to the Board for Mobility Workx to have the opportunity to request a Director rehearing of the Board’s decision under Arthrex.

Judge Newman concurred with the majority’s remand under Arthrex, but dissented from the majority’s rejection of Mobility Workx’s constitutional arguments.

According to Judge Newman, after Arthrex, the majority should have considered Mobility Workx’s argument that it was inappropriate for the USPTO to delegate the authority to institute AIA proceedings (a final, non-appealable decision) from the Director (where the AIA placed such authority) to inferior officers, the APJs. Judge Newman pointed out that Ethicon, in which the Federal Circuit previously considered whether this delegation violated due process, was pre-Arthrex, and therefore the question needed to be reconsidered.

Judge Newman argued that delegation of the authority to institute AIA proceedings to APJs created bias and/or the appearance of bias in AIA proceedings. According to Judge Newman, the AIA properly separated the authority to investigate (and institute) AIA proceedings, and the authority to adjudicate AIA proceedings, between the Director and APJs. Judge Newman cited commentator Public Knowledge in calling it “‘unsurprising that the Board has generally invalidated patents it reviews’ because ‘[r]eview before the Board will only be granted where it is likely’ in the view of the same APJs who will conduct the trial and decide the case, ‘that at least one claim will be cancelled.’”

While the government argued that the USPTO’s employees would not be biased, Judge Newman argued that bias, including unconscious bias, was difficult for the biased party to obverse, and that due process required avoiding both actual and apparent bias. Accordingly, Judge Newman dissented from the majority’s rejection of Mobility Workx’s constitutional challenges.

A copy of the opinion can be found here.

By Tyler Hall 

ALSO THIS WEEK

Energy Heating, LLC v. Heat On-The-Fly, Appeal No. 2020-2038 (Fed. Cir. Oct. 14, 2021)

In an appeal from a district court decision finding a case exceptional and awarding attorneys’ fees, the Federal Circuit affirmed. The case has a storied history, which we have covered twice. In 2018 the Federal Circuit held that claims were unenforceable due to inequitable conduct, but vacated a determination of no exceptionality under Section 285 and remanded on that issue. We covered that first appeal here. On remand, the district court found the case exceptional and awarded attorneys’ fees. Granting deference to the district court’s determination, and finding no error in the district court’s assessment of the facts, the Federal Circuit affirmed.

The case also spawned a separate, Walker Process antitrust case, which the Federal Circuit decided earlier this year. We wrote about that decision here.

A copy of the opinion can be found here.

Hyatt v. Hirshfeld, Appeal Nos. 2020-2321, -2323, -2324, -2325 (Fed. Cir. Aug. 18, 2021, opinion modified Oct. 12, 2021)

The case concerns a Section 145 action brought by Mr. Hyatt, which we discussed here. In August 2021, the Federal Circuit issued an opinion concerning the fee shifting provisions of Section 145. We covered that prior opinion here. This week, the Court issued a modified version of that opinion, removing one phrase in the background portion of its opinion concerning the motivation for Mr. Hyatt’s delays in prosecuting his patents.

A copy of the opinion can be found here.

Traxcell Technologies, LLC v. Nokia Solutions & Networks Oy, Appeal Nos. 2020-1440, -1443 (Fed. Cir. Oct. 12, 2021)

In an appeal from a district court summary judgment opinion, the Court affirmed on multiple issues relating to multiple patents. The Court agreed with the district court that the term “location” meant more than simply being based on a grid. The court provided a lengthy discourse on prosecution disclaimer, and explained that, in order to avoid prior art, the patentee had argued that “location” did not mean merely locating on a grid. Thus, the term “location” had to mean more than that. The Court also agreed that Traxcell had not established infringement based on this definition. The Court also agreed with the district court that “a computer,” when followed by the term “the computer,” meant one computer, and not a plurality of computers. The Court agreed that the patent was not infringed under this construction, agreeing with the district court that the prosecution history estoppel foreclosed a “multiple computer” equivalent of the “a computer” term.

A copy of the opinion can be found here.

Traxcell Technologies, LLC v. Sprint Communications Company LP, Appeal Nos. 2020-1852, -1854 (Fed. Cir. Oct. 12, 2021)

In this companion case, the Federal Circuit affirmed the district court’s summary judgment opinion on multiple additional issues. In addition to some of the same issues raised in the Nokia case, the Court further agreed with the district court’s assessment of a means-plus-function claim term, and that the accused products did not meet the “way” requirement of the function-way-result test. The Court also agreed with the district court that certain claims were indefinite, and that the district court denied leave to amend the complaint. Following a claim construction order finding the terms indefinite, the patentee filed a certificate of correction with the Patent Office to cure one of the indefiniteness issues. However, that certificate of correction did not cure a separate issue of indefiniteness. Thus, it would have been futile to allow Traxcell leave to amend its complaint, because the claims would still have been indefinite. Finally, the Court affirmed summary judgment of noninfringement as to a separate patent, finding certain claim limitations not satisfied in Sprint’s or Verizon’s systems.

A copy of the opinion can be found here.

By Nika Aldrich

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Schwabe, Williamson & Wyatt PC | Attorney Advertising

Written by:

Schwabe, Williamson & Wyatt PC
Contact
more
less

Schwabe, Williamson & Wyatt PC on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.