Federal Circuit Holds IPR Proceedings on Pre-AIA Patents is Not an Unconstitutional Taking Under the Fifth Amendment
August 15 2019
In CELGENE CORPORATION v. PETER, the Federal Circuit recently affirmed the PTAB’s decisions finding appealed claims obvious. However, more importantly, the Federal Circuit also held that the retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment.
Regarding the constitutional issue of whether the retroactive application of IPRs to pre-AIA patents is an unconstitutional taking, the Federal Circuit noted that The Supreme Court left open this challenge with the following passage near the end of its decision in Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365, 1379 (2018) as follows: “Moreover, we address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”
The Takings Clause of the Fifth Amendment states that private property shall not “be taken for public use, without just compensation.” A valid patent is private property for the purposes of the Takings Clause. Celgene thus argued that the retroactive application of IPRs to their pre-AIA patents without just compensation is an unconstitutional taking under the Fifth Amendment. Specifically, Celgene advanced a regulatory takings theory and argues that subjecting its pre-AIA patents to IPR, a procedure that did not exist at the time its patents issued, unfairly interferes with its reasonable investment-backed expectations without just compensation.
The PTO responded on two fronts. First, the PTO argued that when the PTAB finds claims unpatentable in an IPR, it does not effectuate a taking under the Fifth Amendment because the patent owner “never had a valid property right because the patent was erroneously issued in the first instance.” Second, the PTO argued that Celgene’s takings claim fails “because patents have been subject to reconsideration and cancellation by the USPTO in administrative proceedings for nearly four decades, and Celgene’s own patent[s were] issued subject to this administrative revocation authority.” And, the PTO maintains that the AIA “merely revised the procedures by which [the] USPTO conducts these administrative proceedings” and that the procedural differences therefore do not effect a Fifth Amendment taking.
In determining whether the retroactive application of IPRs to pre-AIA patents is an unconstitutional taking, the Federal Circuit first considered the effect that doing so has on the patent right granted by the PTO, and specifically whether IPRs differ from the pre-AIA review mechanisms significantly enough, substantively or procedurally, to effectuate a taking. The Federal Circuit concluded that they do not.
The Federal Circuit also noted that the validity of patents has always been subject to challenge in district court. And for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO. The Federal Circuit reasoned that IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.
Celgene’s pre-AIA patents were therefore granted subject to existing judicial and administrative avenues for reconsidering their validity. Not only were they subject to challenge in district court, “[f]or several decades, the Patent Office has also possessed the authority to reexamine—and perhaps cancel—a patent claim that it had previously allowed.” In this case it thus sufficed that IPRs do not differ sufficiently from the PTO reconsideration avenues available when the patents here were issued to constitute a Fifth Amendment taking.
In sum, Patent owners have always had the expectation that the validity of patents could be challenged in district court. For forty years, patent owners have also had the expectation that the PTO could reconsider the validity of issued patents on particular grounds, applying a preponderance of the evidence standard. Although differences exist between IPRs and their reexamination predecessors, those differences do not outweigh the similarities of purpose and substance and, at least for that reason, do not effectuate a taking of Celgene’s patents.
Thus, the Federal Circuit held that the retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment. However, as noted, it is still possible the Supreme Court may weigh in on this issue before too long.