Is the PTAB Unconstitutionally Biased?
November 24 2021
In Mobility Workx, LLC v. Unified Patents, LLC, (Fed. Cir. 2021), the Federal Circuit Court of Appeals addressed challenges to the constitutionality of the structure of the Patent and Trademark Office’s Patent Trial and Appeal Board.
Mobility owned a patent for a wireless communication system. Mobility sued T-Mobile and Verizon Wireless for patent infringement in the Eastern District of Texas in 2017. A group of patent challengers, Unified Patents, filed a petition for inter partes review (IPR) in 2018, seeking to invalidate the patent’s claims on obviousness grounds. In 2019, the PTAB issued a decision that certain claims were invalid as obvious. Mobility appealed to the Federal Circuit.
On appeal, Mobility argued that the PTAB’s structure is unconstitutional as violative of due process because the PTAB is biased against patent owners. Mobility contended that: (1) the PTAB members have a vested interest in instituting IPRs and other AIA proceedings to raise money for the Board and to ensure their jobs security; and (2) the individual PTAB judges have a financial interest in instituting IPRs and other AIA proceedings to obtain bonuses in their compensation.
The court held that the PTAB members do not have a vested interest in instituting IPRs to raise money for the Board. The court explained that the Chief Administrative Patent Judge and the other administrative patent judges are not responsible for the PTO’s budget or for funding the PTAB. In addition, the fees paid by the parties for AIA proceedings do not go directly to the PTO; the PTO is funded by Congress. According to the court, “congressional control of the USPTO’s budget renders any agency interest in fee generation too tenuous to constitute a due process violation…”
The court further held that individual administrative patent judges do not have a financial interest in instituting IPRs. As the court noted, the administrative patent judges are compensated according to statute and receive a fixed salary. Although the administrative patent judges can receive a small bonus, the bonus is based on several factors. The number of decisions authored by an administrative patent judge is a relevant factor considered in the bonus structure, but the outcome of the decision doesn’t matter. Moreover, there are other types of proceedings that the administrative patent judges handle which can increase the number of decisions they decide, such as ex parte appeals. The court stated that any connection between an administrative patent judge instituting an IPR and earning a bonus “would be too remote to constitute a due process violation.”
Mobility also argued that the PTO Director’s delegation of authority to the PTAB to decide whether to institute AIA proceeding violates due process because the Director has delegated that authority to the same administrative patent judges who will also decide the outcome of the proceeding. The court held that there is nothing unconstitutional about the delegation of the decision to institute an AIA proceeding and the delegation of the decision on the merits of the proceeding to the same administrative patent judges.
Lastly, Mobility argued that, under the Supreme Court’s decision in U.S. v. Arthrex, 141 S. Ct. 1970 (2021), the case should be remanded to the Director to review the PTAB’s final decision. In Arthrex, the Supreme Court held that the PTAB’s structure violated the Appointments Clause of the Constitution because the PTAB’s final decisions were not reviewable by the PTO Director. The Federal Circuit agreed with Mobility and ordered the case remanded so that the Director could review the PTAB’s decision invalidating the claims.
In a dissenting opinion, one of the Federal Circuit panel judges raised an issue that Mobility had not raised. Judge Newman argued that the PTAB’s decision to institute the IPR may have violated the Appointments Clause of the Constitution because that decision was not appealable and was not reviewable by the Director. Judge Newman stated that this issue “cannot, after Arthrex, be dispatched as a non-issue…..”
Judge Newman’s dissent clearly indicates that there are still unresolved constitutional questions with respect to IPRs. Further decisions by the Federal Circuit or the Supreme Court are expected to address these issues.