PTAB Faces New Constitutional Attack In High Court Petition
Share us on: By Ryan Davis
Law360 (August 21, 2018, 6:58 PM EDT) -- Patent owner Smartflash LLC has urged the U.S. Supreme Court to find America Invents Act reviews unconstitutional because Patent Trial and Appeal Board judges are not appointed by the president, and it asked the court to hold that PTAB cannot review patents issued before the AIA was enacted.
Smartflash — which sued Apple Inc., Google LLC and Samsung Electronics Co. Ltd. over seven patents on distributing digital content — on Aug. 9 filed a petition for a writ of certiorari, asking the justices to review a Federal Circuit ruling from April that affirmed numerous PTAB decisions invalidating the patents for claiming patent-ineligible abstract ideas.
The justices rejected a constitutional challenge to AIA reviews in a decision in April in Oil States Energy Services LLC v. Greene's Energy Group LLC , but Smartflash said its petition "presents two constitutional issues left unresolved" by that case and that warrant striking down or limiting the system for challenging patents.
First, the company argued that the system of appointing judges to PTAB is unconstitutional. It claimed the Constitution dictates that the board's judges must be nominated by the president and confirmed by the Senate, but all of them have been appointed by the secretary of commerce. The board's decisions are therefore void, the petition says.
The appointments clause of the Constitution says the "principal" officers must be appointed by the president, with the advice and consent of the Senate, but "inferior" officers can be appointed by the heads of departments. PTAB's nearly 300 administrative patent judges, or APJs, should be considered principal officers, Smartflash said, because they have the authority to invalidate patents and deprive patent owners of property.
Inferior officers are those whose work is directed and supervised by someone who is appointed by the president and confirmed by the Senate, but PTAB judges have no such supervision, Smartflash said. Their decisions on patent validity can't be reviewed or altered by their superior, the director of the patent office, and can be appealed only to the Federal Circuit, the company said.
"Because APJs exercise authority to invalidate issued patents without any review within the executive branch, they cannot be characterized as 'inferior' officers within the meaning of the appointments clause," Smartflash said. "Accordingly, their appointment by the secretary of commerce is unconstitutional."
Second, the petition said it is a violation of the Constitution's due process clause for PTAB to review patents that were issued before the AIA became law in 2011.
Smartflash's patents were challenged under the AIA's covered business method patent review program, known as CBM review, which did not exist when the applications were filed. The new system has "dramatically altered the landscape of administrative patent review and cancelation in a way that the inventors could not have foreseen," the company said.
"The retroactive application of a scheme as dramatically different from what came before as CBM review — and the resulting impairment of patent owners' property — is fundamentally unfair and, therefore, violates due process," Smartflash said.
Finally, the petition argued that the justices should review PTAB's holding that Smartflash's patents cover only abstract ideas that are not patent-eligible, even though experts from the accused infringers conceded to the board that the patents would not preempt people from using alternative methods of delivering digital content.
The Supreme Court has held that a key issue in the patent-eligibility analysis is whether a patent ties up the use of building blocks of knowledge, the petition said. By "shutting their eyes" to the evidence that there are alternatives to Smartflash's patents, the PTAB judges' decisions were "inconsistent with the rationale underlying this court's subject matter eligibility decisions," Smartflash said.
Since Oil States was decided, patent owners have made several constitutional challenges to the system that weren't before the justices in that case, which rejected an argument saying only courts, not PTAB, can invalidate patents.
A pending Federal Circuit appeal makes the same appointments clause argument Smartflash makes and a pending cert petition maintains that PTAB's invalidation of patents is an unconstitutional taking of property by the government.
Smartflash sued Apple, Googleand Samsung over its seven patents and the defendants filed dozens of CBM review petitions challenging the patents. PTAB ultimately found that the patents covered only the patent-ineligible abstract idea of controlling access to data for a fee, a holding the Federal Circuit affirmed without an opinion.
The infringement cases against Google and Samsung were stayed pending PTAB's decisions, but an Eastern District of Texas jury found that Apple infringed three of Smartflash's patents and awarded $533 million in damages.
The Federal Circuit wiped out that award last year, finding the patents invalid as patent-ineligible. In January, the Supreme Court declined to hear Smartflash's appeal of that decision.
Counsel for Smartflash and representatives for Apple, Google and Samsung could not immediately be reached for comment on Tuesday.
The patents-in-suit are U.S. Patent Numbers 7,334,720; 7,942,317; 8,033,458; 8,061,598; 8,118,221; 8,336,772; and 8,794,516.
Smartflash is represented by Aaron Panner, Nicholas Hunter and Jacob Hartman of Kellogg Hansen Todd Figel & Frederick PLLC, and Michael Casey, Gregory Krauss and Davidson Berquist of Jackson & Gowdey LLP.
Counsel information for Apple, Google and Samsung at the Supreme Court was not immediately available on Tuesday. At the Federal Circuit, Apple was represented by Gibson Dunn & Crutcher LLP, Paul Weiss Rifkind Wharton & Garrison LLP, and Ropes & Gray LLP, Google was represented by Quinn Emanuel Urquhart & Sullivan LLP, and Samsung was represented by Fish & Richardson PC.
The case is Smartflash LLC v. Samsung Electronics America Inc., case number 18-189, before the U.S. Supreme Court.
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