Opinions / Panel Activity

Earlier this week the Federal Circuit issued its opinion in Mobility Workx, LLC v. Unified Patents, LLC, a patent case we have been following because it attracted an amicus brief. The case was argued before a panel that included Judges Newman, Schall, and Dyk. Mobility requested a remand to the Patent and Trademark Office in light of the Supreme Court’s holding in United States v. Arthrex, Inc., but it also made numerous constitutional challenges to the structure of the Patent Trial and Appeal Board. Judge Dyk authored the majority opinion in the case, ultimately remanding the case to the Acting Director of the Patent and Trademark Office to consider whether to grant a rehearing in light of Arthrex, but also concluding that Mobility’s constitutional arguments are without merit. Notably, Judge Newman authored an opinion concurring in part and dissenting in part. This is our opinion summary.

Judge Dyk summarized the relevant background:

Mobility is the owner of the ’417 patent. . . . In 2017, Mobility brought suit for infringement of the ’417 patent against T-Mobile and Verizon Wireless in the Eastern District of Texas (one of these proceedings has settled, and the other is stayed pending resolution of this appeal). On June 1, 2018, Unified Patents filed a petition seeking inter partes review of claims 1–7 of the ’417 patent on the theory that those claims would have been obvious over U.S. Patent No. 5,825,759 in combination with several other references. On December 2, 2019, the Board issued its final written decision, determining that claims 1, 2, 4, 5, and 7 were unpatentable as obvious, but that claims 3 and 6 were not shown to be unpatentable. Mobility appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(A).

Judge Dyk started his analysis by considering Mobility’s “constitutional challenges to the USPTO’s structure under the Leahy-Smith America Invents Act.”

Mobility, for example, argued that “Board members have an impermissible financial interest in instituting AIA proceedings” because (1) “Board members have an interest in instituting AIA proceedings to generate fees to fund the agency and ensure future job stability” and (2) “individual administrative patent judges . . . have a personal financial interest in instituting AIA proceedings in order to earn better performance reviews and bonuses.” Mobility pointed out that some administrative patent judges “participate in AIA review proceedings and ‘provide policy direction and ensure the quality and consistency of AIA decisions,’ . . . while also ‘oversee[ing] fiscal planning and expenditures’ of the Board,” which, Mobility argued, presents a “‘impermissible mixing of judicial and administrative/executive roles’” constituting a violation of due process. Judge Dyk rejected the argument, however, because “[t]he President, not the USPTO, submits the budget, and Congress ultimately sets the USPTO budget.” As a result, he explained, the “leadership APJs’ role in budgeting is therefore too remote to constitute a due process violation.” To support this holding, Judge Dyk noted that “[o]ther courts of appeals have held that similar congressional control over an agency’s budget eliminates any argument” of a constitutional violation.

Alternatively, Mobility contended, “individual APJs have an unconstitutional interest in instituting AIA proceedings because their own compensation in the form of performance bonuses is favorably affected” because “an “‘APJ’s salary can be increased, up to five percent, depending on the APJ’s numerical rating and final Performance Rating.’” In response to this argument, Judge Dyk noted that “the number of decisional units earned by an APJ ‘is based upon the number of decisions authored’ and ‘does not depend on the outcomes of those decisions,’” which is in contrast to cases cited where “fees that were only collected upon conviction of the defendants.” Also, according to Judge Dyk, “[d]ecisional units can be earned by participation in non-AIA proceedings, and there is a significant backlog of ex parte appeals.” As a result, Judge Dyk concluded that “Mobility . . . failed to establish that APJs have an unconstitutional financial interest in instituting AIA proceedings.”

Mobility made two additional constitutional arguments. First, it argued that “the Director’s delegation of his authority to institute AIA proceedings violates due process and the Administrative Procedure Act because the Director has delegated the initial institution decision to ‘the exact same panel of Judges that ultimately hears the case.’” Second, Mobility argued that “subjecting a pre-AIA patent to AIA review proceedings “‘constitutes an unlawful taking of property.’” Judge Dyk, however, noted that the arguments had “been previously rejected by this court in other cases.”

Finally, Mobility also raised an Appointments Clause challenge. Judge Dyk agreed with Mobility that “a remand is required under the Supreme Court’s decision in Arthrex to allow the Acting Director to review the final written decision of the APJ panel pursuant to newly established USPTO procedures.” The remand, he explained, would be for the “limited purpose of allowing Mobility the opportunity to request Director rehearing of the final written decision.” Moreover, Judge Dyk indicated that the panel “decline[d] to reach Mobility’s merits challenge until the Acting Director has determined whether rehearing is warranted.”

As mentioned, Judge Newman wrote an opinion concurring in part and dissenting in part. She agreed “with the decision to remand this case to the Director of the U.S. Patent and Trademark Office for review of the final decision of the Patent Trial & Appeal Board.” Judge Newman, however, did not agree with the majority’s “endorsement of the status quo” regarding “this new (since 2012) system whereby issued patents are subject to review and cancellation by the Patent and Trademark Office.” She noted arguments made that “the PTO’s institution procedures are duplicative, expensive, delaying, and subject to bias.” Judge Newman argued that “[t]hese aspects require more attention than my colleagues have accorded them, and raise new constitutional concerns.”

Judge Newman noted that, because of “the Supreme Court’s recent decision in Arthrex, the procedure of institution appears likely to violate the Appointments Clause, for institution, as it is currently conducted by the PTAB, is a final decision of an inferior officer, without supervision or control or review by a principal officer of the agency.” Also, Judge Newman observed, while “the America Invents Act assigned the institution decision to the Director, soon after enactment the agency assigned institution to the PTAB, retaining no control or supervision or review by the Director.” She maintained that “this action not only contravenes the America Invents Act and the Administrative Procedure Act, but the placement of this final, nonappealable decision with an inferior officer also raises Appointments Clause concerns.” Judge Newman argued that the court “should consider whether the removal of institution from the Director is in accordance with law and the Constitution.”

Judge Newman also delved into due process claims “of both pre-judgment bias and structural bias” at the PTAB. She noted that the current structure of “the PTO combined . . . investigative and adjudicative functions.” According to Judge Newman, “[t]he America Invents Act was structured to avoid [related] concerns by simply separating the threshold investigative function from the adjudicative function, along with the authorities performing them.” Given her view, she indicated that her “colleagues err[ed] in their perfunctory ratification of the current practice, particularly when the issue could be resolved simply by restoring the Director to the statutory role in the institution procedure.”

Finally, Judge Newman considered the argument “of structural bias, based on the PTAB’s fee and compensation structures.” Judge Newman noted that the “PTO defends its objectivity,” but, she argued, “‘justice must satisfy the appearance of justice.’” Judge Newman indicated that, because of her “colleagues’ facile endorsement of the present system, although these due process concerns are not resolved, [she] respectfully dissent[s].”