‘Now We Know’ – Lessons in Preserving Constitutional Error Before the USPTO

Constitutional arguments should ordinarily be preserved before the agency; otherwise those constitutional arguments might be summarily deemed forfeited on appeal. The appellate court might consider the constitutional arguments without proper preservation, but don’t bet on it.

constitution - https://depositphotos.com/13456269/stock-photo-we-the.htmlIt has been about a year since my first essay appeared on IPWatchdog.com. My topic dealt with preserving constitutional issues in a proceeding before an administrative agency, such as the United States Patent and Trademark Office (USPTO), instead of arguing such issues for the first time in an Article III court.

My goodness, so much has happened since then.

My essay was premised upon the notion held by some patent practitioners that constitutional arguments need not be made before the USPTO. After all, the argument goes, an administrative agency is not a governmental entity existing under Article III of the Constitution, and only an Article III court can declare a statute unconstitutional. Therefore, asking an agency to declare any of the statutory provisions under which it operates is an exercise in futility.

In my earlier essay, I discussed why making such arguments at the agency level might not be futile. Further, I pointed out that the 2012 United States Supreme Court case of Elgin v. Department of the Treasury, 567 U.S. 1 (2012), supported the view that constitutional issues can, and in most cases ought to, be presented to the agency before they can be reviewed on appeal.

After publication of my essay, a number of constitutional questions pertaining to patent law presented themselves to the Federal Circuit, and whether the issues were preserved for review was a sticking point in all of them.

Those who did not properly preserve constitutional issues stood a good chance of losing, not because their argument was without merit, but merely because the issue was not properly preserved.

What Is Preservation of Error?

Basically, the notion of preservation of error means that, normally, an appellate court will not rule on an issue unless a lower tribunal has had a fair chance to decide the issue.

The concept of preservation is often expressed in many ways: appellate courts are courts of review and generally do not hear issues being presented for the first time; an advocate ordinarily ought not to be able to reverse a lower court on the basis of an argument that the advocate did not present to the lower court; an advocate must work to focus the case and choose the issues to be argued, and those arguments that are left behind are typically deemed waived (deliberately forfeited or abandoned) and cannot be revived on appeal; objections generally should be entered into the record promptly after the cause for the objection is manifest; and so forth.

In each of the previous paragraph’s over-simplified explanations is a “wiggle word”: “normally,” “generally,” “ordinarily,” “typically.” Those words are there because sometimes an appellate court may choose, for various reasons, to consider for the first time an argument that was not properly preserved below.

In re DBC (2008)

It had long been established that arguments would ordinarily not be heard for the first time on appeal, and those issued not preserved at the agency level would typically be deemed waived.

In 2008, the Federal Circuit determined that this jurisprudence extended to constitutional arguments as well as nonconstitutional ones. In the case of In re DBC, 545 F.3d 1373 (Fed. Cir. 2008), a case decided more than four years before Elgin, a litigant tried to make a constitutional argument for the first time on appeal, and the Court ruled that the issue had been waived.

The Federal Circuit set out at least two reasons why constitutional issues could have, and should have, been presented to the agency before being presented on appeal. First, arguing the constitutional problem to the agency would give the agency an opportunity to take remedial action. Second, preserving constitutional issues before the agency promotes judicial efficiency. 545 F.3d at 1378-79.

And that is where the law on preservation of constitutional arguments before an administrative agency rested in the Federal Circuit, for nearly ten years. Apart from DBC making a quiet appearance in a non-patent case in 2018, the Federal Circuit had little to say about preserving constitutional arguments before the agency.

And Then…

In 2019, the issue of preservation of constitutional arguments before the USPTO, which had basically been dormant for a decade, was abruptly and dramatically revived.

The Celgene Case (July 2019)

First came Celgene Corp. v Peter, 931 F.3d 1342 (Fed. Cir. 2019), where Celgene tried to argue for the first time on appeal that that the retroactive application of inter partes review proceedings to pre-AIA (pre-America Invents Act) patents constituted an unconstitutional taking. While holding to the rule that “a party generally may not challenge an agency decision on a basis that was not presented to the agency,” the Federal Circuit exercised its discretion to hear the constitutional question anyway. The Court observed that hearing the constitutional issue was appropriate because: had the issue been raised before the agency, there did not seem to be anything the agency could have done to cure the constitutional problem; and there was no need for any evidentiary record to be made before the agency. Also, the issue had been raised on appeal promptly and had been fully briefed.

Upon hearing the constitutional challenge, then, the Federal Circuit ruled that the challenge was not persuasive. Celgene lost.

The First Arthrex Case (August 2019)

Less than a month after Celgene was decided, the Federal Circuit decided Arthrex, Inc. v. Smith & Nephew, Inc., 935 F.3d 1319 (Fed. Cir. 2019). Arguing a constitutional issue similar to that in Celgene for the first time on appeal, the Federal Circuit, citing DBC, exercised its discretion to hear the challenge.

Upon hearing the constitutional challenge, the Federal Circuit ruled that the challenge was not valid. Arthrex lost.

The Second Arthrex Case (October 2019)

About two months later, an identically-named case, Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), presented a different constitutional argument. The argument had not been preserved before the agency, and the Court had to decide whether that argument ought to be heard on appeal. Once again, the preservation principles of DBC were front and center. Noting that the constitutional issue (violation of the Appointments Clause) was a problem that the agency could not correct, and further noting that the issue was one of “exceptional importance,” the Court decided to hear Arthrex’s the constitutional arguments.

This time, upon hearing the constitutional challenge, the Federal Circuit ruled that the challenge was quite persuasive. This time, Arthrex won.

After Arthrex won, several other litigants tried to jump on the bandwagon, and they raised the same issue on appeal, even though the issue had not been preserved before the agency. Some litigants were allowed to raise the challenge, and some were not. It is beyond the scope of this essay to discuss the reasons that some litigants were allowed to assert the challenge and others were not; but basically, if the issue had been raised as soon as practicable, preferably before all issues were joined on appeal, the Court was more likely to exercise its discretion to consider the challenge.

The Personal Audio Case (January 2020)

Then came Personal Audio, LLC v. CBS Corp., No. 2018-2256, slip op. (Fed. Cir. Jan. 10, 2020). Personal Audio filed an infringement action in an Article III district court against CBS, and received a jury verdict in favor of Personal Audio. At around that time, an inter partes review proceeding was underway with respect to the same patent. Although Personal Audio prevailed before a jury, it lost before the Board. The Article III court, following the Board, declared the claims in question invalid. Personal Audio’s jury verdict vanished.

Personal Audio argued, both to the Board and to the Court, that the Board’s decision violated the Seventh Amendment. In the appeal of the Board’s decision, however, Personal Audio did not make a Seventh Amendment challenge, preferring instead to argue the constitutional issue in court.

In my essay last year, I wrote:

[I]f you want to challenge an action of the United States Patent and Trademark Office (USPTO) on constitutional grounds, you can and ought to raise those challenges before the agency; and you should not expect to be able to bypass the agency and go straight to court.

Personal Audio took a different strategic approach. Despite apparently preserving the issue before the Board, Personal Audio chose not to argue the issue on the appeal from the Board’s decision, and chose instead to argue the constitutional issue in the appeal from the Court decision.

The Federal Circuit discussed the Elgin case in some detail (the earlier Celgene case mentioned Elgin in passing), and ruled: “As described above, Personal Audio took such an appeal [from the agency’s decision], and there is no basis for any conclusion that the opportunity provided in that appeal was inadequate for the assertion and adjudication of any properly preserved challenge to the final written decision as unlawful (emphasis mine).”

So Now We Know

So now the subject of whether constitutional arguments generally ought to be preserved before the agency is settled, at least for the time being. Constitutional arguments should ordinarily be preserved before the agency; otherwise those constitutional arguments might be summarily deemed forfeited on appeal. The appellate court might consider the constitutional arguments without proper preservation, but don’t bet on it.

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Join the Discussion

5 comments so far.

  • [Avatar for Daniel Hanson]
    Daniel Hanson
    March 31, 2020 03:57 pm

    David @3, @4: Thank you for your thoughtful comments.

    A constitutional challenge may involve invalidating a statute, and we can agree that an administrative agency generally does not have the authority to do that.

    But not all constitutional challenges involve striking down a law on the books. In some cases, an agency can moot a constitutional question by acting in a constitutional fashion, or by otherwise dealing with the matter without invalidating anything. If there’s a constitutional error, the agency should be given the opportunity to correct it or avoid it … assuming that there is anything within reason that the agency can do to correct it or avoid it.

    Also, not all constitutional challenges are facial. Some require an evidentiary record. The place to make that record is before the agency, not before the appellate court.

    In some of the cases I discussed, the Federal Circuit noted that no evidentiary record was necessary, and that there was nothing the agency could reasonably have done to resolve the issue. These factors weighed in favor of the Court taking up the constitutional issue.

    As you say, the most prudent path may be to raise the constitutional challenge before the agency and make your record. And that way, it may be possible to avoid all of these discussions at the appellate level as to whether the issue was properly preserved or not.

  • [Avatar for David Boundy]
    David Boundy
    March 27, 2020 12:46 pm

    Even more importantly, Elgin goes off on the statute that creates an exclusive path of review up thorugh the Federal Circuit. Elgin holds that that exclusivity precluded Elgin’s collateral attack in the district court. I don’t think there’s anything in Elgin to preclude raisign the constitutional issue for the first time in the Federal Circuit, is there?

    Elgin explains to the contrary: its rule applies only “where Congress simply channels judicial review of a constitutional claim to a particular court.” “CSRA does not foreclose all judicial review of petitioners’ constitutional claims, but merely directs that judicial review shall occur in the Federal Circuit.” “the CSRA provides review in the Federal Circuit, an Article III court fully competent to adjudicate petitioners’ claims.” I don’t see any requirement to seek intra-agency hara kiri.

    I think there’s a spectrum here. My view is strongest on constitutional issues that go to the authority of the agency tribunal to exist, or to fundamental procedures. I don’t think your analysis applies at all at this end of the spectrum. I can also easily imagine constitutional issues that go to an issue squarely down the middle of the merits jurisdiction of the tribunal — as a completely hypothetical example, whether the interpretation of § 101 is colored by the “promote the progress” language of the Constitution. I could easily see that that Constitutional issue has to be raised or waived.

  • [Avatar for David Boundy]
    David Boundy
    March 27, 2020 12:29 pm

    Dear Daniel —

    I read Elgin v. Department of the Treasury, 567 U.S. 1 (2012) quite differently than you do. Isn’t Elgin only about an agency where the agency’s organic statute grants the agency authority to review constitutional issues, and precludes Article III review at first instance? I don’t see any discussion of preservation for the general case of intra-agency self-review if that power isn’t granted by statute.

    I think the general rule is the one cited in Elgin, Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 215 (1994) (“adjudication of the constitutionality of [legislative] enactments has generally been thought beyond the jurisdiction of administrative agencies,” citation and internal quotation marks omitted).

    As a practical matter, a tribunal won’t dissolve itself on Constitutional grounds, or hold that its own regulations are unconstitutional. The law does not require that an issue be presented to a tribunal that “[lacks] authority to grant the type of relief requested.” McCarthy v. Madigan, 503 U.S. 140, 148 (1992).

    The PTAB has held that the Board lacks jurisdiction to consider constitutional issues such as whether an agency’s organic statute is constitutional, or whether the agency is providing due process. Ex parte Kimbell, 226 USPQ 688, 690 (BPAI 1985) (expanded panel) (Board does not have jurisdiction to evaluate constitutionality of statutes, breaches of due process, or alleged harassment by examiner). The PTAB is not alone in this respect; many intra-agency appeal boards insist they have no jurisdiction to review the constitutionality of the statutes they operate under. Nebraska v. EPA, 331 F.3d 995, 997 (D.C. Cir. 2003); McBride Cotton & Cattle Corp. v. Veneman, 290 F.3d 973, 981–82 and n. 3 (9th Cir. 2002). But Judge Posner shot back: “Why agencies refuse to pass on constitutional questions—why indeed they might lack jurisdiction to do so—has never been adequately explained.” Pasha v. Gonzalez, 433 F.3d 530, 536 (7th Cir. 2005).

    Nonetheless, your overall point is a good one, tactically — if there’s a constitutional argument to be raised, it’s better to raise it before the tribunal of first instance, just to avoid having to argue the issue on appeal. Save the page count for something else.


  • [Avatar for Anne Gilson LaLonde]
    Anne Gilson LaLonde
    March 23, 2020 04:02 pm

    The TTAB also considered constitutional arguments in a recent case, In re ADCO Indus.-Techs. L.P.: “Previously, the Board has stated that it has no jurisdiction or authority to pass on the constitutionality of federal statutes. [But] recent case law suggests that administrative agencies of the executive branch of the federal government can address constitutional questions.” The Board rejected the applicant’s First Amendment challenge, holding that refusing the registration did not violate the applicant’s freedom of speech.

  • [Avatar for AAA JJ]
    AAA JJ
    March 23, 2020 01:41 pm

    “About two months later, an identically-named case, Arthrex, Inc. v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019), presented a different constitutional argument.”

    That was some good lawyering by the folks at CGO.