CAFC Shoots Down Due Process Challenges to PTAB Structure

“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.”- Mobility v. Unified majority

constitution - an appeal from the Patent Trial and Appeal Board (PTAB) brought by Mobility Workx against Unified Patents, the U.S. Court of Appeals for the Federal Circuit today ruled that the structure of the PTAB does not violate due process rights under the U.S. Constitution. While the PTAB’s ruling was ultimately remanded to the USPTO Director for review under Arthrex v. Smith & Nephew, the court said there is no evidence that PTAB administrative patent judges (APJs) have a financial interest in instituting inter partes review (IPR) proceedings. Judge Newman dissented from the majority’s “endorsement of the status quo.”

Distinguishing Tumey, et. al.

Mobility Workx appealed the PTAB’s 2019 ruling that certain claims of its U.S. Patent No. 8,213,417 were obvious. Mobility requested remand under Arthrex, challenged the merits of the Board’s decision, and raised several constitutional challenges. The CAFC did not reach the merits of the PTAB’s decision, but addressed each of the constitutional issues. While Unified Patents and the U.S. government, as intervenor, argued that the constitutional challenges were forfeited because they were raised for the first time on appeal, the court said that “constitutional challenges to the statute under which the agency operates need not be raised before the agency.” The government further argued that the court should not address the constitutional challenges because they were dependent on the resolution of factual issues that should have been presented to the PTAB initially, but the CAFC disagreed. Specifically, since the court’s determination was that there was no due process violation, neither the government nor Unified Patents was prejudiced by its consideration.

In turning to Mobility’s constitutional challenges, the court distinguished the present case from two seminal cases on agency due process violations. Tumey v. Ohio involved a mayor’s court in which the mayor was compensated if the defendant was convicted, but not if the defendant was acquitted. Ward v. Monroeville involved another mayor’s court in which fines paid by convicted defendants went to the village, rather than the mayor directly. The Supreme Court found due process violations in both of these cases, while in Dugan v. Ohio, the Court found no violation because the mayor in that case was paid a fixed salary.

The CAFC explained that, unlike the mayors in Tumey and Ward, the Chief APJ, Deputy Chief APJ, and Vice Chief APJs of the PTAB are not responsible for the agency’s finances. They merely support and assist the Director in preparing budgetary requests, and thus their role is “too remote” to constitute a due process violation. Furthermore, the U.S. President submits and Congress sets the USPTO’s budget and controls whether the agency has access to excess funds. Such congressional control “eliminates any argument under Tumey,” said the court.

No Incentive to Institute

Mobility next argued that individual APJs are unconstitutionally incentivized to institute IPR proceedings because it favorably impacts their performance bonuses.

IPWatchdog has reported in the past on the potentially problematic nature of the PTAB’s bonus structure. Mobility argued that the USPTO’s performance bonus scheme, which requires that an APJ must generally earn at least 84 decisional units per year, creates an incentive to institute IPR proceedings. APJs can receive bonuses of $4,000 to $10,000, according to Mobility. Salary increases of up to 5% are similarly conditioned on performance reviews.

However, the CAFC explained that, even if they were to accept this characterization of APJ compensation, “APJs do not have a significant financial interest in instituting AIA proceedings to earn a bonus.” The court continued:

Initially, we note 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.” Intervenor’s Br. 38. This stands in sharp contrast to Tumey and Ward, which involved fees that were only collected upon conviction of the defendants.

Additionally, “[d]ecisional units can be earned by participation in non-AIA proceedings, and there is a significant backlog of ex parte appeals,” said the majority.

The court also rejected down Mobility’s additional constitutional arguments, i.e., that USPTO Director delegation of the initial institution decision to “the exact same panel of Judges that ultimately hears the case” violates due process and that subjecting a pre-AIA patent to AIA review proceedings “constitutes an unlawful taking of property”, based on its prior precedent.

As for Mobility’s Appointments Clause challenge, the CAFC agreed that the Supreme Court’s decision in Arthrex v. Smith & Nephew warranted remand of the case to allow for a request that the Acting Director review the final written decision, but said that Mobility’s additional argument that the Director should confirm the claims or dismiss the petition for failing to reach a decision in the 12-month statutory timeframe for IPR should be raised before the USPTO on remand.

The court concluded by saying it will retain jurisdiction over the appeal during the limited remand and that the USPTO must inform the CAFC within 14 days of any decision to rehear and make any request to remand the case in its entirety or to continue the stay of proceedings.

Newman: AIA is Ripe for Review

In her partial dissent, Judge Newman agreed with the decision to remand but said that the America Invents Act is “ripe for critical evaluation” and that the constitutional issues raised by Mobility “require more attention than my colleagues have accorded them, and raise new constitutional concerns.”


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Author: jamesgroup
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Join the Discussion

3 comments so far.

  • [Avatar for Pro Say]
    Pro Say
    October 14, 2021 10:49 am

    America needs more beacons of truth and justice like Judge Newman.

    May she live forever.

  • [Avatar for B]
    October 14, 2021 03:21 am

    Just in case anyone missed it: The majority of the CAFC wouldn’t know due process if it jump up and bit them on the posterior.

    Newman, Moore are the biggest exceptions and our best hope right now

  • [Avatar for mike]
    October 14, 2021 12:44 am

    CAFC: we conclude that APJs do not have a significant financial interest in instituting AIA proceedings to earn a bonus.

    So the CAFC admits that APJs having a financial interest in instituting AIA proceedings to earn a bonus exists, but they pass it off as OK because this interest is not “significant”. So, following in the CAFC’s subjective footsteps of not finding something “significantly more” in their quest to kill a patent as ineligible, here the CAFC creates a red herring on “significance” with respect to financial interest. “Oh, the financial interest is not ‘significant'”, they say. Nevermind the fact that there is a financial interest.

    CAFC: Initially, we note 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.’

    So the CAFC admits that the decisional units earned is based on the number of decisions authored. This means that there is an incentive to institute, and the institution decision has a reason to not be based solely on the merits, but might additionally be based on an APJ earning these decisional units. How is this OK again? I thought the institution decision was to be based solely on the merits, not having any influence of decisional units earned by an APJ.

    CAFC: Even though an APJ will earn decisional units for a follow-on merits decision if he or she issues a decision instituting an AIA proceeding, there has been no showing that APJs institute AIA proceedings to earn sufficient decisional units to qualify for a bonus.

    Isn’t the CAFC missing the point? The point is not the bonus. The point is the fact that it is possible the institution decision is not based solely on the merits. And that is all that is needed to undo justice.

    CAFC: Thus, even if there were an incentive to institute AIA proceedings to earn decisional units, any interest APJs have in instituting AIA proceedings to earn decisional units would be too remote to constitute a due process violation.

    The interest would be “too remote”? How about, the interest would exist. Period. And it shouldn’t because it creates prejudice. Period.

    Rather than focus on “bonuses”, how about focus on “job security”. If APJs don’t institute enough reviews, then they will be seen as unnecessary to the PTO. So they institute reviews so they will be needed by the PTO. That is called protecting one’s job. Bonus-schmonus. Bonus is irrelevant. The inquiry is whether there exists the possibility to undo independent and impartial justice.

    “Speaking for myself, I find it inconsistent creating an adjudicatory body with judges who have no job security. It goes against the idea of providing independent, impartial justice, if a judge is thinking about his or her livelihood while also weighing the facts of the case.”
    – Hank Johnson, Chairman of the House Subcommittee on Courts, Intellectual Property, and the Internet

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