Legal Blog

Inter Partes Reviews Survive Takings Challenge

The Federal Circuit addressed the issue of whether subjecting a pre-American Invents Act (“AIA”) patent to inter partes review (“IPR”) was an unconstitutional taking in Celgene Corp. v. Peter, Nos. 2018-1167, 1168, 1169, 1171, 2019 U.S. App. LEXIS 22517 (Fed. Cir. July 20, 2019).  Celgene appealed after the Patent Trial and Appeals Board’s (“PTAB”) determination that U.S. Patent Nos. 6,045,501 and 6,315,720, which encompassed methods for delivering drugs to patients while avoiding the occurrence of adverse side effects, were unpatentable as obvious over the prior art.  Id. at *6-8.

Initially, the Federal Circuit concluded that it was within its discretion to hear the constitutional issue despite the fact that it was not raised before the PTAB in light of the  growing number of retroactive challenges prompted by the Supreme Court’s ruling in Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138 S. Ct. 1365 (2018).  Celgene v Peters, 2019 U.S. App. LEXIS 22517 at 14.  The Federal Circuit further reasoned that it could hear the issue because Oil States was decided after the issuance of the PTAB’s Celgene decision, which also explained why Celgene raised no constitutional challenge at the Board.  Id.  It was unclear to the Federal Circuit, however, that the Board could have resolved the constitutional question if it had been raised because its resolution was purely a question of law requiring no factual findings.  Id.  Furthermore, even though the constitutional question had been sufficiently briefed to allow review by the Federal Circuit.  Id.

Celgene argued that the retroactive application of IPRs to pre-AIA patents without just compensation was an unconstitutional Fifth Amendment regulatory taking because subjecting a pre-AIA patent to the IPR procedure that did not exist at the time the patent issued, unfairly interfered with “its reasonable investment-backed expectations without just compensation.”  Id. at *15.  The Federal Circuit rejected Celgene’s constitutional challenge after determining that procedural difference between IPRs did not differ from the previously available avenues for PTO reconsideration to constitute a Fifth Amendment taking.  Id.  For example, IPRs and ex parte and inter partes reexaminations are based on the same substantive grounds, anticipation and obviousness; they use the same standards of proof, a preponderance of the evidence; the Director has the discretion to initiate all three types of proceedings; and his/her discretionary determination is final and non-appealable.  Id. at *16-17.  The Federal Circuit further noted the Supreme Court’s determination that district court challenges to the validity of patents, ex parte reexaminations, and IPRs are different forms of the same mechanism, see Return Mail, Inc. v. United States Postal Service, 139 S. Ct. 1853, 1860 (2019), which serve the purpose of correcting “prior agency error of issuing patents that should not have issued in the first place,” Celgene v Peters, 2019 U.S. App. LEXIS 22517 at 17-18.  Finally, the Federal Circuit acknowledged that, while there are clear differences between IPRs and the predecessor reexamination proceedings, “these procedural differences come with the longstanding recognition that ‘[n]o one has a vested right in any given mode of procedure.’”  Id. at 18, citing Denver & Rio Grande W. R.R. Co. v. Bhd. Of R.R. Trainmen, 387 U.S. 556, 563 (1967).


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