Patents and Public Rights: the Questionable Constitutionality of Patents Before Article I Tribunals After Stern v. Marshall

• Publication year: 2011

NORTH CAROLINA JOURNAL OF LAW & TECHNOLOGY VOLUME 13, ISSUE 2: SPRING 2012

PATENTS AND PUBLIC RIGHTS: THE QUESTIONABLE CONSTITUTIONALITY OF PATENTS BEFORE ARTICLE I TRIBUNALS AFTER STERN V. MARSHALL

Michael Rothwell*

The Supreme Court’s recent Stern v. Marshall decision both rekindled and revived the oft-overlooked public rights exception. In light of this development, this Article seeks to argue that patents, where subject to final, binding decisions, are unconstitutionally before Article I tribunals. Such tribunals include, for example, the Bankruptcy Court, as well as the newly- created Patent Trial and Appeal Board.

1. INTRODUCTION

   In a case that features exotic dancers, oil tycoons, and seemingly interminable disputes over vast, contested family fortunes, it may be difficult to discern, at first blush, how the recent Stern v. Marshall1 decision impacts the constitutional framework dictating important separation of powers concerns. Beyond the underlying facts and cast of characters, however, at the heart of the Stern decision is a stark reminder from the nation’s highest court that, despite a generally expansive role envisioned for modern-day administrative agencies, Article III of the U.S. Constitution still has meaning in terms of institutional boundaries.2 At issue in Stern was whether the congressional grant of judicial power to the Article I Bankruptcy Courts under 28 U.S.C.

   § 157(b)(2)(C) passed constitutional muster in light of the Court’s

   
   

   * Michael Rothwell is an associate attorney in the Los Angeles office of the Adli Law Group P.C. His practice focuses primarily upon both life sciences and engineering-based patent litigation.

   1. Stern v. Marshall, 131 S. Ct. 2594 (2011).

   2. Article III, § 1 of the Constitution requires that “[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” U.S. CONST. art.

      III, § 1.

      287

      
      

      Article III precedents.3 Specifically, the Court sought to determine on what constitutional grounds, if any, a broad “catch-all” counterclaim provision?which provided for final adjudication by an Article I court of a common law tortious interference claim?passed important institutional safeguards.4 In considering this question, the Court held that only counterclaims implicating “public rights” satisfied the prohibitive mandate of Article III.5 Given that the counterclaim of tortious interference amongst private litigants did not fall within the bounds of the public rights exception, the claim was unconstitutionally before the Article I tribunal.

      Given this important holding, this Article argues that patents for intellectual property, both in the invalidity and infringement contexts and where litigated between private parties, do not fall within the scope of the public rights exception. As such, and after Stern, it is unconstitutional for the Bankruptcy Courts to issue final, binding judgments on patent-related counterclaims. Importantly, though this Article primarily seeks to answer this narrow question as applied to the Bankruptcy Court, it is necessary to concede that an analysis that touches upon public rights cannot be restricted to any one administrative tribunal. After all, determinations of patent validity as applied to issued patents are only constitutionally performed by the United States Patent and Trademark Office (“USPTO”) because the Federal Circuit has acknowledged that in the context of reexamination and reissue, patents are “public rights.”6 Thus, any argument to the contrary invariably operates within this broader context, given that the

      
      

   3. 28 U.S.C. § 157(b)(2)(C) (2006) established that a bankruptcy court shall have core jurisdiction over all “counterclaims by the estate against persons filing claims against the estate.” As such, all counterclaims, including those at common law, were?from a jurisdictional standpoint?properly before the bankruptcy court.

   4. Stern, 131 S. Ct. at 2595.

   5. See id. (holding, inter alia, that it was unconstitutional for the Article I bankruptcy court to issue a final judgment upon the common law tortious

      interference counterclaim).

   6. See, e.g., Patlex Corp. v. Mossinghoff, 758 F.2d 594, 604 on reh’g, 771 F.2d

   480 (Fed. Cir. 1985).

   
   

   mode of analysis is necessarily not severable.7 Of course, this point further resonates in light of the enactment of the Leahy-Smith America Invents Act, which seeks to grant additional adjudicatory power to the USPTO in the patent arena.8

   In order to demonstrate that patents do not fall within the public rights exception, a stepwise, in-depth analysis of this highly complicated and oft-contradictory9 brand of constitutional jurisprudence is required. Given the complexities inherent to the doctrine, only a case-by-case analysis can demonstrate the full parameters of the exception. Additionally, important Supreme Court and Federal Circuit cases that either tangentially or directly impact public rights in the patent context will be evaluated. Here, critical analysis will be provided regarding the Federal Circuit’s attempt to reconcile McCormick,10 a precedential Supreme Court decision that unequivocally declares that the matter of patent validity belongs to the sole discretion of the Article III courts, with its notion of what public rights should encapsulate.11 Similarly, the Federal Circuit’s interpretation of public rights law will be juxtaposed against the Supreme Court’s controlling standard.

   
   

   1. This Article does not seek to address pragmatic or political concerns. Without question, there are reasons grounded in pragmatism as to why, e.g., some level of Article I activity should be allowed with respect to the resolution of patent invalidity disputes. In many respects, these concerns form the foundation of the Federal Circuit’s holding in Patlex, which is discussed infra Part II.G. Instead, this note endeavors to evaluate the public rights rule of law, as formulated by the Supreme Court, and apply it to patents for intellectual property.

   2. See Leahy-Smith America Invents Act, 35 U.S.C. § 6 (2006) (establishing a broad post-issuance review proceeding where all invalidity arguments may be

      heard before the Article I Patent Trial and Appeal Board).

   3. Justice Rehnquist once remarked, “[I]n an area of constitutional law such as that of the ‘Article III Courts,’ with its frequently arcane distinctions and

      confusing precedents . . . that this Court should decide no more of a

      constitutional question than is absolutely necessary accords . . . with sound judicial policy.” N. Pipeline Constr. Co. v. Marathon Pipeline Co., 458 U.S. 50, 89 (1982) (Rehnquist, J., concurring).

   4. McCormick Harvesting Mach. Co. v. C. Aultman Co., 169 U.S. 606 (1898).

   5. See Patlex Corp., 758 F.2d at 604; see also Joy Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992).

      
      

      In addition to synthesizing the relevant case law regarding public rights, an analysis of the Seventh Amendment right to a jury trial as applied to patents is provided. Given that the standard utilized in most forums for the determination of whether a jury trial right exists under the Seventh Amendment is either analogous to, or in some instances, identical with, the standard employed in the public rights determination, a finding of a right to a jury trial under the Seventh Amendment can necessarily be determinative.12 In addition to the jury trial right, the historical nature of patents as property,13 and the implications for public rights and Article III are addressed. Though intellectual property patent rights currently exist in federal statutes, they share in the bundle of rights firmly established over centuries of American jurisprudence inherent to all property obligations.14 Given that patents for intellectual property share in the same rights as those eligible to patents for land, Supreme Court precedent addressing separation of powers in the land patent context will be discussed. Additionally, the discordant treatment of the International Trade Commission by the Federal Circuit is evaluated, and though the Circuit's chosen standard appears to mark a somewhat whimsical departure from traditional public rights rule, the implications of the ITC's limited collateral estoppel effect in patent determinations as applied to separation of powers considerations are highlighted. Lastly, and perhaps most importantly, the applicability of waiver, as applied to the Article III institutional safeguard, is addressed.15 As noted during the analysis of Stern, waiver still plays an integral, albeit undefined, role in modern-day public rights jurisprudence. After

      
      

   6. The standards, and any existing homologies, are discussed infra Part II.C.

   7. Beyond the intellectual property context; e.g., land.

   8. Judge Newman, writing for the Federal Circuit in Patlex, somewhat ironically proclaimed “[a] patent for an invention is as much property as a patent for land. The right rests on the same foundation and is surrounded . . . by the

      same sanctions.” Patlex, 758 F.2d at 599 (quoting Consolidated Fruit Jar Co. v.

      Wright, 94 U.S. 92, 96 (1876)) (emphasis added).

   9. Compare to the personal right to a jury trial under the Seventh Amendment. Prior Supreme Court cases have declared that because Article III implements

      separation of powers schemes core to the structuring of the national government, its requirements cannot be waived by the private litigant. See, e.g., Commodity

      Futures Trading Comm’n v. Schor, 478 U.S. 833 (1986).

      
      

      all, the common law defamation proof of claim is only saved from constitutionality concerns because the primary petitioner for bankruptcy ostensibly waived any and all Article III limitations by filing for bankruptcy in the first place.16 However, much ambiguity still lingers regarding waiver in the Article III context. The Court’s decisions regarding the legitimacy of waiver as applied to foundational separation of powers mandates will be evaluated.17 As one may suspect, this area of constitutional law lacks delineating clarity.

      This Article will

      ...