One of the most vexed issues in the adjudication of patent disputes in India has consistently been the legal competence and professional training of the officers in the Patent Office who are tasked with the responsibility of such adjudication. As Prashant has noted on this blog before, the entrustment of intrinsic judicial functions to the Patent Office, relating to the adjudication of opposition proceedings and compulsory licensing applications, may violate the doctrine of separation of powers by providing a legal basis for undue executive interference.
Similarly, as Shamnad sir has noted, the entrustment of the power to make judicial determinations to the Patent Office also transforms the Office from a mere administrative agency into a quasi-judicial body.
While these issues have not been litigated in Indian courts thus far, a recent legal battle in the United States may offer some guidance on the extent to which intrinsic judicial functions can be entrusted to the Patent Office. Therefore, in this Article, I will aim to present a succinct summary of the legal controversy that has now culminated in a petition for certiorari being filed to the U.S. Supreme Court and examine the relevance that this controversy has to the institutional set-up for adjudication of patent disputes in India. (Long post ahead!)
Inter Partes Review:
At the heart of this controversy is a post-grant opposition proceeding called Inter Partes Review (“IPR”).
Prior to the inception of the IPR mechanism, once a patent was granted, its validity could only be challenged in a judicial proceeding before a court in a patent infringement action. The America Invents Act of 2011, which was enacted to overhaul the patent system, introduced the IPR mechanism with a twofold object.
First, the new mechanism was created to enable a body within the U.S. Patent and Trademark Office (USPTO), called the Patent Trials and Appeals Board (PTAB), to adjudicate upon disputes involving the validity of patents. By virtue of this mechanism, Congress sought to empower the USPTO to correct errors in the grant of a patent through the instrumentality of the PTAB.
Second, in order to ensure that disputes relating to the validity of a patent would be decided by patent experts, Congress transferred the power to adjudicate upon claims relating to the validity of patents from courts set up under Article 3 of the American Constitution, who used to make these determinations on the basis of jury trials, to the PTAB.
In order to institute IPR, a petitioner is required to persuade a panel of PTAB judges that there is a reasonable likelihood of the petitioner being able to demonstrate that the claim is invalid for either lack of novelty or obviousness.
Main flaws of the Review process:
Although the America Invents Act was ostensibly enacted to make the patent system more conducive to fostering innovation, the IPR process has had exactly the opposite effect. As the petition for the grant of certiorari notes, out of the 4288 petitions that were instituted for IPR until 31st March, 2016, 86% of the petitions resulted in at least one claim in the patent under review being invalidated.
No wonder, then, that a Federal Circuit judge has gone so far as to described the PTAB as a death squad responsible for killing property rights.
This problem is further exacerbated by the fact that, in its last week’s decision, the American Supreme Court ruled in Cuozzo Speed Technology versus Lee that the broadest reasonable interpretation (BRI) standard applied by the PTAB while adjudicating upon the validity of a patent is legally defensible. This standard essentially construes the claims in the patent under review in the broadest possible manner while determining if they meet the standards for patentability, thereby substantially increasing the likelihood of most claims being subsumed in the prior art. In addition, the Court also held that the language of the Act makes it unequivocally clear that the decision of the PTAB to institute IPR is final and nonappealable.
Finally, even though there is a statutory provision for the amendment of patent claims during IPR to bring them in consonance with patentability standards, only half a dozen requests for amendments have thus far been granted, resulting in more patents being invalidated.
Decision of Federal Circuit:
The constitutional validity of IPR was assailed before the Federal Circuit which held that the process is completely constitutional. Broadly speaking, the petitioner (MCM) argued that the process is unconstitutional for two main reasons: First, because it takes away the power to decide the validity of patents from regular courts and transfers it to an administrative agency and second, because the review process does not encompass a trial by jury, which is a fundamental right under the seventh amendment to the U.S. Constitution.
The Court rejected these arguments on 2 main grounds.
First, and most important, in accordance with the definition of a ‘public right’ adopted by the American Supreme Court, the Federal Circuit held that patent rights, being a part of a federal regulatory scheme, are public rights. On this basis, it held: “because patent rights are public rights, and their validity susceptible to review by an administrative agency, the seventh amendment poses no barrier to agency adjudication without a jury.”
Second, holding that there were no significant differences between another form of opposition proceedings, called reexamination proceedings, whose constitutionality it had upheld in an earlier case and the IPR process, the Federal Circuit held that its previous decision would operate as a binding precedent. On this basis, it came to the conclusion that IPR was consistent with Article 3.
Reasons warranting the grant of certiorari:
In the petition for the grant of certiorari, the decision of the Federal Circuit has been assailed on 3 main grounds.
First, arguing that the federal circuit erred in recognizing patent rights as public rights, the petition states: “patents are property rights and not mere artifacts of a federal regulatory scheme.” Further, as the NYIPLA’s amicus brief notes, since patent rights have been long recognized as property rights and since property rights are private rights, the Federal Circuit’s conclusion needs to be revisited.
Second, arguing that patent rights stand on the same footing as other property rights, MCM argues that it has been a well-accepted proposition, since the 1898 case of McCormick Harvesting Mach. Co. versus C. Aultman and Co., that the power to annul or set aside patents, once they have been granted, vests exclusively in the courts of the United States and not in the agency granting the patent.
Finally, MCM argues that IPR runs counter to the doctrine of separation of powers embodied in Article 3 because the members of the PTAB are not offered security of tenure or salary on the same footing as other judges and also because the process does not involve the application of locus standi norms applicable in Article 3 proceedings.
Implications for India:
While at first blush it may seem that, owing to the technical nature of the arguments in this case, it is unlikely to have any wide-ranging ramifications for countries whose opposition proceedings closely mirror the IPR process, a closer scrutiny in fact prompts one to adopt the opposite conclusion.
At root, this case raises the same question that is at the heart of debates about the need to prevent executive encroachment and preserve separation of powers principles in opposition proceedings and the adjudication of CL applications in India.
And the question, as the petition eloquently notes, is this: Is it legally or constitutionally permissible for the legislature to strip away the benefit of the bargain entered into by the inventor, which has been an essential feature of the patent system for centuries, by devising suboptimal administrative procedures to determine the fate of crucial patent rights instead of full-fledged judicial trials?
If the Supreme Court does grant cert, its answer to this question will have profound implications for patent adjudication, not just in the United States, but also in other similarly situated jurisdictions.
