Takings Challenge to IPR Fails

Since the Supreme Court’s decision in Cuozzo Speed, there has been speculation that there may be an opportunity to attack AIA trials on different constitutional grounds. Most recently, it was argued that cancellation of an improvidently granted patent constituted a 5th Amendment “taking.”

In Celgene Corporation v. Peter, perhaps not surprisingly, the Federal Circuit held that “IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.”

While IPRs do not differ significantly from reexamination in scope, CBM proceedings do.

In Celgene, the Court explained that in determining whether the retroactive application of IPRs to pre-AIA patents is an unconstitutional taking, it considered whether IPRs differ from the pre-AIA review mechanisms significantly enough, substantively or procedurally, to effectuate a taking. The Court concluded IPRS did not at they do not, explaining:

" The validity of patents has always been subject to challenge in district court. And for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO. . . . IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.

By the time Celgene filed the application that became the ’501 patent (1998) and the patent was issued (2000), and by the time Celgene filed the application that became the ’720 patent (2000) and the patent was issued (2001), ex parte reexamination had existed for roughly two decades. . . . [¶ ] Inter partes reexamination, created by Congress in 1999, was also available when Celgene filed the ’720 patent, although not when it filed the ’501 patent. . . .

Celgene’s pre-AIA patents were therefore granted subject to existing judicial and administrative avenues for reconsidering their validity. Not only were they subject to challenge in district court, for several decades, the Patent Office has also possessed the authority to reexamine—and perhaps cancel—a patent claim that it had previously allowed.

(internal quotes omitted)

As to the argument that IPR proceedings were somehow different than reexamination (an issue that haunted the Cuozzo dispute.) The Court noted:

". . . IPRs do not differ sufficiently from the PTO reconsideration avenues available when the patents here were issued to constitute a Fifth Amendment taking. Celgene identifies a number of differences between reexaminations and IPRs, including that IPRs are adjudicative and have discovery, briefing, and an oral hearing, but . . . these differences are not sufficiently substantive or significant to constitute a taking. [¶] Unsurprisingly, Celgene does not grapple with the far more significant similarities between IPRs and their reexamination predecessors. . . .

In light of the foregoing, we hold that the retroactive application of IPR proceedings to pre-AIA patents is not an unconstitutional taking under the Fifth Amendment. Patent owners have always had the expectation that the validity of patents could be challenged in district court. For forty years, patent owners have also had the expectation that the PTO could reconsider the validity of issued patents on particular grounds, applying a preponderance of the evidence standard. Although differences exist between IPRs and their reexamination predecessors, those differences do not outweigh the similarities of purpose and substance and, at least for that reason, do not effectuate a taking of Celgene’s patents.

Interestingly, CBM proceedings allow for 101 challenges (as well as on-sale and public use art) for pre-AIA patents. Of course, prior to CBM proceedings, there was no USPTO review mechanism to challenge on these bases. (PGR is only for AIA patents). Thus, there would seem to be some opportunity to distinguish Celgene for CBM matters — at least on the administrative side. Of course, 101/public use/sale challenges in district court have always been available.

But, even if successful, it would be mostly academic at this point. This is because the CBM mechanism will sunset on September 16, 2020, and current filings have dropped off to a handful a year.

Scott A. McKeown is an author of the Patents Post Grant