Cascades Projection LLC v. Epson Am., Inc.

• Citation: 864 F.3d 1309 (Mem)
• Decision Date: 11 May 2017
• Docket Number: 2017-1517, 2017-1518
• Parties: CASCADES PROJECTION LLC, Appellant v. EPSON AMERICA, INC., Sony Corporation, Appellees
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

864 F.3d 1309 (Mem)

CASCADES PROJECTION LLC, Appellant

v.EPSON AMERICA, INC., Sony Corporation, Appellees

2017-1517, 2017-1518

United States Court of Appeals, Federal Circuit.

May 11, 2017

Philip P. Mann , Mann Law Group, Seattle, WA, filed a petition for hearing en banc for appellant. Also represented by Robert Greenspoon , Flachsbart & Greenspoon, LLC, Chicago, IL.David J. Ball, Jr. , Paul, Weiss, Rifkind, Wharton & Garrison LLP, Washington, DC, filed a response to the petition for appellee Epson America, Inc. Also represented by Nicholas P. Groombridge, Jenny Chia Cheng Wu , New York, NY.

Kevin P.B. Johnson , Quinn Emanuel Urquhart & Sullivan, LLP, Redwood Shores, CA, filed a response to the petition for appellee Sony Corporation. Also represented by Andrew J. Bramhall ; Matthew A. Smith , Turner Boyd LLP, Redwood City, CA.

Andrew John Dhuey , Berkeley, CA, for amici curiae Daniel R. Cahoy, Eric R. Claeys, Gregory Dolin, James W. Ely, Jr., Richard A. Epstein, Matthew P. Harrington, Ryan Holte, Irina D. Manta, Adam Mossoff, Sean M. O'Connor, Kristen J. Osenga, Mark Schultz, Peter K. Yu.

Frear Stephen Schmid , San Francisco, CA, for amici curiae Security People Inc., Edison Innovators Association, Independent Inventors of America, Inventors Network of the Capital Area, Inventors Network of the Carolinas, Inventors Network of Minnesota, Inventors' Roundtable, Inventors Society of South Florida, Music City Inventors, National Innovation Association, San Diego Inventors Forum, South Coast Inventors, Tampa Bay Inventors Council, US Inventor, Inc.

Before Prost, Chief Judge, Newman, Lourie, Dyk, Moore, O'Malley, Reyna, Wallach, Taranto, Chen, Hughes, and Stoll, Circuit Judges.

Newman, Circuit Judge, concurs in the denial of the petition for initial hearing en banc.

Dyk, Circuit Judge, with whom, Prost, Chief Judge, and Hughes, Circuit Judge, join, concurs in the denial of the petition for initial hearing en banc.

O'Malley, Circuit Judge, dissents from the denial of the petition for initial hearing en banc.

Reyna, Circuit Judge, dissents from the denial of the petition for initial hearing en banc.

ON PETITION FOR HEARING EN BANC

Per Curiam.

ORDER

Appellant Cascades Projection LLC filed a petition for hearing en banc. A response to the petition was invited by the court and filed by appellees Epson America, Inc. and Sony Corporation. Appellant was also granted leave to file a reply in support of the petition.

The petition was referred to the circuit judges who are in regular active service.

Upon consideration thereof,

IT IS ORDERED THAT :

The petition for hearing en banc is denied.

Newman, Circuit Judge, concurring in the denial of initial hearing en banc.

There is no doubt that a patent is a property right, with the attributes of personal property. This was resolved in 35 U.S.C. § 261 ("Subject to the provisions of this title, patents shall have the attributes of personal property ..."). There is, of course, a public interest in the innovation incentive of the patent law, see, e.g. , Patlex Corp. v. Mossinghoff , 758 F.2d 594, 604 (Fed. Cir. 1985), but that does not convert a private right into a public right. That is not the question presented by the current debate concerning the America Invents Act.

Because "the attributes of personal property" enjoyed by patents are "[s]ubject to the provisions of this title," the inquiry focuses on whether patent owners subject to post-grant procedures are afforded appropriate due process protections as the Patent Office ensures issued patents do indeed conform with the provisions of the Patent Act. The question, then, is whether the statutory scheme created by the America Invents Act, in which the Office is given an enlarged opportunity to correct its errors in granting a patent, with its decision subject to review by the Federal Circuit, meets the constitutional requirements of due process in disposition of property.

In view of the uncertainties illustrated in the present debate, I conclude that the matter should be resolved after full opportunity for panel consideration, and, as such, concur in the denial of initial en banc hearing. If necessary to properly resolve these uncertainties, however, resolution by the court en banc is appropriate.

Dyk, Circuit Judge with whom Prost, Chief Judge, and Hughes, Circuit Judge, join, concurring in the denial of initial hearing en banc.

We concur in the court's denial of the petition for initial hearing en banc. The petition raises the same constitutional challenge to the inter partes review provisions of the America Invents Act that the court rejected in MCM Portfolio LLC v. Hewlett-Packard Co. , 812 F.3d 1284 (Fed. Cir. 2015), cert. denied ––– U.S. ––––, 137 S.Ct. 292, 196 L.Ed.2d 212 (2016). MCM was correctly decided, and there is no need to restate MCM's reasoning here. We write solely to address three points raised by today's dissents.

First, MCM is neither "inconsistent" nor "irreconcilable" with the court's decision in Patlex Corp. v. Mossinghoff , 758 F.2d 594 (Fed. Cir. 1985). Op. 1314 (Reyna, J., dissenting). In Patlex , the court upheld the constitutionality of ex parte reexaminations conducted by the PTO. In doing so, the court expressly affirmed the power of an Article I tribunal to adjudicate, in the first instance, the validity of an issued patent. See Patlex , 758 F.2d at 604. MCM faithfully followed the reasoning of Patlex to reach the same conclusion with respect to inter partes review.

Second, Patlex and MCM did not differ in their interpretation of McCormick Harvesting Machine Co. v. Aultman , 169 U.S. 606, 18 S.Ct. 443, 42 L.Ed. 875 (1898). On its face, the decision in McCormick rested on the lack of statutory authority: "Our conclusion upon the whole case is that, upon the issue of the original patent, the patent office had no power to revoke, cancel, or annul it. It had lost jurisdiction over it, and did not regain such jurisdiction by the application for a reissue." Id. at 612, 18 S.Ct. 443.

Both Patlex and MCM distinguished McCormick as resting on a lack of statutory authority, statutory authority which was later conferred by a series of statutes culminating in ex parte reexamination and, later, inter partes review. As explained by the court in Patlex :

We do not read McCormick Harvesting as forbidding Congress to authorize reexamination to correct governmental mistakes, even against the will of the patent owner. A defectively examined and therefore erroneously granted patent must yield to the reasonable Congressional purpose of facilitating the correction of governmental mistakes. This Congressional purpose is presumptively correct, and we find that it carries no insult to the Seventh Amendment and Article III.

758 F.2d at 604. MCM adopted this exact reasoning in upholding the constitutionality of inter partes review. See MCM , 812 F.3d at 1291 (quoting Patlex , 758 F.2d at 604 ).

Third, contrary to the dissents, there is no inconsistency in concluding that patent rights constitute property and that the source of that property right is a public right conferred by federal statute. See Op. 1312–13 (O'Malley, J., dissenting); Op. 1323–25 (Reyna, J. dissenting). The Supreme Court has repeatedly recognized that patent rights are public rights flowing from congressional legislation. In a decision pre-dating McCormick , the Court observed that:

The [patent] monopoly did not exist at common law, and the rights, therefore, which may be exercised under it cannot be regulated by the rules of the common law. It is created by the act of Congress; and no rights can be acquired in it unless authorized by statute, and in the manner the statute prescribes.

Gayler v. Wilder , 51 U.S. (10 How.) 477, 494, 13 L.Ed. 504 (1850). The recognition of patent rights as grounded in statutory law remains to this day. See Sears, Roebuck & Co. v. Stiffel Co. , 376 U.S. 225, 229 n.5, 84 S.Ct. 784, 11 L.Ed.2d 661 (1964) ("Patent rights exist only by virtue of statute.").

The Supreme Court has also repeatedly made clear that such public rights may be adjudicated in the first instance by an administrative agency. For example, most recently in Stern v. Marshall , 564 U.S. 462, 491, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), the Court concluded that the public rights doctrine extends to "cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency's authority."¹ There is no dispute that the issue of patent validity "derives from a federal regulatory scheme" and is "integrally related to particular federal government action." Stern , 564 U.S. at 490–91, 131 S.Ct. 2594.

O'Malley, Circuit Judge, dissenting from the denial of initial hearing en banc.

In MCM Portfolio LLC v. Hewlett-Packard Co ., 812 F.3d 1284 (Fed. Cir. 2015), a panel of this court stated that "patent rights are public rights." Id . at 1293. We did so in the context of rejecting a constitutional challenge to inter partes review ("IPR"), a new post-grant proceeding created by the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) ("the AIA"). In an IPR proceeding, third parties can challenge the validity of issued patent rights before the Patent Trial and Appeal Board of the United States Patent and Trademark Office ("PTO") without plenary Article III trial court review of the decision. The Supreme Court has explained that "public rights" may be assigned to a non-Article III forum for resolution without violating the Constitution, but that core private rights are only subject to adjudication in Article III courts. Stern v. Marshall , 564 U.S. 462, 484-86, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). By characterizing a patent as a public right, therefore, the panel in MCM was able to conclude that patent validity is "susceptible to review by an administrative agency"—in other words, that IPR proceedings do not violate the Constitution....