`FOR THE EASTERN DISTRICT OF VIRGINIA
`Alexandria Division
`
`J. CARL COOPER, et al.,
`
`Plaintiffs,
`
`vs.
`
`Civil Action No. 1:14cv672
`
`)
`)
`)
`)
`)
`)
`)
`MICHELLE LEE,
`)
`
`Deputy Under Secretary of
`Commerce for Intellectual Property )
`and Deputy Director of the United
`)
`States Patent and Trademark Office, )
`et al.,
`
`
`
`)
`)
`)
`)
`
`Defendants.
`_________________________________
`
`MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION FOR
`SUMMARY JUDGMENT & IN OPPOSITION TO PLAINTIFFS’ MOTION FOR
`SUMMARY JUDGMENT
`
`
`
`
`
`
`
`DATE: July 23, 2014
`
`
`
`
`
`
`
`
`
`DANA J. BOENTE
`UNITED STATES ATTORNEY
`
`DENNIS C. BARGHAAN, JR.
`Assistant U.S. Attorney
`2100 Jamieson Avenue
`Alexandria, Virginia 22314
`Telephone: (703) 299-3891
`Fax:
` (703) 299-3983
`Email: dennis.barghaan@usdoj.gov
`
`ATTORNEYS FOR DEFENDANTS
`
`OF COUNSEL:
`
`
`
`
`
`
`
`
`
`
`Scott Weidenfeller
`Joseph Matal
`Associate Solicitors
`United States Patent & Trademark Office
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`INTRODUCTION
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`
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`Nearly ninety years ago, Justice Oliver Wendell Holmes reminded the public – and his
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`fellow jurists – that declaring an Act of Congress unconstitutional “is the gravest and most
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`delicate duty that [a] Court is called on to perform.” Blodgett v. Holden, 275 U.S. 142, 148
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`(1927) (Holmes, J., concurring). In this action, plaintiffs J. Carl Cooper and eCharge Licensing
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`LLC ask this Court to run roughshod over this now-axiomatic principle, and to hold
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`unconstitutional the congressionally-revised system of patent reexamination at the United States
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`Patent and Trademark Office (“USPTO”) now known as inter partes review. Plaintiffs ask this
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`Court to invalidate this entire process – and, sub silentio, its two elder siblings – notwithstanding
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`(a) that this Court’s efforts might prove unnecessary (in the event that plaintiffs prevail before
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`the USPTO), and (b) the existence of at least two Federal Circuit decisions (to which this Court
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`looks for binding precedent on the merits of plaintiffs’ challenge) that have upheld the
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`constitutionality of administrative patent reexamination at the USPTO against the very same
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`arguments that plaintiffs present here. In short, as opposed to the surgical precision required by
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`Justice Holmes’s admonition, plaintiffs want this Court, with the stroke of a pen, to do away with
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`thirty-five years of patent reexamination.
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`
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`This Court should decline the invitation. First, it is now axiomatic that litigants are
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`required to exhaust available administrative remedies before seeking judicial relief. This
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`principle is no less applicable to constitutional claims; indeed, courts have held that exhaustion is
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`a necessary corollary to the doctrine of constitutional restraint. And here, plaintiffs have yet to
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`complete inter partes review before the USPTO – if they succeed in that process, this Court will
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`not need to address plaintiff’s constitutional questions, and if they do not, they can attempt to
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`raise their constitutional challenge with the Federal Circuit in their statutorily-guaranteed direct
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`appeal from the USPTO’s “final written decision.”
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`
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`Second, as this Court has already addressed in some detail, see generally Versata Dev.
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`Corp. v. Rea, 959 F. Supp. 2d 912 (E.D. Va. 2013) (Lee, J.), Congress has, for nearly thirty-five
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`years, authorized the USPTO to engage in administrative proceedings related to the re-
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`examination of patents that the agency previously issued. The Federal Circuit has now twice
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`rejected the position that such an administrative system runs afoul of the Constitution – whether
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`pursuant to Article III or the Seventh Amendment. See Patlex Corp. v. Mossinghoff, 758 F.2d
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`594 (Fed. Cir. 1985); Joy Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992). Plaintiffs
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`identify neither a change in this system arising out of the America Invents Act (“AIA”), nor any
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`intervening Supreme Court authority, that would render these two decisions inapposite to the
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`constitutional issue they raise here. Instead, they ostensibly ask this Court to strike down the
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`entire system of inter partes review based solely on their position that the Federal Circuit erred
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`in construing the Supreme Court’s nineteenth-century patent precedent. But it is well-settled that
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`this Court is bound by, and is not entitled to second-guess the correctness of, Federal Circuit
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`authority; in short, plaintiffs’ arguments must await review by either the en banc Federal Circuit
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`or the Supreme Court itself.
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`
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`Finally, even if this Court could adjudicate this question on a blank slate, Congress is
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`entitled to create a system through which the USPTO – in a quasi-litigative setting – reviews the
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`validity of a patent that it previously issued, without running afoul of either Article III or the
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`Seventh Amendment. Put simply, patent reexamination proceedings before the USPTO, in either
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`their past or current form, fit easily within the Supreme Court’s “public rights” jurisprudence:
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`patent reexamination proceedings resolve patent claims that are derived from a federal regulatory
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`2
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`scheme, and the resolution of these patent claims is essential to the “limited regulatory objective
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`within the [USPTO’s] authority.” Stern v. Marshall, 131 S. Ct. 2594, 2613 (2011).
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`
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`
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`This Court should thus reject plaintiffs’ claims, and enter judgment in USPTO’s favor.
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`STATUTORY & REGULATORY BACKGROUND
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`Plaintiffs’ instant constitutional claims generally concern the processes created by
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`Congress through which the USPTO reviews the validity of a patent that – pursuant to the very
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`same statutory and regulatory scheme Congress promulgated – the agency issued in the first
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`instance. Courts have repeatedly recognized that the availability of these administrative options
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`serve significant public needs, including, inter alia, to “restor[e] confidence in the validity of
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`patents issued by the [US]PTO,” “to correct errors . . . and if need be to remove patents that
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`never should have been granted,” and to ensure that – as with patent issuance in the first instance
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`– questions over patentability are “refer[red] . . . to the expertise of the [USPTO].” Patlex Corp.
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`v. Mossinghoff, 758 F.2d 594, 604 (Fed. Cir. 1985); see also Callaway Golf Co. v. Kappos, 802
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`F. Supp. 2d 678, 686 (E.D. Va. 2011).
`
`It is thus important to provide a threshold discussion of the new processes that Congress
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`appended, through the AIA, to the regulatory scheme governing patents as well as the
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`administrative processes that were previously available (before the AIA) for the review of issued
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`patents.
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`I.
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`PRE-AIA ADMINISTRATIVE REVIEW – PATENT REEXAMINATION
`
`A.
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`PATENT EXAMINATION
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`At the outset, an individual who seeks a patent on a particular invention must file an
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`application with the USPTO that contains a specification and an oath by the applicant to the
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`effect that he or she believes that they are the original inventor of the invention at issue. See 35
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`U.S.C. §§ 111(a); 115. A USPTO patent examiner thereafter reviews the application and makes
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`3
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`a determination as to whether the application presents claims that are patentable. See id.
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`§ 131. If “it appears that the applicant is entitled to a patent under the law,” the USPTO “shall
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`issue a patent.” Id.
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`B.
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`PATENT REEXAMINATION
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`1.
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`“Ex Parte” Reexamination
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`Until approximately 1980, individuals or entities seeking to challenge the validity of an
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`issued patent were without any real administrative recourse. See Patlex, 758 F.2d at 601.
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`Congress concluded that this gap forced many to file costly and time-consuming challenges to
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`patent validity in the federal court system, when the same challenge “could be conducted with a
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`fraction of the time and cost of formal legal proceedings,” in a USPTO proceeding. See H.R.
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`RPT. 96-1307, at 3 (Sept. 9, 1980), reprinted in 1980 U.S.C.C.A.N. 6460, 6462. Congress
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`therefore created an administrative alternative to federal court litigation known as “ex parte
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`reexamination,” which authorized the patent owner or third parties to request that the USPTO
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`reexamine “the substantive patentability” of an issued patent. 35 U.S.C. § 302 (2010).1
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`The use of the modifier “ex parte” to describe this form of reexamination was significant,
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`and reflected the nature of that type of administrative reexamination. In short, even if the
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`USPTO accepted a third-party’s request (i.e., concluded that there was a “substantial new
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`question of patentability,” 35 U.S.C. § 303(a)), and instituted reexamination proceedings, the
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`resulting proceedings would generally continue only between the USPTO and the patent owner.
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`See Syntex (USA), Inc. v. USPTO, 882 F.2d 1570, 1573 (Fed. Cir. 1989). Other than in one rare
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`situation, “[t]he statute [gave] third party requesters no further, specific right to participate in the
`
`
`1Given the amendments made to the Patent Act through the AIA – especially in
`the context of administrative and judicial review of issued patents – all statutory citations within
`this section (i.e., concerning patent reexamination) are to the 2010 codification of the United
`States Code.
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`reexamination proceeding.” Id.; see also 35 U.S.C. §§ 304-05. Instead, if the examiner
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`responsible for conducting the reexamination discovered that the claims were not actually
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`patentable, he or she would issue a final office action rejecting those claims. See 35 U.S.C. §
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`305. In those circumstances, the patent owner could seek administrative appellate review of the
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`rejection (or cancellation) of its former patent claims, and ultimately Article III review at the
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`Federal Circuit. See id. § 306.
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`2.
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`“Inter Partes” Reexamination
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`Almost twenty years later, in 1999, Congress elected to modify the system. In this
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`respect, Congress found that individuals and entities were not utilizing the existing
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`reexamination procedure because “a third party who requests reexamination cannot participate at
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`all after initiating the proceedings.” H.R. CONF. RPT. 106-464, at 133 (Nov. 9, 1999). In 1999,
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`Congress therefore created a new inter partes reexamination procedure that authorized the third-
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`party requester to participate in administrative reexamination proceedings. See 35 U.S.C. § 314.
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`More specifically, in inter partes reexamination, “[e]ach time that the patent owner file[d] a
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`response to an action on the merits . . . the third-party requester [had] one opportunity to file
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`written comments addressing issues raised by the action . . . or the patent owner’s response.” Id.
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`§ 314(b)(2). And just like ex parte reexamination, if the examiner responsible for reexamining
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`the patent concluded that the relevant claims were not patentable, he or she issued an office
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`action rejecting (and thus cancelling) the same. See id. § 314(a). The patent owner, as well as
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`the third-party requester, could similarly seek administrative appellate review of the examiner’s
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`decision, and ultimately Article III review in the Federal Circuit. See id. §§ 315(a)-(b).
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`II.
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`AIA ADMINISTRATIVE REVIEW – INTER PARTES REVIEW & POST-GRANT REVIEW
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`By 2011, however, Congress remained dissatisfied with the progress it had made in
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`shifting reexamination of the legitimacy of issued patents to the expertise of the USPTO. H.R.
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`RPT. 112-98, at 45 (2011). In particular, Congress noted that despite the improvements that
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`it had made to the procedure for the review of issued patents, the “[r]eexamination proceedings
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`are [] often costly, taking several years to complete.” Id. As a result, through the AIA, see PUB.
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`L. 112-29, 125 Stat. 284 (Sept. 16, 2011), Congress made yet another attempt to encourage
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`individuals and entities to utilize this administrative option by significantly streamlining the
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`reexamination process.
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`More specifically, Congress in the AIA created two new types of administrative
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`proceedings through which an individual or entity could secure the USPTO’s review of an issued
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`patent – (1) inter partes review; and (2) post-grant review. Both mechanisms continue the basic
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`functions of the systems described above – i.e., both authorize the USPTO to reexamine the
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`validity of an issued patent, and in the event that the USPTO concludes that it should not have
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`issued the patent, both authorize the USPTO to invalidate (or cancel) the patent. These new
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`systems simply provide a more efficient process for both administrative and judicial review of
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`patent validity questions by eliminating one level of review at the USPTO, while ensuring that
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`patent owners and challengers alike have the ability to seek appellate review at the Federal
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`Circuit at the conclusion of the proceedings.
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`A.
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`POST-GRANT REVIEW
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`First, Congress created “post-grant review.” See generally 35 U.S.C. §§ 321-25 (2013).
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`Anyone “who is not the owner of the patent” may petition the USPTO “to institute a post-grant
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`review of the patent,” id. § 321(a), so long as the petition is filed within the first nine months
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`after the patent in question issued, id. § 321(c). Congress thus intended the post-grant review
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`system “to enable early challenges to patents, while still protecting the rights of inventors and
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`patent owners against new patent challenges unbounded in time and scope.” H.R. RPT. 112-98,
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`at 47-48.
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`In the previously discussed reexamination procedure, an initial review was conducted by
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`a patent examiner, before administrative appeal within the USPTO, which is then followed by
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`Article III appellate review at the Federal Circuit. But in post-grant review, all administrative
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`review at the USPTO is conducted by a single expert entity – the Patent Trial and Appeal Board
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`(“PTAB”). See 35 U.S.C. § 326(c).
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`Congress provided a streamlined process for the administrative and judicial consideration
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`of post-grant review. First, the PTAB must adjudicate a petition seeking to “institute a post-
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`grant review” – a decision that is “final and nonappealable,” id. § 324(e) – within three months
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`of the filing of a response to the petition. Id. § 324(c). Just as the USPTO examiner would do in
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`reexamination proceedings, the PTAB then evaluates the validity of the patent that is the subject
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`of the proceedings. And in undertaking this review, Congress allowed the patent owner and the
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`challenger “the limited use of depositions” as a mechanism to provide the PTAB with additional
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`information pertinent to its review. Abbott Labs. v. Cordis Corp., 710 F.3d 1318, 1326 (Fed.
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`Cir. 2013); see also 35 U.S.C. § 326(a)(5). All post-grant review proceedings, including the
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`PTAB’s final written determination on the validity of the challenged patent claims, must
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`generally be completed within one year of the institution of the proceeding. See id. §
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`326(a)(11). Finally, Congress provided for appellate review at the Federal Circuit at the
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`conclusion of post-grant review proceedings before the USPTO. See id. § 329 (“A party
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`dissatisfied with the final written decision of the [PTAB] . . . may appeal the decision . . . .”).
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`B.
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`INTER PARTES REVIEW
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`Congress also amended the former inter partes reexamination process, and in so doing,
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`created a proceeding known as inter partes review. In direct contrast to post-grant review, an
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`individual or entity may only seek inter partes review – by petition – after the initial nine month
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`period from patent issuance, or the termination of a post-grant review proceedings (whichever is
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`later). See 35 U.S.C. § 311(b). The grounds on which one may seek inter partes review are,
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`however, more limited than in post-grant review. See id. § 311(b) (providing that inter partes
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`review is only available to challenge patentability under 35 U.S.C. §§ 102-03 on the basis of
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`previously-filed patents or printed publications).
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`At least for instant purposes, beyond these distinctions, inter partes review proceedings
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`are conducted – again, entirely by the PTAB, see id. § 316(c) – pursuant to the identical
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`streamlined process created for post-grant review. First, the PTAB must adjudicate a petition
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`seeking to “institute an inter partes review” – a decision that is “final and nonappealable,” id.
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`§ 314(d) – within three months of the filing of a response to the petition. Id. § 314(b). And the
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`patent owner and the challenger are similarly entitled to take limited depositions in order to assist
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`the PTAB in conducting its review function. Id. § 316(a)(5). All inter partes review
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`proceedings, including the PTAB’s final written determination on the validity of the challenged
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`patent claims, must generally be completed within one year of the institution of the proceeding.
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`See id. § 316(a)(11). Finally, Congress provided for appellate review at the Federal Circuit after
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`the conclusion of inter partes review proceedings before the USPTO. See id. § 319 (“A party
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`dissatisfied with the final written decision of the [PTAB] . . . may appeal the decision . . . .”).
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`* * *
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`In sum, Congress created two virtually identical systems that would streamline
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`administrative reexamination of the validity of issued patents. Notwithstanding the
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`groundbreaking nature of Congress’s action on this score, it is important to recall – especially
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`given the arguments presented by plaintiffs here – that these “new” systems remained, at their
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`core, no different than their reexamination siblings. Both “reexamination” and “review”
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`authorize the USPTO to review the validity of an issued patent, despite the availability of federal
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`court review of that patent. And both “reexamination” and “review” – unlike federal court
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`actions concerning of patent validity – do not accord an issued patent a presumption of validity
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`(and thus do not require proof of invalidity by “clear and convincing evidence”), and construe
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`the claims of an issued patent using their broadest-reasonable-interpretation. Finally, both
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`“reexamination” and “review” allow for Article III judicial review of the USPTO’s
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`administrative decision at the conclusion of proceedings.
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`FACTUAL BACKGROUND
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`
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`Plaintiffs J. Carl Cooper (“Cooper”) and eCharge Licensing, LLC (“eCharge”) are the
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`owners and exclusive licensees of the three patents at issue in this action: United States Patent
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`Nos. 6,764,005; 7,828,207; 8,490,875. Complaint, ¶¶3-4. All three patents generally claim
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`processes related to patterns of information that that can be carried on various media, including
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`credit cards and the like. Id. exs. B-D.
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`On September 9, 2013, plaintiff eCharge filed a civil action against Square, Inc.
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`(“Square”), in the United States District Court for the Northern District of Illinois, alleging that
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`Square had infringed the three patents; Square later filed a counterclaim against plaintiff eCharge
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`in that same action seeking a declaratory judgment that the three patents were invalid.
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`Defendants’ Exhibit (“DEX”) A. Shortly thereafter, on November 18, 2013, Square filed three
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`petitions with the USPTO seeking the institution of inter partes review with respect to the three
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`patents, and plaintiffs filed responses to the same. Complaint, ¶24. After reviewing those
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`submissions, the PTAB concluded that there was a “reasonable likelihood” that the claims in the
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`’005 patent were “unpatentable under § 102(e) as anticipated” by a prior art reference, Pl. Mem.
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`(Dkt. No. 5), ex.B; that certain claims in the ’227 patent were similarly “unpatentable under §
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`102(e) as anticipated” by a different prior art reference, id. ex.C; and that certain claims in the
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`’875 patent were “unpatentable under § 102(e) as anticipated” by a series of prior art references,
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`id. ex.D. After the PTAB issued its institution decision, plaintiff eCharge consented to a stay of
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`the Northern District of Illinois action pending the outcome of the inter partes review.2 Id.
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`ex.A.3
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`Inter partes review concerning the three patents have continued apace at the USPTO. On
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`May 4, 2014, the PTAB issued an order providing particularized deadlines for the filing of
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`submissions in each inter partes review – including plaintiffs’ formal opposition to the PTAB’s
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`identified potential ground of unpatentability, and any request to amend their patent claims.4
`
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`2The AIA does not require district courts to stay patent infringement litigation pending
`the outcome of an instituted inter partes review proceeding; rather, “the decision of whether to
`stay the district court proceedings . . . is left to the district court’s discretion.” Virginia
`Innovation Sciences, Inc. v. Samsung Elecs. Co., 983 F. Supp. 2d 713, 753 (E.D. Va. 2014).
`
`3These three patents are also ostensibly the subject of a second federal court civil action
`in which the party roles are reversed; more specifically, in the District of Massachusetts, a
`different entity sued plaintiff eCharge seeking a declaratory judgment that the three patents are
`invalid, and plaintiff eCharge ultimately filed a counterclaim alleging infringement. A motion to
`stay those proceedings pending the resolution of the inter partes review remains pending before
`that court at the present time.
`
`4Of some import, both plaintiffs and Square have stipulated that insofar as at least the
`’005 and ’207 patents will expire before the PTAB issues its final written decision in the inter
`partes review, the PTAB should not evaluate the patentability of the claims of those patents
`using the claims’ “broadest reasonable interpretation.” DEX C. The same would hold true for
`the ’875 patent, which expires on April 3, 2015, if the PTAB’s final written decision is not issued
`by this expiration date. Id.
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`DEX B. Plaintiffs have availed themselves of the limited opportunity to take depositions under
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`inter partes review, DEX D, and have used that deposition testimony in their formal opposition,
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`which they filed on July 16, 2014, DEX E (only attached for the ’005 patent). The PTAB has
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`scheduled oral argument on the substantive patentability issues for January 9, 2015. DEX F.
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`ARGUMENT
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`I.
`
`PLAINTIFFS HAVE NOT EXHAUSTED AVAILABLE ADMINISTRATIVE REMEDIES BEFORE
`SEEKING JUDICIAL RELIEF
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`It is by now axiomatic “that no one is entitled to judicial relief for supposed or threatened
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`injury until the prescribed administrative remedy has been exhausted.” Thetford Properties IV
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`L.P. v. HUD, 907 F.2d 445, 448 (4th Cir. 1990) (noting this to be a “long settled rule of judicial
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`administration”)5; see also Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938);
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`Ticor Title Ins. Co. v. FTC, 814 F.2d 731, 738 (D.C. Cir. 1987) (opinion of Edwards, J.)
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`(identifying “general rule . . . that exhaustion of administrative remedies is a prerequisite to
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`obtaining judicial relief for an actual or threatened injury”). Here, the specific inter partes
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`review proceedings that spawned this litigation remain pending before the USPTO. The PTAB
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`may ultimately rule in plaintiffs’ favor, holding that the relevant claims of the three patents at
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`issue are indeed patentable. And even were the PTAB to rule against plaintiffs, Congress has, as
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`a part of its streamlined system for administrative and judicial review in this context, provided an
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`exclusive avenue for Article III review – a direct appeal to the Federal Circuit from the PTAB’s
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`“final written decision,” through which plaintiffs can raise their instant constitutional challenge
`
`5Although – as plaintiffs’ ostensibly concede, Pl. Mem., at 3 – the law of the Federal
`Circuit serves as binding precedent on the merits of plaintiffs’ constitutional challenge, see, e.g.,
`Electronics for Imaging, Inc. v. Coyle, 340 F.3d 1344, 1348-50 (Fed. Cir. 2003), undersigned
`counsel’s research did not reveal any direct Federal Circuit authority on the specific type of
`exhaustion concerning constitutional causes of action asserted in the instant memorandum (i.e.,
`whether a litigant must complete the administrative remedies that either Congress or a federal
`agency has afforded in a particular context before proceeding to federal court).
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`to the decision. It bears mentioning that the Supreme Court’s decisions on the topic of
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`separation of powers (in the court vs. administrative agency context) and the Seventh
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`Amendment arise in this fashion – i.e., after the completion of the very administrative process to
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`which a particular individual or entity objects on constitutional grounds, the individual or entity
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`invokes the specific vehicle for Article III review provided by Congress, and in that judicial
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`proceeding, the individual or entity alleges that the preceding administrative process was
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`constitutionally infirm. See, e.g., CFTC v. Schor, 478 U.S. 833, 838 (1986); Atlas Roofing Co.
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`v. Occupational Safety & Health Review Comm., 430 U.S. 442, 447-48 (1977).
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`Because plaintiffs have yet to exhaust their available administrative remedies, this Court
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`should reject their instant constitutional challenge, and enter summary judgment in favor of the
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`USPTO.
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`1.
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`As the Fourth Circuit has held, by creating the particular administrative proceeding at
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`issue here (i.e., inter partes review), and “[b]y vesting implementation” of that proceeding “in
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`the administrative agenc[y], Congress was aware that exhaustion is required before a litigant may
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`challenge final agency action in federal court.” Volvo GM Heavy Truck Corp. v. Dep’t of
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`Labor, 118 F.3d 205, 211-12 (4th Cir. 1997).
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`But inter partes review is hardly an ordinary administrative proceeding in this respect;
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`indeed, Congress was quite explicit in explaining its intent that litigants completely exhaust
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`administrative remedies before seeking judicial review, and that such review occur in a particular
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`forum. Congress provided that the very decision that plaintiffs allege caused them injury here –
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`the institution of inter partes review proceedings, Complaint, ¶3 – “shall be final and
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`nonappealable.” 35 U.S.C. § 314(d).6 Although this statutory provision should alone suffice to
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`6Indeed, it is at least questionable whether § 314(d)’s preclusion of district court
`jurisdiction over an interlocutory PTAB decision instituting inter partes review – again, the very
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`IPR2014-01182 EXHIBIT 2103 - 13
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`demonstrate Congress’s intent to require full exhaustion, this Court has concluded “there are
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`three ways by which the AIA evinces clear congressional intent to preclude actions that seek
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`judicial intervention” prior to the conclusion of “reexamination proceedings”:
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`First, the express language of the statute indicates Congress’s intent to preclude judicial
`review of a PTAB decision to institute post-grant review proceedings. . . .
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`Second, Chapter 32 provides detailed procedures for post-grant review and a detailed
`scheme for administrative and judicial review of those post-grant review proceedings. . . .
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`Third, the AIA dictates the court in which a disappointed party may appeal the PTAB
`decision, demonstrating Congress’s intent to cabin the forums for challenging post-grant
`review determinations. . . . .
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`Versata Dev. Corp. v. Rea, 959 F. Supp. 2d 912, 919-20 (E.D. Va. 2013) (Lee, J.). As a result,
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`requiring full exhaustion of all administrative processes before seeking Article III judicial review
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`in a single forum – the Federal Circuit – is consistent with Congress’s intent.
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`2.
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`Nor does the particularized nature of plaintiffs’ instant claims alter this analysis.
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`The Fourth Circuit has noted its “consistent and unambiguous line of cases rejecting the
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`contention that constitutional claims should be exempt from the exhaustion requirement.”
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`Nationsbank Corp. v. Herman, 174 F.3d 424, 429 (4th Cir. 1999). This is so because “[t]he
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`prudential considerations underlying the exhaustion doctrine are ‘no less weighty when an
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`administrative litigant raises a constitutional challenge to a statute which an agency is charged
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`with enforcing.’” Volvo GM, 118 F.3d at 215 (quoting Thetford, 907 F.2d at 448). Indeed,
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`“exhaustion is particularly appropriate when the administrative remedy may eliminate the
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`necessity of deciding constitutional questions,” because “requiring exhaustion . . . may very well
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`lead to a satisfactory resolution of [the] controversy without having to reach [the] constitutional
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`challenge.” Thetford, 907 F.2d at 448; see also Ticor, 814 F.2d at 741 (concluding that
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`decision on which plaintiffs rest their standing to present the instant claims – similarly precludes
`this Court from exercising jurisdiction over this interlocutory action.
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`exhaustion might “render[] it unnecessary for the court to intervene,” which “would conserve
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`judicial resources for those cases in which judicial involvement is absolutely necessary for
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`resolution of the controversy”). And for similar reasons, it is not of moment that plaintiffs’
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`constitutional challenge goes to the very heart of the USPTO’s authority to conduct the
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`administrative proceeding that plaintiffs must exhaust, or that – for similar reasons – the USPTO
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`is unlikely (or unable) to hold its own jurisdiction over inter partes review proceedings
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`unconstitutional. See Ticor, 814 F.2d at 739 (holding that the general exhaustion rule “has been
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`applied even where the plaintiffs have challenged the very authority of the agency to conduct
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`proceedings against them”).7
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`3.
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`There are, to be sure, exceptions to this general exhaustion rule. In particular, the Fourth
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`Circuit has recognized that “in the rare case when a statute is patently unconstitutional or an
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`agency has taken a clearly unconstitutional position, exhaustion may not be required.” Thetford,
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`907 F.2d at 448-49; see also Ticor, 814 F.2d at 740 (concluding that exception applies where
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`Congress “disregard[s] a specific and unambiguous statute, regulation, or constitutional
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`directive”). This “exception” need not detain this Court long. Leaving aside the fact that the
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`Supreme Court’s constitutional jurisprudence in this context is – by the Court’s own admission –
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`less than crystal clear, see Stern v. Marshall, 131 S. Ct. 2594, 2611 (2011), the fact that the
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`Federal Circuit has now twice affirmed the constitutionality of USPTO administrative
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`proceedings concerning the reexamination of issued patents all but destroys any possible
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`application of the “clear right” exception here. See Thetford, 907 F.2d at 449 (rejecting “clear
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`right” exception where “[t]he constitutionality of the Act has been upheld by at least one court”).
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`7Of note, plaintiffs did raise their constitutional challenge to inter partes review
`proceedings in their response to Square’s institution petition. DEX G (only attached for the ’005
`patent). The PTAB did not address the a