Security People, Inc. v. Iancu, 2019-2118, 2020 WL 4873762 (Fed. Cir. Aug. 20, 2020)

September 1, 2020

In an appeal from the Northern District of California, the Federal Circuit affirmed the district court’s dismissal of Security People’s Administrative Procedure Act (APA) suit challenging the constitutionality of inter partes review (IPR) proceedings applied retroactively to pre-America Invents Act patents. The Federal Circuit held that a constitutional challenge to an IPR final written decision is subject to judicial review only by appeal to the Federal Circuit, not by collateral attack in district court under the APA.

The Patent Trial & Appeal Board had issued an IPR final written decision determining one of Security People’s pre-America Invents Act patent claims to be unpatentable. A few months after the Federal Circuit summarily affirmed the IPR final written decision and the Supreme Court denied certiorari, Security People brought suit against the United States Patent and Trademark Office (USPTO) and its Director, Andrei Iancu, seeking a declaratory judgment that the retroactive application of IPR proceedings violated its Fifth Amendment due process right. The district court dismissed the suit for lack of subject matter jurisdiction, positing that Congress intended any constitutional challenges to IPR final written decisions to be reviewable only by appeal to the Federal Circuit, which rendered Security People’s “APA-based collateral attack” in the district court improper.¹

On appeal, Security People first asserted that the PTAB lacked authority to consider constitutional challenges to IPR proceedings. Security People argued that, rather than raise its constitutional retroactivity challenge for the first time on appeal, factual issues would first require resolution in district court. The Federal Circuit rejected this argument, finding that the Federal Circuit may take judicial notice of facts relevant to the constitutional question. The Federal Circuit also reasoned that even if a constitutional claim required development of facts beyond what could be judicially noticed, the PTAB has fact-finding authority to resolve any relevant disputed factual questions without having to decide the legal question at hand.

Security People further contended that its constitutional claims were not ripe until the USPTO cancelled its patent claim, forcing Security People to exhaust any non-constitutional based claims before it could raise its constitutional claims. Put another way, no deprivation of property occurred until after the USPTO issued a certificate cancelling the patent claim, which was prerequisite for a Fifth Amendment due process challenge. The Federal Circuit rejected this assertion, stating that “Security People’s arguments misappl[ied] fundamental concepts of administrative law.”² In determining the finality of an agency action, the correct standard is “whether the agency has completed its decision making process, and whether the result of that process is one that will directly affect the parties.”³ The USPTO’s decision-making process in an IPR proceeding is deemed complete after issuance of the final written decision. Therefore, a final written decision serves as the final agency action that will directly affect the parties and from which an appeal may be taken.

The Federal Circuit made clear that the text, structure, and purpose of 35 U.S.C. § 141(c) precludes district court judicial review of IPR final written decisions. The American Invents Act, in relevant part, is codified in 35 U.S.C. § 141, which is entitled Appeal to Court of Appeals for the Federal Circuit. Pursuant to the statutory language, a PTAB final written decision is subject to broad review, but only in the Federal Circuit. The APA, which governs the review of agency actions, was enacted by Congress to provide a general allowance for review of agency actions in district courts. However, Congress did not intend this general allowance to interfere with previously established special statutory procedures for judicial review like that set forth in 35 U.S.C. § 141. Thus, the APA alone cannot furnish the cause of action Security People asserted because 35 U.S.C. § 141 offers an adequate remedy for the constitutional claims at issue; “[a]llowing [patentees] to collaterally attack [IPR decisions] through suits under the APA would destroy the Patent Act’s careful framework for judicial review at the behest of particular persons through particular procedures.”⁴