Translogic Challenges (1) the Constitutionality of BPAI Decisions and (2) CAFC's Retroactive Application of a PTO Proceeding to a Jury Verdict

In re Translogic (Fed. Cir. 2007)
Translogic v. Hitachi ( Fed. Cir. 2007)

In parallel proceedings, Translogic won its patent infringement case in a jury trial against Hitachi (jury agreed that the claims were valid) and lost its BPAI reexamination appeal (BPAI found claims invalid). Both appeals reached the CAFC at roughly the same time and were decided the same day with the following holding: 

•  In re Translogic: BPAI affirmed; claims are obvious.
• Translogic v. Hitachi: Based wholly on the above decision, the jury verdict vacated because claims are obvious.

Translogic has now requested an en banc rehearing of this unusual pair of cases decisions: 

Unlawful BPAI Composition: In a recent article, Professor John Duffy challenged the current process of appointing BPAI judges as unconstitutional. John F. Duffy, Are Administrative Patent Judges Unconstitutional? , 2007 Patently-O L.J. 21.  The crux of the Duffy article is that these administrative judges must be appointed by either the head of the Commerce Department or the President. I.e., appointment of these officers by lower level offices, such as the under-secretary, is unconstitutional. Art. II, § 2, cl. 2.  In Translogic's favor, the Supreme Court has created "broad standing rules" that that do not require specific 'injury' due to botched appointment. Likewise, Translogic argues that court precedent provides standing despite a failure to raise this issue at the BPAI or in the original CAFC case. Professor Duffy's article also found its way to Congress – HR 1908 would amend Section 6 of the Patent Act to require the Secretary of Commerce to appoint the BPAI members. Of course, this issue calls into question most recent BPAI decisions.

Antiretroactivity Doctrine: Of course, if the BPAI's decision is vacated, the CAFC must then take a second look at its summary decision in the infringement case.  Translogic also argues that the vacatur violates the Supreme Court’s “antiretroactivity doctrine.”  Under that doctrine, later cancellation of an issued patent should not be used to overturn a prior jury verdict. Although in dicta, the Supreme Court spoke on this very issue — noting that “title to these moneys [damage awards] does not depend upon the patent, but upon . . . judgment of the court.” Moffitt v. Garr, 66 US 273 (1861).  In any event, the patent is not invalid until the PTO issues a certificate of cancellation under 35 USC 307. Thus, the holding is at least severely premature.

Jury Trial and Reexamination: The 7^th Amendment right to a jury trial also includes a right not to have a jury verdict reexamined by a Court except according to the rules of Common Law. Translogic’s argument here is that the CAFC decision violates this right because it nullifies the jury verdict “without applying any appellate standard of review, based solely on its affirmance of a Board decision that explicitly reexamined facts tried to the jury.”

Notes:

• Thanks to Hal Wegner for noting this case in an email to the author.

Comments

[Michael Barclay]

Dennis, it is interesting to note that the CAFC decision vacating the jury verdict (Translogic v. Hitachi) was nonprecedential. Maybe the CAFC wasn't too sure of the decision?

[Dennis Crouch]

Although perhaps it works that way in practice, I don't think that the non-precedential designation is supposed to serve as a proxy for how sure a court is in its decision.

[Kevin E. Noonan]

Dennis:

It's my understanding that the difference (precedential vs. non-precedential) has to do with whether the Court delays publication of the panel's decision until the other judges have had an opportunity to weigh in on the decision.

[Michael Barclay]

Responding to Kevin's point, my understanding that under the CAFC's internal operating procedures, drafts of all opinions are circulated to all Judges for about a week before they are released. I suppose it is possible that in this case, the Translogic v. Hitachi opinion was circulated -- at the same time as the precedential opinion affirming the BPAI decision on the merits was circulated -- and a number of the Judges asked that Translogic v. Hitachi be designated nonprecedential for now. But responding to Dennis' point, I think that Translogic v. Hitachi meets the standards for a precedential decision (it adds significantly to the body of caselaw), so perhaps something more is going on here, and we haven't heard the last of this case.

[Jim H.]

Dennis,

Shouldn’t we view this matter under general legal principles and not within the narrow scope of patent law? Aren’t these matters an issue of finality and judicial economy?

The BPAI upheld the examiner’s rejection that the claims were obvious, and the CAFC affirmed the BPAI’s decision. At the point in time of the affirmation, the claims of the patent became invalid and unenforceable as a matter of law.

Translogic had obtained a valid judgment from the district court, but the matter has not yet reached finality while on appeal. Under as assumption that a party may not execute on the judgment until there is no other route for appeal, Hitachi does not have to begin paying the $86.5 million of infringement damages awarded by the jury until finality has been reached.

In its quest to reach finality of its district court judgment, Translogic has hit a bit of a bump in the road. The patent has been held to be invalid as a matter of law. Because no party (and not just a patent litigant) cannot expect a court of law to enforce an action that is repugnant to the law, the CAFC took judicial notice of the fact that the patent was unenforceable as a matter of law, and as a matter of judicial economy, vacated an unenforceable judgment.
In my opinion, Translogic did not reach finality fast enough. Had this matter reached finality and reached a point where no further appeal could be taken, then Translogic could enforce the court’s judgment regardless of whether the claims of the patent were subsequently determined to be invalid. This is the point in Moffitt:
“It is a mistake to suppose, that, upon this construction, moneys recovered on judgments in suits, or voluntary payment under the first patent upon the surrender, might be recovered back. The title to these moneys does not depend upon the patent, but upon the voluntary payment or the judgment of the court.”

[anonymous]

The precedential vs. non-precedential decision is supposed to be made according to Internal Operating Procedure # 10
http://www.cafc.uscourts.gov/pdf/IOPs122006.pdf (pp. 21-23 of the attached .pdf file).

The opinion vacating the jury verdict is just a short order announcing the result. I suppose the public might have found it useful to know that the result of the other appeal required the panel to vacate the jury verdict, but I see nothing wrong with making the order non-precedential.

[Jim H.]

Dennis,

My apologies, but I need to rephrase and reformat a couple of items.

Shouldn’t we view this matter under general legal principles and not within the narrow scope of patent law? Aren’t these matters an issue of finality and judicial economy?

The BPAI upheld the examiner’s rejection that the claims were obvious, and the CAFC affirmed the BPAI’s decision. At the point in time of the affirmation, the claims of the patent became invalid a matter of law and the patent became unenforceable as a matter of law.

Translogic had obtained a valid judgment from the district court, but the matter has not yet reached finality while on appeal. Under as assumption that a party may not execute on the judgment until there is no other route for appeal, Hitachi does not have to begin paying the $86.5 million of infringement damages awarded by the jury until finality has been reached.

In its quest to reach finality of its district court judgment, Translogic has hit a bit of a bump in the road. The claims of the patent have been held to be invalid as a matter of law. Because no party (and not just a patent litigant) can expect a court of law to enforce an action that is repugnant to the law, the CAFC took judicial notice of the fact that the patent was unenforceable, and as a matter of judicial economy, vacated an unenforceable judgment.

In my opinion, Translogic did not reach finality fast enough. Had this matter reached finality and reached a point where no further appeal could be taken, then Translogic could enforce the court’s judgment regardless of whether the claims of the patent were subsequently determined to be invalid.

This, I belive, is the point that Moffitt makes:

“It is a mistake to suppose, that, upon this construction, moneys recovered on judgments in suits, or voluntary payment under the first patent upon the surrender, might be recovered back. The title to these moneys does not depend upon the patent, but upon the voluntary payment or the judgment of the court.”

[Michael Risch]

Ah, the joys of prosecution v. litigation. Note that the court applied the broadest reasonable construction, and under such analysis an obviousness finding was more likely. Of course, the Fed. Cir. claims to be reading the term in light of the specification, but it's impossible to tell whether the litigation construction would have been adopted in the absence of reexamination. Harvard JOLT is publishing my article on this topic this fall.

On a side note, even if the BPAI is held "unconstitutional" it is probably harmless error here - all of the Fed. Cir. determinations appeared to be de novo review. It wouldn't surprise me if they dodge the question that way (assuming they take it up en banc).

[Michael Risch]

Nevermind on the harmless error - I missed the substantial evidence rule part.

[Jim H.]

A couple of other notes…

First, regarding,

“Based wholly on the above decision, the jury verdict vacated because claims are obvious.”

This is not correct. In Translogic v. Hitachi, the CAFC did not vacate because the claims were obvious; rather, the CAFC vacated in “light of this court's decision in In re Translogic Tech[,]” and it held that the patent was unpatentable because “the claims of the '666 patent are obvious under 35 U.S.C. § 103(a).” The Court in Translogic v. Hitachi never reached the conclusion that the claims were obvious. It didn’t have to because the patent was held to be unenforceable (or unpatentable) as a matter of law in a separate legal proceeding involving different parties.

Second, assume that the CAFC in In re Translogic Tech held the claims to be valid. Would Hitachi likely prevail on its appeal on the jury’s decision of infringement? Not necessarily. The CAFC in In re Translogic Tech rejected Translogic’s argument the district court’s Markman construction was the correct construction. This would have affected jury instructions and a finding of infringement.

[Jim H.]

Change that to "[w]ould Translogic likely prevail on its appeal on the jury’s decision of infringement? Not necessarily."

[Jim H.]

Make a second change to read "[w]ould Translogic likely prevail on Hitachi's appeal of the jury’s decision of infringement? Not necessarily."

[Jim H.]

One more note…

Neither the BPAI nor the trial court had the benefit of KSR, and KSR played a key role in the CAFC’s determination: “[i]n its prior art argument, Translogic is making the same error corrected by the Supreme Court in KSR.”

This is a bad case to make new constitutional law. Intervening case law, inconsistent Markman constructions, two sets of parties, two sets of facts, and no res judicata. Yikes!

[deven]

Michael Risch, you wrote:

"The Court in Translogic v. Hitachi never reached the conclusion that
the claims were obvious. It didn’t have to because the patent was held
to be unenforceable (or unpatentable) as a matter of law in a separate
legal proceeding involving different parties."

However, the entire point of the Motion For Rehearing centers on the Fed. Cir.'s power to upset a jury verdict and resulting judgment based on an administrative body's subsequent ruling, and having that ruling apply ab initio. Was the patent, because of the determination on reexamination, NEVER valid, back to the date of grant? The Fed. Cir. did not bother to explain, but such a holding seems contrary to precedent. Moreover, unlike review of a Markman determination, the Fed. Cir.'s review of a jury verdict and resulting judgment is NOT de novo.

Note that Hitachi serially filed FIVE reexaminations before it finally wore the USPTO down and got a decision that it liked. The District Court initially stayed the litigation for over three years for the first three reexaminations, then took another three-and-a-half years to try the case to a final judgment. On appeal, the Fed. Cir. then stayed the appeal from the District Court's judgment until the proceedings on the five reexaminations finally caught up.

In addition, the District Court (the Article III court of original jurisdiction) did reach a conclusion that the claims were obvious in a jury trial. In that earlier jury trial on invalidity, Hitachi abandoned two of the references used by the BPAI to invalidate the claims, and AGREED TO a claim construction different from that subsequently adopted by the BPAI. Therefore, the administrative decision cannot be given retroactive effect (as it was by the Fed. Cir.) without effectively giving Hitachi a complete "do over" on the jury trial.

Finally, note that the special master who wrote the claim construction adopted by the district court was Harmon of Harmon on the Fed. Cir., so this was not some odd decision by an outlier district court. However, even though the record before the BPAI included the same evidence as that before the District Court jury (the record of the preceding trial and its outcome were submitted to and considered by the BPAI), the BPAI developed a wholly new claim construction in arriving at its decision. So the BPAI effectively reexamines the same facts presented to the jury, but comes to a different conclusion based on a novel claim construction that had not been preserved as an issue for appeal by Hitachi.

[Winstin]

Dear Dennis,
i do not believe you. The things that you are writing are not true! You can't just blame someone like that!

[M. Slonecker]

Perhaps an uninformed question, but how many judges were on the BPAI panel and how did they vote? Unanimous? Split? If split, how did the "illegal" judge vote?

The Supreme Court considers cases as presented. If it turns out that the decision would be sustained even if the "illegal" judge's opinion was given no weight, then would in effect the Supreme Court be called upon to provide what in essence would comprise an advisory opinion?

Since I can not recall the last time a case with which I was involved during prosecution was taken on appeal within the USPTO so my familiarity with the governing rules is, at best, quite "rusty", is there anything in the rules that would have prevented the applicant from filing a continuation after final rejection by the examiner (or perhaps even the BPAI decision) without abandoning the parent application under appeal?

In mine are incredibly silly questions please extend me the benefit out the doubt as my coffee has not yet kicked in.