Tuesday, May 6, 2008

Risks Of Patents Being Unconstitutional

The New York Times had a legal sidebar article yesterday, May 5. In this article, they cite the work of John F. Duffy, law professor at the George Washington University Law School, who has discovered a serious breach of constitutional due process in the way Board of Patent Appeals and Interferences administrative patent judges are appointed over the last eight years.

“His [John F. Duffy’s] basic point does not appear to be in dispute. Since 2000, patent judges [on the Board of Patent Appeals and Interferences] have been appointed by a government official without the constitutional power to do so.”

The regulation is the center of the conflict of the conflict is 35 U.S.C. § 6, which grants Director of the Patent and Trademark Office (PTO) the authority to appoint the administrative patent judges to the Board of Patent Appeals and Interferences (BPAI). The problem that Professor Duffy found is that this regulation is unconstitutional as it violates the appointment clause of the Constitution (article II, section 2, second paragraph) [bold and italics added to highlight the relevant area]:

“He [The President] shall have power…and he shall nominate, and by and with the advice and consent of the Senate, shall appoint…all other officers of the United States, whose appointments are not herein otherwise provided for, and which shall be established by law: but the Congress may by law vest the appointment of such inferior officers, as they think proper, in the President alone, in the courts of law, or in the heads of departments.”

The Supreme Court had already noted in its decision on Freytag v. Commissioner in 1991, that tax court’s special trial judges are inferior officers even though they do mostly administrative tasks. Since the administrative patent judges on the Board of Patent Appeals and Interferences have more authority and discretion than the tax court’s special trial judges, the appointment of administrative patent judges must adhere to the appointment clause of the Constitution.

According to the NY Times article, “…the Justice Department has already all but conceded that Professor Duffy is right.“

If Professor Duffy is indeed right, then “the impact of Professor Duffy’s discovery could be cataclysmic for the patent world, casting “a cloud over many thousands of board decisions” and “unsettling the expectations of patent holders and licensees across the nation.”

Risks And Consequences
“The patent court hears appeals from people and companies whose patent applications were turned down by patent examiners, and it decides disputes over who invented something first. There is often a lot of money involved.”

We may be talking trillions of dollars at stake here.

The consequences of Professor Duffy’s findings are far reaching, as they would potentially invalidate patents filed from the regulation effective date of “4 months after Nov. 29, 1999.” A quick search of the final decisions rendered by the Board of Patent Appeals and Interferences from March 1, 2000 to May 6, 2008 lists 16,610 items (note: clicking this link will open up a list of all 16,610 items, which may take a bit of time depending on your connection speed).

Potential Events:

  • News of major patent litigation being filed
  • Congress legislating on this matter
  • Supreme Court potentially reviewing this matter and contemplating a tortured ruling to allow the affected patents to remain
Whichever way the ruling on this matter goes, do expect people to protest the ruling and file lawsuits. In the interim, one should see more focus being put on this issue, including talk of possible Constitutional amendment to allow for the current patents to stand and be considered constitutional.

Ed Kim
Practical Risk Manager

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