In re Construction Equipment

A Strongly Worded Dissent

In her strongly worded dissent, Judge Pauline Newman all but accused the majority of shirking its duty to uphold the integrity of the judicial power under Article III of the Constitution against encroachment by the executive branch, acting through the Patent Office. According to Judge Newman, this particular re-examination was unconstitutional because the Patent Office was considering an issue “that [ ] was finally decided in the courts in 2001,” upsetting the delicate balance of judicial, executive, and legislative powers delineated in the Constitution. Id. at 1257. Judge Newman argued that the “plan of the Constitution places the judicial power in the courts, whose judgments are not thereafter subject to revision or rejection. Neither the legislative nor the executive branch has the authority to revise judicial determinations.” Id. at 1258. In responding to the argument of the majority that the constitutional issue should not be addressed because “neither CEC nor, crucially, the PTO has had an opportunity to submit evidence or argument addressing the concerns laid out in the dissent,” Id. at 1256, Judge Newman stated that the “constitutional impact of the [re-examination] procedure that gives rise to this appeal cannot be deemed waived, for it affects no less than the integrity of judgments and the separation of powers.” Id. at 1257. Since the nature of the judicial power is to render final, dispositive judgments in cases or controversies, the dissent argued that the majority opinion erodes that power by allowing an administrative agency like the Patent Office to issue a ruling of invalidity on a patent that the courts had previously deemed valid over the same prior art. Id. at 1258 (“The record of history shows that the Framers crafted this charter of the judicial department with an expressed understanding that it gives the Federal Judiciary the power, not merely to rule on cases, but to decide them, subject to review only by superior courts in the Article III hierarchy ' with an understanding, in short, that 'a judgment conclusively resolves the case' because 'a 'Judicial Power' is one to render dispositive judgments.'”).

Judge Newman's alarm seems unwarranted, however. The court that entered a final judgment enjoining Powerscreen is not obligated to lift the injunction simply because the Patent Office canceled certain of the claims of the '564 patent in the re-examination. There is nothing illogical about a court, out of respect for the principle of judicial finality, deciding to keep in place an injunction covering a patent that, as a result of the re-examination, would no longer be prospectively enforceable. Nor does any of the precedent cited by Judge Newman hold that the cancellation via re-examination of claims previously and finally held to be not invalid by a court amounts to an unconstitutional superseding of the court's authority under Article III to dispose of cases or controversies. In a tripartite system such as ours, in which “Ambition [of one branch] must be made to counteract ambition [of another],” The Federalist No. 51, such clashes are inevitable and do not, by simple virtue of their occurrence, signify that one branch has acquiesced to another, in violation of the separation of powers. Although, as acknowledged by the majority opinion, Powerscreen may attempt to use the re-examination to persuade the district court to dissolve the injunction, the ultimate responsibility for deciding whether to maintain the injunction would remain with the court that issued the injunction in the first place. The majority appears to tacitly acknowledge that control over the finality of the injunction remains with the issuing court when it states “[w]e express no opinion on whether Powerscreen might or might not be entitled to seek abrogation of the injunction.” Id. at 1256. So long as the district court remains free to gauge how influential the re-examination will be, or not, on whether to abrogate the injunction, the Patent Office has not usurped any of the judicial power by its conduct of the re-examination.

Moreover, none of the precedent on which Judge Newman relies supports her argument that the re-examination of the '564 patent is unconstitutional. The judge cites to several opinions expressing the commonly understood notion that “'Judicial Power' is one to render dispositive judgments” and the principle that “[n]either the legislative nor the executive branch has the authority to revise judicial determinations.” Id. at 1259. None of these opinions, however, applies these well-known constitutional principles to the situation at hand, or to one analogous thereto. For instance, in one case cited by Judge Newman, Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995), the Supreme Court ruled unconstitutional, as having violated the separation of powers, a statute mandating “federal courts to reopen final judgments in private civil actions under ' 10(b) of the” Securities Exchange Act of 1934. The fundamental reason why this statute was an affront to the separation of powers was that “[w]hen retroactive legislation requires its own application in a case already finally adjudicated, it does no more and no less than 'reverse a determination once made, in a particular case.'” Plaut, 514 U.S. at 225. In Plaut, the offending statute retroactively changed the statute of limitations, and for those cases that had been dismissed as untimely filed under the old statute of limitations, the new statute stated that they “shall be reinstated on motion by the plaintiff.” Id. at 215 (emphasis added). Thus, Plaut dealt with a statute that expressly mandated courts to reopen cases that had been finally adjudicated: Congress invaded the province of the judiciary by commanding it to open certain cases that had been finally disposed. No such commandeering of the courts occurs, however, when the Patent Office simply re-examines a patent that had been previously subject to a final judgment. Nothing in the re-examination statute, or in any other statute, commands a court to reopen a previously entered final judgment when the re-examination conflicts with that judgment. If the court reopens the case, it will have done so not as a matter of acquiescence to a command from another branch of government, but as an exercise of its independent judgment, in which the re-examination is but one factor that may or may not sway it toward a particular disposition.

The Majority Opinion

The majority appears to have been similarly unmoved by the constitutional issues raised in the dissent, since it wrote that “we can see no reason why Swanson would not control this case.” Construction Equipment, 665 F.3d at 1256. In In re Swanson, 540 F.3d 1368 (Fed. Cir. 2009), the Federal Circuit was faced with a fact pattern similar to the one in this case. Just as in the Construction Equipment case, Swanson dealt with a party seeking to invalidate via re-examination a patent that it had failed to invalidate in a prior litigation in which a final judgment had been entered and affirmed by the Federal Circuit. Id. at 1373. In Swanson, the Federal Circuit agreed with the Patent Office's position that a prior finding of validity of a patent claim by a district court does not preclude finding that a “substantial new question” of patentability sufficient to institute re-examination of the same claim may exist with regard to the same prior art considered in the prior district court litigation. Id. at 1378. The Swanson opinion also addressed the separation of powers issue as well, holding that because “the court's final judgment and the examiner's rejection are not duplicative ' they are differing proceedings with different evidentiary standards for validity ' there is no Article III issue created when a reexamination considers the same issue of validity as a prior district court proceeding” Id. at 1379.

An Interesting Question

With Construction Equipment and Swanson having affirmed the right of litigants to pursue re-examination of the very same patents that they had failed to invalidate in litigation, the interesting question is the one left expressly unanswered by the Construction Equipment court: How amenable will district courts be to lift or modify injunctions entered against parties who successfully used in re-examination the very same patent invalidity arguments they had unsuccessfully raised before the courts?

Dervis Magistre is a partner at the intellectual property law firm of Fay Kaplun & Marcin LLP in New York, where he specializes in patent infringement and invalidity analysis, inter partes and ex parte re-examinations, and all aspects of patent prosecution in electronics, software, and medical devices. He can be reached at [email protected].

If the Federal Circuit affirms a lower court verdict holding a patent not invalid over a prior art reference, may the losing party ask the Patent Office to invalidate that patent via re-examination over the same prior art reference? In the case of In re Construction Equipment, 665 F.3d 1254 (Fed. Cir. 2011), the Federal Circuit answered yes, raising important issues bearing on the scope of the re-examination statute, the finality of judgments, and the relationship between the Patent Office and the federal judiciary under the separation of powers doctrine of the Constitution.

Factual History

Construction Equipment Company (“CEC”) owns U.S. Patent 5,234,564 (the '564 patent), which is “directed to a vehicle for screening rocks and plant matter ' based on size from, for example, soil or dirt at a construction site.” Construction Equipment, 665 F.3d at 1254-55. A request for ex parte re-examination was filed in January 2007. Although the request did not name the third-party requester, the opinion states “CEC claims that the request was initiated by a company called Powerscreen International Distribution Ltd. (“Powerscreen”).” Id. at 1255 n.1. In litigation between CEC and Powerscreen that ended in 2000, Powerscreen had failed on appeal to overturn a final judgment of infringement of the '564 patent. Id. At issue in the re-examination was prior art that Powerscreen had unsuccessfully asserted against the validity of the '564 patent in the prior litigation. Id. at 1261 (Newman, J., dissenting). According to the 2-1 majority opinion, the claims at issue in the re-examination of the '564 patent were invalid over the prior art because “CEC's alleged invention consists entirely of combining known elements that, while possibly new, was nevertheless obvious and therefore unpatentable.” Id. at 1256.

A Strongly Worded Dissent

In her strongly worded dissent, Judge Pauline Newman all but accused the majority of shirking its duty to uphold the integrity of the judicial power under Article III of the Constitution against encroachment by the executive branch, acting through the Patent Office. According to Judge Newman, this particular re-examination was unconstitutional because the Patent Office was considering an issue “that [ ] was finally decided in the courts in 2001,” upsetting the delicate balance of judicial, executive, and legislative powers delineated in the Constitution. Id. at 1257. Judge Newman argued that the “plan of the Constitution places the judicial power in the courts, whose judgments are not thereafter subject to revision or rejection. Neither the legislative nor the executive branch has the authority to revise judicial determinations.” Id. at 1258. In responding to the argument of the majority that the constitutional issue should not be addressed because “neither CEC nor, crucially, the PTO has had an opportunity to submit evidence or argument addressing the concerns laid out in the dissent,” Id. at 1256, Judge Newman stated that the “constitutional impact of the [re-examination] procedure that gives rise to this appeal cannot be deemed waived, for it affects no less than the integrity of judgments and the separation of powers.” Id. at 1257. Since the nature of the judicial power is to render final, dispositive judgments in cases or controversies, the dissent argued that the majority opinion erodes that power by allowing an administrative agency like the Patent Office to issue a ruling of invalidity on a patent that the courts had previously deemed valid over the same prior art. Id. at 1258 (“The record of history shows that the Framers crafted this charter of the judicial department with an expressed understanding that it gives the Federal Judiciary the power, not merely to rule on cases, but to decide them, subject to review only by superior courts in the Article III hierarchy ' with an understanding, in short, that 'a judgment conclusively resolves the case' because 'a 'Judicial Power' is one to render dispositive judgments.'”).

Judge Newman's alarm seems unwarranted, however. The court that entered a final judgment enjoining Powerscreen is not obligated to lift the injunction simply because the Patent Office canceled certain of the claims of the '564 patent in the re-examination. There is nothing illogical about a court, out of respect for the principle of judicial finality, deciding to keep in place an injunction covering a patent that, as a result of the re-examination, would no longer be prospectively enforceable. Nor does any of the precedent cited by Judge Newman hold that the cancellation via re-examination of claims previously and finally held to be not invalid by a court amounts to an unconstitutional superseding of the court's authority under Article III to dispose of cases or controversies. In a tripartite system such as ours, in which “Ambition [of one branch] must be made to counteract ambition [of another],” The Federalist No. 51, such clashes are inevitable and do not, by simple virtue of their occurrence, signify that one branch has acquiesced to another, in violation of the separation of powers. Although, as acknowledged by the majority opinion, Powerscreen may attempt to use the re-examination to persuade the district court to dissolve the injunction, the ultimate responsibility for deciding whether to maintain the injunction would remain with the court that issued the injunction in the first place. The majority appears to tacitly acknowledge that control over the finality of the injunction remains with the issuing court when it states “[w]e express no opinion on whether Powerscreen might or might not be entitled to seek abrogation of the injunction.” Id. at 1256. So long as the district court remains free to gauge how influential the re-examination will be, or not, on whether to abrogate the injunction, the Patent Office has not usurped any of the judicial power by its conduct of the re-examination.

Moreover, none of the precedent on which Judge Newman relies supports her argument that the re-examination of the '564 patent is unconstitutional. The judge cites to several opinions expressing the commonly understood notion that “'Judicial Power' is one to render dispositive judgments” and the principle that “[n]either the legislative nor the executive branch has the authority to revise judicial determinations.” Id. at 1259. None of these opinions, however, applies these well-known constitutional principles to the situation at hand, or to one analogous thereto. For instance, in one case cited by Judge Newman, Plaut v. Spendthrift Farm, Inc. , 514 U.S. 211 (1995), the Supreme Court ruled unconstitutional, as having violated the separation of powers, a statute mandating “federal courts to reopen final judgments in private civil actions under ' 10(b) of the” Securities Exchange Act of 1934. The fundamental reason why this statute was an affront to the separation of powers was that “[w]hen retroactive legislation requires its own application in a case already finally adjudicated, it does no more and no less than 'reverse a determination once made, in a particular case.'” Plaut, 514 U.S. at 225. In Plaut, the offending statute retroactively changed the statute of limitations, and for those cases that had been dismissed as untimely filed under the old statute of limitations, the new statute stated that they “shall be reinstated on motion by the plaintiff.” Id. at 215 (emphasis added). Thus, Plaut dealt with a statute that expressly mandated courts to reopen cases that had been finally adjudicated: Congress invaded the province of the judiciary by commanding it to open certain cases that had been finally disposed. No such commandeering of the courts occurs, however, when the Patent Office simply re-examines a patent that had been previously subject to a final judgment. Nothing in the re-examination statute, or in any other statute, commands a court to reopen a previously entered final judgment when the re-examination conflicts with that judgment. If the court reopens the case, it will have done so not as a matter of acquiescence to a command from another branch of government, but as an exercise of its independent judgment, in which the re-examination is but one factor that may or may not sway it toward a particular disposition.

The Majority Opinion

The majority appears to have been similarly unmoved by the constitutional issues raised in the dissent, since it wrote that “we can see no reason why Swanson would not control this case.” Construction Equipment, 665 F.3d at 1256. In In re Swanson, 540 F.3d 1368 (Fed. Cir. 2009), the Federal Circuit was faced with a fact pattern similar to the one in this case. Just as in the Construction Equipment case, Swanson dealt with a party seeking to invalidate via re-examination a patent that it had failed to invalidate in a prior litigation in which a final judgment had been entered and affirmed by the Federal Circuit. Id. at 1373. In Swanson, the Federal Circuit agreed with the Patent Office's position that a prior finding of validity of a patent claim by a district court does not preclude finding that a “substantial new question” of patentability sufficient to institute re-examination of the same claim may exist with regard to the same prior art considered in the prior district court litigation. Id. at 1378. The Swanson opinion also addressed the separation of powers issue as well, holding that because “the court's final judgment and the examiner's rejection are not duplicative ' they are differing proceedings with different evidentiary standards for validity ' there is no Article III issue created when a reexamination considers the same issue of validity as a prior district court proceeding” Id. at 1379.

An Interesting Question

With Construction Equipment and Swanson having affirmed the right of litigants to pursue re-examination of the very same patents that they had failed to invalidate in litigation, the interesting question is the one left expressly unanswered by the Construction Equipment court: How amenable will district courts be to lift or modify injunctions entered against parties who successfully used in re-examination the very same patent invalidity arguments they had unsuccessfully raised before the courts?

Dervis Magistre is a partner at the intellectual property law firm of Fay Kaplun & Marcin LLP in New York, where he specializes in patent infringement and invalidity analysis, inter partes and ex parte re-examinations, and all aspects of patent prosecution in electronics, software, and medical devices. He can be reached at [email protected].