Federal Circuit Holds That the PTAB Does Not Have an Impermissible Incentive to Institute IPRs

MOBILITY WORKX, LLC v. UNIFIED PATENTS, LLC

Before Newman, Schall, and Dyk.  Appeal from the Patent Trial and Appeal Board.

Summary: Fee-funded structure of AIA review proceedings does not violate due process.

After inter partes review (“IPR”), the Board found Mobility’s patent claims invalid.  Mobility appealed the decision to the Federal Circuit, arguing that the structure and funding of AIA review proceedings violates due process.  Particularly, Mobility argued that the Board and the individual administrative patent judges (“APJs”) have impermissible financial incentives to institute IPRs.

The Federal Circuit rejected Mobility’s due process challenges.  First, the Court distinguished the Board from the mayor’s court found impermissible in Tumey v. Ohio, 273 U.S. 510 (1927) where the mayor presiding over the proceedings received compensation if the defendant was convicted and used the fees to finance the town.  The Federal Circuit explained that Congress, not the APJs, is responsible for setting the USPTO’s budget, and thus held that the fee-funded structure of IPRs does not violate due process.  Second, the Federal Circuit held that individual APJs did not have an impermissible incentive to institute IPRs based on the APJ bonus structure because any interest in instituting IPRs for a bonus was too remote to violate due process.

In light of United States v. Arthrex, Inc., 141 S. Ct. 1970 (2021), the Court remanded the case to allow the Patent Office Director to review the Board’s final written decision and did not reach the merits of the patentability issue.

Judge Newman concurred with the decision to remand but dissented from the rest of the opinion.  In her dissent, Judge Newman addressed multiple constitutional concerns raised by Mobility, including a possible Appointments Clause violation by delegating the institution decision to the Board and bias in having the same Board decide institution and patentability.

Editor: Paul Stewart

Written by: Suyoung Jang & Kendall Loebbaka