Usually, when we're scanning the daily email from the Federal Circuit for takings decisions of interest, we look for "United States" as the defendant, and our eyes glaze over the other cases on the court's docket such as patent matters. But today, we were rewarded: a takings issue in a patent matter.
In Celgene Corp. v. Peter, No. 18-1167 (July 30, 2019), the court concluded that the invalidation of an issued patent via inter partes review was not a taking. This issue was ripened by the U.S. Supreme Court's recent decision in Oil States, which noted that patents may be "property for purposes of the Due Process Clause or the Takings Clause."
Celgene obtained patents for "a system to safely distribute thalidomide to patients." Slip op. at 4. The Coalition for Affordable Drugs objected, and sought inter partes review, which according to the USPTO is, "a trial proceeding conducted at the Board to review the patentability of one or more claims in a patent only on a ground that could be raised under §§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications." The Board "held that CFAD had shown by a preponderance of the evidence" that Celgene's patents unpatentable as obvious.
Celgene appealed, making two points. First, its patents should have been upheld. Second, the Board could not invalidate them without condemning and providing compensation (takings). We won't go into the details of the court's resolution of the first argument, except to note that it upheld the challenges, and concluded the patents were unpatentable.
Before the court addressed the takings claim, it had to get over the fact that the takings issue was not raised below. "Below" in this case does not mean the Court of Federal Claims, but the Board. Wait, you say, how does an administrative agency even have jurisdiction to consider constitutional arguments? It doesn't, and since it didn't, what obligation did Celgene have to raise the argument? For the answer to that, see footnote 11 on page 24. And here is where it gets kind of nuanced. Although agencies cannot adjudicate constitutionality of an action, they do have the obligation to not do unconstitutional things. On balance, the court held that there was enough of a reason to overlook Celgene's failure to raise the takings issue in the Board.
But here, no taking. Yes, patents are "property," but a different kind of property:
The validity of patents has always been subject to challenge in district court. And for the last forty years, patents have also been subject to reconsideration and possible cancellation by the PTO. As explained below, IPRs do not differ significantly enough from preexisting PTO mechanisms for reevaluating the validity of issued patents to constitute a Fifth Amendment taking.
Slip op. at 28.
Celgene obtained its patents long after the review process was in place. And even though inter partes review is somewhat different than the existing review process, a challenge to a patent's validity was always possible, and "Celgene’s pre-AIA patents were therefore granted subject to existing judicial and administrative avenues for reconsidering their validity. Not only were they subject to challenge in district court, '[f]or several decades, the Patent Office has also possessed the authority to reexamine—and perhaps cancel—a patent claim that it had previously allowed.'" Slip op. at 29.
The court spent the remainder of the opinion outlining how inter partes review does not significantly differ than the review process already in place when Celgene obtained its patents. "There are undoubtedly differences between IPRs and their predecessors.... But these procedural differences come with the longstanding recognition that '‘[n]o one has a vested right in any given mode of procedure.'" Slip op. at 33.
Is this one done? We're guessing no, so stay tuned.
Celgene Corp. v. Peter, No. 18-1167 (Fed. Cir. July 30, 2019)
