Two Federal Circuit judges seemed skeptical at oral argument of a patent owner’s allegation that the Patent Trial and Appeal Board is constitutionally flawed because its process for starting patent reviews is based on impermissible incentives.
New Vision Gaming & Development Inc. told the U.S. Court of Appeals for the Federal Circuit the PTAB is “essentially a pay-for-play system.”
Parties arguing before the board see its decisions as “affected by business considerations,” New Vision attorney Matthew James Dowd of Dowd Scheffel PLLC in Washington said. “In the government sector that raises substantial problems of the appearance of impartiality.”
Patent judges get bonuses, which can range as high as $36,000, according to a study prepared for the Administrative Conference of the United States.
Bonuses typically are based, in part, on the number of cases judges review, not just the quality of their decisions.
Judge Richard G. Taranto pushed back on Dowd’s use of the “business” label. “It’s kind of a nice, helpful word from your perspective, but it seems to me it by itself doesn’t actually say anything at all about the concrete operations,” he said.
Dowd called the phrase “much more than a sound bite because it really goes to the flow of money to and from the agency.”
New Vision raised due process arguments based on the agency’s structure and bonus system for board administrative patent judges while challenging a PTAB decision to invalidate its card game patents.
Taranto focused on how exactly the structure creates improper incentives for the judges.
“Is there any case that finds an unconstitutional structural bias not based on an individual adjudicator’s possible self-enrichment but this more general idea of wanting to help be a part of a growing administrative empire?” he asked.
“You don’t have to have a direct to pecuniary interest to see a due process violation,” Dowd answered.
Judge Kimberly A. Moore explored whether the court should even reach the due process argument.
“Under the doctrine of constitutional avoidance, if there’s another way to resolve this case that doesn’t require reaching a constitutional issue we ought to do so, correct?” she said.
Moore also asked whether the court could use New Vision’s alternate argument that the PTAB judges were unconstitutionally appointed to send the case back to the board for a retrial, since the Federal Circuit has already said their appointments were unconstitutional.
Dowd said that was a possibility “but it leaves the due process argument unresolved.”
Justice Department attorney Dana Kaersvang, arguing for the patent office, said New Vision has the agency’s structure all wrong.
“APJs do not make more money if they institute. An institution decision counts exactly the same as a non-institution in the performance review process,” she said. She also pointed to the fact that the board conducts patent review proceedings at a loss, and the APJs have all the assignments that they want.
“It’s always easy to allege that somebody has some kind of incentive because everything an agency does indirectly affects the agency, and in some sense, the agency staff,” she said. “You can always draw some kind of chain of reasoning.”
The case arises from covered business method reviews of New Vision’s U.S. Patent Nos. 7,451,987 and 7,325,806 on a novel bonus feature for a card game. The PTAB invalidated the patents, finding they cover only an abstract idea.
Judge Pauline Newman also served on the panel.
The case is New Vision Gaming & Dev., Inc. v. SG Gaming, Inc., Fed. Cir., No. 20-1399, argued 4/9/21.