Stepping Over the Line: Can an Administrative Agency Overturn a Court’s Ruling?

Addressing the patentability of an issued patent following a reexamination, the U.S. Court of Appeals for the Federal Circuit upheld a finding of invalidity following an appeal of a reexamination from the U.S. Patent and Trademark Office (USPTO) Board of Patent Appeals and Interferences (the Board), 11 years after the Federal Circuit, in an appeal from a district court, held the same patent valid!   In Re Construction Equipment Company, Case No. 10-1507 (Reexamination Control No. 90/008,447) (Fed. Cir. Dec. 15, 2011) (Prost, J.) (Newman, J. dissenting). 

Construction Equipment Company (CEC) appealed a decision by the U.S. Patent and Trademark Office holding that CEC’s patent directed to a vehicle for screening rocks and plant matter was invalid due to obviousness over the prior art.   The Board affirmed the obviousness rejections by the examiner and denied a rehearing. 

On appeal, the Federal Circuit found no error in the Board’s analysis regarding the validity of the claims.  Judge Prost, writing for the majority, noted that because neither party argued that the reexamination was unlawful during the appeal, the Court had no need to further consider the matter of whether the reexamination was lawful.

However, in a strongly worded dissent, Judge Newman found that the reexamination appeal raised serious questions as to the constitutionality and ramifications of allowing an administrative agency to question and overturn the findings of a court of law.   The patent in suit had previously been upheld as valid by the Federal Circuit in 2000, and CEC obtained an injunction against further infringement by defendant in that suit, Powerscreen International Distribution.  In 2007 Powerscreen filed an ex parte reexamination, alleging that the claims were unpatentable. 

In Judge Newman’s view, the fact that neither party raised the issue of whether the reexamination was lawful is of scant import:   “waiver is inapplicable to significant questions of general impact or of great public concern.”  Judge Newman noted that the constitutional impact of the procedure that gives rise to the appeal cannot be deemed waived, because of the effect on the “integrity of judgments and the separation of powers.”  The dissent argued that because the Constitution places the judicial power in the courts, it would be improper to allow an administrative agency to undermine the finality of the judicial power of the Court.  Thus, in Judge Newman’s view, the issue involves the separation of powers as well. 

The dissent also argued that under the doctrine of res judicata, i.e., because the issue of the validity of the patent had already been adjudicated, Powerscreen could not have relitigated the question of obviousness in any court.  As such, the dissent argued that reexamination on this issue should not be available.

Judge Newman also found fault with the analysis on the merits of the decision by the USPTO and subsequent affirmation by the Court.   The patent claimed a machine that, while using a combination of elements known in the art, achieved commercial success.  According to Judge Newman, it is only by judicial hindsight reasoning that the Court was able to construct a machine that was not previously known.  As is well known, it is impermissible to use the claimed invention as a “template” to piece together the teachings of the prior art so that the claimed invention is rendered obvious.  Moreover, Judge Newman could find no articulation of rational underpinning for combining the references that was used in the analysis of obviousness.