Background
MCM Portfolio LLC held U.S. Patent No. 7,162,549, directed to error correction for flash memory — a technology used in solid-state storage devices. Hewlett-Packard petitioned for inter partes review of the patent under the America Invents Act (AIA), and the Patent Trial and Appeal Board (PTAB) instituted review and ultimately cancelled several claims. MCM appealed, raising a constitutional challenge that went beyond the merits of the IPR: it argued that Congress lacked the constitutional authority to authorize the PTAB — an administrative body — to cancel issued patents without the procedural protections guaranteed by Article III (the right to an Article III judge) and the Seventh Amendment (the right to a jury trial in suits at common law).
MCM’s argument was that patents are private property rights, and that a government proceeding to extinguish a patent right should be subject to the full procedural safeguards of the federal court system — an Article III judge, full discovery, and a jury if the patentee requests one. The argument tracked concerns raised by some scholars and practitioners that the PTAB system, which cancels patents at a much higher rate than district courts invalidate them, was depriving patent holders of constitutional property rights.
The Court’s Holding
Judge Dyk, writing for a unanimous Federal Circuit, rejected MCM’s constitutional challenge. The court held that patents are “public rights” — a category of rights that, unlike purely private rights, Congress may properly assign to administrative adjudication without requiring an Article III court. The public rights doctrine recognizes that Congress created the patent system through statute, retains the authority to shape the conditions of patent grants, and may authorize administrative bodies to review those grants. Patents are not common law rights pre-existing the Constitution but are instead statutory rights created by the government — making them quintessential public rights subject to administrative review.
On the Seventh Amendment argument, the court held that the right to a jury trial attaches to common law actions, not to administrative proceedings involving public rights. Because Congress properly assigned IPR review to the PTAB as an administrative matter, no Seventh Amendment right to a jury arises. The court applied and reaffirmed its prior precedents in Patlex Corp. v. Mossinghoff and Joy Technologies Inc. v. Mara, which had upheld the constitutionality of prior administrative patent reexamination proceedings. IPR, while more adversarial and trial-like than reexamination, was not constitutionally distinguishable on the public rights issue.
Key Takeaways
- Patents are public rights created by Congress through statute — they may be cancelled by administrative adjudication (PTAB) without violating the Article III requirement that federal judicial power be exercised by Article III courts.
- The Seventh Amendment’s right to a jury trial does not apply to administrative IPR proceedings, because the Seventh Amendment protects jury rights in common law suits, not in administrative proceedings involving statutory public rights.
- The decision foreclosed what was then the most direct constitutional path to invalidating the AIA’s IPR system — though subsequent challenges under different theories (Oil States Energy v. Greene’s Energy Group) continued to be litigated until the Supreme Court upheld IPR constitutionality in 2018.
- IPR proceedings thus offer patent challengers a constitutional pathway to cancel issued patents through an administrative process that requires no jury and applies less demanding procedural rules than district court litigation.
Why It Matters
MCM Portfolio v. Hewlett-Packard was one of the earliest and most direct Federal Circuit rulings on the constitutional legitimacy of the AIA’s PTAB proceedings. From the time the AIA was enacted in 2011, patent holders — particularly NPEs and pharmaceutical companies — argued that IPR was an unconstitutional deprivation of property rights. The Federal Circuit’s unanimous rejection of those arguments in MCM gave the PTAB system a constitutional foundation at the appellate level, deterring further constitutional challenges and allowing PTAB proceedings to expand significantly.
The decision has practical implications for every patent holder in the United States. Under IPR, any issued patent can be challenged at the PTAB within one year of service of an infringement complaint, with lower procedural barriers than district court and a historically higher invalidation rate. The MCM ruling confirmed that this asymmetric system — more favorable to challengers than the original examination that granted the patent — is constitutional. Patent holders and investors in patent portfolios must account for IPR risk in their assessments of patent strength, knowing that the PTAB can be used to re-examine and cancel issued claims without the full protections of a jury trial or Article III adjudication.