Court Opinion

ID: 4531759
Source: CourtListenerOpinion
Date Created: 2020-05-05 16:00:36.812794+00
Date Added: 2024-06-11T12:29:29.388101
License: Public Domain

Case: 19-2117    Document: 48     Page: 1   Filed: 05/05/2020

   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                CIENA CORPORATION,
                      Appellant

                             v.

                 OYSTER OPTICS, LLC,
                       Appellee

     ANDREI IANCU, UNDER SECRETARY OF
   COMMERCE FOR INTELLECTUAL PROPERTY
    AND DIRECTOR OF THE UNITED STATES
      PATENT AND TRADEMARK OFFICE,
                   Intervenor
             ______________________

                        2019-2117
                  ______________________

     Appeal from the United States Patent and Trademark
 Office, Patent Trial and Appeal Board in No. IPR2018-
 00070.
                  ______________________

    NONPRECEDENTIAL ORDER ISSUED: January 28, 2020
       PRECEDENTIAL ORDER ISSUED: May 5, 2020 *

    *   This order is being issued as a precedential order
 pursuant to a request filed by the U.S. Patent and Trade-
 mark Office under Fed. Cir. R. 32.1(e).
Case: 19-2117     Document: 48     Page: 2    Filed: 05/05/2020

 2                   CIENA CORPORATION   v. OYSTER OPTICS, LLC

                   ______________________

                       ON MOTION
                   ______________________

     JOSEPH PALYS, Paul Hastings LLP, Washington, DC,
 for appellant.    Also represented by IGOR VICTOR
 TIMOFEYEV, ANDERSON TO.

     WAYNE MICHAEL HELGE, Davidson Berquist Jackson &
 Gowdey, LLP, McLean, VA, for appellee. Also represented
 by JAMES THOMAS WILSON, ALDO NOTO.

     MOLLY R. SILFEN, Office of the Solicitor, United States
 Patent and Trademark Office, Alexandria, VA, for interve-
 nor. Also represented by THOMAS W. KRAUSE, FARHEENA
 YASMEEN RASHEED, MAUREEN DONOVAN QUELER.
                 ______________________

     Before MOORE, O’MALLEY, and STOLL, Circuit Judges.
 O’MALLEY, Circuit Judge.
                          ORDER
     Ciena Corporation (“Ciena”) moves to vacate and re-
 mand for further proceedings in light of Arthrex, Inc. v.
 Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019). Oys-
 ter Optics, LLC (“Oyster”) and the Director of the United
 States Patent and Trademark Office oppose the motion.
 For the reasons explained here, the motion is DENIED.
     Oyster owns U.S. Patent No. 8,913,898 (“the ’898 pa-
 tent”). In 2016, Oyster filed suit in district court, alleging
 that Ciena infringed several patents, including the ’898 pa-
 tent. Ciena petitioned the Patent Trial and Appeal Board
 (“Board”) for inter partes review of the asserted patents. At
 Ciena’s request, the district court stayed the litigation. In
 May 2018, the Board instituted review proceedings on the
 ’898 patent. After conducting proceedings, the Board
Case: 19-2117    Document: 48      Page: 3   Filed: 05/05/2020

 CIENA CORPORATION   v. OYSTER OPTICS, LLC                 3

 issued a final written decision in May 2019, concluding
 that Ciena had failed to demonstrate by a preponderance
 of the evidence that any of the challenged claims were un-
 patentable. Ciena then filed this appeal.
      Ciena argues that, under Arthrex, the Board’s decision
 must be vacated and remanded for a new hearing before a
 differently constituted panel because the members of the
 Board panel that issued the decision were not appointed in
 compliance with the Appointments Clause. The problem
 with Ciena’s request is that, unlike the patent owner in Ar-
 threx, Ciena requested that the Board adjudicate its peti-
 tion. It, thus, affirmatively sought a ruling from the Board
 members, regardless of how they were appointed. Ciena
 was content to have the assigned Board judges adjudicate
 its invalidity challenges until the Board ruled against it.
 Under those circumstances, we find that Ciena has for-
 feited its Appointments Clause challenge.
     The Supreme Court cases cited by Ciena do not compel
 a different conclusion. Ciena primarily relies on Commod-
 ity Futures Trading Commission v. Schor, 478 U.S. 833
 (1986). In that case, Schor invoked the Commodity Fu-
 tures Trading Commission’s (“CFTC’s”) reparations juris-
 diction by filing complaints against his broker, while the
 broker filed a competing lawsuit in federal district court
 against Schor. Schor moved to stay or dismiss the district
 court action, arguing that the agency action would fully re-
 solve and adjudicate all the rights of the parties. The bro-
 ker subsequently dropped the civil suit and filed a
 counterclaim at the agency. After the agency ruled against
 Schor, Schor argued that the agency’s adjudication of the
 counterclaim violated Article III of the Constitution.
     Under those circumstances, the Court held that “Schor
 indisputably waived any right he may have possessed” to
 having the matter adjudicated in an Article III court. Id.
 at 849. The Court explained that “Schor expressly de-
 manded that [the broker] proceed on its counterclaim in the
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 4                   CIENA CORPORATION   v. OYSTER OPTICS, LLC

 reparations proceeding rather than before the District
 Court.” Id. And like Ciena here, the Court explained that
 Schor “was content to have the entire dispute settled in the
 forum he had selected until the ALJ ruled against him on
 all counts; it was only after the ALJ rendered a decision to
 which he objected that Schor raised any challenge to the
 CFTC’s consideration of” the counterclaim. Id.
     Despite its finding of waiver, the Court nonetheless ad-
 dressed whether the Executive Branch tribunal’s handling
 of Schor’s claims violated Article III. It explained that it
 was doing so because “[t]o the extent that [a] structural
 principle [regarding the separation of powers] is implicated
 in a given case,” “notions of consent and waiver cannot be
 dispositive because the limitations serve institutional in-
 terests that the parties cannot be expected to protect.” Id.
 at 851. After assessing the potential structural issue it
 identified, the Court concluded that, where a decision to in-
 voke a forum is freely made by the complaining party, “sep-
 aration of powers concerns are diminished.” Id. at 855.
 The Court then found that Schor’s consent to having the
 CFTC adjudicate the matters it put to it—particularly
 while eschewing the very Article III forum to which he
 claimed entitlement—was sufficient to allow the Court to
 find that no structural concern regarding the integrity of
 the judiciary was actually implicated. Id.
     The Court again forgave waiver because of potential
 structural concerns regarding separation of powers in Frey-
 tag v. Commissioner, 501 U.S. 868 (1991). There, the peti-
 tioners sought review in the United States Tax Court and
 consented to having a special trial judge preside over their
 case. On appeal, the Fifth Circuit held that the petitioners
 had waived any constitutional challenge to the appoint-
 ment of the special trial judge by their consent and by fail-
 ing to raise the challenge in the Tax Court. Id. at 872. The
 Supreme Court agreed that waiver had occurred, but none-
 theless decided to take up the Appointments Clause chal-
 lenge. It first agreed that Appointments Clause challenges
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 CIENA CORPORATION   v. OYSTER OPTICS, LLC                   5

 are non-jurisdictional, and thus, waivable. Id. at 878–79.
 The Court noted, however, that it had included “Appoint-
 ments Clause objections to judicial officers in the category
 of” structural separation of powers issues it had previously
 exercised its discretion to consider even if not preserved be-
 low. Id. The Court concluded that “this is one of those rare
 cases in which we should exercise our discretion to hear
 petitioners’ challenge to the constitutional authority of the
 Special Trial Judge.” Id. at 879.
      Proceeding once more to scrutinize the structural ques-
 tion it identified, again, the Court found that no separation
 of powers concern actually was implicated. Id. at 891–92.
 It based that conclusion on the fact that the Tax Court is a
 “Court[] of Law[,]” exercising “its judicial power in much
 the same way as the federal district courts exercise
 theirs[,]” and being subject to review by the courts of ap-
 peals “in the same manner and to the same extent” as dis-
 trict courts. Id. at 891. Given those conclusions, the Court
 found the appointment of tax court judges by the chief
 judge to be constitutional because the Tax Court was “in-
 dependent of the Executive and Legislative Branches.” Id.
     Importantly, while the Court did consider the Appoint-
 ments Clause challenge before it based on possible “struc-
 tural concerns,” it did not answer the question of whether
 “a party’s consent to have its case heard by a special tax
 judge constitute[s] a waiver of any right to challenge the
 appointment of that judge on the basis of the Appointments
 Clause.” Id. at 893 (Scalia, J., concurring in part and con-
 curring in the judgment). And, it did not tell us whether
 lower courts must always forgive waiver where a structural
 constitutional deficiency under the Appointments Clause is
 alleged.
      Relying on Schor and Freytag, Ciena argues that this
 court must consider its objection to the authority of the
 panel members who decided its case and set aside their de-
 cision because structural interests justify forgiving Ciena’s
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 6                   CIENA CORPORATION   v. OYSTER OPTICS, LLC

 clear waiver. There are several problems with Ciena’s re-
 quest.
     First, while we agree that courts of appeals may forgive
 waiver or forfeiture of claims that implicate structural con-
 stitutional concerns, we do not believe we are always bound
 to do so. Neither Schor nor Freytag compel such a conclu-
 sion. Indeed, the Court in Freytag not only said it was ex-
 ercising its “discretion” to consider the otherwise waived
 constitutional challenge; it said that exercising such discre-
 tion should only occur in “rare” circumstances. 501 U.S. at
 879. In Arthrex, we considered the Appointments Clause
 challenge presented not only because of the structural na-
 ture of the challenge, but because of its importance to liti-
 gants, and, importantly, because we had not considered the
 question previously. Arthrex, 941 F.3d at 1326–27. We did
 not say we had no choice but to consider the issue.
     While the presence of a structural separation of powers
 issue can justify considering a matter in the face of a clear
 waiver or forfeiture, it does not compel it. In Freytag, the
 Supreme Court did not say that the Fifth Circuit erred in
 refusing to address the Appointments Clause challenge in
 that case; it only said that it would exercise its own discre-
 tion to do so. Freytag, 501 U.S. at 879. The Supreme Court
 clearly explained the interaction between forfeiture and as-
 sertions of structural constitutional defects in Plaut v.
 Spendthrift Farm, Inc., 514 U.S. 211, 231 (1995). The
 Court made clear both (1) that “the proposition that legal
 defenses based upon doctrines central to the courts’ struc-
 tural independence can never be waived simply does not
 accord with our cases” and (2) that what follows from a con-
 clusion that a structural constitutional principle has been
 violated in a given case “is not that waivers of res judicata
 are always impermissible, but rather that . . . waivers of
 res judicata need not always be accepted.” Id. (citing
 Schor, 478 U.S. at 849, 851; Freytag, 501 U.S. at 878–879;
 Coleman v. Ramada Hotel Operating Co., 933 F.2d 470, 475
 (7th Cir. 1991); In re Medomak Canning, 922 F.2d 895, 904
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 CIENA CORPORATION   v. OYSTER OPTICS, LLC                   7

 (1st Cir. 1990); Holloway Constr. Co. v. U.S. Dept. of Labor,
 891 F.2d 1211, 1212 (6th Cir. 1989)).
     Understanding that it is a discretionary decision to for-
 give waivers of non-jurisdictional challenges comports with
 our conclusion in Customedia Technologies, LLC v. Dish
 Network Corp., 941 F.3d 1173 (Fed. Cir. 2019), where, after
 Arthrex, we held that the type of constitutional challenge
 at issue in both Arthrex and here is subject to forfeiture.
 And it explains the many same holdings by our sister cir-
 cuits post-Freytag. See, e.g., Island Creek Coal Co. v.
 Wilkerson, 910 F.3d 254, 256 (6th Cir. 2018); Turner Bros.
 v. Conley, 757 F. App’x 697, 699–700 (10th Cir. 2018);
 NLRB v. RELCO Locomotives, Inc., 734 F.3d 764, 798 (8th
 Cir. 2013). Having forgiven forfeiture in Arthrex to con-
 sider a structural challenge that presented an important
 case of first impression in this Circuit, we remain free to
 exercise our discretion to impose standard principles of
 waiver in other cases raising the same challenge. See
 United States v. Booker, 543 U.S. 220, 268 (2005) (“[W]e
 expect reviewing courts to apply ordinary prudential doc-
 trines,” including those relating to waiver, even in cases in-
 volving constitutional challenges).
     Second, even if we chose to consider Ciena’s structural
 challenge, its consent to the jurisdiction of the Board would
 most certainly doom it. As in Schor, Ciena had a valid al-
 ternative forum in which it could have challenged Oyster’s
 patent claims—the district court. In district court, there
 would be no question that the matter would be adjudicated
 by a properly appointed judicial officer. But, like Schor,
 Ciena asked the Board to address its challenge. Where the
 decision to invoke a forum “is left entirely to the parties,”
 “separation of powers concerns are diminished.” Schor,
 478 U.S. at 855. “Leaning heavily on the importance of
 Schor’s consent, the Court [in Schor] found no structural
 concern implicated by the CFTC’s adjudication of the coun-
 terclaims against him.” Wellness Int’l Network, Ltd. v.
 Sharif, 135 S. Ct. 1932, 1943 (2015).
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 8                   CIENA CORPORATION   v. OYSTER OPTICS, LLC

     The Supreme Court has “reiterated the importance of
 consent to the constitutional analysis” of separation of pow-
 ers concerns on more than one occasion since Schor. Id. at
 1943. In Wellness, the Court considered whether bank-
 ruptcy court judges were constitutionally permitted to de-
 termine claims that they are otherwise not authorized to
 consider by virtue of the Supreme Court’s earlier decision
 in Stern v. Marshall, 564 U.S. 462 (2011) (holding that
 bankruptcy courts, as non-Article III forums, cannot issue
 final decisions on state common law counterclaims). Where
 the party challenging the ruling consented to adjudication
 by the bankruptcy court, the Court determined that they
 can; it concluded that no constitutional concerns exist
 where a party consents to a particular form of adjudication.
 Wellness, 135 S. Ct. at 1945 n.10, 1947; see also Peretz v.
 United States, 501 U.S. 923, 932, 937 (1991) (defendant’s
 consent to supervision of voir dire by Magistrate Judge—
 which is otherwise unconstitutional—“significantly
 changes the constitutional analysis” and negates implica-
 tion of structural constitutional concerns).
     In this case, Ciena not only consented to adjudication
 by the Board, but it affirmatively sought to delay any con-
 sideration of its patent challenges by seeking a stay of the
 district court litigation initiated by Oyster. Any constitu-
 tional concern regarding the appointment of the Board
 judges in this case is negated by Ciena’s forfeiture.
                        CONCLUSION
     For these reasons, we decline to take up Ciena’s Ap-
 pointments Clause challenge. Its motion is DENIED.