A Patents as Property Rights History Lesson

By James Edwards
September 7, 2017

When the Supreme Court hears Oil States v. Greene’s Energy, that a patent is private property affording the owner private property rights should be without question.

In Oil States, the Supreme Court will consider the constitutionality of postgrant patent validity challenges in an administrative venue, as opposed to proper proceedings in a real court. That question hinges on the premise of patents securing exclusive private property rights.

The private property right and exclusivity over the inventor’s creation during the patent term cannot be missed in a plain reading of the constitutional language. Nor can it be missed in two centuries’ worth of statutes and judicial rulings and patterns and practice operationalizing private property rights in patents.

Unless most of the justices are impeachment-worthy judicial activists who stomp on stare decisis and the U.S. Constitution, this central legal tenet should be a slam-dunk in favor of private property rights in patents.

As the justices take up this case, they’ll have plenty of resources at hand cementing this incontrovertible property-rights fact. Four amicus curiae briefs, three by conservatives and libertarians and one by law professors, provide convincing, irrefutable proof that U.S. patents amount to private property. These briefs show what one of them called “a striking unanimity in the judicial decisions construing patents as private property rights.”

A sampling from these briefs illustrates this firm foundation about private property rights in one’s invention.

The brief of a dozen conservative leaders cites Chief Justice John Marshall from an 1813 circuit case (Evans v. Jordan). Marshall found “[a] patent was certainly required to make the property right enforceable, but the right itself ‘was vested in the inventor, from the moment of discovery,’ was an ‘indefeasible property in the thing discovered,’ and was being merely ‘perfected by the patent.’”

The Cato Institute and the American Conservative Union Foundation joint brief quotes Chief Justice Marshall more extensively from this same case. The Marshall quotation begins: “The constitution and law, taken together, give to the inventor, from the moment of invention, an inchoate property therein, which is completed by suing out a patent. This inchoate right is exclusive. It can be invaded or impaired by no person. No person can, without the consent of the inventor, acquire a property in the invention.”

Thus, the most influential, notable chief justice of the U.S. Supreme Court embraced the fact that property ownership attaches to the newly created property, the invention, and belongs solely to its inventor or a patent’s subsequent purchaser. The patent secures one’s property right.

Conservative leaders, as well as 27 law professors (including NYU’s Richard Epstein and George Mason University’s Adam Mossoff) and other briefers, show that the consistent American legal principle regarding patents is inventors’ inherent property right in their patent. Kenneth Blackwell et al. quote Justice Joseph Story’s opinion from the unanimous 1824 Ex Parte Wood & Brundage ruling, where the court said “[t]he inventor has, during [the patent] period, a property in his inventions; a property which is often of very great value, and of which the law intended to give him the absolute enjoyment and possession.”

Briefers illuminate clearly that property is property, under U.S. constitutionalism. The Supreme Court, in the 1869 case Providence Rubber Co. v. Goodyear, equated real, or physical, property and its secured property rights with the property right in an invention, Blackwell et al. point out. Addressing patent infringement, the court held that there is “no distinction between . . . a patent [for land] and one for an invention or discovery.” The high court in 1865 affirmed a patent as private property, the conservatives’ brief says, averring in the court’s words that a “valid patent . . . is just as sacred as any right of property . . . .”

Eagle Forum Education & Legal Defense Fund’s brief quotes Seventh Circuit Judge Frank Easterbrook’s explanation of patent property rights being equivalent to those rights in other forms of private property: “Patents give a right to exclude, just as the law of trespass does with real property. Intellectual property is intangible, but the right to exclude is no different in principle from General Motors’ right to exclude Ford from using its assembly line, or an apple grower’s right to its own crop.”

Similarly, the Supreme Court ruled in Davoll v. Brown (1845), the professors remind us, that “we protect intellectual property, the labors of the mind, . . . as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.”

The brief from Cato and ACUF reiterates the private property right, whether in physical or intellectual property. These amici cite an 1876 ruling: “A patent for an invention is as much property as a patent for land. The right rests on the same foundation, and is surrounded and protected by the same sanctions. There is a like larger domain held in ownership by the public. Neither an individual nor the public can trench upon or appropriate what belongs to the other.”

The law professors note that the Supreme Court has “consistently affirmed that ‘the [patent] right is a species of property,’” quoting an 1879 case. The law professors expand upon Justice Story’s practice of relying on real property precedents in patent cases, saying, “many justices and judges repeatedly used common-law property concepts in patent cases.”

Cato and ACUF further illustrate the U.S. Supreme Court’s clear understanding of property being property and property rights being private rights, regardless of the form the property takes — physical, personal, intellectual. This brief quotes the court in McClurg v. Kingsland (1843). There, the court said legislative changes to the patent statute “can have no effect to impair the right of property then existing in a patentee, or his assignee, according to the well-established principles of this court in” an 1823 land ownership case.

Quoting the Supreme Court’s unanimous 2002 Festo ruling, in which Justice Anthony Kennedy penned the opinion, Eagle Forum ELDF’s brief reminds the court of the principle it repeatedly has lain: “The patent laws ‘promote the Progress of Science and useful Arts’ by rewarding innovation with a temporary monopoly. U.S. Const., Art. I, § 8, cl. 8. The monopoly is a property right; and like any property right, its boundaries should be clear. This clarity is essential to promote progress, because it enables efficient investment in innovation. A patent holder should know what he owns, and the public should know what he does not. … [I]nventors … rely on the promise of the law to bring the invention forth, and the public, which should be encouraged to pursue innovations, creations, and new ideas beyond the inventor’s exclusive rights.”

The conservative leaders’ brief also cites the court where it reaffirmed in Festo (2002) and reaffirmed its reaffirmation (Nautilus, 2014) of the cold, hard fact that “a patent ‘is a property right.’“ It further quotes the Supreme Court’s 2011 opinion in Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, where the court cites the 1890 patent case Solomons v. U.S., “whatever invention [an inventor] may thus conceive and perfect is his individual property.”

Several of the briefs address the absurdity currently being advanced, claiming patents are so-called “public rights.” This novel notion — more in line with Karl Marx than John Locke — is a direct assault upon the very essence of private property rights.

For example, the Eagle Forum Education brief exposes this falsehood: “The unjustified attempt by some antipatent activists to recharacterize patent rights as some kind of ‘public right’ is of recent vintage, and an outgrowth of the often-criticized legal realism movement. ‘Since the turn of the century, the concept of property had succumbed to the acid wash of a nominalism first popularized in the law by the legal realists.’ Id. at 372. Part of that legal realism is to mischaracterize patents as merely a government-granted monopoly which can be taken away. . . . [A] ‘public right’ in the patent context is an oxymoron, and is really not any right at all. Property rights need to be secure . . . .”

The Cato-ACUF brief reasons “public rights” into a sniveling lump: “Ultimately, the implications of the argument that merely because a right to particular property flows from a statutory scheme, such rights are ‘public rights’ and that disputes over them can be withdrawn from Article III courts are staggering. Such a conclusion would mean that anyone who derives his land title from the Homestead Act can be forced to have any disputes over that property be resolved by a bureaucrat in the Bureau of Land Management. Under this view, Congress could require that a dispute between an individual and a private financial institution over a mortgage or a student loan be heard before an official in the Treasure Department on the theory that the relevant loans were made pursuant to a federal statutory scheme. The government enacts statutes affecting property rights all the time, but that does not convert the rights that trace their roots to such statutes into ‘public rights.’”

Conservative leaders Blackwell et al. draw from the court’s 1897 ruling in U.S. v. American Bell Telephone Co., further pummeling the reckless, unfounded idea: “The government parted with nothing by the patent. It lost no property. Its possessions were not diminished. The patentee, so far as a personal use is concerned, received nothing which he did not have without the patent, and the monopoly which he did receive was only for a few years.”

The professors apply the coup de grace to “the Federal Circuit’s wrong assertion that ‘patent rights are public rights’” (citing MCM Portfolio). “In saying this, the Federal Circuit directly contradicts the longstanding jurisprudence of this Court. This Court should reverse the Federal Circuit given its ahistorical argument based entirely in modern administrative law that patents are “public rights.” The Federal Circuit is wrong; its decision in this case and prior cases conflict with the decisions handed down by this court in the early American Republic and repeatedly sustained for over two-hundred years that patents are private property rights.”

As shown, these several amicus briefs are chock full of historical and judicial record that leads to only one conclusion — that American patents secure fully enforceable private property rights for the fruit of one’s intellectual labor, no less private property than other forms of property, and protected by the same due process and substantive rights as any other individual right or property.

The Author

James Edwards

James Edwards consults on intellectual property, health care innovation, and regulatory and policy issues. Among other clients, Edwards advises the nonprofit group Eagle Forum on patent policy and is Co-Director of the Inventor's Project. He participates in the Medical Device Manufacturers Association's Patent Working Group. Edwards mentors start-ups and early-stage companies, largely in the med tech space, and is involved in several IP-centric projects.

Edwards served as Legislative Director to Rep. Ed Bryant, R-Tenn., then a member of the U.S. House Judiciary Committee, and handled IP legislative matters. Edwards also worked on the staffs of Rep. John Duncan, R-Tenn., the U.S. Senate Judiciary Committee, and Sen. Strom Thurmond, R-S.C. In addition, he was an association executive at the Healthcare Leadership Council. Edwards earned a Ph.D. at the University of Tennessee, and bachelor's and master's degrees at the University of Georgia.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 18 Comments comments. Join the discussion.

  1. Anon2 September 7, 2017 11:03 am

    A distinctly American, principled, and morally valid article.

    Well said.

    All free people should be proud of America’s foundations and ideas, and earnestly hope for a stop to their alarming decline and erosion.

    It truly is a choice between Locke and Marx, Freedom and Statism.

  2. JPM September 7, 2017 6:12 pm

    If the Supreme court rules that the IPR process is unconstitutional, what do you guys think will happen to all the patents they killed?

    Would be great if all of the killed patents would be restored.

  3. Gene Quinn September 7, 2017 6:24 pm

    JPM-

    Stay tuned. I believe I have someone working on an article that will touch upon that. Actually, I know the abstract pitched addresses this, but sometimes when the writing starts articles can take on a life of their own.

    If the PTAB process were ruled unconstitutional and there was never any authority for the Patent Office to do what they did, and patents could only be invalidated in federal court (as the Supreme Court has previously ruled) then it would seem logical that all the patents that were “lost” would suddenly rise from the dead. What a thorny issue that would create with respect to intervening rights though. I wonder whether the only recourse for patent owners would be to sue the government for an unconstitutional taking.

  4. David September 7, 2017 8:03 pm

    JPM,

    The 3M brief explains why those patents wouldn’t come back.

  5. Edward Heller September 7, 2017 8:16 pm

    All that is required for deprivation of property is due process. Newman, who wrote Patlex, recently dissented to en banc consideration of the constitutionality of IPR by making this very point.

    The problem with the PTAB is that it is not independent, but part of the Executive. As Gene has pointed out in many posts, the Director interferes in decisions to make them come out the why she wants. The Director or her delegate gives performance reviews and raises. The Director can fire for performance reasons. Moreover, there is no requirement that a PTAB member not have any prior (or future) relationship to a party appearing before that member.

    But due process is not an issue before the Supreme Court except through Article III. Certainly Article III provides independence. But cannot some other form of tribunal short of requiring Article III judges? Some of the briefs focused on the independence of ALJ’s as an alternative. This would suggest simply carving the PTAB out of the PTO and making APJ’s into ALJ’s would be sufficient to cure the problem.

    I say all of the above because I do not want the issue of constitutionality of IPRs depend solely on due process. I really want all forms of post-grant procedures that do not provide a trial by jury to never see the light of day again. That is why my own brief focused on the Seventh Amendment exclusively.

    For all of us here, just look at the stats. Juries uphold the validity of a patent at rates substantially above those of the courts, and far, far above those of the PTAB. To really win this issue, we need it to be resolved on the right to a jury trial.

  6. Edward Heller September 7, 2017 8:21 pm

    David, 3M, I believe, argued the PTAB decision would be final even if the underlying statute were declared unconstitutional. Perhaps. But, the final act is the cancellation of claims after all appeals and time for appeals has been completed. To date, the PTO has not (to my knowledge) cancelled any claims in any patents as a result of IPRs.

    Now the Supreme Court declares IPRs unconstitutional. A patent owner goes into court suing on claims “lost” in an IPR but not cancelled from his patent. What is a court going do do?

  7. David September 7, 2017 8:28 pm

    I’ll answer your question with a question. What did the Supreme Court with do prior decisions by the bankruptcy court when it declared the bankruptcy statute unconstitutional?

  8. Edward Heller September 7, 2017 8:51 pm

    Well, treated them as advisory.

  9. David September 7, 2017 8:58 pm

    In the interest of justice they were treated as final. There is no reason to expect that the Supreme Court would do anything different in Oil States.

  10. angry dude September 7, 2017 11:04 pm

    The doc said ‘to the morgue’, to the morgue it is!

  11. Edward Heller September 8, 2017 1:36 am

    Justice?

    Further, by statute the claims are good and enforceable until cancelled. The PTO is not cancelling claims.

  12. Anon September 8, 2017 8:12 am

    The PTO is not cancelling claims.

    How is that statement coming out of your mouth?

  13. PTY September 8, 2017 8:16 am

    @11: Ned, can you please explain why the certificates issues by the PTO after IPR do not cancel claims. Sorry if I missed your explanation earlier or elsewhere.

  14. Judge Rich's Ghost September 8, 2017 8:43 am

    To Anon 8:12 AM – Absurd statements such as the one you quote are the reasons patent attorneys are often not taken seriously

  15. Edward Heller September 8, 2017 8:46 am

    Anon, I guess they are. The certificate for the ‘549 patent involved in MCM Portfolio LLC v. HP just issued effective 07/18/2017.

    But this only shows that they issue only after appeals are over. The decision of the PTAB itself does not cancel the claims.

  16. David September 8, 2017 12:04 pm

    And what happens if you don’t appeal from the PTAB?????

  17. Edward Heller September 8, 2017 2:02 pm

    @13. They do.

    @14. David, district court judgments are binding and executable unless they are stayed while an appeal is pending. To stay, one has to post bond. The PTAB decision is not binding on the patent owner – he has a right to appeal which he, of course, can waive. Only a loss on appeal binds him as that triggers the certificate.

    But let’s get back to justice. The Director/PTAB is political and corrupt as Gene has proven. They do not deliver due process. It would be extremely unfair to patent owners to allow these adverse, unfair, IPR decisions to stand. I am sure most here would agree with this.

  18. Damien October 17, 2017 10:56 am

    “Unless most of the justices are impeachment-worthy judicial activists who stomp on stare decisis and the U.S. Constitution…” My god, the hyperbolic rhetoric on this site is getting unbearable.

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