Predicting Oil States in Advance of SCOTUS Oral Arguments

The United States Supreme Court will hear oral arguments in Oil States v. Greene’s Energy Group on Monday, November 27, 2017. This case will give the Supreme Court its first opportunity to address the constitutionality of the inter partes review procedures created by the America Invents Act (AIA). The issue specifically taken by the Supreme Court is as follows:

Whether inter partes review – an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents – violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

In advance of this much anticipated hearing, I reached out to a number of industry insiders with a simple question: What are you thoughts and predictions on Oil States in advance of Supreme Court oral arguments? Their answers follow.

As for my thoughts — as I’ve said at various speaking engagements, I’ve made a career out of correctly predicting chaos when it comes to Supreme Court decisions. That means I’m going to go out on a limb this time with my prediction that the Supreme Court will find IPRs unconstitutional. We all know the Supreme Court does not ordinarily take Federal Circuit cases to affirm, although it does happen from time to time. With this particular issue there seems to be no reason to take the case, and they’ve refused to take the same issue several times. So what has changed? Justice Gorsuch is now on the Court. I believe the patent community is too myopically focusing on this case as a patent case. I believe this case may well be treated as an administrative case giving the conservatives on the Court an opportunity to say something profound about the growth of the Administrative State, which if true would inure to the benefit of those wanting a strong patent system and a dismissal of the Patent Trial and Appeal Board from the post grant challenge business.

In any event, once oral arguments are complete we will circle back with further articles and prognostications in advance of what should be a momentous decision by the Supreme Court.

 

Bob Stoll
Partner, Drinker Biddle

I think that Oil States is one of those rare cases that the Supreme Court takes up to affirm the Court of Appeals for the Federal Circuit. The Supremes feel that they need to have some cases to balance all of the reversals they hand down and this is one of them. The chaos that could result from a reversal will drive the decision. If the Supreme Court decided that Article III judges are needed to invalidate patents what would happen with all of the cases already decided? What about the earlier Inter Partes Review decisions? What about third party reexamination? What about other administrative courts in other agencies handling other property-related issues? I also believe that the Supreme Court will deem patents to be a “quasi-public” right to explain its decision.   The right would neither be fully private nor fully public, but a hybrid. This is how they will justify a decision that is necessitated by the trouble that would result from a reversal.

Robert L. Stoll has more than 40 years of experience in intellectual property prosecution. Bob retired from the USPTO as Commissioner for Patents at the end of 2011 after a distinguished 34-year government career.

 

Stephen Kunin
Partner, Oblon, McClelland, Maier & Neustadt, L.L.P.

I predict that the Supreme Court will not strike down AIA trials as being unconstitutional.  With that said the Supreme Court may focus more on the language of Article 1, section 8, clause 8 of the Constitution on the scope of Congressional authority and discretion in enacting patent laws rather than on lightning rod issues of the right to jury trial and public v. private property aspect of patent grants.  On the other hand, it would not surprise me if the Supreme Court in dicta criticizes how the AIA statutes have been implemented and urges that Congress and the Executive Branch to take action to make reforms to better balance the proceedings to make them more flexible.

Stephen Kunin serves as an expert witness and consultant on patent policy, practice and procedure. Mr. Kunin served three decades at the USPTO, including 10 years as Deputy Commissioner for Patent Examination Policy.

 

Marc Adler
Of Counsel, Buchanan Ingersoll & Rooney, PC

I doubt that the Supreme Court will find IPRs unconstitutional. Joe Matal predicted at the AIPLA annual meeting that the constitutionality of IPR proceedings would be upheld by the Court without dissent. In support of this prediction is the fact that the Federal Circuit denied en banc review in this case 10-2 and the Supreme Court has repeatedly denied petitions on the same issue, see MCM Portfolio v. Hewlett-Packard; Cooper v. Lee; and Cooper v. Square. It is also interesting to note that the Supreme Court will hear SAS Institute v. Lee, another IPR related case that asks whether the PTAB must issue a final written decision on all claims challenged, at the same time as Oil States. If IPRs are unconstitutional, then there is little need to determine whether a final written decision must address all claims challenged. Like Joe Matal, consumers of the proceedings do not seem to be worried. The number of IPR petitions filed after Oil States was granted cert is comparable to historical rates. This reflects continued confidence in the IPR system. Should the unlikely happen, I predict that we will simply move forward to rectify the timing of the challenges to occur prior to the grant of a patent right.

Marc Adler is an intellectual property attorney and strategist with Buchanan Ingersoll & Rooney, PC. Prior to joining the firm Marc spent more than 25 years at Rohm & Haas, a Fortune 100 company, serving as the company as assistant general counsel and chief IP counsel.

 

Erik Oliver
Partner, Richardson Oliver Law Group

One might be excused for thinking IPR is in trouble, many of the amicus briefs in support of neither party seem to tilt heavily against IPR. In contrast, the FantasySCOTUS crowd wisdom as of late October leans heavily the other way (estimating that IPR will be found constitutional unanimously). My own prediction: IPRs will be upheld. My primary rationale rests on (1) a generally anti-patent owner trend in outcomes across several decades of Supreme Court decisions and (2) the fact that the unanimous Supreme Court outcome in Cuozzo from 2016 lacks any dicta in the concurring-in-part opinions that would suggest concern about Article III issues. As to the second point, while it is true that the Supreme Court is not required (nor does it regularly) raise issues sua sponte, it just strikes me as too odd for them have upheld details of the IPR process with some concurrences and not even generated any dicta about the validity of the proceeding itself.

With an ever greater proportion of products in the market necessarily incorporating and practicing hundreds of thousands of innovations (and thus patents), a more robust mechanism for challenging weak patents was needed. Congress recognized this and created IPRs. IPRs delivered by shifting the cost curve for a patent challenge from one-million plus dollars to on the order of one-hundred thousand dollars. This shift has changed the landscape in a positive way for many industries. Particularly, helping clear the NPE landscape. For industries where there are fewer patents per product, the patent-value/protection cheese has moved; however, the answer is not to blame IPRs (or the PTAB). But to recognize that the IPR process affords opportunities to more cost effectively challenge weaker patents and deliver products into markets that your company had previously avoided due to the high cost of patent challenges.

Mr. Oliver counsels clients on a variety of patent and business matters, including licensing, buying, selling, valuation, prosecution and business processes. Prior to founding the ROL Group, Mr. Oliver was a Vice President at ThinkFire Services USA, Ltd’s Silicon Valley office.

 

Edward KwokEdward Kwok
Partner, VLP Law Group

The Federal Circuit’s 2015 holding that patents are “public property rights” in MCM Portfolio v. HP underlies the dispute in this case. Neither the brief by Petitioner (Oil States Energy’s Services) brief, arguing for private property rights, nor the briefs by the two Respondents (Greene’s Energy Group and the U.S. Solicitor General), arguing for public property rights, seem convincing. Indeed, the Respondents’ argument that Congress intends the Inter Partes Review (IPR) to be a vehicle by which the U.S. Patent and Trademark Office (USPTO) corrects its own mistakes seem especially contrived, given that the petitioner of an IPR certainly plays a much bigger role than merely bringing to the USPTO’s attention that it has made a mistake in granting the patent. The Solicitor General’s Brief opens strongly in arguing that patents are not “natural rights” but a creature of “positive law,” but inexplicably fails to follow through to a compelling result. The Court may find a more reliable footing in the amicus brief by “27 Law Professors,” which argues from the historical viewpoint that patents — at least in American jurisprudence of the 19th and 20th centuries — were consistently seen as private property rights.

I think it is likely that the Court will resolve the issue in favor of private property rights, overruling MCM, but it is not clear to me that such a ruling would mandate the Court to require a jury trial under the Seventh Amendment. Again, neither Petitioner’s brief nor Respondent’s brief address that issue convincingly. I think the Court will struggle to save the USPTO’s IPR jurisdiction. One possibility would be to treat an IPR invalidation like an invalidation at the U.S. International Trade Commission (USITC), i.e., the invalidation is not binding, unless affirmed by a judicial appeal. That result, of course, would also necessarily strike down the statutory estoppel provisions in the IPR statute. Would the Court risk further confusion by so holding? That seems unlikely. Perhaps, the Court does not have a choice but to find the IPR unconstitutional in its entirety.

Edward Kwok is a partner with VLP Law Group. His practice focuses on patent prosecution and Inter Partes adverse proceedings before the U.S. Patent and Trademark Office, and intellectual property litigations in state and federal courts.

 

Josh Lorentz (left)
Oleg Khariton (right)
Dinsmore & Shohl LLP

There is no question that, since its introduction just over five years ago, the inter partes review process has had a dramatic impact on U.S. patent litigation as well as the U.S. patent system as a whole, though of course there is some debate about whether, on the whole, this impact has been positive or negative.  A ruling in favor of Oil States striking down the IPR process would have similarly massive consequences, even if the full extent of those consequences (particularly on patents that have already been invalidated by the PTAB) might not become immediately clear.  Given the Federal Circuit’s recent track record at the Supreme Court, it might be tempting to see the fact that the justices have agreed to hear this case in the first place as an indication that they are getting ready to hand down another reversal.  But in contrast to past cases, the question presented here goes far beyond challenging the validity of the Federal Circuit’s interpretation of a statute, and instead invites the Supreme Court to strike down the IPR statute in its entirety as an unconstitutional exercise of Congress’s legislative powers—which, needless to say, is an altogether different proposition.

On balance, the legal and policy arguments in favor of upholding the IPR statute appear to be stronger.  One thing that will be interesting to watch is whether, in the event the statute is upheld (as seems probable), the Court will nonetheless seek to provide patent owners with a measure of relief.  The Court may well decide to signal to the PTO that the agency has pursued the congressional mandate to invalidate weak patents too zealously, and that it should strive (through its rulemaking authority or otherwise) to make the IPR process more friendly to patent owners, for example by making it easier to amend claims.  Similarly, the Court might signal to the Federal Circuit that it needs to take on a more active role in policing the PTO’s implementation of the statute.

Josh Lorentz is chair of Dinsmore & Shohl LLP’s Intellectual Property Department and practice group chair of the firm’s IP Litigation and Licensing Practice, where he manages IP litigation, as well as trademark, copyright, privacy and social media matters. Oleg Khariton is a member of Dinmore’s Intellectual Property Department, focusing his practice on patent litigation.

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43 comments so far.

  • [Avatar for Anon]
    Anon
    November 19, 2017 05:41 pm

    Ron,

    Perhaps I should have made the point more clear:

    The C&C is gone at the moment of an initiation decision being in the affirmative.

    It is NOT a later decision type of thing.

    The taking is immediate.

    This is in addition to your point about what it takes “to get in.”

    My apologies if my post muddled the two very different things by talking about them in such close proximity.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 19, 2017 03:55 pm

    Anon,
    While I agree with you on the results, I beg to differ on the characterization of the process. The lower evidentiary level “to get in” is not unique to IPRs. It is also applicable in challenging patent validity in Article III court – one must only meet the pleading standard for alleging invalidity; the C&C level must be overcome only later in adjudication.

    The entry problem in IPRs is not as much the low evidentiary levlel to “get in,” but the total lack of standing protection and the lack of finality in institution decisions – IPR petitioners can repeatedly seek and obtain multiple institutions of IPRs challenging the same patent claims. This is an Article III violation. IMHO, as explained above, the taking (threatened, direct or collateral) is not per se a Fifth Amendment violation.

    It is not until the PTAB actually applies the C&C evidentiary standard that a patent holder may have a Fifth Amendment claim, but it is under the due process clause rather than the taking clause.

    But this is all academic – we both agree that the IPR statute as a whole is constitutionally infirm and should be struck down.

  • [Avatar for Anon]
    Anon
    November 19, 2017 07:42 am

    Your post proves my point Ron – the administrative agency employs a taking at the institution decision point, and the loss of C&C is not some “merely later threat.”

    Your post shows a lower level “to get in.” When the agency decides that you are “in,” you are – at that point – stripped of the C&C level. That level is gone. That the agency also uses a lower level to decide whether or not to put you “back in,” does not change the loss of a stick in the bundle of property rights that the granted patent had provided.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 19, 2017 06:04 am

    Anon,
    Incorrect. IPRs would not be instituted as often if the standard for institution were C&C evidence. Unfortunately, institution requires only “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” 35 U.S.C. 314(a). This is even lower that the preponderance of the evidence.

  • [Avatar for Anon]
    Anon
    November 18, 2017 05:50 pm

    Actually Ron, the C&C standard is taken at the institution point (not merely threatened later on).

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 18, 2017 04:20 pm

    Anon,
    We seem to agree on the fundamentals but not on the technical details. You seem to conflate the stripping away of the C&C evidence standard (used in the PTAB final decision) with the decision to institute. Your definition of “taking” appears to loose. Mere institution of an IPR has no legal effect which would qualify as “taking” regardless of the nature of government involvement. There is no legal authority for public use of the claimed invention at that time; no transactions that would qualify as a transfer of rights.

    Institution of IPR at most constitutes a threatened “taking.” But this does not per se violate the Fifth Amendment. The Takings Clause does not prohibit a taking but merely requires payment of just compensation in exchange for a taking. A patent holder recourse can at best be an action in the Court of Claims for just compensation after having claims cancelled by the PTAB. Good luck on that….

    There are, however, transactions the patent holder enters into and there are funds paid to defend the multiple challenges in IPRs upon institution. Those are collaterally incurred well before the PTAB reaches any final decision. The loss of quiet title after institution may also have tangible devaluation effects and/or a damper on licensing revenues. Those losses are what I meant by “collateral taking.”

    While there are serious issues with respect to the Due Process clause of the Fifth Amendment in deviating from the C&C evidence standard (as I describe in the IEEE-USA Amicus brief in Oil States), we must now come to terms on the Fifth Amendment “taking” challenge to IPR – skepticism as to applicability.

  • [Avatar for Anon]
    Anon
    November 18, 2017 01:11 pm

    Ron,

    I find your comment quite interesting and does add to the conversation. The notion of “collateral taking” is one that I had not included in my views.

    But let’s return to clarify takings at the point of the initiation decision. You venture forth a requirement of “ by the government for its own use or for public use” and follow that with a statement of “and that is not the case upon institution of an IPR

    I disagree on more than one front.

    First, on its face you statement would allow for the government to perform a taking out of nothing but sheer wantonness. A government could then (fully legally) take not to use at all. From my understanding of eminnent domain, this “not use” is itself considered a use, and the “bar” of use by the government or for some other public use is an extremely low bar (in fact, per Kelo, private may count as public use).

    Second, the fact of the matter is that Congress wrote this stripping away of the level of clear and convincing FOR a use, and as we have seen with the creation of the new “right to challenge,” this use IS a public use.

    Takings indeed occurs at the institution decision point. Further, this taking suffers other Constitutional infirmities including a taking with NO remuneration and a taking with no chance of Article III review (and I mean this outside of any wanton disregard for law that might bring about other Article III reviews).

    What Congress did simply does not pass Constitutional scrutiny.

    It’s not the first time that an Act of Congress so fails Constitutional scrutiny. It certainly will not be the last.

  • [Avatar for Anon]
    Anon
    November 18, 2017 01:02 pm

    Mr. Heller,

    I find none of your responses here to advance the conversation in a meaningful way.

    First, proceedings in an Article I forum simply do not require standing. Your statement at 33 ignores the difference between the Article I forum and the Article III forum and attempts to impose something not required. Straight up legal error on your part.

    Second, your statement at 34 misconstrues who is doing the challenging in the first portion (the Article I forum) of the IPR regime. Such is not the government. This then doubles down on the error that standing is not required in an Article I forum.

    Third, your notion of British scire facias and ANY amount of a posted bond is simply not pertinent to the NEW public right created by Congress in the AIA. We have been over this already, and this new right is NOT scire facias. Three for three in your legal errors here.

  • [Avatar for Edward Heller]
    Edward Heller
    November 18, 2017 07:08 am

    Also, Ron, note that the British scire facias required the petitioner to post a£1000 bond to pay for the attorney’s fees of the patent owner in the event. The somewhat leveled the playing field.

  • [Avatar for Edward Heller]
    Edward Heller
    November 18, 2017 06:44 am

    Also, Ron, given that the Supreme Court has already ruled that the government cannot challenge the validity of a patent in a court without a case and controversy, and there is none, isn’t it remarkable that Congress simply take the issue of validity out of the courts allowing the government to correct its own mistakes?

  • [Avatar for Edward Heller]
    Edward Heller
    November 18, 2017 06:24 am

    Ron, to the extent that Article III standing might be constitutionally required as a matter of due process, then the statute that authorizes trial of an action in a forum without any standing requirement not only should violate the Fifth Amendment, but should also violate Article III.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 18, 2017 12:38 am

    Anon,
    I agree with your point @ 30 that the constitutional infirmity of IPRs is manifested even at the moment that the PTAB makes the decision to institute the IPR. That said, a “taking” involves appropriation by the government for its own use or for public use and that is not the case upon institution of an IPR. However, I would agree that there is a “collateral taking” of tangibles from the patent holder not merely through loss of quiet title but through more pernicious loss mechanisms due to lack of Article III’s standing protections, as explained below.

    The most important aspect of the Article III standing requirement is that it prevents private parties from being haled into tribunals in the absence of a legal controversy with a particular plaintiff. The standing doctrine furthers three policy objectives: to promote separation of powers, to prevent those without a stake in the lawsuit from bringing suit, and to foster fairness such that only actual right holders assert their rights. See United States v. Richardson, 418 U.S. 166, 192 (1974) (Powell, J., concurring) (identifying the prevention of unrelated parties from bringing suit as justification for the standing doctrine). Constitutional standing requires that a plaintiff show: an injury in fact; a causal connection between the injury and the defendant’s conduct; and that a favorable decision would redress the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).

    The pernicious “collateral taking” of patent holders’ resources stems from the ability under the IPR statute of any and multiple parties who have no “case or controversy” with the patent holder to gang up and institute multiple IPR proceedings against multiple patents held by the patent owner. See http://www.patexia.com/feed/weekly-chart-32-not-a-single-claim-survived-after-125-ipr-challenges-20170314. That one such patent holder must bear a vastly disproportionate burden of defending the patents alone in multiple IPR proceedings instituted by multiple parties indicates that IPRs are extremely unfair and prejudicial to the patent owner, even up to the point of having insufficient resources to successfully mount an effective defense. The onslaught of IPRs after 2012 thus introduce unbounded risks which patent holders cannot control nor adequately forecast in choosing to bring their patented technologies to market and engage in commerce.

    It is the constitutional protection enshrined in the standing requirement of Article III that gives commercial actors control over their potential legal risks in the normal course of business. It ensures fairness as legal risks assumed are commensurate with actions taken. Under the standing requirement, patent holders can devise specific business conduct and affirmative self-limiting interactions with others in the market by relying on the standing requirement for insulation so that a putative injury be “fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court.” Lujan, 504 U.S. at 560. The IPR statute throws all these established practices and risk-control mechanism out the window. It drains patent holders’ resources (“collateral taking”), exposes them to unlimited risks, and can even get them out of business. It turns mere issuance of a patent into an uncapped legal liability for the patent owner.

    Unfortunately, this constitutional aspect – the Fifth Amendment violation – was not part of the Question Presented in Oil States.

  • [Avatar for Anon]
    Anon
    November 17, 2017 11:05 am

    Mr. Heller at 28,

    At the risk of suffering from chasing down a rabbit hole away from where I would rather direct the conversation with you towards, your view of the “judicial function” WITHIN the administrative agency of the USPTO has been commented upon by me previously.

    I have shown you that the judicial function within ANY administrative agency is typically set at that agency’s founding and that there exist a spectrum of separation between the judicial and non-judicial elements of any one administrative agency. I have also shared with you that the USPTO long has been recognized as one of the administrative agencies wherein that separation is one of the least separated of all administrative agencies.

    Previous comments regarding the ability of the Commissioner to not only BE a “judge,” not only be able to select particular judges, and not only to stack panels to obtain “consistency” in policy, have all been proffered previously. Not only do these aspects exist – these aspects have always existed for the particular administrative agency of the USPTO.

    Knowing this then, the mere feelings an desire for something else in relation to ANY judicial activities within the USPTO amount to nothing more than Pollyanna dreaming.

    Congress in the AIA must be presumed to have been aware of the exact agency makeup to which they provided the (generous) powers within the IPR regime setup. And the law written by Congress in the AIA simply lacks ALL of those things now being pined for.

    One must take the law as written as it comes, and NOT wax melancholy about some different law that Congress could have written that would have provided for the “fairness” (or Due Process) that one would “like” to have in place.

  • [Avatar for Anon]
    Anon
    November 17, 2017 10:53 am

    Ron,

    Thank you for checking out the discussion. I was hoping that Mr. Heller would fully engage further (given that it was his own comment that kicked off this “different view” of what may be at stake with IPRs).

    That being said, and continuing then with the view that the “right to challenge” is distinct from (albeit related to) the patent right, lets take this a sep further if we may.

    Let’s presume for the continued discussion that this new right (the “right to challenge”) is fully a public right.

    As you note correctly, this aspect is what provides for the elimination of “standing” – at least in forums that do not have a separate standing requirement (the Article I forum). There is no doubt (even as the likes of Mr. Heller continue to attempt to insert doubt) that this was the aim of Congress.

    This of course runs into difficulties (as witness other discussions as to whether Article III standing may be “legislated” into being, and whether or not the actions of Congress regarding its set-up of IPRs do (or attempt) just that. The IPR set-up is a hybrid forum setup; and as noted, other discussion have engaged whether or not it is proper for Congress to create a path into the Article III forum for those who lack traditional proper standing.

    But lets return to your comment as to what exactly is being “adjudicated.” I see your position in that even if a new right was created in the AIA, and it is this new right that “gets you in” the (at least) Article I forum, once in that forum, something ELSE is being adjudicated.

    I understand this point that you are making.

    In fact, I would go you one step further, and postulate (as I have previously) that this type of “other right” in the crosshairs is going on at that critical point (the separate legal point) of the initiation decision point. At the exact moment that the administrative agency of the Executive Branch is making the decision to institute, there is a takings involved of at least some of the sticks in the bundle of property rights that a granted patent is considered to be composed of.

    Yes, per Mr. Heller’s prior statement and the discussion thereof, there may exist a new (and public) right, the “right to challenge,” IPR necessarily involves MORE THAN just that new public right.

    I think that clarity on this point is far more helpful than the other mechanisms being postulated in this article (particularly, the actions of the Court to fabricate out of whole cloth the “hybrid” public/private right and assign the singular patent right to be of this “new” nature.

    Clarity that the distinction of more than one right in play ALLOWS for both the continued existence of patents as property (inherent in the US sovereign patent system) and a discussion on this new public right of the right of challenge.

    One problem though with the (excessively poor writing of the) AIA in this regards is that Congress basically provided that the new public right of challenge (as reflected at least in part by the ability to challenge institution) carries NO Article III review.

    For those seeking to NOT separate the new public right from the property right, this aspect runs full force into Constitutional infirmity. This is due to takings law, and the fact that under takings law, the elimination of Article III review (along with other aspects, such as the takings that occur at the initiation decision point are NOT accompanies with ANY remuneration whatsoever for the sticks in the bundle being taken) doom ANY legitimate “eminent domain” like reasoning for the takings.

    To be sure, these musings exist in a nexus of several subsets of law (Constitutional law, takings law, patent law, administrative law) that MOST typical attorneys lack the wherewithal to follow along.

    But this screams for MORE clarity, not less. And the views as to “well, this is really a hybrid” and the like only bring less clarity.

    In the end then, I am grateful that Mr. Heller made his initial statement (in the linked article above at 16) concerning what is and what is not an appropriate Public Right, and I postulate that dutifully following along the discussion that generated from that initial statement only makes MORE CLEAR that the IPR regime as enacted by Congress fails Constitutional scrutiny.

    Perhaps failing for more nuanced reasons than have been provided previously, but failing nonetheless.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 16, 2017 04:39 am

    Anon,
    I acknowledge the nuance in your point on the AIA having created a new “right” – the right to challenge the validity of an issued patent. While this “right” might well be deemed a “public right,” it is not adjudicated in IPR, nor is it sought as a remedy in any proceeding. This “right” is rather a right to have standing, if you will, even when there is no “case or controversy” – a right essentially bestowed on any “person who is not the owner of a patent.” 35 U.S.C. § 311(a). To be sure, there are proceedings in which the right of standing is adjudicated – it happens as an initial matter in essentially all Article III cases – but IPRs are not such proceedings.

    So while Congress created under the AIA a new statutory “right” to challenge patents, the fact is that once a challenge is mounted, IPRs adjudicate old private rights known at law before the adoption of our Constitution. No attempt to create statutory instruments that are analogous to, or look like patents but are issued subject to consent of the applicant to submit upon a challenge to PTAB proceeding can evade constitutional infirmity. This is because “the Seventh Amendment also applies to actions brought to enforce statutory rights that are analogous to common law causes of action ordinarily decided in English law courts in the late 18th century.” Curtis v. Loether, 415 U.S. 189, 193 (1974) (emphasis added).

  • [Avatar for Edward Heller]
    Edward Heller
    November 15, 2017 08:46 pm

    anon, the basis for equity jurisdiction (for which there is no right to a trial by jury) is that there is no adequate remedy at law. I would think that the same argument might apply to moving patent validity out of the courts entirely and into an administrative proceeding. But, that administrative proceeding must be completely neutral — provide real ALJs with complete independence from the political branches and not be funded from fees. As well, the standard of proof and claim construction should be the same as the courts.

    As Gene has ably pointed out in his numerous posts, the IPR system seems rigged and unfair because it is rigged and unfair. It is rigged and unfair because it is controlled by a White House that fully intended it to be that way.

  • [Avatar for Edward Heller]
    Edward Heller
    November 15, 2017 08:19 pm

    anon, you talked of “new” right to challenge a patent by the PTO. Well, trademarks have all along had cancellation proceedings. Nobody thinks they are unconstitutional because trademark owners have a right to their day in court regardless.

  • [Avatar for Anon]
    Anon
    November 15, 2017 07:38 pm

    Mr. Heller,

    Was your comment to me lost in translation? (Dragon induced perhaps?)

  • [Avatar for Edward Heller]
    Edward Heller
    November 15, 2017 05:55 pm

    iwasthere, somewhat agree. The court will not be impressed with the argument that patents are revocable privileges — and this will basically all but kill the idea that the PTO has a “right” to correct “its” mistakes by cancelling patents at times worth tens of millions without giving the patent owner a day in court. From the “public rights” and Seventh Amendment viewpoint, It is abundantly clear that the patent owners had a right to trial by jury at common law before his patent might be revoked. But there remains the argument that the Privy Council had “authority” to revoke patents that extended well into the 1800’s. I think the Supreme Court will address that argument, as it bears directly on both Murray’s Lessee and on the Seventh Amendment.

  • [Avatar for Edward Heller]
    Edward Heller
    November 15, 2017 05:17 pm

    anon, just to compare, consider trademark cancellation proceedings conducted in the PTO by the TTAB. The cancellation proceeding has to be filed within 5 years and can be appealed to a District Court for trial de novo. The majority in B&B Hardware placed great emphasis on the right of a trademark owner to have a trial de novo in order to uphold the constitutionality of using collateral estoppel from PTAB oppositions and presumably cancellation proceedings. The Supreme Court did not say or even hint at oppositions and cancellation proceedings being constitutional because Congress had the authority to make them constitutional and binding on subsequent court trials involving the validity of a trademark.

    I think is generally a problem when Congress because it

  • [Avatar for iwasthere]
    iwasthere
    November 15, 2017 05:14 pm

    To be sure, Breyer is a property hater and a patent hater too. His camp has probably 3 votes. The election of Trump, however, calls the love of the Administrative State, and it’s unchecked power into question. And without question, the AIA is obviating judgments of the Art III department, this might provoke RBG to #Resist! The Federalist camp will be very troubled by the Hybrid-System of Courts and the AIA ‘experts’ ability to obviate final decisions. My guess 5-4 or 6-3 overturning the IPR, without reaching the 7th Amendment issue.

  • [Avatar for Anon]
    Anon
    November 15, 2017 04:16 pm

    Ron,

    I see (and understand) the point that you are making as to “the nature and the remedy sought.”

    But bear with me for a moment and consider the discussion path (links at post 16 above) that provides that the focus of the adjudicated rights are NOT the patent rights (as seems to be the prevalent view).

    If – and for argument’s sake, let’s accept this “if” – Congress instead of changing the patent right (which itself necessarily draws Constitutional scrutiny), created a new right (a right of challenge) with the AIA, then as the discussion between Mr. Heller and I drew out, that new right may in fact BE a public right as that term is legally recognized.

    The arguments then become a little different (and much more nuanced) in that the adjudicated rights are not the patent right directly, but merely the “right to challenge.”

    Per Mr. Heller’s statement at the root of the conversation pertaining to when it is proper for there to be this sense of “public right,” then the AIA new public right survives Oil States, even as that new right may be impacting the separate patent right.

    Take a look please at that unfolding conversation. I believe that this path stands on firmer legal ground than any change to the patent right (either by the subsequent conditions advanced by Congress in the AIA or by the commentators here versions of the Court creating or modifying any such public right aspect of the patent right (as has been indicated, such action by the Court breaches separation of powers issues, or at a minimum does not lessen the need for explaining its decision).

    And while I believe that we all recognize that the Court may do as it damm well pleases (being “Supreme,” or at least believing itself to be above the Constitution), I would be interested in your view on the possibility of the nuanced “new public right” created by the AIA as opposed to any change to the existing (property nature) of the patent right per the evolved conversation between Mr. Heller and myself.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 15, 2017 12:01 pm

    To be clear, Thomas is amply distinguishable from Oil States and the Court would be wrong if it finds the rights adjudicated in IPR to be public rights. Under the Court’s own Tull-Curtiss test, it is the nature and the remedy sought that determines whether the adjudicated rights are public or private rights. Specifically, the remedy sought in IPR is to cancel patent claims, thereby extinguishing the patent owner’s private right to exclude others and conferring onto the IPR petitioner a private right to freely exploit the invention for its own private benefit. The public is not involved, nor directly represented in the IPR – the PTAB must be an impartial adjudicator of a dispute between two private parties – a dispute the parties may settle w/o PTAB decision on patent validity. Any benefits to the public are ancillary. The focus therefore should not be on the (valid) argument that patents are private property – but rather on the fact that IPRs adjudicate private rights, which are not subject to the “public rights” exception. See http://bit.ly/Oil-States-Amicus , Section I.B.

  • [Avatar for The Time Is Now To Act]
    The Time Is Now To Act
    November 15, 2017 11:49 am

    The Stoll and Adler comments are less than veiled attempts to regurgitate prose from the government’s brief and amici in support of the same.

    Adler’s use of ‘we’ in his statement ‘I predict we will simply move forward’ to rectify’ says it all.

    I proudly separate myself from whatever ‘we’ he speaks of in such a glib tone. That ‘we’ is not the of America nor of Invention or Inventors.

    That ‘we’ is ‘something else’ trying to get away with ‘something more’.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 15, 2017 02:55 am

    Bob Stoll: “I also believe that the Supreme Court will deem patents to be a “quasi-public” right to explain its decision. The right would neither be fully private nor fully public, but a hybrid.”

    This fantastic notion of SCOTUS creating a “hybrid” right to “explain its decision” is absurd given the century of SCOTUS jurisprudence on the public rights exception to Article III adjudication. Applying the exception is binary – either Congress is empowered to remove certain adjudications from Article III courts and relegate them to an administrative tribunal (adjudicating public rights), or it does not. In more than a dozen cases, SCOTUS strived to determine whether removal of adjudication from Article III courts was constitutional based on the public rights exception, creating precedents and an established framework. Because there are only two possible outcomes – not three – in applying the exception, SCOTUS is not about to create a third tier of rights – “hybrid” rights. This is because it does not need to do so “to explain its decision,” whatever decision it makes. Instead, SCOTUS will “explain its decision” as it always has – explain why the adjudicated right is “public” (or “private”), even if the explanation is less than persuasive. That explanation will be necessary even if the right is deemed “hybrid” – so there is no benefit for creating a third tier of rights.

    This is what the SCOTUS has done in Thomas v. Union Carbide, where it struggled to find justifications for holding an administrative arbitration proceeding constitutional, despite the fact that it adjudicated a dispute between two private litigants on the level of financial remunerations for the use by one party of the technical data (trade secret) of the other – a common law private right. The Court nevertheless held that because the technical data owner disclosed it to the agency, it is no longer a protectable trade secret, even though the agency does not make it available to the public. Thomas, 473 U.S. at 584. The Court also invoked the public health risks involved to further “explain its decision” to deem the adjudicated right a “public” right.

  • [Avatar for Ron Katznelson]
    Ron Katznelson
    November 15, 2017 02:49 am

    Marc Adler: “Should the unlikely happen [IPRs struck down], I predict that we will simply move forward to rectify the timing of the challenges to occur prior to the grant of a patent right.”

    What this statement ignores is that (a) pre-grant opposition proceeding proposals were rejected over the years; and (b) such proceedings cannot be instituted under the American patent system because applicants can elect to keep their application secret under 35 U.S.C. § 122(b)(2)(B). Any effort to repeal section 122 and mandate pre-grant publication for the purpose of pre-grant review will be met with fierce opposition – it will simply not happen in the foreseeable future.

  • [Avatar for Night Writer]
    Night Writer
    November 13, 2017 11:16 pm

    I haven’t read enough about this to make a prediction, but I smell Google bucks in some of these opinions.

    I also everyone is underestimating the SCOTUS ability to bend the facts to fit the Constitution.

    I also suspect that the argument that the Constitution provides the Congress the right probably could be used as an out as in Congress has merely redefined what a patent is with the AIA.

  • [Avatar for Anon]
    Anon
    November 13, 2017 06:13 pm

    Ned,

    Please recall our past conversation in which YOU provided the path for Congress to create a public right.

    Take care here to NOT confuse the property right and the new public right, that public right being one of a right to challenge. Your reply here slips back into talking about the property right, whereas our previous conversation was about separating the property right and this new public right.

    For a reminder, see: https://ipwatchdog.com/2017/10/10/the-modern-public-rights-doctrine/ and then follow-up with https://ipwatchdog.com/2017/10/24/iprs-unduly-harm-patent-holders-benefit-big-tech-infringers/ wherein Ron K. adds a new and different vantage point (but do not lose sight of our discussion).

    You seemed to balk at merely Congress being the one that determined that a remedy was insufficient, but never really addressed the counter point that Congress does that very “type” of evaluation all the time (i.e., that type is a policy consideration).

  • [Avatar for Edward Heller]
    Edward Heller
    November 13, 2017 05:03 pm

    Anon, I am not sure Congress can create anything else but an exclusive right for a limited time. That is a legal right, the property of the inventor which he pays for by disclosure of his invention. The idea that Congress can, on the basis that a patent is a revocable privilege, revoke the patent for invalidity or delegate its revocation to the PTO flies in the face of its limited power, especially where historically, patent owners had a right to a day and court and to a jury.

  • [Avatar for Anon]
    Anon
    November 13, 2017 04:44 pm

    Mr. Heller,

    Consider my post at 9 above, and then consider our previous discussion as to Congress NOT making the patent right some “commingled” mongrel undefined hybrid, but instead, that they created a new and different public right, separate from (albeit related to) the patent right.

    Such a situation is a more plausible “out” than what I see in this article.

  • [Avatar for Edward Heller]
    Edward Heller
    November 13, 2017 04:20 pm

    13. I agree, Greg. I argued this case from the start based the law, comparing IPRs to scire facias actions prior to 1789. I also relied on McCormick Harvesting. The issues are legal, not policy, and surely not about patent policy. If there are problems with bad patents, Congress needs to solve them in a constitutional way. But the existence of large numbers of bad patents is not going to influence the court too much if all it comes down to is that this provides an excuse to ignore the constitution.

    Recall that Truman nationalized the railroads during the Korean War. I think that was a valid national purpose. But nevertheless, the Supreme Court ruled that Truman did not have that power.

    If patent owners had a right to try issues of fact concerning validity to a jury before their patents could be invalidated prior to 1792, the court will find in favor of Oil States. The only concern I have is the role of the Privy Council supervising the English patent system. Fortunately, they stopped trying validity at the Privy Council in 1753.

  • [Avatar for Greg DeLassus]
    Greg DeLassus
    November 13, 2017 09:35 am

    “I believe the patent community is too myopically focusing on this case as a patent case. I believe this case may well be treated as an administrative case giving the conservatives on the Court an opportunity to say something profound about the growth of the Administrative State…”

    Agree 1000%. Could not have said it better myself.

  • [Avatar for Paul F. Morgan]
    Paul F. Morgan
    November 13, 2017 08:50 am

    Gene, thanks for collecting Oil States prognostications of some real D.C. patent experts outside of academia.

  • [Avatar for Anon]
    Anon
    November 13, 2017 08:44 am

    In truth, chaos will not be avoided by “doing the right thing” here; it will be institutionalized.

    should read

    In truth, chaos will not be avoided by not “doing the right thing” here; it will be institutionalized.

    Apologies for the miss and for the double negative…

  • [Avatar for Anon]
    Anon
    November 13, 2017 08:42 am

    EG,

    The notion advanced by Rob Stoll – that the Court will change the meaning of the law and make this particular personal property into a “quasi-public right” should enrage (if actually undertaken by the Court) every attorney and inventor in this country.

    You would have the Court (once again) legislating from the bench and changing substantive statutory patent law to fit its own view of how Congress should have done things.

    Some say that they will do this to preserve and avoid a Constitutional problem. But engaging in a Constitutional problem to “avoid” some other Constitutional problem is not really a viable path. In truth, chaos will not be avoided by “doing the right thing” here; it will be institutionalized.

    Leastwise, the people should be enraged, and for attorneys, at least those of us outside of the Commonwealth of Massachusetts with State attorney oaths that do not place the Court above the Constitution, whom have a duty to challenge such Court decisions.

    Be that as it may, even making the personal property right into some type of “quasi” public right means that the property nature of patents, inherent in many other areas of patent jurisprudence would be thrown into the very chaos that some see the Court wanting to avoid. There will be ripple effects.

    For one thing, where is the dividing line between public and non-public that such an undefined (as we all know that the Court will not engage to the degree to provide ANY sense of a brightline rule) hybrid “thing” to be found? Who will decide what that line is?

  • [Avatar for EG]
    EG
    November 13, 2017 08:19 am

    For all those who believe SCOTUS will uphold IPRs constitutional Oil States, I ask these two questions: (1) how do you address the SCOTUS holding in McCormick Harvesting that says only an Article III court can invalidate an issued patent?; and (2) does 35 USC 261 mean what it says and says what it means (i.e., patents are “personal property”)?

  • [Avatar for Anon]
    Anon
    November 12, 2017 09:44 pm

    Curious,

    You forget to figure in chaos for whom.

    If it works against patent holders, the Court seems to put blinders on. If it works for patent holders, then panties get twisted.

  • [Avatar for Anon]
    Anon
    November 12, 2017 04:24 pm

    Better yet, will you defend my patents against ALL IPR[s] for $100K?

    Fixed.

    😉

  • [Avatar for Bemused]
    Bemused
    November 12, 2017 02:34 pm

    “IPRs delivered by shifting the cost curve for a patent challenge from one-million plus dollars to on the order of one-hundred thousand dollars.”

    Erik, will you file an IPR for me for $100K? Better yet, will you defend my patents against an IPR for $100K? Wish I lived in your world…

    On a more relevant/realistic note, if SCOTUS upholds the constitutionality of the AIA, I’d expect that the next battleground will be sovereign immunity – both as regards native American tribes and state universities.

  • [Avatar for Curious]
    Curious
    November 12, 2017 01:02 pm

    The chaos that could result from a reversal will drive the decision.
    They didn’t seem to have a problem with creating chaos in Alice. Arguably, by failing to give the lower courts (and USPTO) a working definition of “abstract idea,” they created far more chaos than that would result from a reversal in Oil States.

    They disturbed decades old case law with Alice and Mayo — they basically said that 35 USC 101 is essentially meaningless and invited the lower courts make up their own definitions of “abstract idea.”

    With all this in mind, you think they are concerned about the “chaos” that would result from a procedure that has only been in place for about 5 years?

  • [Avatar for Anon]
    Anon
    November 12, 2017 01:00 pm

    Appearance of…,

    touché

  • [Avatar for Appearance of ...]
    Appearance of …
    November 12, 2017 12:23 pm

    I predict a two-step test:

    1) IPR are constitutional for those patents that are “not-worthy”.

    2) A “not-worthy” patent may not be reviewed by IPR if it has “something more”.

    We need not labor to delimit the precise contours of “not-worthy” and “something more”.

  • [Avatar for Anon]
    Anon
    November 12, 2017 11:45 am

    The single best line of this article:

    As for my thoughts — as I’ve said at various speaking engagements, I’ve made a career out of correctly predicting chaos when it comes to Supreme Court decisions.

    Word.