Solicitor General Tells SCOTUS that Patents are Public Rights in Oil States Brief

By Steve Brachmann
November 26, 2017

On November 27th, the U.S. Supreme Court will hear oral arguments in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC. The case, which stems from an appeal of an inter partes review (IPR) trial at the Patent Trial and Appeal Board (PTAB), asks the highest court in the U.S. to decide if the PTAB operates in violation of the U.S. Constitution by extinguishing property rights in a non-Article III federal judicial forum without a jury trial.

On October 23rd, U.S. Solicitor General Noel Francisco filed a brief for the federal respondent in the case. A brief for the federal respondent filed in April by Principal Deputy Solicitor General Jeffrey Wall filed a brief with SCOTUS in opposition of their granting a writ of certiorari to hear Oil States. The October brief filed with the Supreme Court argues that IPR proceedings at the PTAB comport with both Article III of the U.S. Constitution as well as the Seventh Amendment, which guarantees both the right to a jury trial as well as no reexamination of a fact found by a jury by another U.S. court.

The U.S. federal government pushed back against petitioner Oil States’ argument that Article III precludes Congress from authorizing the same agency that issues patents to reconsider the validity of the patents which it has issued. “That argument is unsupported by precedent, logic, or history,” the brief reads. The federal government equated the cancellation of patents through IPR proceedings as serving the “same public purpose” of an examiner concluding that an invention doesn’t satisfy statutory prerequisites to patentability.

The government’s brief argues that IPR proceedings at the PTAB are consistent with Article III because, in its view, patents are public rights and not private ones and the right for an inventor to seek a patent is a public right. In the government’s eyes, it is constitutionally permissible for the U.S. Patent and Trademark Office to reassess previously issued patents for revoking in order to “correct its own errors.” If the PTAB errs, then patent owners have legal recourse in appealing those cases to the Court of Appeals for the Federal Circuit, the government argues.

“Petitioner does not contend that initial patent-issuance decisions must instead be made by Article III courts,” the federal government argues. Thus, because executive branch employees, and not federal judges, are given Congressional approval to grant patents under terms of the U.S. Patent Act, Citing to Supreme Court decisions in Gayler v. Wilder (1850) and Graham v. John Deere Co. (1966), the government argued that patent rights did not exist at common law and historically have not reflected the natural right of inventors. Second, because patent examiners determine if a patent owner has rights “as against the world” and Article III courts adjudicate disputes between opposing litigants, the determination of whether an invention qualifies for patent protection “is appropriate for Executive but not Judicial Branch resolution.”

“Inter partes review serves the same important public purposes as the initial examination, namely the protection of the public from private monopolies that exceed the bounds authorized by Congress,” the government contends. Citing to Cuozzo Speed Technologies, LLC v. Lee (2016), the Solicitor General argues that the reexamination process enabled by IPR proceedings serves the purpose of the Framers of the Constitution by preserving balance between “the goal of encouraging innovation against the dangers and economic loss of monopoly.” Having a review process available through the Executive Branch is appropriate in the government’s eyes because of the presumption of validity which patents have in Article III district courts. The Solicitor General also argues against Oil States’ contention that Executive Branch employees may not revoke a private property right as the petitioner “confuses the distinct concepts of private property and “private rights”—those rights that are not integrally related to federal government action.” The government’s brief tries to take Oil States’ petition, which notes that ex parte reexamination is constitutionally valid, as reason why IPRs should remain in force. “At the end of both proceedings, however, the agency makes the same decision: whether a patent (or particular patent claims) should be cancelled,” the government argues.

“Contrary to petitioner’s contention, the AIA provisions that created inter partes review did not ‘withdraw’ questions of patent validity from Article III courts,” the Solicitor General’s brief states. Because the America Invents Act (AIA) of 2011, the law enacting the PTAB, did not expressly preclude the right of Article III courts from adjudicating questions of patent validity, the government argued that Article III courts have not been diminished. This is true even in cases where a judge or jury rejects an infringer’s defense of patent invalidity in district court, the federal government’s brief maintains.

“Just as a civil finding of liability for wrongful death does not displace an acquittal in a criminal prosecution where the beyond-a-reasonable-doubt standard applies, the Board’s conclusion that particular claims are unpatentable is not logically inconsistent with a court’s determination that an infringement defendant failed to prove the invalidity of those claims by clear and convincing evidence.”

Further, the Solicitor General argues that IPR proceedings satisfies standards set out by the Supreme Court regarding the imposition of monetary liability by non-Article III adjudicators. The brief argues that SCOTUS has previously upheld that agencies are capable of deciding disputes based on conclusive finding of facts; Article III courts are charged with findings of law. The Solicitor General cites to the 1932 decision in Crowell v. Benson, a case about longshoreman injury compensation, to support that idea that an administrative agency can adjudicate private rights. Because patent law is such a “technically complex subject matter,” the government argues, it becomes “especially appropriate to administrative as opposed to judicial redetermination,” an argument the government gets from Dickinson v. Zurko (1999). The Solicitor General further argues against Oil States’ contention that IPRs determine the rights of adverse litigants; rather, they are procedures by which the USPTO reconsiders its own prior determination.

The Solicitor General then moves on to its argument that there has been a longstanding tradition of patents being revocable as property rights. “The Founding generation distinguished between ‘‘core’ private rights’ that individuals would enjoy ‘even in the absence of political society,’ and ‘privileges’ or ‘franchises’ that the government could create ‘for reasons of public policy,’” the Solicitor General argues, adding that patents have always been considered privileges or franchises and thus were not vested in private individuals in the same way as core private rights. Cancellation of patent rights have been seen in English practice and early American practice, and the Patent Office has been granted authorization to cancel patents through reissue, interference proceedings or failure to pay maintenance fees. “In any event, inter partes review does not authorize the USPTO to impose liability on any private party,” the Solicitor General writes. “It is simply a mechanism by which the agency can reconsider its own prior patent-issuance decision.” Petitioner Oil States reliance on McCormick Harvesting Machine Co. v. Aultman (1898) is misplaced, in the government’s view, because in that case the Supreme Court didn’t announce a constitutional limit to Congress’ power to authorize the USPTO to correct its own mistakes.

Along with Article III, the brief for the federal respondent argues that IPR proceedings also satisfy the Seventh Amendment specifically because IPRs comport with Article III. Citing to Granfinanciera S.A. v. Nordberg, a 1989 case over entitlements to a jury trial for a claim against a bankruptcy estate, the Solicitor General argues that “if Congress has permissibly assigned ‘the adjudication of a statutory cause of action to a non-Article III tribunal, then the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.’” The government argued that Oil States’ Seventh Amendment argument also fails because IPR doesn’t afford relief analogous to that traditionally granted by courts of law. Court precedents found by the Solicitor General “underscore that patent cancellations do not implicate a jury-trial right, even when patent-cancellation cases have been assigned to the courts, rather than to an administrative agency.”

There are plenty of reasons for patent owners to be discouraged by the arguments raised by the Solicitor General, especially the viewpoint that patents are somehow a public right and not private property. As oral arguments in Oil States approach, we’ll publish a series of articles looking at collections of amicus briefs submitted by the groups from tech, manufacturing, retail, academia and the patent owners themselves who have had their private property rights so abused at the PTAB.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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.

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