Supreme Court seems split on Oil States constitutionality challenge to IPR proceedings

By Gene Quinn
November 27, 2017

Earlier today the United States Supreme Court heard oral arguments in Oil States Energy Services, LLC v. Green’s Energy Group, LLC, the case that will require the Supreme Court to determine whether inter partes review (IPR) proceedings before an executive agency tribunal are constitutional, or whether the adjudication of patent validity must take place in Article III federal courts.

While it is always difficult and sometimes impossible to predict the outcome of Supreme Court cases based only on the oral argument transcript, a review of the transcript in Oil States suggests the Supreme Court is split on what to do with IPR proceedings. Leading up to the oral arguments Acting PTO Director Joe Matal has been on record in various forums predicting a 9-0 ruling by the Supreme Court in favor of the constitutionality of IPR proceedings. While the oral argument raises more questions than it provides answers, a 9-0 decision that ratifies the constitutionality of IPR proceedings seems quite unlikely.

Justice Gorsuch seems the most likely, based on his questions, to support the petitioner’s position that there is a constitutional infirmity surrounding IPR proceedings. Chief Justice Roberts also seemed to have substantial concerns with respect to IPR proceedings. Perhaps somewhat predictably, Justice Breyer and to a lesser extent Justices Sotomayor and Kagan, seemed through their questions to view IPR proceedings as just another opportunity for the Patent Office to make sure the correct determination has been reached at the time the patent was granted by the Patent Office. Justice Kennedy overall seemed more in line with the thinking of the liberals on the Court, Justice Ginsberg asked difficult questions and seemed difficult to predict how she might rule. Justice Thomas characteristically remained silent, although his judicial philosophy would be typically in line with Justice Gorsuch. Justice Alito asked only a few questions of the petitioner’s counsel, Allyson Ho, which focused on whether the Constitution requires a Patent Act and whether Congress could put limitations on the grant of “these monopolies.”

It seems accurate to recognize that each of those before the Supreme Court today fielded difficult questions from a hot Court. There were themes that emerged throughout the questioning. And one peculiar aspect of the day seemed to be that the Department of Justice continues to take patent positions that are perfectly simpatico with Obama era policies. I suppose the lesson of the day is this: Not much has changed relative to patent policy under President Trump despite the great hopes of many in the patent owner community.

Questions for Ms. Ho, representing Oil States, tended to focus on the differences between reexamination and inter partes review, with Ms. Ho explaining that reexamination is “fundamentally examinational,” in contrast to IPR proceedings, which are adjudicatory and the type of “cases that have been adjudicated in courts for centuries…”

Questions for Christopher Kise, representing the respondent Greene’s Energy Group, tended to focus on three different aspects: (1) What if a patent owner has spend millions or billions of dollars in reliance on the patent over a period of many years, do rights ever vest? (2) Whether there is an opportunity to review the agency determination in an Article III tribunal. (3) Whether patents are a private right.

With respect to the first issue, which continued to come up over and over again once raised by Justice Breyer, it seemed to trouble the Court that there is no period of time in which a patent vests and patent owners can meaningfully rely on the patent having vested. Although Justice Breyer raised the question, which was picked up on by Chief Justice Roberts and Justice Gorsuch, Breyer would later say show his contempt for a vested rights theory, saying that such a theory was popular in the 19th century, and held sway with Justice Story in earlier cases, “but in fact has happily sunk from sight.” Still, Roberts and Gorsuch seemed concerned with the issue of vested rights.

Questions reserved for Malcolm Stewart, who argued on behalf of the federal government, tended to focus on the difference between patents and land, the extent to which the Patent Office could constitutionally be involved in deciding infringement issues, and the impact on panel stacking at the Patent Trial and Appeal Board in order to achieve the result desired by the Director in a particular case.

With respect to the Patent Office deciding infringement issues, Stewart seemed to paint himself into a bit of a corner when he distinguished an executive tribunal such as the PTAB deciding infringement issues because there is no precedent in common law or elsewhere to support damages being awarded by an agency in a dispute between parties. This led Justices Sotomayor and Gorsuch to ask whether it would be constitutional for the Patent Office, or the Director specifically, to render decisions in patent infringement matters if no damages were sought.

Following up on Justice Sotomayor’s question, Gorsuch to ask: “So a declaration of non-infringement could be issued by the director, for example, right?” Stewart explained that would be harder to defend because making such decisions is “not part of the PTO’s traditional work.” This caused Gorsuch to question how long does it take to make a tradition. This was in reference to Kise and Stewart arguing that for the past 40 years reexamination has been a procedure offered by the PTO, while Ms. Ho had argued that for 400 years courts have been responsible for adjudicating patents.

In rebuttal Ms. Ho picked up on the line of questioning relating to panel stacking as being problematic, which was a recurring theme during the oral arguments: “[T]he existence of panel stacking shows precisely the danger of judges, of decision-makers, who are subject to executive political influence.”

It seemed that no one serious defended the practice of panel stacking, although it was minimized as not having happened very much. This lead Justice Kennedy to ask Mr. Kise to assume panel stacking were rampant as he answered the Chief Justice’s concerns. Kise would again say that it is not rampant, but “that the Administrative Procedures Act and other provisions of the Constitution would deal with infirmities in a particular case on an as-applied basis…”

One moment of humor did arise when Chief Justice Roberts was asking Mr. Stewart about PTAB panel stacking.

MR. STEWART:… My understanding of the cases is that the chief judge was concerned that the initial -­

CHIEF JUSTICE ROBERTS: The chief judge?

MR. STEWART: The chief judge of the PTAB.

CHIEF JUSTICE ROBERTS: You’re talking about the executive employee?

MR. STEWART: An executive branch official. The chief judge of the PTAB -­

CHIEF JUSTICE ROBERTS: When we say “judge,” we usually mean something else.

MR. STEWART: Okay.

(Laughter.)

Whatever the ultimate outcome of the case is, one thing seems certain. The thoughts of Neal Solomon in his series were eerily on point. Solomon wrote an 8-part series on the constitutionality of the PTAB under the public rights doctrine, which was absolutely front and center throughout the questioning. Solomon predicted cases like Crowell, Northern Pipeline, Schor and Stern would all be relevant to the Court’s determination, and each of those cases were raised in questioning by the Justices.

There will undoubtedly be more to write in the coming days and weeks. Stay tuned.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 26 Comments comments. Join the discussion.

  1. Night Writer November 27, 2017 7:47 pm

    I thought Kagan sounded like she might go with unconstitional. And, I thought Ginsburg was squarely Constitutional.

    My current guess:

    Constitutional: Kennedy, Ginsburg, Sotomayer, and Breyer.

    Unconstitutional: Gorsuch, Kagan, Alito, Roberts, and Thomas.

  2. Night Writer November 27, 2017 7:55 pm

    >>He also mentioned that expanded panels are not unlike en banc panels in the federal circuit courts, and exist principally to correct panels that diverged from precedents.

    Mr Stewart should have been ripped in two for this misrepresentation–at best. An expanded panel is nothing like an en banc review of the CAFC because the en banc review is all the judges that are not retired. The expanded panel is selected by the directed. Should have resulted in the immediate stopping of oral arguments and removal of Mr. Stewart. This is pretty bad. He should be charged with an ethical violation for this misrepresentation.

  3. Edward Heller November 27, 2017 8:25 pm

    I doubt that the Court will rule in favor of Oil States based on the assertion that the unconstitutionality issue is that two private parties are litigating patent validity, something always done in court. As observed by Kise, Oil States admits the PTO has the (statutory) power to revoke a patent for invalidity reducing Oil States complaint to the process in the PTO by which such revocation takes place. This seems a thin reed at best. Perhaps she is arguing to Kennedy, the swing vote.

    Gorsuch obviously was on board with the vested property rights issue, making the problem revocation, not the process by such revocation occurs. Ms. Ho actively disagreed with Gorsuch.

    What Ms. Ho was thinking?

    The only point she made that resonated was the point about the Privy Council’s last revocation in 1779. She used the language I used in my brief about the canons, national security and the American Revolution. I had been wondering if she had ever bothered to actually read my brief.

  4. Edward Heller November 27, 2017 8:26 pm

    Night, Kennedy is the swing vote, IMHO. I don’t know where he is going.

  5. Pro Se November 27, 2017 8:38 pm

    What can’t be overlooked here is the hard line of the message in today’s proceeding that will be decided here:

    Companies spending billions on a patented product with either need to take the “bitter with the sweet” or not..

    This case will be the make or break of investments in IP reliant products in America.

  6. IPdude November 27, 2017 8:42 pm

    Edward @3 – Ho has a very impressive resume but came across as a first-time novice. I could not believe she refused the obvious help she needed from Gorsuch. I’m actually surprised that most of the coverage on this has been that the Court seems split. If so, it is not because Ho had a good showing. I was optimistic given her credentials. Not so sure now.

  7. Edward Heller November 27, 2017 9:58 pm

    IPdude, I spoke with Ho once, a long time ago. I offered her my help given that I have been involved with this case since 2013 and developed the law and argument that gained certiorari in the first place. She never accepted my offer.

    Obviously, she did not agree with me just as she did not agree with Gorsuch.

    We shall see whether her brand of weakness and illogic prevails. I am pessimistic.

  8. Bluejay November 28, 2017 12:24 am

    The briefs are way more important than oral argument.

  9. Scienctist November 28, 2017 12:28 am

    There are several differences between Re-examinations and IPR.

    Could be appealed till section 141 was enacted in 1999 in district court by both patent applicants and owners. Could be appealed in district court by patent applicants even after that.
    https://content.next.westlaw.com/Document/Ibb0a86f0ef0511e28578f7ccc38dcbee/View/FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1

    The constitutionality of re-examinations was never decided by Supreme court.

    You get to do amendmends in re-examinations.

    How could she miss these?

  10. Night Writer November 28, 2017 7:54 am

    @8 I agree, but you can tell a lot about what they are thinking from the oral arguments.

    Sotomayer had a slimy point trying to say IPRs are really between government and individual because government can continue IPR if individual drops it.

    I need to read the whole again when I am not speed reading and read the briefs. Probably can guess to about 90 percent what each will say.

    I think that there is real concern about overreach from some of the Justices. My gut tells me that a lot of this will depend on how much they think an appeal to the CAFC is worth.

    Ned, I am aware that Kennedy is usually the swing vote, but Kagan is a bit different than Ginsburg, Sotomayer, and Bryer (who are hopeless judicial activists that could care a less about the Constitution and seem comfortable just fabricating anything nonsensical reason they feel like.) Kagan seems to have more respect for the rule of law.

  11. Night Writer November 28, 2017 7:56 am

    I rotten thing to say, but it really is too bad that one of the liberal judges didn’t retire or expire before this so we could get another Gorsuch on the bench for these arguments.

    Think about it, though. The SCOTUS has really become a legislative body with despots and that is why there can be no pleasantries. They are like kings and queens who are capable of tyranny. It is no surprise that people do not shed a tear when they die.

  12. Mark November 28, 2017 8:27 am

    Pro Se, I agree completely with “This case will be the make or break of investments in IP reliant products in America.” I myself have been thinking about developing copycat products, if the barriers to entry other than patent aren’t too great, and just keep a 500K fund available for IPR in case someone sues the company for infringement. If Oil States fails, I won’t sit by a cry about patents being worthless, I will just follow the U.S. Supreme Court that inventions are not protected by any significant barrier.

  13. Mark Guttag November 28, 2017 9:02 am

    Edward@3

    “What Ms. Ho was thinking?”

    That was my thought as well.

    What did she think she had to lose by saying that any type of re-examination by the USPTO after issuance of a patent that is not instigated by the patent owner would be unconstitutional?

  14. Bemused November 28, 2017 9:55 am

    Ed/Mark: Query whether Ms. Ho took the position that she did (vis-a-vis reexaminations) to leave some Article I process in place which can be used to invalidate (or fix) improvidently issued patents?

    Allyson Ho is a smart/experienced appellate lawyer; she didn’t miss what Gorsuch was offering her. I believe she purposefully didn’t go that far in an effort to leave something on the table for the fence-sitters (i.e. Kennedy, Kagan) as regards what mechanisms will remain after this case (and assuming SCOTUS gets it right) for businesses to use against the so-called “patent trolls”.

    Of course, I’m just speculating/reading tea leaves here so feel free to poke holes in this hypothesis…

  15. HoHoHo November 28, 2017 10:35 am

    Ho already has Gorsuch. She doesn’t need to convince him of anything. So she can disagree with him as much as she wants and offer a middle road, while facing no risk of losing Gorsuch.

  16. Ternary November 28, 2017 11:34 am

    “CHIEF JUSTICE ROBERTS: If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point.“

    That is, in a nutshell, how patents are generally viewed. A privilege bestowed by an authority that can also take that privilege away. But it all evens out for large companies: win some/lose some, some bitter and some sweet.

    It completely ignores the underlying purpose of a patent, to induce an inventor to disclose what is in her/his head. And despite the power of the state, you really cannot force people to create great inventions. You have to entice them. That enticement, despite the Constitutional Patent Clause, is being taking away under the assumption that for corporations the system works and they will continue to do what they are doing. No harm done. Of course, eventually even the most determined independent inventor (like myself) will realize the futility of obtaining a patent.

  17. Night Writer November 28, 2017 12:53 pm

    >That enticement, despite the Constitutional Patent Clause, is being taking away under the assumption that for corporations the system works and they will continue to do what they are doing.

    The modern patent system was started by Carter to end the great malaise. He was the one that wanted the CAFC. He wanted the patent system to put a fire in the belly of the corporations or let them be usurped by inventors.

    The corporations want to end the patent system as a threat to them.

  18. Anon November 28, 2017 1:33 pm

    Those seeking to buttress Ho’s performance as anything but abysmal are really reaching.

    If she is seeking some “middle road” she will fail to reach either side.

    Not to get preachy, but this comes to mind:

    Revelation 3:16
    So then because thou art lukewarm, and neither cold nor hot, I will spue thee out of my mouth. (King James Bible)

  19. step back November 28, 2017 1:39 pm

    Scientist at #9

    Quite right.

    In an examinational procedure the patentee gets to tweak the scope of the claims.

    By contrast, the PGR process is essentially a yes/no binary revocation process. There is no true opportunity to tweak the scope of the claims. The patentee is punished for the “mistake” of the government in not having earlier found new prior art which may have required a slight narrowing (rather than extinguishing) of the claims.

    https://patentu.blogspot.com/2017/11/binary-model-flipping-examinational.html

  20. PTO-Indentured November 28, 2017 2:04 pm

    Ternary @16 (adding to) It’s Not Just ‘THAT’ a re-evaluation might occur it’s ‘HOW’:

    ““CHIEF JUSTICE ROBERTS: If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point.“”

    RE-EVALUATE THIS!

    It isn’t just “the bitter” THAT a US patent may get subsequently re-evaluated — it’s “the far more bitter” HOW it gets ‘re-evaluated’ under AIA/IPR/serial-IPRs/PTAB/BRI, stacked Pro-Big-Corp panels, ‘patent-kill’ mandate, yielding a proven, unprecedented post-AIA US patent-destroying track record, evident to any (SCOTUS judge?) willing to take a fair and balanced look.

    OR:

    Re-evaluate under — The Best US Patent System Money Can Buy

    (How did the AIA rule-making get done? Hint: Follow the money.)

  21. The Time Is Now To Act November 28, 2017 2:29 pm

    PTO-Indentured @20: –

    ‘evident to any (SCOTUS judge?) willing to take a fair and balanced look’.

    The devil is in that detail.

  22. Ternary November 28, 2017 2:50 pm

    Night @17. “The corporations want to end the patent system as a threat to them.” I agree. Eventually, we will have the same malaise again. Corporations are risk averse.

    Folklore, tradition and politics require the existence of a patent system. Corporations cannot make patents go away. What they have done is making patents toothless for independent inventors and small entities, an annoying class of patent owners, with whom companies cannot negotiate a cross-licensing deal and who potentially can be an existential threat. They are getting the best of 2 worlds: exclude small entities from this “sport of kings” and protect their own IP.

    Under a guise of “harmonization” our patent system is increasingly like the European system. The whole transformation will be completed when basic filing and maintenance fees will (under the guise of patent quality) be out of reach for unfunded independent inventors and small entities.

    It is unsettling to see how China (a communist country!) is trying to use their patent system to unleash the power of their independent inventors, who are as smart as any.

  23. Patent Investor November 28, 2017 4:01 pm

    It seems to me that the PTO’s and AIA’s premise of “correcting a mistake” is totally ignored from start to finish. The only thing petitioners should be able to introduce under this premise is EXISTING prior art and previously made arguments to the examiner. If the can find NO holes in the listed prior art or in the final reasoning of the original examiner, there was NO mistake made upon issuance. THIS should be the certainty that patent owners and investors are allowed to make their business on. NEW prior art (and with patents that have survived lawsuits against major corporations, the phrase just galls me as inappropriate*) should only be allowed to be introduced into an Article III court as no previous “mistake” was made.

    *If the patents survived in court against MSFT, AAPL, CSCO, etc. any “newly discovered” “prior art” was apparently not available to be found when the patent was issued in the first place.

  24. Night Writer November 28, 2017 4:08 pm

    @22 Ternary: Yes. The Chinese are definitely using patents to improve their economy and inventions. They believe that they can become more like S. Korea with patents.

    It is hard to believe that somehow we will come out of this OK. Just look at Google. They are supposed to be the new model of where innovation will come. Corporations will fund it so we don’t need small inventors. That is the story being told to Congress. But, very little has come from Google despite billions spent. Another thing too is that Google and the other giants are putting away 10’s of billions in the bank, which shows you they have no worries about innovation taking their businesses.

  25. Night Writer November 28, 2017 4:11 pm

    @23: This new prior art thing is a quite a rhetorical device. Duffy (who I bet was paid big time by Google) pushed this idea that somehow magically new art was found. The reality is that only some art will ever be cited on the patent because there is so much art. The expert patent examiners are only citing the art they think is most relevant.

  26. B November 28, 2017 8:30 pm

    “Night, Kennedy is the swing vote, IMHO. I don’t know where he is going.”

    Based on the Kelo decision and others, Kennedy doesn’t know where he’s going

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