October 30th was a very busy day for amici filing briefs with the U.S. Supreme Court on how the highest court in the nation should decide in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, a case in which oral arguments will be heard on November 27th. Many of the briefs filed on the 30th were submitted by some of the biggest names in the tech industry. Taking a look at briefs filed by this major companies, some of whom have been seeing great success in patent validity trials at the Patent Trial and Appeal Board (PTAB), it’s both revealing and unsurprising to find how the tech ruling class feels that the Supreme Court should decide in Oil States.
Apple Brief in Favor of Respondent Greene’s Energy Group
“Apple is a frequent litigant in patent disputes and has extensive firsthand experience with the positive effects of Congress’s enactment of IPR,” reads the amicus brief filed by Apple in Oil States. Apple argues that inter partes review (IPR) proceedings at the PTAB benefit the U.S. patent system as a whole because it gives the U.S. Patent and Trademark Office the opportunity to correct its own mistakes in issuing patents, an argument which has also been used by the Solicitor General in its brief for the federal respondent in the case. Congressional enactment of the America Invents Act (AIA) of 2011, the law which created the PTAB, gave the USPTO authority to “quickly and efficiently” clarify patent law regarding anticipation and obviousness. Apple argues that IPRs are a more targeted proceeding for determining patent validity, reducing costs for litigants in a way that “makes eminent practical sense.” The structure given by Congress to the AIA for the PTAB’s design makes it likely that the Board will “produce well-reasoned and correct decisions,” citing to the 75 percent of PTAB appeals which are upheld by the Court of Appeals for the Federal Circuit without remand.
Apple filed nearly 5 percent of all IPR petitions filed at the PTAB between 2012 and 2016 and the consumer tech giant argues that “its experience may provide insight to the Court on the salutary benefits of the AIA for litigants.” Adjudication of the PTAB conserves judicial resources and reduces the cost of litigation; Apple cites sources which report that the average cost of a single IPR through final written decision is $340,000, much less than the $9.5 million average costs of legal defense in federal court. Apple also notes three patent cases in which it was the defendant to highlight the convenience of PTAB proceedings for litigants including cases filed by SightSound Technologies, Jongerius Panoramic Technologies and Global Touch Solutions. Apple further argues that the PTAB often focuses patent disputes between parties even where it doesn’t resolve litigation, and that the transparent processes of the PTAB create indirect benefits for the nation’s patent system.
There are holes in Apple’s arguments which deserve to be pointed out. All of the benefits to litigants to which Apple refers seems to be defendant-side only; Apple cites heavily to cases in which it was the defendant without speaking about potential plaintiff benefits. Although Apple argues that Congressional framework for PTAB activities leads to proper decisions on validity, former Chief Judge Paul Michel has testified to Congress that the PTAB often fails to follow the Congressional statutes laid out within the AIA. Interestingly, among the counsel representing Apple listed in the brief is James Batchelder of Ropes & Gray. Batchelder was part of the link between Apple and PTAB administrative patent judge Matt Clements, a former lawyer representing Apple on defense who sat on PTAB trials petitioned by Apple leading to an incredibly high rate of patent invalidation. Had those trials been in U.S. district court, code of conduct rules would have required a sua sponte recusal by APJ Clements to clear any potential conflicts of interest in the case.
It’s also not surprising to see Apple come down in favor of the PTAB remaining open as a forum to challenge patent validity given the fact that Apple has, on average, seen more successful outcomes at the PTAB than most. 16 percent of the 7,741 PTAB petitions filed through November 20th, 2017, have led to findings of all challenged claims invalid. 22 percent of the 383 petitions filed by Apple have led to invalidity of all challenged claims. Only once did Apple sit on a trial as a patent owner; 382 times the tech giant appeared before the PTAB as a petitioner.
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Dell, Facebook, et. al. Brief in Favor of Respondent Greene’s Energy Group
Another amicus brief filed in Oil States on October 30th received the support of a collection of major tech companies including Dell, Facebook, Arista, Hewlett-Packard, Twitter and Red Hat. The amici listed in this brief push back against petitioner Oil States’ argument that the cancellation of patent claims has historically been available through English common-law or chancery courts while there was no such procedure available outside of English courts. The brief notes that the non-judicial Crown’s Privy Council had authority to invalidate patents outside of court proceedings. Because of this, “neither Article III nor the Seventh Amendment requires that patentability challenges be decided solely by courts.”
To support its argument regarding the Crown’s Privy Council as a historical analogue to IPR proceedings at the PTAB, amici cite to the Supreme Court’s 2011 decision in Stern v. Marshall, noting that the courts look to whether the proceeding is made of “the stuff of the traditional actions at common law tried by the courts at Westminster in 1789.” Because the Privy Council could invalidate patents outside of judicial proceedings, the amici reason that Article III does not limit Congressional power to authorize a non-Article III forum to invalidate patent claims.
Amici in this brief also argue against Oil States’ contention that English chancery courts were charged with the authority to invalidate patents commenced by a writ of scire facias. Dell and others argue that cases in which patents could be challenged via scire facias were not analogous to the findings of anticipation or obviousness through IPR trials at the PTAB. Likewise, patent invalidity findings from 18th century English courts did not provide a similar invalidation path as the PTAB because English patent owners “could repeatedly sue for patent infringement even after a court had declared the patent to be invalid on one or more occasions.” Finally, amici argue that IPR proceedings promotes innovation by “eliminating unpatentable claims that would otherwise constitute a barrier to innovation.”
A closer look at the list of amici on this brief renders some interesting supporters for this argument. One of the entities listed is Cloudflare, a company which has been vocal on the subject of “patent trolls” to the point of misrepresenting patent owner and litigant Blackbird Technologies. Also listed among the amici is retailer JCPenney Corporation, an entity which has not been targeted as a defendant in a patent suit going back to early 2000.
Intel, Google, et. al. Brief in Favor of Respondent Greene’s Energy Group
“Inter partes review does not encroach on the Judiciary’s Article III power because it only enables the PTO to correct errors in its own earlier decision to grant a patent,” begins the argument in the Oil States brief submitted by Intel, Cisco, Google, LG Electronics, Samsung et. al. The amici in this brief argued that the Framers of the Constitution based the roots of the American patent system upon the English system, where patent rights were royal prerogatives to be issued and revoked only by the Crown, citing to the Supreme Court’s 2015 decision in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.
The PTAB doesn’t encroach on the Article III judiciary, amici argue, because the Executive Branch has long had a role in adjudicating patentability when issuing patents. Interference proceedings at the Patent Office going back to the 1830s provides a historical basis for the adjudication of the validity of issued patents by the Patent Office, and amici argue that IPR proceedings are simply the latest form of such post-issuance adjudication. “The overarching question for Article III purposes is whether inter partes review erodes the Judiciary’s ability to serve as an independent check on the Executive,” amici write, arguing that IPR proceedings involve administration error correction within an agency that “perhaps obviates the need for judicial intervention.” Amici argue that patents have been a public right as they “exist only by virtue of statute” (Sears, Roebuck & Co. v. Stiffel Co., 1964) which is “closely intertwined with a federal regulatory program.” (Granfinanciera, S.A. v. Nordberg, 1989) Further, amici argue that IPRs do not impinge on individual liberty interests protected by Article III, and thus IPRs do not run afoul of the Seventh Amendment and its guarantee of a jury trial.
IPRs also serve sound patent policy considerations, amici argue. The USPTO frequently issues patents erroneously, they contend, caused in no small part by the large number of patent applications filed at the office. “Research suggests that the average patent is examined for less than 20 hours before the PTO renders a decision,” they write, citing to a January 2013 publication on the subject from Vanderbilt Law Review. IPRs thus provide an efficient means of correcting those erroneously granted patents. “When review is instituted, inter partes review is an efficient error correction mechanism for bad patents,” amici write.
As is the case with Apple, one amicus supporting this brief likely has a good reason to support an agency which is proving to be more successful for that firm than the average petitioner. Google has been involved in 209 PTAB trials, each time as a petitioner, and 25 percent of all petitions it has filed have ended in final written decisions of all claims unpatentable, a fair increase over the 16 percent of all petitions ending in such decisions.
Internet Association et. al. Brief in Favor of Respondent Greene’s Energy Group
October 30th also saw the filing of an Oil States brief filed by a group of trade associations including the Internet Association. It can be safely assumed that the Internet Association supports the viewpoints of the most powerful members of the American tech cartel as it represents major entities including Facebook, Google, Amazon.com, Microsoft and Netflix. Other amici listed in this brief include the Software & Information Industry Association, the National Association of Realtors and analytics software firm SAS Institute.
Amici in this brief also support the argument that patents are public rights which are subject to Executive Branch determination, noting that patents have been considered “public franchises” since the Supreme Court’s 1870 decision in Seymour v. Osborne. The brief takes issue with petitioner Oil States’ comparison of patent rights to land rights, arguing that patent grants are analogous to federal leases of public land and that such leases only provide state-level property rights. Similarly, in the face of Oil States’ argument that patent invalidity is a subject of suits in law or in equity, amici contend that invalidity is not the subject of infringement suits but rather “merely an issue that an alleged infringer can raise as a defense.”
Next, amici move on to argue that IPR proceedings rein in Executive Branch power rather than aggrandize it. “In every other field of administrative law, a process such as inter partes review would be utterly unremarkable,” the brief reads. Although patent application denials have been subject to the constraints of modern administrative law, “patent grants have not been similarly constrained,” leading to the “predictable result” of a “flood of bad patents.” “In reality, the Petitioner in this case is the champion of aggrandized executive power,” amici argue. IPR proceedings thus equalizes the legal constraints on issuing and denying patents.
Finally, amici in this brief support the idea that the Constitution does not require juries to review the validity of issued patents, citing to SCOTUS’ 1947 decision in Cox v. United States to support its claim that the validity of administrative proceedings did not require juries. Congress has traditionally provided judicial review, and not jury review, when reviewing executive actions. Amici also cite to SCOTUS’ 1881 decision in Smelting Company v. Kemp, a case involving a federal patent for public lands, to support its argument that the Court has previously held that juries have been prohibited from reviewing the validity of federal patent grants.