What is at issue in Oil States Energy Services LLC v. Greene’s Energy Group LLC?1 The constitutionality of inter partes review proceedings.
IPRs—increasingly popular since being established in 2012 by the Leahy-Smith America Invents Act—give third parties a speedy route to attempt invalidating existing patents as obvious or lacking novelty, based solely on earlier patents or printed publications. These administrative proceedings represent an attractive alternative to federal court for many parties challenging patents: They can be faster, procedurally more straightforward and less expensive than district court invalidity challenges.
Hard numbers underscore how the Patent Trial and Appeal Board has shifted the landscape in the past five years as the number of IPRs has continued to grow. This year alone 647 new IPRs were filed as of mid-October. And, if an IPR is instituted, the PTAB cancels claims at a high rate.
But the fact that IPRs take place entirely inside the U.S. Patent and Trademark Office forms the basis of Oil States Energy Services’ Supreme Court challenge. In its petition for certiorari, Oil States argues that IPRs run afoul of the Constitution by allowing private property rights to be extinguished in a non-Article III forum lacking a jury. Not so, responds both Greene’s Energy and the USPTO, which contend that patents involve “public rights”—so having the USPTO decide whether a patent was properly granted is constitutional. More than that, they assert, it makes perfect sense to allow the USPTO to make this decision—patents are the USPTO’s reason for being, and it has the technical expertise needed to reach sound decisions.
Having heard the opening salvoes, the Supreme Court took up the case, and we now have Oil States’ opening brief, the respondents’ briefs and nearly 60 amicus briefs on file. All eyes are on this case, and this is an overview of the merits briefs filed by the parties, their supporters and amici supporting neither party.
Oil States: IPRs Violate Right to Jury Trial
Oil States’ opening brief in the U.S. Supreme Court relies heavily on the pre-AIA history of patent adjudication.2 Oil States first argues that IPRs conflict with constitutional guarantees, namely, the Seventh Amendment’s right to trial by jury, in combination with the historical precedent of Article III courts as the forum for patent invalidation. For example, Oil States relies heavily on the Supreme Court’s decision in Markman v. Westview Instruments Inc.,3 where the court wrote that ”[patent] infringement cases today must be tried to a jury, as their predecessors were more than two centuries ago.”
Oil States then argues that IPRs do not fall under the public-rights doctrine. This doctrine holds that rights that are integrally related to government regulatory schemes are best and properly adjudicated by the relevant agency. Oil States reasons that patent disputes have historically been resolved by courts. It says patent owners must enforce patent rights in district court without government aid. Oil States argues that patent disputes have not historically been “resolved wholly outside the judicial branch,” patent cases do not involve “new statutory obligations,” and patent cases are not “essential to a limited regulatory objective.”
Oil States concludes by urging that Congress had no basis for giving the USPTO the authority to conduct IPRs. To bolster its stance, it points to Congress’ statements that IPRs were needed to overcome inefficiencies in the patent system and the difficulty of challenging “meritless patents” in federal court. According to Oil States, this reflects just the kind of “overreach” that the framers intended to check.
Greene’s Energy: IPRs Let USPTO Nix Public Rights
Greene’s Energy frames patents as rights grounded in federal law, subject to the power of Congress.4 Greene’s Energy also says patents are “integrally related to particular Federal Government action”—all characteristics of “public rights,” citing the Supreme Court’s words from Stern v. Marshall.5 Given this public nature, Greene’s Energy contends that Congress can provide for nonjudicial correction of errors via limited and specialized proceedings such as IPRs. The proceedings let the USPTO revisit its own decision-making in a narrow capacity by considering questions that do not “inherently or necessarily requir[e] judicial determination,” as the Supreme Court said was permitted in Ex parte Bakelite Corp.6
The respondent argues that patents fall under what the Supreme Court in Murray’s Lessee v. Hoboken Land & Improvement Co.7 called a “particularized area of law,” so Congress has leeway to empower non-Article III tribunals to adjudicate. Particularly where Congress has set up a comprehensive regulatory scheme to handle patent applications, including a specialized administrative agency, Article III “does not confer on litigants an absolute right to the plenary consideration of every nature of claim by an Article III court.“8
Greene’s Energy acknowledges the Seventh Amendment’s applicability to issues that an Article III court must handle, but argues it “poses no independent bar” where Congress permissibly charged a non-Article III tribunal with adjudicating an administrative scheme with a statutory cause of action in Granfinanciera SA v. Nordberg.9 To bolster its stance, the respondent recounts the ways Congress has provided for post-issuance review over time, beginning with post-issuance information from holder in 1870, interference proceedings in 1952, ex parte re-examinations in 1980, inter partes re-examinations in 1999 and finally IPRs in 2011. In sum, Greene’s Energy asserts there is nothing unconstitutional about giving the USPTO the chance to revoke public rights it never should have created in the first place.
USPTO: IPRs Don’t Run Afoul of Article III or Seventh Amendment
The USPTO shares Greene’s Energy’s position that patents are public rights, bound up with federal action, for which Congress can set adjudicatory conditions.10 To make its point, the agency cites Northern Pipeline Construction Co. v. Marathon Pipe Line Co.,11 which says the public-rights doctrine is grounded in historical distinction between inherently judicial matters and those that can be conclusively determined by other branches of government.
For support, the USPTO notes that patent rights “did not exist at common law,” citing Gayler v. Wilder.12 Nor have they historically been viewed as any “natural right” of inventors, the USPTO says, citing Graham v. John Deere Co.13 Additionally, the USPTO notes that patent rights come into being when allowed by an agency patent examiner, and no one has called for involving an Article III court at issuance. Given Congress’ “authority to delegate to the USPTO the power to issue patents in the first instance, it would be odd indeed if Congress could not authorize the USPTO to reconsider its own decisions,” the USPTO says, citing MCM Portfolio LLC v. Hewlett-Packard Co.14
The federal respondent also brings legislative history to bear, asserting that Congress revised post-issuance review “to improve patent quality and restore confidence in the presumption of validity that comes with issued patents in court” in response to the “growing sense” that “questionable patents [were] too easily obtained and [were] too difficult to challenge.”
Fifty-eight friend-of-the-court briefs have been filed and are shown in the tabular figures, grouped by support for the petitioner, the respondents or neither party. Here, we summarize major themes found in these briefs, including: Article III concerns and the separation of powers; private versus public rights doctrine; policy questions on fairness, impact and efficiency; and a historical analysis of jury trials and the Seventh Amendment.
Article III and the Separation of Powers
Several amici point to historical precedent holding that only Article III courts may resolve patent disputes, not administrative courts. Many of these briefs point to Murray’s Lessee15 to argue that common law courts traditionally heard patent disputes, and that the Constitution does not allow Congress to entrust these disputes to administrative courts.
A recurring theme among many supporting Oil States is that the Constitution requires Article III courts to adjudicate patent disputes because Article III courts historically have done so, and patents are private property rights, so Congress overstepped its authority by granting adjudication powers to part of the USPTO. The Pharmaceutical Research and Manufacturers of America, or PhRMA, for example, contends that the status of rights—public versus private—determines the procedure for revoking the right, because ”[w] ere it otherwise, Congress could transform a right from private to public ‘simply by deeming it part of some amorphous ‘public right,’ [and] Article III would be transformed from the guardian of individual liberty and separation of powers into mere wishful thinking.’“16 Along similar lines, the Institute of Electrical and Electronics Engineers, or IEEE-USA, contends that the IPR statute’s mandate giving PTAB decisions preclusive effects on Article III courts effectively “dispens[es] with rights otherwise available in Article III court adjudications [which] violates separation of powers.“17
Intel reached a different conclusion, arguing that IPRs do not “supplant or alter the Judiciary’s ultimate review of the validity issues, as the USPTO’s conclusions remain subject to judicial review, under the same standards that have long been viewed as adequate to superintend the USPTO’s issuance decisions.“18
Private Versus Public Rights
One of this case’s central disputes turns on whether patents involve private or public rights. Private rights are the property of an individual, and juries typically resolve private property disputes. Public rights, in contrast, belong to the public, but can sometimes be given to individuals by regulatory arms of the government. A jury is not required to resolve disputes over public rights.
Arguing that patents involve private rights, PhRMA cites Section 261 of the Patent Act, 35 U.S.C.A. § 261, as support for patents having all the attributes of personal property. Its brief also points out that courts have found common origins for both patents and copyrights, which it says are unquestionably private property. The Internet Association has a different take, describing patents as a type of “public franchise.“19
The American Intellectual Property Law Association, or AIPLA, rejects the centrality of the private-public distinction altogether, arguing against “a rigid, binary parsing of the bundle of patent rights,” and urging that Congress “acted within its right to ‘promote the progress of the useful arts’ under Article I.“20 Likewise, General Electric discounts the private-public issue and contends an IPR is “an exercise of the executive power—not the judicial power—and thus does not violate Article III of the Constitution, regardless of whether a patent is a public or private right.“21
Policy Questions on Fairness, Impact and Efficiency
Several briefs argue in support of IPRs as more efficient and effective forums than district courts for testing patent validity, allowing companies to focus resources on innovation instead of litigation. The PTAB Bar Association characterizes IPRs as “efficient, but limited, procedures to revisit the initial decision to grant patents,” addressing the real-word constraints of initial patent examination.22 Given that the USPTO currently examines over 600,000 new patent applications annually, the association asserts that IPRs provide more extensive review of the overburdened USPTO’s initial decisions. Other briefs argue that IPRs are intrinsically unfair. Unisone Strategic IP Inc.’s brief, for one, declares that “the PTAB suffers from a structural bias toward over-granting IPR petitions and over-invalidating patents, and cannot fairly adjudicate patent validity.“23 In contrast, SAP America favorably spotlights IPRs as “substantively identical to reexamination, enforcing the same patentability conditions and issuing the same certificates canceling, amending, adding or confirming claims.“24
Some amici argue that IPRs devalue patents. US Inventor Inc., for instance, posits that the availability of IPRs have reduced the incentive to invent because they “suddenly and drastically increased the probability that a contested patent will be held invalid.“25 In contrast, Knowledge Ecology International draws attention to “the negative consequences of granting patents that do not meet inventive step or which are not novel.“26 AARP describes IPRs as part of Congress’ desire to address negative effects of patent litigation on investment and innovation.27
Other briefs comment on particular aspects of IPRs as implemented. LiquidPower Specialty Products Inc. argues, for example, that the burden of the flawed IPR system falls heavier on smaller businesses, since the ease of mounting IPR challenges makes enforcement unduly risky.28 3M predicts that the USPTO would improve the patent-granting process when faced with the threat of de novo review by Article III courts, because these courts would improve the “consistency, reliability and fairness” of patent disputes.29 In contrast, IEEE-USA raises concerns about IPR limits on discovery as “undermin[ing] substantive litigants’ rights that can only be available in an Article III court.”
Jury Trials and The Seventh Amendment
Several briefs reach to early American jurisprudence to support the position that IPRs violate the Seventh Amendment. Some note early cases where juries decided patent validity in the English Commonwealth and American Colonies.
Many argue that Seventh Amendment jurisprudence requires that the types of cases tried before juries at the time of the country’s founding must be tried before juries today. For example, one amicus contends that ”[r]ecords from the 18th century are unequivocal and demonstrate that juries decide validity questions.“30 This is echoed by another amici advancing the proposition that “the framers considered granting the legislature power over jury authority and rejected it,” pointing to state constitutions, early legislation such as the Stamp Act, and the writings of Alexander Hamilton and other Founders.31
Nonetheless, other amicus filers see IPRs fitting within a “classic administrative or regulatory scheme of the kind this Court hasrepeatedly held legitimate.“32 For example, Dell, Facebook and others assert that ”[p]rior to the Founding—and for more than a century thereafter—the Crown’s Privy Council had broad authority to revoke patents outside of a judicial proceeding, including for a variety of reasons related to patentability, such as lack of novelty.“33
All these themes will probably come into play during oral argument before the Supreme Court on Nov. 27.