The Constitutionality of Inter Partes Review Is Before the Supreme Court

November 15, 2017

By: N. Scott Pierce

Abstract

The America Invents Act of 2011 introduced three new avenues for third parties to question the validity of granted patents at the United States Patent and Trademark Office (Patent Office), namely covered business method review, post-grant review, and inter partes review.  While all three are intended to be relatively inexpensive alternatives to litigating weak patents, inter partes review has proved so far to be the most popular and most effective, the Patent Office granting about 80% of petitions filed and invalidating about 75% of patents in which petitions have been granted.  The constitutionality of inter partes review is now being challenged at the Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.  Oral hearings are set for November 27, 2017.  This article summarizes the briefs filed by the parties, including the federal government, provides some context for the issue on appeal, suggests some implications of possible holdings by the Court, and proposes one possible resolution

TABLE OF CONTENTS

I.......... Introduction. 3

II......... Background and Arguments Made by the Parties. 3

A. Background. 3

B. Petitioner Oil States’ Brief on Appeal 4

C. Brief of Respondent Greene’s Energy. 6

D. Federal Respondent’s Brief. 8

III........ The Roots and Development of America’s Article III Jurisprudence. 9

A. American Roots of “Private” vs. “Public” Rights. 9

B. Expanding the Authority of Article I Courts to Adjudicate
“Seemingly” Private Rights. 11

IV........ Article III Jurisprudence as Applied to Patents of Invention. 14

A. Historical Limits on the Government’s Ability to Invalidate
Issued Patents. 14

B.  Private Rights vs. Protection of the Public. 16

C.  Resolution of Competing Private and Public Interests in Patents,
and Recent Decisions by the Federal Circuit. 18

V......... The Relevance of Oil States’ Arguments Invoking the Seventh Amendment
Right to Jury Trial if Patents are Public Rights. 21

VI........ Possible Results if Patents are Held to be Private Rights. 22

VII....... Conclusion. 22

 

  1. Introduction

The Supreme Court has set oral arguments for November 27th regarding the constitutionality of inter partes review under the America Invents Act of 2011 (AIA).[1]  The specific question to be decided in Oil States Energy Services LLC v. Greene’s Energy Group, LLC. is:

 

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. [2]   
 

A decision by the Supreme Court holding inter partes review to be in violation of Article III of the Constitution would profoundly impact the changes made to United States patent law under the AIA.  On the other hand, upholding inter partes review in its current form would have strong implications for the power of the legislative and executive branches over the judiciary to decide the validity of granted patents. 

One possible solution is to remove the finality of decisions under the Patent Trial and Appeal Board (PTAB) by limiting the role of the Patent Office in inter partes review to fact-finding that is reviewed for substantial evidence under federal district court supervision. 

  1. Background and Arguments Made by the Parties
    1. Background

Oil States filed suit against Greene’s Energy in 2012 for infringement of U.S. 6,179,053 (‘053 Patent).  The ‘053 patent claimed a device for sealing off a wellhead for easy access to high-pressure valves.  In response, Green’s Energy petitioned to the United States Patent Trademark Office (Patent Office, or PTO) for inter partes review (IPR), which is an administrative proceeding enacted under the America Invents Act (AIA)[3] that determines patent validity of issued patents over “prior art” in view of the statutory requirements of novelty under 35 U.S.C. § 102 and non-obviousness under 35 U.S.C. § 103.
 

In 2015, the Patent Trial and Appeal Board (the Board) of the Patent Office granted the petition and decided in favor of Greene’s Energy.[4]  The Board found the closest prior art to be a published patent application, Canadian Patent Application No. 2,195,118 (the ‘118 Application), the United States counterpart of which is U.S. Patent 5,819,851 (the ‘851 Patent).  Based on a “broadest reasonable construction” standard, the Board held that claims 1 and 22 of the ‘053 Patent were anticipated by a “second lockdown mechanism” taught by the ‘118 application that also relied on hydraulic pressure.[5] 
 

Oil States appealed to the Federal Circuit, which affirmed the Board decision without opinion, and denied requests for panel rehearing and rehearing en banc.[6]  Oil States then filed a petition for certiorari on May 4, 2016, asking three questions, the first of which, recited above in the Introduction, was granted on June 12, 2017.[7] 

    1. Petitioner Oil States’ Brief on Appeal

On appeal to the Supreme Court, Oil States’ overall argument was that inter partes review, which is conducted under Article I of the Constitution,[8] is contrary to Supreme Court precedent and, moreover, is contrary to Article III of the Constitution, at Section 2.[9]  Further, for Oil States, Amendment VII of the Constitution dictates that jurisdiction lies in the courts, as opposed to an administrative body, given the scope of jurisdiction in law and equity as it existed at enactment of the Constitution in 1789.[10] 
 

Oil States stated that, fundamentally, inter partes review “involves the exercise of the ‘judicial power of the United States’” over patents, which historically, and by nature, are “quintessential private property rights that must be adjudicated by courts.”[11]  For Oil States, to relegate the issue of patent validity to “an administrative agency ‘simply by deeming it part of some amorphous ‘public right,’ would cause “Article III’s protections [to] have devolved into mere ‘wishful thinking.’”[12]
 

In explanation, Oil States argued that the “most straightforward line demarcating public-rights cases is whether the case is brought against the government” which, in the case of inter partes review, it is not, but rather between private parties.[13]  Further, relying on Supreme Court precedent extending back to 1855, designating a right to be “public” means “‘simply that Congress may set the terms of adjudicating a suit when the suit could not otherwise proceed at all’ because of sovereign immunity.”[14]  In the alternative, “public rights cases,” are “those involving rights that traditionally have been resolved wholly within another branch.”[15]  Either alternative, according to Oil States, will “foreclose calling a patent a ‘public right’….”[16]
 

Addressing more recent Supreme Court precedent, Oil States asserted that “[p]atent-validity claims satisfy neither criterion” set forth in Stern v. Marshall,[17] a bankruptcy case, that would designate patents as “public rights,” namely those “involving claims that ‘derive [ ] from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.’”[18]  According to Oil States, satisfaction of these two criteria required that “the claim must arise from a ‘new statutory obligation [ ]’ created by Congress without a historical analogue to actions adjudicated by courts,” and that “the claim must be ‘integrally related to’ a regulatory scheme governing parties’ private conduct beyond merely the adjudication of those kinds of claims.”[19]  More particularly, to view patent rights as “new statutory obligations” would, in essence, mean that “the mere creation of a right by federal statute” would suffice to “vest the judicial power to adjudicate disputes regarding that right in a non-Article III tribunal,” a result that would “surely have confused the conventions ratifying Article III, who affirmed that the ‘judicial power’ of the federal courts” shall extend to all cases, in law and equity, arising under *** the laws of the United States,…’ even when those laws granted rights.”[20]
 

“[E]ven if patent rights were somehow ‘new statutory obligations,’” for Oil States, “adjudication itself cannot be the ‘limited regulatory objective’ -- otherwise it would be no limit at all.”[21]  Oil States observed the Supreme Court’s adherence to this distinction in Stern,[22] while criticizing the Federal Circuit’s broader interpretation recently expressed in MCM Portfolio, which relied on agency expertise.[23]  As stated by Oil States, “to justify conferring the judicial power under Article III merely on the PTO’s expertise amounts to a buy-one-get-one-free sale for the Constitution’s Vesting Clauses: exercise the executive power, get the judicial power thrown in, too.”[24]  According to Oil States, “to justify the PTO’s exercise of the judicial power based on its potential errors in applying the patent laws (by wrongly issuing certain patents in the first place) . . . is risible,” because the Judicial Branch of the United States government “is already a branch with a specific competence and the constitutional mandate to examine whether Executive Branch actors have complied with the laws of the United States.” [25]
 

Oil States also noted the lack of “meaningful Article III supervision” under inter partes review, in contrast to other areas of law, such as bankruptcy, in which, unlike judges that are appointed to the Board “through a process seated entirely in the Executive Branch,” there are “‘[b]ankruptcy judges, like magistrate judges, [which] ‘are appointed and subject to removal by Article III judges.’”[26]  The result, as viewed by Oil States, is inconsistent with the independence of the judiciary from the Executive Branch because “Board judges depend wholly on their superiors for performance evaluations, promotions, and raises,” making “every judge,” dependent upon “the approval of a politically appointed Executive Branch officer (or the officer’s subordinates).”[27] As an example, Oil States pointed to the power of the “Acting Chief Judge, acting on behalf of the Director,” in a recent case, to appoint members of a panel on rehearing, thereby heavily weighing the outcome on the positions of selected members.[28]  This, in effect, for Oil States constituted “aggrandizing one branch at the expense of the other.”[29]
 

Finally, Oil States argued that, regardless, the Seventh Amendment mandates that challenges to patent validity are entitled to a jury trial as a function of common law extending back to 1623 and the Statute of Monopolies, which required “[t]hat all *** lettres patentes *** and the force and validitie of them and every of them ought to be, and shall be for ever hereafter examyned heard tryd and determined by and accordinge to the Cōmon Lawes of this Realme & not otherwise.”[30]   The explanation provided by Edward Coke at the time was a means of “the preventing of … mischief” by the “boldness the monopolists took” in “not obeying the commandments and clauses of said grants and monopolies.”[31]  Traditionally, then “the responsibility for deciding that [type of] suit rests,’ at a minimum, ‘with Article III judges in Article III courts.’”[32] “For these reasons,” Oil States concluded, “inter partes review violates the Constitution.” 

    1. Brief of Respondent Greene’s Energy

Greene’s Energy based its argument on Congress’ “plenary authority to create and regulate patents,” asserting that Article I, §8, c.8, of the Constitution is a “permissive” grant of authority, whereby “nothing in the Constitution requires giving exclusive rights to inventors for their discoveries.”[33]   Greene’s Energy contradicted Oil States’ suggestion that “patents derive from common law rights,” instead claiming that the “patent right is created exclusively through the statutory monopoly, and has no separate existence.”[34]  Greene’s Energy also denied petitioner’s assertion that a patent is “emphatically a private property right.”[35]  Rather, for Greene’s Energy, “the rights embodied in a patent are instead public, granted to promote the paramount public purpose of the progress of science and useful arts.” [36] According to respondent Greene’s Energy, “an applicant has no property right to receive and retain a patent that fails the statutory standards,” and, as a consequence, a “patent issued in error cannot possibly create a legitimate property right.”[37]  Greene’s Energy stated that, as a result, “the PTO power to engage in post-issuance error-correction inheres in every issued patent.”[38]  Greene’s Energy also identified several mitigating factors to distinguish IPRs from litigation, such as the patent owner’s ability to amend claims, limitations on the ability to file a petition, and certain estoppels associated with any final written decision issued by the Board, and concluded that all of these features are “characteristics [that] demonstrate IPR is truly a ‘second look,’ not an Article III adjudication.”[39]


Greene’s Energy repeatedly invoked Justice Clarence Thomas’s characterization of patents from his dissent in the recent Supreme Court case of Teva Pharmaceuticals USA v. Sandoz, Inc., as “‘privileges’ or ‘franchises’ ‘which public authorities ha[ve] created purely for reasons of public policy and which ha[ve] no counterpart in the Lockean state of nature.’”[40]  Citing Supreme Court precedent, Greene’s Energy further stated that “the fact that an adjudication ‘clearly concern[ed] obligations among private parties, *** did not make the scheme valid under Article III.’”[41]  Even as a “public right” that is “integrally related to particular federal government action,” Greene’s Energy asserted that “the government need not be a party for the doctrine [of public rights] to apply.”  Oil States’ reliance on late eighteenth-century English law suggesting that treatment of patent validity was a matter of common law and, therefore, entitled to a jury trial was also dismissed.  Greene’s Energy instead concluded that, “based on this ‘muddled’ history [of a right to jury trial], Petitioner asks this Court to abandon congressionally established procedures integral to the patent regulatory framework.”[42]  The decisive factor, Greene’s Energy argued, was that the “benefits of the [IPR] adjudication flow to the public, not merely the third party participant.”[43] 

    1. Federal Respondent’s Brief

Like Greene’s Energy, the federal respondent (Government) hinged justification for inter partes review on “the same public purpose that an examiner seeks to vindicate when he concludes that a putative invention does not satisfy the statutory prerequisites to patentability.”[44]  Also like Greene’s Energy, patents were considered by the Government to be “a paradigmatic public right” which, therefore, “comports with the traditional understanding of patent rights as privileges that the government may revoke without judicial involvement.”[45]  The fact that any “legal errors the Board may make” are “appealable to the Federal Circuit,” only “reinforces,” according to the Government, the “traditional understanding of patent rights as privileges.”[46]  The Government supported these conclusions with an extended discussion of the origins of patent rights which, according to the Government, “did not exist at common law,” instead “being ‘solely a product of positive law,’ whose ‘extent, duration, and validity … must be determined by the legislative branch.’”[47]  More broadly, “[v]indicating the public interest *** is the function of Congress and the Chief Executive,”[48] as evidenced by, for example “a patent examiner [who] decides whether the applicant will have certain rights as against the world.”[49]  The Government also relied on a “historical tradition [that] provides strong evidence that USPTO cancellation of issued patents comports with Article III” to argue that a limitation on the ability of the Executive Branch to “rescind an earlier patent grant,” is one that “confuses the distinct concepts of private property and ‘private rights,’ -- those rights that are not integrally related to federal government action.”[50]  The Government, like Greene’s Energy, viewed IPRs as an authorization by Congress to reassess “issued patents by the expert agency charged with deciding patentability in the first instance,” and that “the USPTO is particularly well-positioned to undertake that reassessment when additional information or arguments have come to light.”[51]  Quoting the Federal Circuit, the Government stated that “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”[52]


The Government then followed with various policy justifications that it viewed as justifying Congress’s institution of inter partes review, such as “[a] virtue of administrative adjudication … to ensure application of uniform standards ‘to the thousands of cases involved’ through tools that include oversight of agency employees,”[53] “efficient allocation of the USPTO’s finite resources,”[54] “and pairing of “a comparatively fast ex parte examination at the outset with opportunities for post-grant review thereafter … [that] … benefits patent applicants by enabling them to gain patent protection more quickly.”[55]  While Congress does have, according to the Government, “evident authority to mandate an opportunity for third-party participation in the initial examination process,” IPRs are intended to be a “more modest approach reflected in the AIA, under which the USPTO makes initial patent grants without that scrutiny but may conduct more intensive post-issuance review in a smaller class of cases,”[56] This is intended,  according to the Government, to “ensure that unpatentable inventions do not continue to receive unwarranted monopoly protection, thereby addressing what Congress determined was a substantial problem of erroneous grants under the preexisting patent system.”[57]

 

  1. The Roots and Development of America’s Article III Jurisprudence
    1. American Roots of “Private” vs. “Public” Rights

Article III of the Constitution states that “the Judicial Power of the United States, shall be vested in one Supreme Court and in such Courts as the Congress may from time to time ordain and establish,” and that, “[t]he Judicial Power shall extend to all cases, in Law and Equity, arising under this Constitution, the laws of the United States . . .; [and] to controversies to which the United States shall be a party….”[58]  Nevertheless, well-established jurisprudence dictates that the government cannot be sued without its consent:


The constitution itself declares that the judicial power shall extend to all cases to which the United States shall be a party; and that this means mainly where it is a party plaintiff [it] is a necessary result of the well-established proposition that it cannot be sued in any court without its consent.[59]

 

The Constitution also provides that the government can set up tribunals for adjudication of rights outside Article III.  The tribunals are a form of court under Article I of the Constitution, which states at Section 8, “The Congress shall have Power … to constitute Tribunals inferior to the Supreme Court; ….”[60]  Such tribunals are deemed “extra-judicial” and derive from “public rights,” as opposed to “private rights,” as first articulated by the Supreme Court in Murray’s Lessee v. Hoboken Land & Improvement Co.: 


Though, generally, both public and private wrongs are reddressed through judicial action, there are more summary extra-judicial remedies for both.  An instance of extra-judicial redress of a private wrong is the recapture of goods by their lawful owner; of a public wrong, by a private person is the abatement of a public nuisance….

***

To avoid misconstruction upon so grave a subject, we think it proper to state that we do not consider congress can either withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty; nor, on the other hand, can it bring under the judicial power a matter which, from its nature, is not the subject for judicial determination.  At the same time there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which Congress may or may not bring within the cognizance of the courts of the United States, as it deems proper.[61]

               

The Supreme Court in Crowell v. Benson relied on Murray’s Lessee to distinguish “legislative courts” from “constitutional courts”:

The Court referred to this distinction in Murray’s Lessee v. Hoboken Land & Improvement Company….Thus the Congress, in enacting the powers confided to it, may establish “legislative” courts (as distinguished from “constitutional courts in which the judicial power conferred by the Constitution can be deposited”) … to serve as special tribunals “to examine and determine various matters, arising between the government and others, which from their nature do not require judicial determination yet are susceptible of it.”[62]

 

“Legislative courts” could also function in an “adjunct” capacity under Article III courts, as stated by the Supreme Court in Atlas Roofing Co. v. Occupational Safety and Health Review Commission:

 

In cases which do not involve only ‘private rights,’ this Court has accepted factfinding by an administrative agency, without intervention by a jury, only as an adjunct to an Art. III court, analogizing the agency to a jury or a special master and permitting it in admiralty cases to perform the function of the special master.[63]

 

In a plurality decision, and with reference to Crowell, the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipeline Co. stated that “this Court has sustained the use of adjunct factfinders even in the adjudication of constitutional rights,” but that the “functions of the adjunct must be limited in such a way that ‘the essential attributes’ of judicial power are retained in the Art. III court.”[64]  Among the “essential attributes” of judicial power that cannot be conferred upon an “adjunct” Article I court, according to Northern Pipeline, was issuance of “final judgments, which are binding and enforceable even in the absence of appeal.”[65]  Rather, any decision by an “adjunct court,” having merely an advisory capacity, was subject to de novo review by a district court.[66]


Overall, the Supreme Court in Northern Pipeline identified three forums where “Art. III does not bar the creation of legislative courts” under Article I.  They are:  “territorial courts,” which are “‘created in virtue of the general right of sovereignty which exists in the government’”; “courts-martial”; and “public rights.”[67]  While acknowledging that “the distinction between public rights and private rights has not been definitively explained by our precedents,” the Court found that “it suffices to observe that a matter of public rights must at a minimum arise ‘between the government and others.’”[68]

    1. Expanding the Authority of Article I Courts to Adjudicate “Seemingly” Private Rights

The Supreme Court broadened the permissible scope of legislative courts in the Supreme Court case of Thomas v. Union Carbide Agr. Products Co.  There, the Court could not agree to the appellant’s assertion that the Courts in Northern Pipeline and Crowell meant “the right to an Article III forum is absolute unless the Federal Government is a party of record.”[69]  Instead, Justice O’Connor, for the majority, held that “Congress, acting for a valid legislative purpose pursuant to its constitutional powers under Article I, may create a seemingly ‘private right’ that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Art. III judiciary.”[70]    
 

A year later, in Commodity Futures Trading Comm’n. v. Schor, the majority opinion, also written by Justice O’Connor, stated that, moreover, consent by the government or any other party was not dispositive of the boundaries between government branches: 
 

To the extent that this structural principle [of checks and balances among federal branches of the government] is implicated in a given case, the parties by consent cannot cure the constitutional difficulty for the same reason that the parties cannot by consent confer on federal courts subject- matter jurisdiction beyond the limitations imposed by Article III.  When these Article III limitations are at issue, notices of consent and waivers cannot be dispositive because the limitations serve institutional interests that the parties cannot be expected to protect.[71]

Instead, Justice O’Connor laid out four factors to be considered in deciding constitutionally permissible limitations on Article III jurisprudence: 

 

[T]he extent to which the “essential attributes of judicial power” are reserved to Article III courts, the extent to which the non-Article III forum exercises the range of jurisdiction and powers normally vested only in Article III courts, the origins and importance of the right to be adjudicated, and the concerns that drove Congress to depart from the requirements of Article III.[72]

 

None of the factors were “deemed determinative, [but, rather, were viewed] with an eye to the practical effect that the congressional action will have on the constitutionally assigned role of the federal judiciary.”[73]
 

Combination of these factors with denial that the government must be a party of record in any Article I proceeding has led to controversy.  For example, in the Supreme Court case of Granfinanciera S.A. v. Nordberg, Justice Brennan for the majority relied on Thomas to conclude that “the Federal Government need not be a party for a case to revolve around ‘public rights.’”[74]  Justice Scalia, concurring-in-part and concurring in the judgment, however, was emphatic that “[t]he notion that the power to adjudicate a legal controversy between two private parties may be assigned to a non-Article III, yet, federal, tribunal is entirely inconsistent with the origins of public rights doctrine.”[75]  According to Justice Scalia, the Court in Thomas improperly broadened the “public rights doctrine” announced in Murray’s Lessee beyond “rights of the public – that is, rights pertaining to claims brought by or against the United States.”[76]  For Justice Scalia, “[w]aiver of sovereign immunity can only be implicated, of course, in suits where the Government is a party.”[77]  “Public rights,” as a waiver of the general rule of government immunity, was replaced by the Court in Thomas, in Justice Scalia’s view, “by sheer force of our office,”[78] with “simply a pragmatic understanding that when Congress selects a quasi-judicial method of resolving matters that ‘could be conclusively determined by the Executive and Legislative Branches,’ the danger of encroaching on the judicial power is reduced.”[79]  As a result, according to Justice Scalia, the Court in Thomas held “for the first time, that a purely private federally created action did not require Article III courts.”[80]  This was, for Justice Scalia, “too much”:


I do not think one can preserve a system of separation of powers on the
basis of such intuitive judgments regarding “practical effects,”. . . .
 This
central feature [of separation of powers] of the Constitution must be
anchored in rules, not set adrift in some multifactored “balancing test”
- - and especially not in a test that contains as its last and most revealing
factor “the concerns that drove Congress to depart from the requirements
of Article III.”
[81] 

Nevertheless, since that time the number of “factors” have accumulated, further aggravating the difficulty of administering Justice O’Connor’s “balancing test.”[82]  For example, the Court in Stern v. Marshall relied on a variety of factors to conclude that the plaintiff’s “claimed right to relief does not flow from a federal statutory scheme, as in Thomas or Atlas Roofing.”[83]  The Court narrowly held that the Bankruptcy Court under the Bankruptcy Court Act of 1984 “lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim.”[84]  The Court cautioned, however, that “[g]iven the extent to which this case is so markedly distinct from the agency cases discussing the public rights exception in the context of this regime, … we do not in this opinion express any view on how the doctrine might apply in that different context.”[85]  In his concurrence-in-part and concurrence-in-judgment, Justice Scalia counted “at least seven different reasons given in the Court’s opinion for concluding that an Article III judge was required to adjudicate the lawsuit….”[86]  Justice Scalia stated that “[t]he multifactors relied upon today seem to have entered our jurisprudence almost randomly,” and concluded that, “in my view an Article III judge is required in all federal adjudications, unless there is a firmly established historical practice to the contrary.”[87]

 

  1. Article III Jurisprudence as Applied to Patents of Invention
    1. Historical Limits on the Government’s Ability to Invalidate Issued Patents

At least with respect to issued patents, there is, in fact, well-established historical precedent that clearly precludes the government from being a party to a determination of patent validity.  For example, in McCormick Harvesting Mach. Co. v. C. Aultman & Co., decided in 1898, the Supreme Court stated that, upon issuance, a patent has “become the property of the patentee,” and, therefore, an attempt to cancel an issued patent by an examiner “would be in fact an invasion of the judicial branch of the government by the executive.”[88]    While the court in McCormick upheld statutory provisions for reissue proceedings,[89] it was because such proceedings required that the patentee voluntarily surrender the patent.  As stated by the Court:

If the patentee abandoned his application for reissue, he is entitled to a return of his original patent precisely as it stood when such application was made, and the patent office has no greater authority to mutilate it by rejecting any of its claims than it has to cancel the entire patent.[90] 

 

A year later, in 1899, the Court in United States v. Duell[91] held that determination of validity of claimed subject matter prior to grant of an issued patent was a matter of “public rights,” thereby entitling the legislative branch to remove, at its discretion, what would otherwise be subject to Article III review.[92]  This is consistent with McCormick and decisions by the Supreme Court that limited such public rights to patent applications.  Moreover, treatment of letters patents generally, namely land patents and patents for invention, in the United States did not necessarily follow from practice in England.  For example, the Court in United States v. American Bell[93] expressly dismissed reliance on scire facias,[94] whereby letters patent could be invalidated at the prerogative of the King:  “We have no king in this country; we have no prerogative of the crown….  The patent, then, … is not subject to be repealed or revoked by the president, the secretary of the interior, or the commissioner of patents, when once issued.”[95] 
 

The reason for distinguishing between pre- and post-grant was stated broadly as a “rule” in Michigan Lumber v. Rust[96]“[W]herever the granting act specifically provides for the issue of a patent, then the rule is that the legal title remains in the government until the issue of the patent.”[97]  The policy behind the rule, at least with respect to land patents, was made clear twenty years earlier, in Moore v. Robbins[98]:
 

‘A patent,’ says the court in United States v. Stone, ‘is the highest evidence of title, and is conclusive against the government and all claiming under junior patents or titles, until it is set aside or annulled by some judicial tribunal.  In England, this was originally done by scire facias; but a bill in chancery is found a more convenient remedy.’

***

But in all this [in the United States] there is no place for the further control of the Executive Department over the title….  He [the President] is absolutely without authority.  If this were not so, the titles derived from the United States, instead of being the safe and assured evidence of ownership which they are generally supposed to be, would be always subject to the fluctuating and in many cases, unreliable, action of the land office.

***

The existence of any such power in the Land Department is utterly inconsistent with the universal principle on which the right of private property is founded.[99]

 

Arguably, the same reasoning can be applied to patents of invention and the Patent Office, particularly in view of the parallel often drawn between land patents and patents of invention, as expressed, for example, by the Supreme Court in American Bell:

 

The power, therefore, to issue a patent for an invention, and the authority to issue such an instrument for a grant of land, emanate from the same source; and, although exercised by different bureaus or offices under the government, are of the same nature, character, and validity, and imply in each case the exercise of the government according to modes regulated by acts of congress.[100]

 

It should be noted, however, that an exception to lack of power by the Executive Department over patents exists where there is “fraud in the patentee,” or where patents are “issued unadvisedly or by mistake, or where the officer has no authority in law to grant them, or where another party has a higher equity, and should have received the patent.”[101]  In such cases, “the right of the United States to interfere … is its obligation to protect the public from the monopoly of the patent which was procured” by those means.[102]  Even so, the Supreme Court in American Bell affirmed only “the power of the government of the United States to get rid of a patent [that was] obtained from it by fraud and deceit,” and left to the legislature to give “private individuals a more limited form of relief, by way of defense to an action by the patentee.”[103]

    1. Private Rights vs. Protection of the Public

A dilemma, therefore, appears in the nature of private property that would ban the government from unilaterally withdrawing a patent grant without being a party in any challenge to its validity, and regarding the interest of the government in protecting the public from patents improperly granted.  Resolution may be found in the nature of proceedings authorized by Congress for addressing issues of fraud by the patentee, mistake by the Patent Office, and “higher equity” among inventors.  In other words, while a limited exclusionary right to inventions is granted by the Constitution, Congress has defined the manner in which patents are to be granted.  On one hand, a granted patent is private property and, therefore, protected by the Judiciary under Art. III of the Constitution.  On the other hand, the legislative and  executive branches are charged with protecting the public’s legitimate interest against mistakes made by the granting authority, which is the Patent Office.
 

A similar situation was presented in Northern Pipeline, discussed supra.[104]  There, bankruptcy courts under the Bankruptcy Act of 1978 were declared unconstitutional by the Supreme Court because, even though designated “adjunct” courts, they issued “final judgments, which are binding and enforceable even in the absence of an appeal.”[105]  Accordingly, they could exercise “jurisdiction behind the façade of a grant to the district courts, and are exercising powers far greater than those lodged in the adjuncts approved in Crowell….” and in another Supreme Court Case, U.S. v. Raddatz.[106]  The Court in Northern Pipeline also viewed Crowell and Raddatz as recognizing the “delicate accommodations required by the principle of separation of powers reflected in Art. III,”[107] by limiting the powers of an adjunct court, at least in bankruptcy proceedings, to:
 

  1. making “only specialized, narrowly confined factual determinations regarding a particularized area of law”;
  2. engaging in “statutorily channeled factfinding functions”;
  3. possession of “only a limited power to issue … orders pursuant to specialized procedures”;
  4. susceptibility to having such orders “set aside if ‘not supported by the evidence,’” instead of “the more deferential ‘clearly erroneous standard’”; and
  5.  enforcement enabled only by order of a district court. [108]

 

In Northern Pipeline, the Court distinguished between “rights created by Congress and other rights, including “a critical difference between rights created by federal statute and rights recognized by the Constitution.” [109]  If “the right being adjudicated is not of congressional creation,”[110] then:


[S]ubstantial inroads into functions that have traditionally been performed by the Judiciary cannot be characterized merely as incidental extensions of Congress’ power to define rights that it has created.  Rather, such inroads suggest unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.[111]

 

In the case of Northern Pipeline, for example, the claims involved rights created by state law, “independent of and antecedent to the reorganization petition that conferred jurisdiction upon the Bankruptcy Court.”[112]  The Court, therefore, upheld the District Court decision dismissing a suit for breach of contract in a United States bankruptcy court on the ground that the Bankruptcy Act of 1978, by reaching rights created by state law, was unconstitutional under Article III. 
 

If patents of invention ultimately are deemed to be “recognized by the Constitution,” such as by virtue of Art. I, § 8, cl. 8, which states that Congress shall have the power “[t]o promote the Progress of … useful Arts, by securing for limited Times to … inventors the exclusive right to their … Discoveries,” and if those rights are ultimately held to be “private rights,” deprivation of those rights might well be protected by the Constitution under the 5th Amendment, which states:    


No person shall be… deprived of property, without due process of law; nor shall private property be taken for public use, without just compensation.[113]

 

To act otherwise with regard to granted patents might then “far exceed the powers that it vested in administrative agencies that adjudicate only rights of Congress’ own creation.”[114]  Therefore, following the reasoning of Northern Pipeline, acts of Congress that make “substantial inroads” into, for example, determining the validity of granted patents, which has traditionally been performed by the Judiciary may be, as phrased by the Court in Northern Pipeline, “unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.”[115]

    1. Resolution of Competing Private and Public Interests in Patents, and Recent Decisions by the Federal Circuit

If patent rights are private, and broad authority of the Board is an unnecessary encroachment, as was the “adjunct court” in Northern Pipeline, there is a dilemma of conflicting rights of patent owners and obligations of the government.  Resolution, however, can be found in limitation of post-issuance review of patent rights by the Patent Trial and Appeal Board to “only specialized, narrowly confined factual determinations.”[116]  Such a limitation on the Board should be “statutorily defined,” enabling possession of “only a limited power to issue… orders pursuant to specialized procedures” and enforceable only by a district court, which would set aside any such order if “not supported by the evidence.”[117]  To ignore these limiting principles would, as stated by the Court in Northern Pipeline:

 

… require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government.[118]

 

Again operating on the assumption that patent rights are private, such “evisceration” may, in fact, have already been the consequence, at least with respect to patents of invention, in MCM Portfolio LLC. v. Hewlett-Packard Co., where the Court of Appeals for the Federal Circuit recently held that “patent rights are public rights, and their validity susceptible to review by an administrative agency.”[119]  This conclusion was not based on Supreme Court precedent, but derived from earlier decisions only tangentially associated with Article III.  For example, according to the Federal Circuit, McCormick was limited to reissue proceedings, which held only that cancellation of a patent without surrender of the patent by the patent owner would be a deprivation of due process of law.[120]  From this holding, the Federal Circuit inferred that McCormick  “did not address Article III and certainly did not forbid Congress from granting the PTO the authority to correct or cancel an issued patent.”[121]  The Federal Circuit then drew from the Supreme Court’s decision in Thomas that Congress “may create a seemingly ‘private’ right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary.”[122]  The Supreme Court’s opinion in Stern was also quoted, stating that “public rights doctrine [can apply] to disputes between private parties” where “the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential….”[123]  The Federal Circuit deemed “the PTO, [to be] ‘an executive agency with specific authority and expertise’ in the patent law,” and stated that “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”[124]


The court in MCM also drew a parallel with reexamination proceedings, which are a statutory mechanism for examination of issued patents, and is available to “any person” at the Patent Office who can establish, on the basis of lack of novelty, under 35 U.S.C. § 102, or obviousness, under 35 U.S.C. § 103, a “substantial new question of patentability.”[125]  The Federal Circuit decisions of  Joy Technologies v. Manbeck[126] and Patlex Corp. v. Mossinghoff[127] were relied upon by the court in MCM as “controlling authority” for the proposition that inter partes review, like reexamination in Joy and Patlex, does not violate Article III because “the issuance of a valid patent is primarily a public concern and involves a ‘right that can only be conferred by the government’ even though validity is brought into question in disputes between private parties.”[128]  The Federal Circuit in Patlex based “favored treatment from the courts” for “curative statutes” on the Supreme Court decision of Graham & Foster v. Goodcell, which hinged legislative intervention to cure “mistake of officers purporting to administer the law in the name of the Government” on a “lack of substantial equity” in an “asserted vested right.”[129]    


Contrary to the contention of the Federal Circuit in MCM, the McCormick court did not imply the capacity of the PTO to “correct or cancel” a patent simply as a function of “statutory authorization.”[130]  Further, it would not make sense for the Court in McCormick, nor in American Bell for that matter, to do so because the result would leave the doctrine of separation of powers among the Legislative, Executive and Judicial Branches solely to the discretion of the Legislative Branch--a clear misunderstanding of this fundamental concept. 


It should also be noted that neither Thomas nor Stern involved the grant of patent rights and, therefore, did not recognize the well-established premise that a “patent is the highest evidence of title, and is conclusive as against the Government, and all claiming under junior patents or titles, until it is set aside or annulled by some judicial tribunal.”[131] While acknowledging that patents are “property,” and that patent owners have a 5th Amendment right to due process, Judge Newman in Patlex cited no Supreme Court authority for the proposition that patents are a “public right.”  Rather, only an “overriding public purpose” of “curative statutes” was invoked.[132]   Interestingly, the relevant legislative history of reexamination proceedings, as summarized by the Federal Circuit in Patlex, was viewed to be “‘an aid’ to the trial court ‘in making an informal decision on the patent’s validity,’”[133] not a court of appeal, such as the Federal Circuit.  Further, in contrast to Graham, where the issue centered on a Treasury Department error which the Court held could be corrected “without violating substantial equity,”[134] involuntary deprivation of granted patents by reexamination at the Patent Office would, arguably violate “substantial equity” inherent in the exclusionary right of a granted patent.[135]


Moreover, reexamination is conducted at the Patent Office according to “procedures established for initial examination.”[136]  Appeal from a decision by the PTAB is to the United States Court of Appeals for the Federal Circuit,[137] and in the absence of appeal the judgment of the PTAB is enforceable.  Therefore, contrary to the statement made by the Federal Circuit in Patlex, there is no “trial court” to be aided by reexamination, unless either the PTAB, which is part of the Patent Office under the Department of Commerce, or the Federal Circuit, which is a court of appeals, is to be so considered.  All of this mitigates against the “great weight” the Federal Circuit allotted to “enacting the reexamination law.”[138]


Overall, the Federal Circuit in MCM did not rely on Supreme Court authority for the assertion that patents of invention are “public rights.”  No such authority exists to-date.  Even Patlex and Joy, both of which are lower appeals court decisions, did not directly address the question of “public rights” in granted patents.  The court in Patlex instead opted for the “public purpose of the improved administration of law” without regard for the “vested right” that is linked to the “substantial equity” conferred by the grant of a patent.[139]  The court in Joy, in turn, perfunctorily demurred to Patlex as controlling authority.[140]

 

  1. The Relevance of Oil States’ Arguments Invoking the Seventh Amendment Right to Jury Trial if Patents are Public Rights

As summarized above, Oil States argued that, based on the Constitution’s adoption of English common law “‘preserving the right under the Seventh Amendment to jury trial as it existed in 1791’” and on historical precedent, determinations of patent validity are to be tried before a jury regardless of whether patents are considered to be private or public rights.[141]  This issue takes on added significance if  issued patents are found to be public rights by the Supreme Court in Oil States because adjudicative responsibility for deciding patent validity under an Article I court would then necessarily be subject to the possibility of an overriding Seventh Amendment right under common law to be “preserved” for jury trial.[142] 

Despite Greene’s dismissal of the “muddled history” of a right to jury trial, it is clear that, while determinations of patent validity were considered pursuant to a writ of scire facias in the Kings Privy Council, by 1789 such actions were being heard in the Court of Chancery, which had no provision for a jury.[143]  Nevertheless, it is error to conclude that, therefore, patent validity, as a matter of scire facias, was an issue of equity rather than common law, and not subject to jury trial.  Instead, as indicated by Lemley, “scire facias actions seem to have been part of the Chancery Court’s subsidiary common-law jurisdiction.” [144]  As also commented upon by Lemley, Chancery Court was known to “seek the advice of a jury in assessing the facts underlying a scire facias petition,” by having the “Lord Chancellor deliver the record to the King's Bench for a jury trial and return the verdict to the Chancellor for consideration and judgment.”[145]  Therefore, in the event that the Supreme Court holds issued patents to be “public rights,” there is substantial support for also holding that there is a common law tradition of judging patent validity by jury trial under the Seventh Amendment, at least where there are issues of fact. 

  1. Possible Results if Patents are Held to be Private Rights

Although unlikely, it is possible that the Supreme Court in Oil States may agree with Justice Scalia’s minority view in Thomas and Granfinanciera.  Specifically, the Court may hold that its own precedent in Thomas improperly broadened the “public rights doctrine” beyond “rights of the public – that is, rights pertaining to claims brought by or against the United States.”  If so, the Court may limit “public rights” suits to those where the government is a party.[146]  If Thomas is overturned in this respect, whereby the government must, by definition, be a party to adjudication of any such “rights of the public,” the “public rights doctrine” would not extend to “purely private federally created action[s],” such as disputes between private parties over the validity of granted patents.[147]  In turn, if the governement must be a party to a dispute involving “public rights,” then it would not matter whether IPRs, which do not include the government as a party, were part of a statutory right “so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary,” as was prescribed by the majority in Thomas.[148]  Instead, while an Article I tribunal, such as the Patent Trial and Appeal Board (PTAB) of the Patent Office, may operate, it would be able to do so only as an adjunct to a district court and only in an advisory capacity as to issues of fact.  Any finding by the Court in Oil States that IPRs are not valid under Article III, moreover, would likely implicate not just examination of “covered business methods,” post-grant reviews, and IPRs, but also interference proceedings (that revoke issued patents) and re-examination proceedings requested by third parties. 

  1. Conclusion

The Court in Stern did provide a narrow path for adjudication under Article I by expressly refraining from “any view on how the doctrine [of the public rights exception] might apply in a different context [than that of a state law counterclaim.]”[149]  However, and despite potentially relevant Supreme Court precedent in Thomas and Granfinanciera, the better view under the weight of Supreme Court precedent with respect to patent validity might be that determination of the validity of issued patents does not include the government as a party and, therefore, only private rights are involved.  If so, jurisdiction should be solely within Article III, which would preclude final determinations as they currently exist in statutory provisions for interference proceedings, re-examination, and post-issuance adjudication under the AIA.  Instead, any statutory provision for post-grant examination at the Patent Office should be limited to an advisory capacity as an adjunct to a federal district court as to issues of fact.  Further, any such factual determinations coming from the Patent Office should be subject to review for substantial evidence by the district court in order to pass constitutional muster under Article III.[150]
 

If issued patents are deemed to be “public rights” and IPRs are upheld as constitutionally valid, then there may be no limit to the power Congress can grant to the Patent Office over the validity of patents, potentially usurping any role for the judiciary in this regard under Article III.  Instead, patent rights should be considered private rights and, as a consequence, post-issuance examination by the Patent Office other than reissue (which requires voluntary surrender of the patent owner) or reexamination requested by the patentee, should be limited to fact-finding in an adjunct capacity reportable to a federal district court and subject to review for substantial evidence.

 

[1] Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified as 35 U.S.C.) [hereinafter AIA].   

[2] Oil States Energy Services LLC v. Greene’s Energy Group, LLC, 2015 WL 2089371, Pat. Tr. & App. Bd., Case IPR2014-00216 (May 1, 2015).

[3] Pub. L. No. 112-29, 125 Stat. 284 (codified in various sections of 28 and 35 U.S.C. (2012)).

[4] Greene’s Energy Group, LLC, Petitioner v. Oil States Energy Services, LLC, Patent Owner, 2015 WL 2089371 (Patent Tr. & Appeal Bd., May 1, 2015).

[5] Id.

[6] Oil States Energy Servs., LLC. v. Greene’s Energy Grp., LLC, (No. 2015-1855), 639 F. App’x. 639 (Fed. Cir. 2016) (mem.)

[7] See text at n.2, supra.  The other two questions were: 

Whether the amendment process implemented by the PTO in inter partes  review conflicts with this Court’s decision in Cuozzo Speed Technologies, LLC. v. Lee, 136 S. Ct. 2131 (2016), and congressional direction.

Whether the “broadest reasonable interpretation” of patent claims – upheld in Cuozzo for use in inter partes review – requires the application of traditional claim construction principles, including disclaimer by disparagement of prior art and reading claims in light of the patent’s specification.

[8] U.S. Const. art. I, (“The Congress shall have Power … [9] To constitute Tribunals inferior to the supreme Court….”).

[9] U.S. Const. art. III, § 2 (“The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, under their Authority …; -- to all cases of admiralty and maritime jurisdiction; to Controversies to which the United States shall be a Party….”).

[10] U.S. Const. Amend. VII (“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right by jury trial shall be preserved, and no fact trial by jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.”).

[11] Petitioner’s Brief at 22, 27.

[12] Id. at 27.

[13] Id. at 30.

[14] Id. (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1855)).

[15] Id. at 31.

[16] Id. at 32.

[17] Stern v. Marshall, 564 U.S. 462 (2011).

[18] Petitioner’s Brief at 33 (quoting Stern, 564 U.S. at 490).

[19] Id. (quoting Atlas Roofing Co. v. Occupational Safety & Health Review Comm’n, 430 U.S. 442, 450 (1977) and Stern, 564 U.S. at 490-491).

[20] Id. at 35 (quoting U.S. Const. art. III, § 2).

[21] Id.

[22] Stern at 490 (“The Court has continued, however, to limit the exception [of public rights] to cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.”).

[23] MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015). (“Congress created the PTO, an executive agency with specific authority and expertise in the patent law… and saw powerful reasons to utilize the expertise of the PTO for an important public purpose – to correct the agency’s own errors in issuing patents in the first place.” (quoting Kappos v. Hyatt, 566 U.S. 431, 132 S. Ct. 1690, 1696 (2012)).

[24] Petitioner’s Brief at 38. 

[25] Id.

[26] Id. at 43 (quoting Wellness Int’l Network v. Sharif, 135 S. Ct. 1932, 1945 (2015) (quoting Peretz v. United States, 501 U.S. 923, 937 (1991)).

[27] Id. at 44-45.

[28] Id. at 45.

[29] Id. at 47 (quoting Wellness Int’l, 135 S. Ct at 1944 (quoting Commodity Futures Comm’n v. Schor, 478 U.S. 833, 850 (1986)).

[30] Id. at 51 (quoting 21 Jac 1 c. 3 §2) (emphasis added).

[31] Id. at 54 (quoting Edward Coke Third Part Of The Institute Of The Laws Of England 182-83 (London, W. Clarke & Sons, 1809) (1644)).”

[32] Id. at 58 (quoting Stern, 564 U.S. 484).

[33] Respondent’s Brief at 12.

[34] Id. at 13.

[35] Id. at 16.

[36] Id.

[37] Id. at 17.

[38] Id.

[39] Id. at 24-26.

[40] Id. at 30 (quoting Teva Pharmaceuticals USA v. Sandoz, Inc., 135 S. Ct. 831, 848 (2015)).

[41] Id. at 28 (quoting Thomas v. Union Curbside Agric. Prods. Co., 473, U.S. 568, 586-587 (1985), noting Crowell v. Benson, 285 U.S. 22 (1932)).

[42] Id. at 51.

[43] Id. at 54.

[44] Federal Respondent’s Brief at 15.

[45] Id. at 16.

[46] Id.

[47] Id. at 18 (quoting McConnell, 157 Cong. Rec. at 13,042).

[48] Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 576 (1992)(emphasis original)).

[49] Id.

[50] Id. at 19, 21.

[51] Id. at 22.

[52] Id. at 23 (quoting MCM at 1291).

[53] Id. at 27.

[54] Id. at 28.

[55] Id. at 29.

[56] Id.

[57] Id. at 28.

[58] U.S. Const. Art. III, § 1.

[59] United States v. San Jacinto Tin Co., 125 U.S. 273, 279 (1888); see also McElrath v. United States, 102 U.S. 426, 440 (1880) (“The government cannot be sued, except with its own consent.”)

[60] U.S. Const. Art. I, § 8[9].

[61] Murray’s Lessee v. Hoboken Land & Imp. Co., 59 U.S. 272, 283-284 (1855) (emphasis added).

[62] Crowell v. Benson, 285 U.S. 22, 50 (1932) (citations omitted).

[63] Atlas Roofing Co. v. Occupational Safety and Health Rev. Comm’n., 430 U.S. 442, 450 n.7 (1977) (emphasis added).

[64] Northern Pipeline Const. Co. v. Marathon Pipeline, 458 U.S. 50, 78, 81 (1982) (citing Crowell, 285 U.S. at 51, 54).

[65] Id. at 85-86.

[66] See, for example, Commodity Futures Trading Comm’n. v. Schor, 478 U.S 833, 853 (1986) (“The legal rulings of the CFTC [Commodity Futures Trading Commission], like the legal determinations of the agency in Crowell, are subject to de novo review.”)

[67] Northern Pipeline, 458 U.S. at 65-67, (citations omitted.)

[68] Id. at 69. (quoting Ex parte Bakelite, 279 U.S. 438, 458 (1929)).

[69] Id. at 586 (“Insofar as appellees interpret that case Northern Pipeline and Crowell as establishing that the right to an Article III forum is absolute unless the Federal Government is a party of reward, we cannot agree.”).

[70] Thomas v. Union Carbide Agr. Products Co., 473. U.S. 568, 593-594 (1985) (emphasis added).

[71] Commodities Futures Trading Comm’n v. Schor, 478 U.S. at 850-851(emphasis added).

[72] Id.

[73] Id. at 851.

[74] Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 54 (1989) (quoting Thomas v. Union Carbide Agricultural Products, 473 U.S. at 586 (Brennan, J., concurring-in-judgment)).

[75] Id. at 66 (Scalia, J., concurring-in-part and concurring-in-judgment). 

[76] Id.

[77] Id. at 68 (Scalia, J., concurring-in-part and concurring in the judgment).

[78] Id.

[79] Id. at 69 (Scalia, J., concurring-in-part and concurring in the judgment) quoting Thomas, 473 U.S. at 593-594, quoting Northern Pipeline, 458 U.S. at 68.

[80] Id. (Scalia, J., concurring-in-part and concurring in the judgment).

[81] Id. at 70 (Scalia, J., concurring-in-part and concurring in the judgment) (quoting Schor, 478 U.S. at 851).

[82] Id. at 70 (Scalia, J., concurring-in-part and concurring in the judgment) (Referring to Justice O’Connor’s four factors recited in Schor.)

[83] Stern v. Marshall, 564 U.S. 464, 493 (2011).

[84] Id. at 503.

[85] Id. at 494.

[86] Id. at 504 (Scalia, J., concurring) (emphasis added).

[87] Id. at 504-505 (Scalia, J., concurring).

[88] McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, 609, 612 (1898).

[89] “Reissue” is a proceeding before the Patent Office that was originally established under the Patent Act of 1832, and is intended to correct patents that are considered wholly or partly invalid.  In the Patent Act of 1870, reissue required surrender of the original patent to take effect.  Chisum 15.02[5].

[90] McCormack, 169 U.S. at 610.

[91] 172 U.S. 576 (1899).

[92] Id. at 583 (emphasis added).

[93] 128 U.S. 315 (1888).

[94] Latin for “make known.”

[95] Id. at 362-363 (emphasis added).

[96] 168 U.S. 589 (1897).

[97] Id. at 593.

[98] Moore v. Robbins, 96 U.S. 530 (1877).

[99] Id. at 533-534 (emphasis added) (quoting U.S. v. Stone, 69 U.S. 525, 535 (1864)).

[100] U.S. v. American Bell, 128 U.S. at 358-359.

[101] Id. at 365.

[102] Id. at 367.

[103] MCM, 812 F.3d at 1290.

[104] See text supra at n. 64-68.

[105] Northern Pipeline, 458 U.S. at 85-86.

[106] Id. at 86 (citing Crowell v. Benson, 285 U.S. 22 (1932) and United States v. Raddatz, 447 U.S. 667 (1980).

[107] Id. at 83.

[108] 458 U.S. at 85.

[109] Id. at 83.

[110] Id. at 84.

[111] Id.

[112] Id.

[113] U.S. ConstArt. 1, § 8, cl. 8.

[114] Id. Northern, 458 U.S. at 84.

[115] Id.

[116] Id. at 85.

[117] Id.

[118] Id. at 74.

[119] MCM Portfolio LLC v. Hewlett-Packard Co, 812 F.3d 1284, 1293 (Fed. Cir. 2015). 

[120] Id. at 1289, citing McCormick, 169 U.S. at 612.  The court in MCM also cited American Bell as “noting lack of statutory authority for the Patent Office to cancel patents.” Id. citing American Bell, 128 U.S. at 364-365.   For example, as stated in American Bell at 364:  “The only authority competent to set a patent aside, or to annul it, or to correct it, for any reason whatsoever, is vested in the judicial department of the government, and this can only be effected by proper proceedings taken in the courts of the United States.”

[121] MCM, 812 F. 3d at 1290.

[122] Id. (quoting Thomas, 473 U.S. at 593-94) (emphasis added).

[123] Id. at 1290 (quoting Stern, 564 U.S. at 490).

[124] Id. at 1290-1291 (quoting Kappos v. Hyatt, 566 U.S. 431, 132 S.Ct. 1690, 1696 (2012)).

[125] 35 U.S.C. § 301.  After enactment of the AIA only ex parte reexamination is available.  From 1999 to 2011, another alternative, forum, inter partes reexamination, which allowed greater participation by third parties beyond petitioning for reexamination, was available under 35 U.S.C. § 311.  The AIA ended inter partes review (IPR).

[126] Joy Technologies v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992).

[127] Patlex Corp. v. Mossinghoff, 758 F.2d 595 (Fed. Cir. 1985).

[128] MCM, 812 F.3d at 1291 (quoting Joy 959 F.2d at 228 (quoting and citing Patlex, 758 F.2d at 604)).

[129]Patlex at 603 (quoting Graham & Foster v. Goodell, 282 U.S. 409, 429 (1931)).

[130] MCM at 1289.

[131] U.S. v. Stone, 69 U.S. 525, 535 (1864).

[132] Patlex, 758 F.2d at 603.  The court in Patlex quoted Graham & Foster as follows:

Where the asserted vested right, not being linked to any substantial equity, arises from the mistake of officers purporting to administer the law in the name of the Government, the legislature is not prevented from curing the defect in administration simply because the effect may be to destroy causes of action which would otherwise exist.

[133] Patlex, 758 F.2d. at 602 (quoting Sen. Bayh, Patent Reexamination Hearings on S. 1679 Before the Comm. on the Judiciary, 96th Cong., 1st Sess. (1979)) (emphasis added).

[134] Id. at 430.

[135] Mowry (1872), Stone (1864), and American Bell (1888) were all cases directed to validity of patents, either in land or of  invention, and were all brought in equity.  As stated by Lemley, “But when courts [in the United States], considered whether to invalidate a patent altogether during that period [before 1870], they did so at equity.”  As further stated by Lemley, “In 1938, law and equity were merged in the U.S. courts.  After 1938, patentees had no reason to prefer equity in law….  [However], jury trials [which were in law] remained uncommon for decades after the law of merger and equity.”  Lemley, Mark A., “Why Do Juries Decide If Patents are Valid,” 99 Va. L. Rev. 1673, 1700-01, 1704-05 (Dec. 2013).

[136] 35 U.S.C. § 305.

[137] 35 U.S.C. §§ 306, 141(b).

[138] Patlex, 758 F.2d at 603.

[139] See text at n. 128, supra.

[140] Joy, 959 F.2d at 229 (“Because Patlex is controlling authority and has not been impaired by either of the subsequent Supreme Court cases cited by Joy, we reject Joy’s attack on that decision.”)

[141] Petitioner Brief at 50-51 (quoting Curtis v. Loether, 415 U.S. 189, 193 (1974)).  (“No less than wrongfully usurping the role guaranteed to federal courts by Article III, inter partes review also usurps the role guaranteed to juries under the Seventh Amendment.”). 

[142] See, e.g., Baltimore & Carolina Line v. Redman, 295 U.S. 654, 657 (1935) (“The right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.”)

[143] See, e.g. Lemley at 1684.

[144] Id. at n. 44, citing Theodore F.T. Plucknett, A Concise History of the Common Law 392 n. 3 (5th ed. 1956) (“There seem no grounds for the suggestion that there is anything ‘equitable’ about scire facias.”)

[145] Id. at 1685.

[146] Granfinanciera, 492 U.S. at 68. (Scalia, J., concurring-in-part and concurring-in-judgment).

[147] Id. at 69 (“We thus  held in Thomas, for the first time, that a purely private federally-created action did not require Article III courts.”)  (Scalia, J., concurring-in-part and concurring-in-judgment.

[148] Thomas, 473 U.S. at 594.

[149] See text supra at n. 84.

[150] This paper is not the first suggestion of such a change.  Similar proposals have been made, for example, in the dissenting opinion by Justice Burger in Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), which stated: 

The problems arising from today’s judgment [in bankruptcy adjudication] can be resolved by providing that ancillary common law action, such as the one involved in these cases, be routed to the United States district court of which the bankruptcy court is an adjunct.

(Burger, J., dissenting). 

Even more pertinent is Michael Rothwell’s proposal: 

The structural fix is straightforward.  USPTO invalidity determinations [under inter partes review] are recalibrated so as to receive federal district court enforcement, where questions of law are reviewed de novo and questions of fact are reviewed for substantial evidence.

Michael I. Rothwell, After MCM, a Second Look:  Article I Invalidation of Issued Patents For Intellectual Property Still Likely Unconstitutional After Stern v. Marshall, 18 N.C.J.L. & Tech. 1, 37 (2017).

 

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November 15, 2017

By: N. Scott Pierce

Abstract

The America Invents Act of 2011 introduced three new avenues for third parties to question the validity of granted patents at the United States Patent and Trademark Office (Patent Office), namely covered business method review, post-grant review, and inter partes review.  While all three are intended to be relatively inexpensive alternatives to litigating weak patents, inter partes review has proved so far to be the most popular and most effective, the Patent Office granting about 80% of petitions filed and invalidating about 75% of patents in which petitions have been granted.  The constitutionality of inter partes review is now being challenged at the Supreme Court in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.  Oral hearings are set for November 27, 2017.  This article summarizes the briefs filed by the parties, including the federal government, provides some context for the issue on appeal, suggests some implications of possible holdings by the Court, and proposes one possible resolution

TABLE OF CONTENTS

I.......... Introduction. 3

II......... Background and Arguments Made by the Parties. 3

A. Background. 3

B. Petitioner Oil States’ Brief on Appeal 4

C. Brief of Respondent Greene’s Energy. 6

D. Federal Respondent’s Brief. 8

III........ The Roots and Development of America’s Article III Jurisprudence. 9

A. American Roots of “Private” vs. “Public” Rights. 9

B. Expanding the Authority of Article I Courts to Adjudicate
“Seemingly” Private Rights. 11

IV........ Article III Jurisprudence as Applied to Patents of Invention. 14

A. Historical Limits on the Government’s Ability to Invalidate
Issued Patents. 14

B.  Private Rights vs. Protection of the Public. 16

C.  Resolution of Competing Private and Public Interests in Patents,
and Recent Decisions by the Federal Circuit. 18

V......... The Relevance of Oil States’ Arguments Invoking the Seventh Amendment
Right to Jury Trial if Patents are Public Rights. 21

VI........ Possible Results if Patents are Held to be Private Rights. 22

VII....... Conclusion. 22

 

  1. Introduction

The Supreme Court has set oral arguments for November 27th regarding the constitutionality of inter partes review under the America Invents Act of 2011 (AIA).[1]  The specific question to be decided in Oil States Energy Services LLC v. Greene’s Energy Group, LLC. is:

 

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. [2]   
 

A decision by the Supreme Court holding inter partes review to be in violation of Article III of the Constitution would profoundly impact the changes made to United States patent law under the AIA.  On the other hand, upholding inter partes review in its current form would have strong implications for the power of the legislative and executive branches over the judiciary to decide the validity of granted patents. 

One possible solution is to remove the finality of decisions under the Patent Trial and Appeal Board (PTAB) by limiting the role of the Patent Office in inter partes review to fact-finding that is reviewed for substantial evidence under federal district court supervision. 

  1. Background and Arguments Made by the Parties
    1. Background

Oil States filed suit against Greene’s Energy in 2012 for infringement of U.S. 6,179,053 (‘053 Patent).  The ‘053 patent claimed a device for sealing off a wellhead for easy access to high-pressure valves.  In response, Green’s Energy petitioned to the United States Patent Trademark Office (Patent Office, or PTO) for inter partes review (IPR), which is an administrative proceeding enacted under the America Invents Act (AIA)[3] that determines patent validity of issued patents over “prior art” in view of the statutory requirements of novelty under 35 U.S.C. § 102 and non-obviousness under 35 U.S.C. § 103.
 

In 2015, the Patent Trial and Appeal Board (the Board) of the Patent Office granted the petition and decided in favor of Greene’s Energy.[4]  The Board found the closest prior art to be a published patent application, Canadian Patent Application No. 2,195,118 (the ‘118 Application), the United States counterpart of which is U.S. Patent 5,819,851 (the ‘851 Patent).  Based on a “broadest reasonable construction” standard, the Board held that claims 1 and 22 of the ‘053 Patent were anticipated by a “second lockdown mechanism” taught by the ‘118 application that also relied on hydraulic pressure.[5] 
 

Oil States appealed to the Federal Circuit, which affirmed the Board decision without opinion, and denied requests for panel rehearing and rehearing en banc.[6]  Oil States then filed a petition for certiorari on May 4, 2016, asking three questions, the first of which, recited above in the Introduction, was granted on June 12, 2017.[7] 

    1. Petitioner Oil States’ Brief on Appeal

On appeal to the Supreme Court, Oil States’ overall argument was that inter partes review, which is conducted under Article I of the Constitution,[8] is contrary to Supreme Court precedent and, moreover, is contrary to Article III of the Constitution, at Section 2.[9]  Further, for Oil States, Amendment VII of the Constitution dictates that jurisdiction lies in the courts, as opposed to an administrative body, given the scope of jurisdiction in law and equity as it existed at enactment of the Constitution in 1789.[10] 
 

Oil States stated that, fundamentally, inter partes review “involves the exercise of the ‘judicial power of the United States’” over patents, which historically, and by nature, are “quintessential private property rights that must be adjudicated by courts.”[11]  For Oil States, to relegate the issue of patent validity to “an administrative agency ‘simply by deeming it part of some amorphous ‘public right,’ would cause “Article III’s protections [to] have devolved into mere ‘wishful thinking.’”[12]
 

In explanation, Oil States argued that the “most straightforward line demarcating public-rights cases is whether the case is brought against the government” which, in the case of inter partes review, it is not, but rather between private parties.[13]  Further, relying on Supreme Court precedent extending back to 1855, designating a right to be “public” means “‘simply that Congress may set the terms of adjudicating a suit when the suit could not otherwise proceed at all’ because of sovereign immunity.”[14]  In the alternative, “public rights cases,” are “those involving rights that traditionally have been resolved wholly within another branch.”[15]  Either alternative, according to Oil States, will “foreclose calling a patent a ‘public right’….”[16]
 

Addressing more recent Supreme Court precedent, Oil States asserted that “[p]atent-validity claims satisfy neither criterion” set forth in Stern v. Marshall,[17] a bankruptcy case, that would designate patents as “public rights,” namely those “involving claims that ‘derive [ ] from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.’”[18]  According to Oil States, satisfaction of these two criteria required that “the claim must arise from a ‘new statutory obligation [ ]’ created by Congress without a historical analogue to actions adjudicated by courts,” and that “the claim must be ‘integrally related to’ a regulatory scheme governing parties’ private conduct beyond merely the adjudication of those kinds of claims.”[19]  More particularly, to view patent rights as “new statutory obligations” would, in essence, mean that “the mere creation of a right by federal statute” would suffice to “vest the judicial power to adjudicate disputes regarding that right in a non-Article III tribunal,” a result that would “surely have confused the conventions ratifying Article III, who affirmed that the ‘judicial power’ of the federal courts” shall extend to all cases, in law and equity, arising under *** the laws of the United States,…’ even when those laws granted rights.”[20]
 

“[E]ven if patent rights were somehow ‘new statutory obligations,’” for Oil States, “adjudication itself cannot be the ‘limited regulatory objective’ -- otherwise it would be no limit at all.”[21]  Oil States observed the Supreme Court’s adherence to this distinction in Stern,[22] while criticizing the Federal Circuit’s broader interpretation recently expressed in MCM Portfolio, which relied on agency expertise.[23]  As stated by Oil States, “to justify conferring the judicial power under Article III merely on the PTO’s expertise amounts to a buy-one-get-one-free sale for the Constitution’s Vesting Clauses: exercise the executive power, get the judicial power thrown in, too.”[24]  According to Oil States, “to justify the PTO’s exercise of the judicial power based on its potential errors in applying the patent laws (by wrongly issuing certain patents in the first place) . . . is risible,” because the Judicial Branch of the United States government “is already a branch with a specific competence and the constitutional mandate to examine whether Executive Branch actors have complied with the laws of the United States.” [25]
 

Oil States also noted the lack of “meaningful Article III supervision” under inter partes review, in contrast to other areas of law, such as bankruptcy, in which, unlike judges that are appointed to the Board “through a process seated entirely in the Executive Branch,” there are “‘[b]ankruptcy judges, like magistrate judges, [which] ‘are appointed and subject to removal by Article III judges.’”[26]  The result, as viewed by Oil States, is inconsistent with the independence of the judiciary from the Executive Branch because “Board judges depend wholly on their superiors for performance evaluations, promotions, and raises,” making “every judge,” dependent upon “the approval of a politically appointed Executive Branch officer (or the officer’s subordinates).”[27] As an example, Oil States pointed to the power of the “Acting Chief Judge, acting on behalf of the Director,” in a recent case, to appoint members of a panel on rehearing, thereby heavily weighing the outcome on the positions of selected members.[28]  This, in effect, for Oil States constituted “aggrandizing one branch at the expense of the other.”[29]
 

Finally, Oil States argued that, regardless, the Seventh Amendment mandates that challenges to patent validity are entitled to a jury trial as a function of common law extending back to 1623 and the Statute of Monopolies, which required “[t]hat all *** lettres patentes *** and the force and validitie of them and every of them ought to be, and shall be for ever hereafter examyned heard tryd and determined by and accordinge to the Cōmon Lawes of this Realme & not otherwise.”[30]   The explanation provided by Edward Coke at the time was a means of “the preventing of … mischief” by the “boldness the monopolists took” in “not obeying the commandments and clauses of said grants and monopolies.”[31]  Traditionally, then “the responsibility for deciding that [type of] suit rests,’ at a minimum, ‘with Article III judges in Article III courts.’”[32] “For these reasons,” Oil States concluded, “inter partes review violates the Constitution.” 

    1. Brief of Respondent Greene’s Energy

Greene’s Energy based its argument on Congress’ “plenary authority to create and regulate patents,” asserting that Article I, §8, c.8, of the Constitution is a “permissive” grant of authority, whereby “nothing in the Constitution requires giving exclusive rights to inventors for their discoveries.”[33]   Greene’s Energy contradicted Oil States’ suggestion that “patents derive from common law rights,” instead claiming that the “patent right is created exclusively through the statutory monopoly, and has no separate existence.”[34]  Greene’s Energy also denied petitioner’s assertion that a patent is “emphatically a private property right.”[35]  Rather, for Greene’s Energy, “the rights embodied in a patent are instead public, granted to promote the paramount public purpose of the progress of science and useful arts.” [36] According to respondent Greene’s Energy, “an applicant has no property right to receive and retain a patent that fails the statutory standards,” and, as a consequence, a “patent issued in error cannot possibly create a legitimate property right.”[37]  Greene’s Energy stated that, as a result, “the PTO power to engage in post-issuance error-correction inheres in every issued patent.”[38]  Greene’s Energy also identified several mitigating factors to distinguish IPRs from litigation, such as the patent owner’s ability to amend claims, limitations on the ability to file a petition, and certain estoppels associated with any final written decision issued by the Board, and concluded that all of these features are “characteristics [that] demonstrate IPR is truly a ‘second look,’ not an Article III adjudication.”[39]


Greene’s Energy repeatedly invoked Justice Clarence Thomas’s characterization of patents from his dissent in the recent Supreme Court case of Teva Pharmaceuticals USA v. Sandoz, Inc., as “‘privileges’ or ‘franchises’ ‘which public authorities ha[ve] created purely for reasons of public policy and which ha[ve] no counterpart in the Lockean state of nature.’”[40]  Citing Supreme Court precedent, Greene’s Energy further stated that “the fact that an adjudication ‘clearly concern[ed] obligations among private parties, *** did not make the scheme valid under Article III.’”[41]  Even as a “public right” that is “integrally related to particular federal government action,” Greene’s Energy asserted that “the government need not be a party for the doctrine [of public rights] to apply.”  Oil States’ reliance on late eighteenth-century English law suggesting that treatment of patent validity was a matter of common law and, therefore, entitled to a jury trial was also dismissed.  Greene’s Energy instead concluded that, “based on this ‘muddled’ history [of a right to jury trial], Petitioner asks this Court to abandon congressionally established procedures integral to the patent regulatory framework.”[42]  The decisive factor, Greene’s Energy argued, was that the “benefits of the [IPR] adjudication flow to the public, not merely the third party participant.”[43] 

    1. Federal Respondent’s Brief

Like Greene’s Energy, the federal respondent (Government) hinged justification for inter partes review on “the same public purpose that an examiner seeks to vindicate when he concludes that a putative invention does not satisfy the statutory prerequisites to patentability.”[44]  Also like Greene’s Energy, patents were considered by the Government to be “a paradigmatic public right” which, therefore, “comports with the traditional understanding of patent rights as privileges that the government may revoke without judicial involvement.”[45]  The fact that any “legal errors the Board may make” are “appealable to the Federal Circuit,” only “reinforces,” according to the Government, the “traditional understanding of patent rights as privileges.”[46]  The Government supported these conclusions with an extended discussion of the origins of patent rights which, according to the Government, “did not exist at common law,” instead “being ‘solely a product of positive law,’ whose ‘extent, duration, and validity … must be determined by the legislative branch.’”[47]  More broadly, “[v]indicating the public interest *** is the function of Congress and the Chief Executive,”[48] as evidenced by, for example “a patent examiner [who] decides whether the applicant will have certain rights as against the world.”[49]  The Government also relied on a “historical tradition [that] provides strong evidence that USPTO cancellation of issued patents comports with Article III” to argue that a limitation on the ability of the Executive Branch to “rescind an earlier patent grant,” is one that “confuses the distinct concepts of private property and ‘private rights,’ -- those rights that are not integrally related to federal government action.”[50]  The Government, like Greene’s Energy, viewed IPRs as an authorization by Congress to reassess “issued patents by the expert agency charged with deciding patentability in the first instance,” and that “the USPTO is particularly well-positioned to undertake that reassessment when additional information or arguments have come to light.”[51]  Quoting the Federal Circuit, the Government stated that “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”[52]


The Government then followed with various policy justifications that it viewed as justifying Congress’s institution of inter partes review, such as “[a] virtue of administrative adjudication … to ensure application of uniform standards ‘to the thousands of cases involved’ through tools that include oversight of agency employees,”[53] “efficient allocation of the USPTO’s finite resources,”[54] “and pairing of “a comparatively fast ex parte examination at the outset with opportunities for post-grant review thereafter … [that] … benefits patent applicants by enabling them to gain patent protection more quickly.”[55]  While Congress does have, according to the Government, “evident authority to mandate an opportunity for third-party participation in the initial examination process,” IPRs are intended to be a “more modest approach reflected in the AIA, under which the USPTO makes initial patent grants without that scrutiny but may conduct more intensive post-issuance review in a smaller class of cases,”[56] This is intended,  according to the Government, to “ensure that unpatentable inventions do not continue to receive unwarranted monopoly protection, thereby addressing what Congress determined was a substantial problem of erroneous grants under the preexisting patent system.”[57]

 

  1. The Roots and Development of America’s Article III Jurisprudence
    1. American Roots of “Private” vs. “Public” Rights

Article III of the Constitution states that “the Judicial Power of the United States, shall be vested in one Supreme Court and in such Courts as the Congress may from time to time ordain and establish,” and that, “[t]he Judicial Power shall extend to all cases, in Law and Equity, arising under this Constitution, the laws of the United States . . .; [and] to controversies to which the United States shall be a party….”[58]  Nevertheless, well-established jurisprudence dictates that the government cannot be sued without its consent:


The constitution itself declares that the judicial power shall extend to all cases to which the United States shall be a party; and that this means mainly where it is a party plaintiff [it] is a necessary result of the well-established proposition that it cannot be sued in any court without its consent.[59]

 

The Constitution also provides that the government can set up tribunals for adjudication of rights outside Article III.  The tribunals are a form of court under Article I of the Constitution, which states at Section 8, “The Congress shall have Power … to constitute Tribunals inferior to the Supreme Court; ….”[60]  Such tribunals are deemed “extra-judicial” and derive from “public rights,” as opposed to “private rights,” as first articulated by the Supreme Court in Murray’s Lessee v. Hoboken Land & Improvement Co.: 


Though, generally, both public and private wrongs are reddressed through judicial action, there are more summary extra-judicial remedies for both.  An instance of extra-judicial redress of a private wrong is the recapture of goods by their lawful owner; of a public wrong, by a private person is the abatement of a public nuisance….

***

To avoid misconstruction upon so grave a subject, we think it proper to state that we do not consider congress can either withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty; nor, on the other hand, can it bring under the judicial power a matter which, from its nature, is not the subject for judicial determination.  At the same time there are matters, involving public rights, which may be presented in such form that the judicial power is capable of acting on them, and which are susceptible of judicial determination, but which Congress may or may not bring within the cognizance of the courts of the United States, as it deems proper.[61]

               

The Supreme Court in Crowell v. Benson relied on Murray’s Lessee to distinguish “legislative courts” from “constitutional courts”:

The Court referred to this distinction in Murray’s Lessee v. Hoboken Land & Improvement Company….Thus the Congress, in enacting the powers confided to it, may establish “legislative” courts (as distinguished from “constitutional courts in which the judicial power conferred by the Constitution can be deposited”) … to serve as special tribunals “to examine and determine various matters, arising between the government and others, which from their nature do not require judicial determination yet are susceptible of it.”[62]

 

“Legislative courts” could also function in an “adjunct” capacity under Article III courts, as stated by the Supreme Court in Atlas Roofing Co. v. Occupational Safety and Health Review Commission:

 

In cases which do not involve only ‘private rights,’ this Court has accepted factfinding by an administrative agency, without intervention by a jury, only as an adjunct to an Art. III court, analogizing the agency to a jury or a special master and permitting it in admiralty cases to perform the function of the special master.[63]

 

In a plurality decision, and with reference to Crowell, the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipeline Co. stated that “this Court has sustained the use of adjunct factfinders even in the adjudication of constitutional rights,” but that the “functions of the adjunct must be limited in such a way that ‘the essential attributes’ of judicial power are retained in the Art. III court.”[64]  Among the “essential attributes” of judicial power that cannot be conferred upon an “adjunct” Article I court, according to Northern Pipeline, was issuance of “final judgments, which are binding and enforceable even in the absence of appeal.”[65]  Rather, any decision by an “adjunct court,” having merely an advisory capacity, was subject to de novo review by a district court.[66]


Overall, the Supreme Court in Northern Pipeline identified three forums where “Art. III does not bar the creation of legislative courts” under Article I.  They are:  “territorial courts,” which are “‘created in virtue of the general right of sovereignty which exists in the government’”; “courts-martial”; and “public rights.”[67]  While acknowledging that “the distinction between public rights and private rights has not been definitively explained by our precedents,” the Court found that “it suffices to observe that a matter of public rights must at a minimum arise ‘between the government and others.’”[68]

    1. Expanding the Authority of Article I Courts to Adjudicate “Seemingly” Private Rights

The Supreme Court broadened the permissible scope of legislative courts in the Supreme Court case of Thomas v. Union Carbide Agr. Products Co.  There, the Court could not agree to the appellant’s assertion that the Courts in Northern Pipeline and Crowell meant “the right to an Article III forum is absolute unless the Federal Government is a party of record.”[69]  Instead, Justice O’Connor, for the majority, held that “Congress, acting for a valid legislative purpose pursuant to its constitutional powers under Article I, may create a seemingly ‘private right’ that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Art. III judiciary.”[70]    
 

A year later, in Commodity Futures Trading Comm’n. v. Schor, the majority opinion, also written by Justice O’Connor, stated that, moreover, consent by the government or any other party was not dispositive of the boundaries between government branches: 
 

To the extent that this structural principle [of checks and balances among federal branches of the government] is implicated in a given case, the parties by consent cannot cure the constitutional difficulty for the same reason that the parties cannot by consent confer on federal courts subject- matter jurisdiction beyond the limitations imposed by Article III.  When these Article III limitations are at issue, notices of consent and waivers cannot be dispositive because the limitations serve institutional interests that the parties cannot be expected to protect.[71]

Instead, Justice O’Connor laid out four factors to be considered in deciding constitutionally permissible limitations on Article III jurisprudence: 

 

[T]he extent to which the “essential attributes of judicial power” are reserved to Article III courts, the extent to which the non-Article III forum exercises the range of jurisdiction and powers normally vested only in Article III courts, the origins and importance of the right to be adjudicated, and the concerns that drove Congress to depart from the requirements of Article III.[72]

 

None of the factors were “deemed determinative, [but, rather, were viewed] with an eye to the practical effect that the congressional action will have on the constitutionally assigned role of the federal judiciary.”[73]
 

Combination of these factors with denial that the government must be a party of record in any Article I proceeding has led to controversy.  For example, in the Supreme Court case of Granfinanciera S.A. v. Nordberg, Justice Brennan for the majority relied on Thomas to conclude that “the Federal Government need not be a party for a case to revolve around ‘public rights.’”[74]  Justice Scalia, concurring-in-part and concurring in the judgment, however, was emphatic that “[t]he notion that the power to adjudicate a legal controversy between two private parties may be assigned to a non-Article III, yet, federal, tribunal is entirely inconsistent with the origins of public rights doctrine.”[75]  According to Justice Scalia, the Court in Thomas improperly broadened the “public rights doctrine” announced in Murray’s Lessee beyond “rights of the public – that is, rights pertaining to claims brought by or against the United States.”[76]  For Justice Scalia, “[w]aiver of sovereign immunity can only be implicated, of course, in suits where the Government is a party.”[77]  “Public rights,” as a waiver of the general rule of government immunity, was replaced by the Court in Thomas, in Justice Scalia’s view, “by sheer force of our office,”[78] with “simply a pragmatic understanding that when Congress selects a quasi-judicial method of resolving matters that ‘could be conclusively determined by the Executive and Legislative Branches,’ the danger of encroaching on the judicial power is reduced.”[79]  As a result, according to Justice Scalia, the Court in Thomas held “for the first time, that a purely private federally created action did not require Article III courts.”[80]  This was, for Justice Scalia, “too much”:


I do not think one can preserve a system of separation of powers on the
basis of such intuitive judgments regarding “practical effects,”. . . .
 This
central feature [of separation of powers] of the Constitution must be
anchored in rules, not set adrift in some multifactored “balancing test”
- - and especially not in a test that contains as its last and most revealing
factor “the concerns that drove Congress to depart from the requirements
of Article III.”
[81] 

Nevertheless, since that time the number of “factors” have accumulated, further aggravating the difficulty of administering Justice O’Connor’s “balancing test.”[82]  For example, the Court in Stern v. Marshall relied on a variety of factors to conclude that the plaintiff’s “claimed right to relief does not flow from a federal statutory scheme, as in Thomas or Atlas Roofing.”[83]  The Court narrowly held that the Bankruptcy Court under the Bankruptcy Court Act of 1984 “lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim.”[84]  The Court cautioned, however, that “[g]iven the extent to which this case is so markedly distinct from the agency cases discussing the public rights exception in the context of this regime, … we do not in this opinion express any view on how the doctrine might apply in that different context.”[85]  In his concurrence-in-part and concurrence-in-judgment, Justice Scalia counted “at least seven different reasons given in the Court’s opinion for concluding that an Article III judge was required to adjudicate the lawsuit….”[86]  Justice Scalia stated that “[t]he multifactors relied upon today seem to have entered our jurisprudence almost randomly,” and concluded that, “in my view an Article III judge is required in all federal adjudications, unless there is a firmly established historical practice to the contrary.”[87]

 

  1. Article III Jurisprudence as Applied to Patents of Invention
    1. Historical Limits on the Government’s Ability to Invalidate Issued Patents

At least with respect to issued patents, there is, in fact, well-established historical precedent that clearly precludes the government from being a party to a determination of patent validity.  For example, in McCormick Harvesting Mach. Co. v. C. Aultman & Co., decided in 1898, the Supreme Court stated that, upon issuance, a patent has “become the property of the patentee,” and, therefore, an attempt to cancel an issued patent by an examiner “would be in fact an invasion of the judicial branch of the government by the executive.”[88]    While the court in McCormick upheld statutory provisions for reissue proceedings,[89] it was because such proceedings required that the patentee voluntarily surrender the patent.  As stated by the Court:

If the patentee abandoned his application for reissue, he is entitled to a return of his original patent precisely as it stood when such application was made, and the patent office has no greater authority to mutilate it by rejecting any of its claims than it has to cancel the entire patent.[90] 

 

A year later, in 1899, the Court in United States v. Duell[91] held that determination of validity of claimed subject matter prior to grant of an issued patent was a matter of “public rights,” thereby entitling the legislative branch to remove, at its discretion, what would otherwise be subject to Article III review.[92]  This is consistent with McCormick and decisions by the Supreme Court that limited such public rights to patent applications.  Moreover, treatment of letters patents generally, namely land patents and patents for invention, in the United States did not necessarily follow from practice in England.  For example, the Court in United States v. American Bell[93] expressly dismissed reliance on scire facias,[94] whereby letters patent could be invalidated at the prerogative of the King:  “We have no king in this country; we have no prerogative of the crown….  The patent, then, … is not subject to be repealed or revoked by the president, the secretary of the interior, or the commissioner of patents, when once issued.”[95] 
 

The reason for distinguishing between pre- and post-grant was stated broadly as a “rule” in Michigan Lumber v. Rust[96]“[W]herever the granting act specifically provides for the issue of a patent, then the rule is that the legal title remains in the government until the issue of the patent.”[97]  The policy behind the rule, at least with respect to land patents, was made clear twenty years earlier, in Moore v. Robbins[98]:
 

‘A patent,’ says the court in United States v. Stone, ‘is the highest evidence of title, and is conclusive against the government and all claiming under junior patents or titles, until it is set aside or annulled by some judicial tribunal.  In England, this was originally done by scire facias; but a bill in chancery is found a more convenient remedy.’

***

But in all this [in the United States] there is no place for the further control of the Executive Department over the title….  He [the President] is absolutely without authority.  If this were not so, the titles derived from the United States, instead of being the safe and assured evidence of ownership which they are generally supposed to be, would be always subject to the fluctuating and in many cases, unreliable, action of the land office.

***

The existence of any such power in the Land Department is utterly inconsistent with the universal principle on which the right of private property is founded.[99]

 

Arguably, the same reasoning can be applied to patents of invention and the Patent Office, particularly in view of the parallel often drawn between land patents and patents of invention, as expressed, for example, by the Supreme Court in American Bell:

 

The power, therefore, to issue a patent for an invention, and the authority to issue such an instrument for a grant of land, emanate from the same source; and, although exercised by different bureaus or offices under the government, are of the same nature, character, and validity, and imply in each case the exercise of the government according to modes regulated by acts of congress.[100]

 

It should be noted, however, that an exception to lack of power by the Executive Department over patents exists where there is “fraud in the patentee,” or where patents are “issued unadvisedly or by mistake, or where the officer has no authority in law to grant them, or where another party has a higher equity, and should have received the patent.”[101]  In such cases, “the right of the United States to interfere … is its obligation to protect the public from the monopoly of the patent which was procured” by those means.[102]  Even so, the Supreme Court in American Bell affirmed only “the power of the government of the United States to get rid of a patent [that was] obtained from it by fraud and deceit,” and left to the legislature to give “private individuals a more limited form of relief, by way of defense to an action by the patentee.”[103]

    1. Private Rights vs. Protection of the Public

A dilemma, therefore, appears in the nature of private property that would ban the government from unilaterally withdrawing a patent grant without being a party in any challenge to its validity, and regarding the interest of the government in protecting the public from patents improperly granted.  Resolution may be found in the nature of proceedings authorized by Congress for addressing issues of fraud by the patentee, mistake by the Patent Office, and “higher equity” among inventors.  In other words, while a limited exclusionary right to inventions is granted by the Constitution, Congress has defined the manner in which patents are to be granted.  On one hand, a granted patent is private property and, therefore, protected by the Judiciary under Art. III of the Constitution.  On the other hand, the legislative and  executive branches are charged with protecting the public’s legitimate interest against mistakes made by the granting authority, which is the Patent Office.
 

A similar situation was presented in Northern Pipeline, discussed supra.[104]  There, bankruptcy courts under the Bankruptcy Act of 1978 were declared unconstitutional by the Supreme Court because, even though designated “adjunct” courts, they issued “final judgments, which are binding and enforceable even in the absence of an appeal.”[105]  Accordingly, they could exercise “jurisdiction behind the façade of a grant to the district courts, and are exercising powers far greater than those lodged in the adjuncts approved in Crowell….” and in another Supreme Court Case, U.S. v. Raddatz.[106]  The Court in Northern Pipeline also viewed Crowell and Raddatz as recognizing the “delicate accommodations required by the principle of separation of powers reflected in Art. III,”[107] by limiting the powers of an adjunct court, at least in bankruptcy proceedings, to:
 

  1. making “only specialized, narrowly confined factual determinations regarding a particularized area of law”;
  2. engaging in “statutorily channeled factfinding functions”;
  3. possession of “only a limited power to issue … orders pursuant to specialized procedures”;
  4. susceptibility to having such orders “set aside if ‘not supported by the evidence,’” instead of “the more deferential ‘clearly erroneous standard’”; and
  5.  enforcement enabled only by order of a district court. [108]

 

In Northern Pipeline, the Court distinguished between “rights created by Congress and other rights, including “a critical difference between rights created by federal statute and rights recognized by the Constitution.” [109]  If “the right being adjudicated is not of congressional creation,”[110] then:


[S]ubstantial inroads into functions that have traditionally been performed by the Judiciary cannot be characterized merely as incidental extensions of Congress’ power to define rights that it has created.  Rather, such inroads suggest unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.[111]

 

In the case of Northern Pipeline, for example, the claims involved rights created by state law, “independent of and antecedent to the reorganization petition that conferred jurisdiction upon the Bankruptcy Court.”[112]  The Court, therefore, upheld the District Court decision dismissing a suit for breach of contract in a United States bankruptcy court on the ground that the Bankruptcy Act of 1978, by reaching rights created by state law, was unconstitutional under Article III. 
 

If patents of invention ultimately are deemed to be “recognized by the Constitution,” such as by virtue of Art. I, § 8, cl. 8, which states that Congress shall have the power “[t]o promote the Progress of … useful Arts, by securing for limited Times to … inventors the exclusive right to their … Discoveries,” and if those rights are ultimately held to be “private rights,” deprivation of those rights might well be protected by the Constitution under the 5th Amendment, which states:    


No person shall be… deprived of property, without due process of law; nor shall private property be taken for public use, without just compensation.[113]

 

To act otherwise with regard to granted patents might then “far exceed the powers that it vested in administrative agencies that adjudicate only rights of Congress’ own creation.”[114]  Therefore, following the reasoning of Northern Pipeline, acts of Congress that make “substantial inroads” into, for example, determining the validity of granted patents, which has traditionally been performed by the Judiciary may be, as phrased by the Court in Northern Pipeline, “unwarranted encroachments upon the judicial power of the United States, which our Constitution reserves for Art. III courts.”[115]

    1. Resolution of Competing Private and Public Interests in Patents, and Recent Decisions by the Federal Circuit

If patent rights are private, and broad authority of the Board is an unnecessary encroachment, as was the “adjunct court” in Northern Pipeline, there is a dilemma of conflicting rights of patent owners and obligations of the government.  Resolution, however, can be found in limitation of post-issuance review of patent rights by the Patent Trial and Appeal Board to “only specialized, narrowly confined factual determinations.”[116]  Such a limitation on the Board should be “statutorily defined,” enabling possession of “only a limited power to issue… orders pursuant to specialized procedures” and enforceable only by a district court, which would set aside any such order if “not supported by the evidence.”[117]  To ignore these limiting principles would, as stated by the Court in Northern Pipeline:

 

… require that we replace the principles delineated in our precedents, rooted in history and the Constitution, with a rule of broad legislative discretion that could effectively eviscerate the constitutional guarantee of an independent Judicial Branch of the Federal Government.[118]

 

Again operating on the assumption that patent rights are private, such “evisceration” may, in fact, have already been the consequence, at least with respect to patents of invention, in MCM Portfolio LLC. v. Hewlett-Packard Co., where the Court of Appeals for the Federal Circuit recently held that “patent rights are public rights, and their validity susceptible to review by an administrative agency.”[119]  This conclusion was not based on Supreme Court precedent, but derived from earlier decisions only tangentially associated with Article III.  For example, according to the Federal Circuit, McCormick was limited to reissue proceedings, which held only that cancellation of a patent without surrender of the patent by the patent owner would be a deprivation of due process of law.[120]  From this holding, the Federal Circuit inferred that McCormick  “did not address Article III and certainly did not forbid Congress from granting the PTO the authority to correct or cancel an issued patent.”[121]  The Federal Circuit then drew from the Supreme Court’s decision in Thomas that Congress “may create a seemingly ‘private’ right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary.”[122]  The Supreme Court’s opinion in Stern was also quoted, stating that “public rights doctrine [can apply] to disputes between private parties” where “the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential….”[123]  The Federal Circuit deemed “the PTO, [to be] ‘an executive agency with specific authority and expertise’ in the patent law,” and stated that “[i]t would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.”[124]


The court in MCM also drew a parallel with reexamination proceedings, which are a statutory mechanism for examination of issued patents, and is available to “any person” at the Patent Office who can establish, on the basis of lack of novelty, under 35 U.S.C. § 102, or obviousness, under 35 U.S.C. § 103, a “substantial new question of patentability.”[125]  The Federal Circuit decisions of  Joy Technologies v. Manbeck[126] and Patlex Corp. v. Mossinghoff[127] were relied upon by the court in MCM as “controlling authority” for the proposition that inter partes review, like reexamination in Joy and Patlex, does not violate Article III because “the issuance of a valid patent is primarily a public concern and involves a ‘right that can only be conferred by the government’ even though validity is brought into question in disputes between private parties.”[128]  The Federal Circuit in Patlex based “favored treatment from the courts” for “curative statutes” on the Supreme Court decision of Graham & Foster v. Goodcell, which hinged legislative intervention to cure “mistake of officers purporting to administer the law in the name of the Government” on a “lack of substantial equity” in an “asserted vested right.”[129]    


Contrary to the contention of the Federal Circuit in MCM, the McCormick court did not imply the capacity of the PTO to “correct or cancel” a patent simply as a function of “statutory authorization.”[130]  Further, it would not make sense for the Court in McCormick, nor in American Bell for that matter, to do so because the result would leave the doctrine of separation of powers among the Legislative, Executive and Judicial Branches solely to the discretion of the Legislative Branch--a clear misunderstanding of this fundamental concept. 


It should also be noted that neither Thomas nor Stern involved the grant of patent rights and, therefore, did not recognize the well-established premise that a “patent is the highest evidence of title, and is conclusive as against the Government, and all claiming under junior patents or titles, until it is set aside or annulled by some judicial tribunal.”[131] While acknowledging that patents are “property,” and that patent owners have a 5th Amendment right to due process, Judge Newman in Patlex cited no Supreme Court authority for the proposition that patents are a “public right.”  Rather, only an “overriding public purpose” of “curative statutes” was invoked.[132]   Interestingly, the relevant legislative history of reexamination proceedings, as summarized by the Federal Circuit in Patlex, was viewed to be “‘an aid’ to the trial court ‘in making an informal decision on the patent’s validity,’”[133] not a court of appeal, such as the Federal Circuit.  Further, in contrast to Graham, where the issue centered on a Treasury Department error which the Court held could be corrected “without violating substantial equity,”[134] involuntary deprivation of granted patents by reexamination at the Patent Office would, arguably violate “substantial equity” inherent in the exclusionary right of a granted patent.[135]


Moreover, reexamination is conducted at the Patent Office according to “procedures established for initial examination.”[136]  Appeal from a decision by the PTAB is to the United States Court of Appeals for the Federal Circuit,[137] and in the absence of appeal the judgment of the PTAB is enforceable.  Therefore, contrary to the statement made by the Federal Circuit in Patlex, there is no “trial court” to be aided by reexamination, unless either the PTAB, which is part of the Patent Office under the Department of Commerce, or the Federal Circuit, which is a court of appeals, is to be so considered.  All of this mitigates against the “great weight” the Federal Circuit allotted to “enacting the reexamination law.”[138]


Overall, the Federal Circuit in MCM did not rely on Supreme Court authority for the assertion that patents of invention are “public rights.”  No such authority exists to-date.  Even Patlex and Joy, both of which are lower appeals court decisions, did not directly address the question of “public rights” in granted patents.  The court in Patlex instead opted for the “public purpose of the improved administration of law” without regard for the “vested right” that is linked to the “substantial equity” conferred by the grant of a patent.[139]  The court in Joy, in turn, perfunctorily demurred to Patlex as controlling authority.[140]

 

  1. The Relevance of Oil States’ Arguments Invoking the Seventh Amendment Right to Jury Trial if Patents are Public Rights

As summarized above, Oil States argued that, based on the Constitution’s adoption of English common law “‘preserving the right under the Seventh Amendment to jury trial as it existed in 1791’” and on historical precedent, determinations of patent validity are to be tried before a jury regardless of whether patents are considered to be private or public rights.[141]  This issue takes on added significance if  issued patents are found to be public rights by the Supreme Court in Oil States because adjudicative responsibility for deciding patent validity under an Article I court would then necessarily be subject to the possibility of an overriding Seventh Amendment right under common law to be “preserved” for jury trial.[142] 

Despite Greene’s dismissal of the “muddled history” of a right to jury trial, it is clear that, while determinations of patent validity were considered pursuant to a writ of scire facias in the Kings Privy Council, by 1789 such actions were being heard in the Court of Chancery, which had no provision for a jury.[143]  Nevertheless, it is error to conclude that, therefore, patent validity, as a matter of scire facias, was an issue of equity rather than common law, and not subject to jury trial.  Instead, as indicated by Lemley, “scire facias actions seem to have been part of the Chancery Court’s subsidiary common-law jurisdiction.” [144]  As also commented upon by Lemley, Chancery Court was known to “seek the advice of a jury in assessing the facts underlying a scire facias petition,” by having the “Lord Chancellor deliver the record to the King's Bench for a jury trial and return the verdict to the Chancellor for consideration and judgment.”[145]  Therefore, in the event that the Supreme Court holds issued patents to be “public rights,” there is substantial support for also holding that there is a common law tradition of judging patent validity by jury trial under the Seventh Amendment, at least where there are issues of fact. 

  1. Possible Results if Patents are Held to be Private Rights

Although unlikely, it is possible that the Supreme Court in Oil States may agree with Justice Scalia’s minority view in Thomas and Granfinanciera.  Specifically, the Court may hold that its own precedent in Thomas improperly broadened the “public rights doctrine” beyond “rights of the public – that is, rights pertaining to claims brought by or against the United States.”  If so, the Court may limit “public rights” suits to those where the government is a party.[146]  If Thomas is overturned in this respect, whereby the government must, by definition, be a party to adjudication of any such “rights of the public,” the “public rights doctrine” would not extend to “purely private federally created action[s],” such as disputes between private parties over the validity of granted patents.[147]  In turn, if the governement must be a party to a dispute involving “public rights,” then it would not matter whether IPRs, which do not include the government as a party, were part of a statutory right “so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary,” as was prescribed by the majority in Thomas.[148]  Instead, while an Article I tribunal, such as the Patent Trial and Appeal Board (PTAB) of the Patent Office, may operate, it would be able to do so only as an adjunct to a district court and only in an advisory capacity as to issues of fact.  Any finding by the Court in Oil States that IPRs are not valid under Article III, moreover, would likely implicate not just examination of “covered business methods,” post-grant reviews, and IPRs, but also interference proceedings (that revoke issued patents) and re-examination proceedings requested by third parties. 

  1. Conclusion

The Court in Stern did provide a narrow path for adjudication under Article I by expressly refraining from “any view on how the doctrine [of the public rights exception] might apply in a different context [than that of a state law counterclaim.]”[149]  However, and despite potentially relevant Supreme Court precedent in Thomas and Granfinanciera, the better view under the weight of Supreme Court precedent with respect to patent validity might be that determination of the validity of issued patents does not include the government as a party and, therefore, only private rights are involved.  If so, jurisdiction should be solely within Article III, which would preclude final determinations as they currently exist in statutory provisions for interference proceedings, re-examination, and post-issuance adjudication under the AIA.  Instead, any statutory provision for post-grant examination at the Patent Office should be limited to an advisory capacity as an adjunct to a federal district court as to issues of fact.  Further, any such factual determinations coming from the Patent Office should be subject to review for substantial evidence by the district court in order to pass constitutional muster under Article III.[150]
 

If issued patents are deemed to be “public rights” and IPRs are upheld as constitutionally valid, then there may be no limit to the power Congress can grant to the Patent Office over the validity of patents, potentially usurping any role for the judiciary in this regard under Article III.  Instead, patent rights should be considered private rights and, as a consequence, post-issuance examination by the Patent Office other than reissue (which requires voluntary surrender of the patent owner) or reexamination requested by the patentee, should be limited to fact-finding in an adjunct capacity reportable to a federal district court and subject to review for substantial evidence.

 

[1] Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (codified as 35 U.S.C.) [hereinafter AIA].   

[2] Oil States Energy Services LLC v. Greene’s Energy Group, LLC, 2015 WL 2089371, Pat. Tr. & App. Bd., Case IPR2014-00216 (May 1, 2015).

[3] Pub. L. No. 112-29, 125 Stat. 284 (codified in various sections of 28 and 35 U.S.C. (2012)).

[4] Greene’s Energy Group, LLC, Petitioner v. Oil States Energy Services, LLC, Patent Owner, 2015 WL 2089371 (Patent Tr. & Appeal Bd., May 1, 2015).

[5] Id.

[6] Oil States Energy Servs., LLC. v. Greene’s Energy Grp., LLC, (No. 2015-1855), 639 F. App’x. 639 (Fed. Cir. 2016) (mem.)

[7] See text at n.2, supra.  The other two questions were: 

Whether the amendment process implemented by the PTO in inter partes  review conflicts with this Court’s decision in Cuozzo Speed Technologies, LLC. v. Lee, 136 S. Ct. 2131 (2016), and congressional direction.

Whether the “broadest reasonable interpretation” of patent claims – upheld in Cuozzo for use in inter partes review – requires the application of traditional claim construction principles, including disclaimer by disparagement of prior art and reading claims in light of the patent’s specification.

[8] U.S. Const. art. I, (“The Congress shall have Power … [9] To constitute Tribunals inferior to the supreme Court….”).

[9] U.S. Const. art. III, § 2 (“The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, under their Authority …; -- to all cases of admiralty and maritime jurisdiction; to Controversies to which the United States shall be a Party….”).

[10] U.S. Const. Amend. VII (“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right by jury trial shall be preserved, and no fact trial by jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.”).

[11] Petitioner’s Brief at 22, 27.

[12] Id. at 27.

[13] Id. at 30.

[14] Id. (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1855)).

[15] Id. at 31.

[16] Id. at 32.

[17] Stern v. Marshall, 564 U.S. 462 (2011).

[18] Petitioner’s Brief at 33 (quoting Stern, 564 U.S. at 490).

[19] Id. (quoting Atlas Roofing Co. v. Occupational Safety & Health Review Comm’n, 430 U.S. 442, 450 (1977) and Stern, 564 U.S. at 490-491).

[20] Id. at 35 (quoting U.S. Const. art. III, § 2).

[21] Id.

[22] Stern at 490 (“The Court has continued, however, to limit the exception [of public rights] to cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.”).

[23] MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015). (“Congress created the PTO, an executive agency with specific authority and expertise in the patent law… and saw powerful reasons to utilize the expertise of the PTO for an important public purpose – to correct the agency’s own errors in issuing patents in the first place.” (quoting Kappos v. Hyatt, 566 U.S. 431, 132 S. Ct. 1690, 1696 (2012)).

[24] Petitioner’s Brief at 38. 

[25] Id.

[26] Id. at 43 (quoting Wellness Int’l Network v. Sharif, 135 S. Ct. 1932, 1945 (2015) (quoting Peretz v. United States, 501 U.S. 923, 937 (1991)).

[27] Id. at 44-45.

[28] Id. at 45.

[29] Id. at 47 (quoting Wellness Int’l, 135 S. Ct at 1944 (quoting Commodity Futures Comm’n v. Schor, 478 U.S. 833, 850 (1986)).

[30] Id. at 51 (quoting 21 Jac 1 c. 3 §2) (emphasis added).

[31] Id. at 54 (quoting Edward Coke Third Part Of The Institute Of The Laws Of England 182-83 (London, W. Clarke & Sons, 1809) (1644)).”

[32] Id. at 58 (quoting Stern, 564 U.S. 484).

[33] Respondent’s Brief at 12.

[34] Id. at 13.

[35] Id. at 16.

[36] Id.

[37] Id. at 17.

[38] Id.

[39] Id. at 24-26.

[40] Id. at 30 (quoting Teva Pharmaceuticals USA v. Sandoz, Inc., 135 S. Ct. 831, 848 (2015)).

[41] Id. at 28 (quoting Thomas v. Union Curbside Agric. Prods. Co., 473, U.S. 568, 586-587 (1985), noting Crowell v. Benson, 285 U.S. 22 (1932)).

[42] Id. at 51.

[43] Id. at 54.

[44] Federal Respondent’s Brief at 15.

[45] Id. at 16.

[46] Id.

[47] Id. at 18 (quoting McConnell, 157 Cong. Rec. at 13,042).

[48] Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 576 (1992)(emphasis original)).

[49] Id.

[50] Id. at 19, 21.

[51] Id. at 22.

[52] Id. at 23 (quoting MCM at 1291).

[53] Id. at 27.

[54] Id. at 28.

[55] Id. at 29.

[56] Id.

[57] Id. at 28.

[58] U.S. Const. Art. III, § 1.

[59] United States v. San Jacinto Tin Co., 125 U.S. 273, 279 (1888); see also McElrath v. United States, 102 U.S. 426, 440 (1880) (“The government cannot be sued, except with its own consent.”)

[60] U.S. Const. Art. I, § 8[9].

[61] Murray’s Lessee v. Hoboken Land & Imp. Co., 59 U.S. 272, 283-284 (1855) (emphasis added).

[62] Crowell v. Benson, 285 U.S. 22, 50 (1932) (citations omitted).

[63] Atlas Roofing Co. v. Occupational Safety and Health Rev. Comm’n., 430 U.S. 442, 450 n.7 (1977) (emphasis added).

[64] Northern Pipeline Const. Co. v. Marathon Pipeline, 458 U.S. 50, 78, 81 (1982) (citing Crowell, 285 U.S. at 51, 54).

[65] Id. at 85-86.

[66] See, for example, Commodity Futures Trading Comm’n. v. Schor, 478 U.S 833, 853 (1986) (“The legal rulings of the CFTC [Commodity Futures Trading Commission], like the legal determinations of the agency in Crowell, are subject to de novo review.”)

[67] Northern Pipeline, 458 U.S. at 65-67, (citations omitted.)

[68] Id. at 69. (quoting Ex parte Bakelite, 279 U.S. 438, 458 (1929)).

[69] Id. at 586 (“Insofar as appellees interpret that case Northern Pipeline and Crowell as establishing that the right to an Article III forum is absolute unless the Federal Government is a party of reward, we cannot agree.”).

[70] Thomas v. Union Carbide Agr. Products Co., 473. U.S. 568, 593-594 (1985) (emphasis added).

[71] Commodities Futures Trading Comm’n v. Schor, 478 U.S. at 850-851(emphasis added).

[72] Id.

[73] Id. at 851.

[74] Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 54 (1989) (quoting Thomas v. Union Carbide Agricultural Products, 473 U.S. at 586 (Brennan, J., concurring-in-judgment)).

[75] Id. at 66 (Scalia, J., concurring-in-part and concurring-in-judgment). 

[76] Id.

[77] Id. at 68 (Scalia, J., concurring-in-part and concurring in the judgment).

[78] Id.

[79] Id. at 69 (Scalia, J., concurring-in-part and concurring in the judgment) quoting Thomas, 473 U.S. at 593-594, quoting Northern Pipeline, 458 U.S. at 68.

[80] Id. (Scalia, J., concurring-in-part and concurring in the judgment).

[81] Id. at 70 (Scalia, J., concurring-in-part and concurring in the judgment) (quoting Schor, 478 U.S. at 851).

[82] Id. at 70 (Scalia, J., concurring-in-part and concurring in the judgment) (Referring to Justice O’Connor’s four factors recited in Schor.)

[83] Stern v. Marshall, 564 U.S. 464, 493 (2011).

[84] Id. at 503.

[85] Id. at 494.

[86] Id. at 504 (Scalia, J., concurring) (emphasis added).

[87] Id. at 504-505 (Scalia, J., concurring).

[88] McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, 609, 612 (1898).

[89] “Reissue” is a proceeding before the Patent Office that was originally established under the Patent Act of 1832, and is intended to correct patents that are considered wholly or partly invalid.  In the Patent Act of 1870, reissue required surrender of the original patent to take effect.  Chisum 15.02[5].

[90] McCormack, 169 U.S. at 610.

[91] 172 U.S. 576 (1899).

[92] Id. at 583 (emphasis added).

[93] 128 U.S. 315 (1888).

[94] Latin for “make known.”

[95] Id. at 362-363 (emphasis added).

[96] 168 U.S. 589 (1897).

[97] Id. at 593.

[98] Moore v. Robbins, 96 U.S. 530 (1877).

[99] Id. at 533-534 (emphasis added) (quoting U.S. v. Stone, 69 U.S. 525, 535 (1864)).

[100] U.S. v. American Bell, 128 U.S. at 358-359.

[101] Id. at 365.

[102] Id. at 367.

[103] MCM, 812 F.3d at 1290.

[104] See text supra at n. 64-68.

[105] Northern Pipeline, 458 U.S. at 85-86.

[106] Id. at 86 (citing Crowell v. Benson, 285 U.S. 22 (1932) and United States v. Raddatz, 447 U.S. 667 (1980).

[107] Id. at 83.

[108] 458 U.S. at 85.

[109] Id. at 83.

[110] Id. at 84.

[111] Id.

[112] Id.

[113] U.S. ConstArt. 1, § 8, cl. 8.

[114] Id. Northern, 458 U.S. at 84.

[115] Id.

[116] Id. at 85.

[117] Id.

[118] Id. at 74.

[119] MCM Portfolio LLC v. Hewlett-Packard Co, 812 F.3d 1284, 1293 (Fed. Cir. 2015). 

[120] Id. at 1289, citing McCormick, 169 U.S. at 612.  The court in MCM also cited American Bell as “noting lack of statutory authority for the Patent Office to cancel patents.” Id. citing American Bell, 128 U.S. at 364-365.   For example, as stated in American Bell at 364:  “The only authority competent to set a patent aside, or to annul it, or to correct it, for any reason whatsoever, is vested in the judicial department of the government, and this can only be effected by proper proceedings taken in the courts of the United States.”

[121] MCM, 812 F. 3d at 1290.

[122] Id. (quoting Thomas, 473 U.S. at 593-94) (emphasis added).

[123] Id. at 1290 (quoting Stern, 564 U.S. at 490).

[124] Id. at 1290-1291 (quoting Kappos v. Hyatt, 566 U.S. 431, 132 S.Ct. 1690, 1696 (2012)).

[125] 35 U.S.C. § 301.  After enactment of the AIA only ex parte reexamination is available.  From 1999 to 2011, another alternative, forum, inter partes reexamination, which allowed greater participation by third parties beyond petitioning for reexamination, was available under 35 U.S.C. § 311.  The AIA ended inter partes review (IPR).

[126] Joy Technologies v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992).

[127] Patlex Corp. v. Mossinghoff, 758 F.2d 595 (Fed. Cir. 1985).

[128] MCM, 812 F.3d at 1291 (quoting Joy 959 F.2d at 228 (quoting and citing Patlex, 758 F.2d at 604)).

[129]Patlex at 603 (quoting Graham & Foster v. Goodell, 282 U.S. 409, 429 (1931)).

[130] MCM at 1289.

[131] U.S. v. Stone, 69 U.S. 525, 535 (1864).

[132] Patlex, 758 F.2d at 603.  The court in Patlex quoted Graham & Foster as follows:

Where the asserted vested right, not being linked to any substantial equity, arises from the mistake of officers purporting to administer the law in the name of the Government, the legislature is not prevented from curing the defect in administration simply because the effect may be to destroy causes of action which would otherwise exist.

[133] Patlex, 758 F.2d. at 602 (quoting Sen. Bayh, Patent Reexamination Hearings on S. 1679 Before the Comm. on the Judiciary, 96th Cong., 1st Sess. (1979)) (emphasis added).

[134] Id. at 430.

[135] Mowry (1872), Stone (1864), and American Bell (1888) were all cases directed to validity of patents, either in land or of  invention, and were all brought in equity.  As stated by Lemley, “But when courts [in the United States], considered whether to invalidate a patent altogether during that period [before 1870], they did so at equity.”  As further stated by Lemley, “In 1938, law and equity were merged in the U.S. courts.  After 1938, patentees had no reason to prefer equity in law….  [However], jury trials [which were in law] remained uncommon for decades after the law of merger and equity.”  Lemley, Mark A., “Why Do Juries Decide If Patents are Valid,” 99 Va. L. Rev. 1673, 1700-01, 1704-05 (Dec. 2013).

[136] 35 U.S.C. § 305.

[137] 35 U.S.C. §§ 306, 141(b).

[138] Patlex, 758 F.2d at 603.

[139] See text at n. 128, supra.

[140] Joy, 959 F.2d at 229 (“Because Patlex is controlling authority and has not been impaired by either of the subsequent Supreme Court cases cited by Joy, we reject Joy’s attack on that decision.”)

[141] Petitioner Brief at 50-51 (quoting Curtis v. Loether, 415 U.S. 189, 193 (1974)).  (“No less than wrongfully usurping the role guaranteed to federal courts by Article III, inter partes review also usurps the role guaranteed to juries under the Seventh Amendment.”). 

[142] See, e.g., Baltimore & Carolina Line v. Redman, 295 U.S. 654, 657 (1935) (“The right of trial by jury thus preserved is the right which existed under the English common law when the Amendment was adopted.”)

[143] See, e.g. Lemley at 1684.

[144] Id. at n. 44, citing Theodore F.T. Plucknett, A Concise History of the Common Law 392 n. 3 (5th ed. 1956) (“There seem no grounds for the suggestion that there is anything ‘equitable’ about scire facias.”)

[145] Id. at 1685.

[146] Granfinanciera, 492 U.S. at 68. (Scalia, J., concurring-in-part and concurring-in-judgment).

[147] Id. at 69 (“We thus  held in Thomas, for the first time, that a purely private federally-created action did not require Article III courts.”)  (Scalia, J., concurring-in-part and concurring-in-judgment.

[148] Thomas, 473 U.S. at 594.

[149] See text supra at n. 84.

[150] This paper is not the first suggestion of such a change.  Similar proposals have been made, for example, in the dissenting opinion by Justice Burger in Northern Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982), which stated: 

The problems arising from today’s judgment [in bankruptcy adjudication] can be resolved by providing that ancillary common law action, such as the one involved in these cases, be routed to the United States district court of which the bankruptcy court is an adjunct.

(Burger, J., dissenting). 

Even more pertinent is Michael Rothwell’s proposal: 

The structural fix is straightforward.  USPTO invalidity determinations [under inter partes review] are recalibrated so as to receive federal district court enforcement, where questions of law are reviewed de novo and questions of fact are reviewed for substantial evidence.

Michael I. Rothwell, After MCM, a Second Look:  Article I Invalidation of Issued Patents For Intellectual Property Still Likely Unconstitutional After Stern v. Marshall, 18 N.C.J.L. & Tech. 1, 37 (2017).

 

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