Oil States v Greene’s Energy, 584 U.S. ___ (2018), just decided that patents are a public right, a franchise right, akin to a right to erect a toll bridge, and not personal property (slip op. at 9). Therefore inter partes reviews (IPRs) do not violate Article III or the Seventh Amendment. Although most practitioners were hoping that Oil States would rule widely on the constitutionality of the PTAB, the issues raised–and the issues decided on–are narrow.
What was unfortunately never addressed in Oil States, and which the court specifically left the door open for, was that patents rights are still property rights for the purpose of Due Process–the inference being that IPRs may fail under the Due Process or Takings Clause. Indeed the court seemed to lament that Oil States did not challenge the retroactive application of IPRs and their constitutional sufficiency on a broader basis. From the court:
We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only… Moreover, we address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter parties review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for the purpose of the Due Process Clause or the Takings Clause. (pg 16-17, emphasis added)
That sounds like the type of language that a reluctant Justice would have required before joining the majority. As it is, the majority opinion only garnered seven out of nine votes.
Even though the ruling is that patents are a franchise for the purpose of Article III, they are still a property right for the purpose of Due Process. The court seems to be asking that Oil States or another patent holder challenge the due process of the matter. If so, we believe such a challenge would garner more votes, perhaps even a majority. A good basis would be Mathews v. Eldridge, 424 U.S. 319 (1976).
The Mathews v. Eldridge test involves the constitutional sufficiency of administrative procedures prior to the termination of rights and requires consideration of three factors: (1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and probable value, if any, of additional procedural safeguards; and (3) the Government’s interest, including the fiscal and administrative burdens that the additional or substitute procedures would entail.
Looking to those three factors, IPRs are quite vulnerable to constitutional challenge.
Factor 1), the private interest that will be affected by the official action
The private interest is an invention. This runs the spectrum from the inane to the world changing. In order to acquire a patent, a company or individual must undertake a process where they disclose their secret information to the public, and undertake an arduous process. Justice Gorsuch in the Oil State’s dissent quotes it as “maybe $30,000.00 and two years,” (pg 1), though that could be called optimistic. Sometimes it is much longer and at much greater cost. Even that assumes success. There is a large risk that after the invention is disclosed, it will be deemed an obvious combination or an unpatentable abstract concept.
Factor 2), the risk of an erroneous deprivation of such interest through the procedures used, and probable value, if any, of additional procedural safeguards
The Supreme Court has already remarked that it is highly unusual that a right can be subject to two different outcomes using two different administrative bodies. The less rigorous PTAB standard has a now infamous tendency of invalidating patents. As of September 2017, in instituted cases, 81% of patents have at least some of the claims invalidated, and 65% are held completely invalid. Over 15% of patents have had multiple petitioners, sometimes as many as nine. Keep in mind that these are patents that were already granted in a multi-year process, which is why they have historically been deserving of a presumption of validity.
Conflicting findings between courts and the PTAB on the same patents, and the less rigorous PTAB standard, suggest there is a significant risk of erroneous deprivation of patent rights in IPRs.
While additional procedural safeguards may be imminent and valuable, they may or may not be sufficient for Due Process. The PTO has thus far been reluctant to embrace such safeguards.
Looking only to some of the statutory requirements of §316 that the PTAB did not even honor, there are:
- The right of a patent holder to amend claims. This is so obviously beneficial that it is included in the statute as right but was not honored by the PTAB. See Aqua Products.
(316(d) AMENDMENT OF THE PATENT.— (1) IN GENERAL.—During an inter partes review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of the following ways: (A) Cancel any challenged patent claim. (B) For each challenged claim, propose a reasonable number of substitute claims.
- The issuance of a final decision on all claims challenged. The PTAB has thus far not issued final decisions on all the claims challenged, exposing a patent holder to repeated attempts to strip patent rights in the same administrative process. This safeguard is also required by statute but not followed by PTAB. See SAS.
318. Decision of the Board — (a) FINAL WRITTEN DECISION.—If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d).
In addition, there has been a disturbing stacking of the judges in the PTAB to influence the outcome of a case. This is one of the points that Justice Gorsuch warns about in his Oil States dissent:
“The Director of the Patent Office is a political appointee who serves at the pleasure of the President. He supervises and pays the Board members responsible for deciding patent disputes. The Director is allowed to select which of these members, and how many of them, will hear any particular patent challenge. If they (somehow) reach a result he does not like, the Director can add more members to the panel—including himself—and order the case reheard. Nor has the Director proven bashful about asserting these statutory powers to secure the ‘policy judgments’ he seeks.” (pg 3)
Factor 3) the Government’s interest, including the fiscal and administrative burdens that the additional or substitute procedures would entail
It is hard to imagine that procedures written into the statute constitute undue fiscal or administrative burdens for the Government. Nor are safeguards against conflicts of interest in stacking a panel. It is also worth remembering that the patent office is a revenue-generating agency and employs over 12,000 people. It clearly has the budget and manpower for additional or substitute procedures.
Although factor 3 can be read to cover primarily fiscal burdens, it is worth first mentioning the intangible Government interest involved. The entire patent system is in place to aid in the promotion of the useful arts. A strong patent system is synonymous with investment and promotion in new technologies. Time and again it has been shown that weak patent rights result in underdeveloped industries, even when the abridgment of the patent rights were intended actually to aid the industry incumbents. Although not always intuitive, a strong patent rights system is a public good. Therefore the Government’s interest is no less than the promotion of innovation itself.
In conclusion, inter partes review may still be held unconstitutional when it is challenged under the three-prong Mathews v. Eldridge test. The majority opinion in Oil States explicitly left room for just such an outcome.
Join the Discussion
34 comments so far.
AnonApril 27, 2018 06:15 pm
Thomas dicta won’t hold up – heck, even holdings do not hold up, seeing as the Court’s 101 jurisprudence simply is not reconcilable with itself (and one reason why the otherwise respectable Paul Cole goes off the deep end every time he tries to puff up the respectability of the Court).
As to the severability clause, at one point in time I was certain that an amendment to add the clause was defeated. Such an event would dictate that no severability was intended, and indeed, under that situation, all one would need is to blow one Constitutional hole in the bulkhead below the waterline and the entire ship would go down.
As I mentioned, that may still be the case – but the call is much more involved without that factoid.
EGApril 27, 2018 01:49 pm
Fair enough on the “severability clause” question, and I’ve got no “historical” data, be it legislative intent or otherwise to say one way or the other. But if there is no “severability clause” in the AIA, one must still wonder why not? And my point that we need to test the majority’s statement about “retroactive application” to pre-AIA patents at face value still stands to confirm whether or not they meant or is this just more “marlarkey” like patent rights are equivalent to a “public franchise” (I still cringe at that characterization
AnonApril 27, 2018 12:36 pm
I have backed off of the severability clause position as I have not been able to find in the record the rejection of an amendment adding such a clause, and there exists enough “grey zone” absent such that an argument could be made for either direction.
If you happen to locate that historical item, please share it!
EGApril 27, 2018 11:26 am
I don’t disagree that the majority’s choice of “public franchise” is abysmal and hypocritical, given that it’s contrary to their own SCOTUS precedent, as well as the express words of 35 USC 261 (but as you and I know that hasn’t stopped the Royal Nine in the past). But until the majority’s statement about “retroactive application” to pre-AIA patents is tested at face value, how will we ever know?
Also, if you want to possibly get some leverage with Congress about fixing this mess that SCOTUS has created in Oil States, tell them that if we blow a whole in IPRs on “retroactive application,” you might lose the whole AIA (Abominable Inane Act) because you deliberately decided not to include a “severability clause.” In other words Congress, if you want to play “hardball,” we can too.
AnonApril 27, 2018 11:05 am
crossed in passing – EG, your note at 28 SHOWS that pre-AIA “franchise” treatment WOULD STILL BE ALLOWED – the Court sua sponte should have recognized a fundamental infirmity, and should not have attempted to “scriven” around it to reach a desired Ends,
AnonApril 27, 2018 11:03 am
Your “ploy” would only work if patents were not deemed to be “Franchises.”
Sorry, but the Thomas’ dicta would only apply to “true” property rights, since it is only through “true” property rights that any other Constitutional protections TO property would flow through.
There is no such thing as a “hybrid” – such is undefined in law, and it is NOT up to the Supreme Court to create a law that creates (and yet does not define) such an animal.
Put it this way: if patents are not personal property (FOR ANY REASON), then THAT aspect (whatever reason is fabricated) can ALSO serve as the “connection” to do whatever it is that is being done currently for the “franchise” effect.
It is an alarming display of LACK of Constitutional understanding by the Supreme Court that “permits” a (new) bifurcated understanding here.
EGApril 27, 2018 11:01 am
“Given some of the CAFC cancellation of claims and large awards to pre-AIA patents, it is hard to believe that this hasn’t been raised already in a cert petition.”
Thanks for the kind words. What’s really shocking is that Oil States (whose patent is pre-AIA) didn’t push hard for this “retroactive application” aspect as a potential “fall back” position. If pre-AIA patents are deemed to be immune to attack through IPRs, the current scope of IPRs would be much more limited, as are CBM proceedings are currently.
Night WriterApril 27, 2018 10:42 am
That is a good point that if pre-AIA patents are not subject to IPRs, then it would for some time cripple the IPR cancellation machine.
Given some of the CAFC cancellation of claims and large awards to pre-AIA patents, it is hard to believe that this hasn’t been raised already in a cert petition .
EGApril 27, 2018 10:38 am
After the getting past the “doom and gloom” feeling of this past Tuesday, the “retroactive application” of IPRs aspect that the majority opinion left open has lots of legs for challenging the constitutionality of IPRs for any patent having an effective filing date prior to March 16, 2013. That aspect likely came from Justice Kennedy who asked Oil States’ advocate during oral argument whether Congress could shorten the term of a granted patent to 10 years. Even Kennedy realized you can’t “change the rules” on patent rights retroactively and survive a 5th Amendment “due process” and “takings clause” challenge. (Unfortunately, that advocate stumbled in answering incorrectly that Congress could with respect to existing patent rights.)
Given that the large majority of currently granted patents are pre-AIA (i.e., have effective filing dates prior to March 16, 2013), a ruling that IPRs cannot be constitutionally used to adjudicate those pre-AIA patents might well pull the props out from under IPRs as the preferred “patent killing field,” at least for the foreseeable future. It might also get Congress to reconsider whether IPRs are really cost effective, given the resources that would have be expended for a procedure that would currently have limited applicability.
AnonApril 27, 2018 07:37 am
angry dude @ 23,
Alas, my comment does include the notion that sanity prevails.
It may be a while.
Heck, with Congress so interested in political sides and corporate voices screaming and controlling both sides, it may be a very long while.
On the other hand, stomping on the gas pedal and devastating the patent system as constructed by the Supreme Court may very well what is needed for Congress to finally wake up and take the critical step of exercising their own Constitutional power of jurisdiction stripping of the non-original jurisdiction of patent appeals from the Supreme Court.
And a train wreck is what we have (on that note, my own emotions reflect your moniker).
angry dudeApril 26, 2018 10:21 pm
(Frito walking through Costco) Yeah, I know this place pretty good. I went to law school here.
angry dudeApril 26, 2018 09:59 pm
“the dicta of Thomas will not – and cannot – survive”
Sure it can and most likely will – this is USA circa 2018 after all
it’s not “Idiocracy” yet but getting there…
AnonApril 26, 2018 09:35 pm
IR, – the dicta of Thomas will not – and cannot – survive.
Invention RightsApril 26, 2018 04:45 pm
I think it is terrible Anon. It is what Justice Thomas says it is. What I want and what has been settled are very different.
He said it is both a franchise and a property right.
Misconstruing the claims is a legally permissible approach to revoke the franchise. That does not get the infringer off the hook for infringing the properly construed claims while the franchise was in effect.
AnonApril 26, 2018 04:33 pm
IR – you are – quite simply – utterly mistaken** in every aspect of thinking that what the PTAB can do (with the “franchise right” – which SWALLOWS whole any semblance of remaining property right).
It’s as if you are trying to say that the IPR regime is “not so bad.”
You have not made a single cogent remark in support of that premise.
**and void ab initio is exactly what the PTAB is doing. You should get at least that correct.
Invention RightsApril 26, 2018 11:16 am
“Should never have issued” is not a legal term, though the AIA drafters and patent bar love that malleable approach – it keeps the parties chasing the carrot at the end of the stick.
The legal term is void ab initio. That authority the PTAB does not have. (notwithstanding a single split panel decision in 2013 which this SCOTUS would be unlikely to affirm).
angry dudeApril 26, 2018 11:07 am
Jimmy Niles @15
Dude, stop thinking about this or your head will explode
Meaningless mumbo jumbo words concocted by ignorant and/or corrupt old critters wearing black robes
Many of scotus decisions contradict each other and US Constitution and simply can’t be reconciled
A judicial farce – that’s all it is
To the morgue !
Night WriterApril 26, 2018 11:07 am
>>you are still entitled to the tolls owed by the users of the bridge while you were legally operating it.
Ahhh, there is the rub. In the case of the toll bridge the IPR would determine that your right to operate the toll bridge should never have been issued and therefore you have no right to previous tolls.
Invention RightsApril 26, 2018 11:03 am
If you are bestowed the privilege by our gracious rulers to operate a toll bridge and one day it is cancelled – say you forget to bow when Silicon Valley elites pass by – you are still entitled to the tolls owed by the users of the bridge while you were legally operating it.
Jimmy NilesApril 26, 2018 10:55 am
So this question is more geared toward the legal experts to answer, as a Pro Se inventor, it’s tough cramming all the patent legal language which I understand the courts seem to look at the meaning of every word which is a little confusing to me.
Going back over 200 years to the first patent act and coming forward, I’m seeing the wording “all action” or “any matter” “controversies” related to patent are handled within the court system. I know that when new patent laws are enacted, congress does a markup on the language and deletes, adds, etc. wording and paragraphs to let the public know what has changed.
The problem I have (or question), is I’m not finding anything in any patent acts that have deleted those sections. I found the patent act where IPR is shown but I don’t see anything that has deleted the previous court action within a patent act/law.
Patent Act 1790-SEC 2
…specification shall be filed in the office of the said Secretary, and certified copies thereof, shall be competent evidence in all courts and before all jurisdictions, where any matter or thing, touching or concerning such patent, right, or privilege, shall come in question…
Patent Act 1836-SEC 17
…That all actions, suits, controversies, and cases arising under any law of the United States, granting or confirming to inventors the exclusive right to their inventions or discoveries, shall be originally cognizable, as well in equity as at law, by the circuit courts of the United States, or any district court having the powers and jurisdiction of a circuit court…
Patent Act 1870-SEC 55
…That all actions, suits, controversies, and cases arising under the patent laws of the United States shall be originally cognizable, as well in equity as at law, by the circuit courts of the United States, or any district court having the powers and jurisdiction of a circuit court, or by the supreme court of the District of Columbia, or of any Territory; and the court shall have power, upon bill in equity filed by any party aggrieved, to grant injunctions according to the course and principles of courts of equity, to prevent the violation of any right secured by patent, on such terms as the court may deem reasonable…
Invention RightsApril 26, 2018 10:44 am
A patent is a temporally limited property right, according to the Oil States dicta. Congress has determined the nominal term of a patent to be 20 years from filing. Under AIA as interpreted by SCOTUS the term can be foreshortened to something less than that.
All patent property rights wink in and out of existence. Now some wink faster than others.
There is no way the Executuve branch can annihilate the property right ab initio, especially under this Oil States ruling. That may be the effect, but the infringer is going to have to convince the district court that thr PTAB findings establish a defense under 282. It is not automatic.
In particular if the PTAB applied BRI and denied discovery then the patent owner will have his claim for damages for the period the patent was in force.
Patentability is not the same thing as validity. The PTAB determines patentability. The courts determine validity.
angry dudeApril 26, 2018 10:09 am
Mark Graham @11
“Institution of IPRs was clearly one of those instances in which Congress was unwittingly misled…”
Stop playing an idiot here, OK ?
AIA was drafted in SV corporate boardrooms and passed by their paid lackeys in US congress and WH
From day one it worked exactly as intended by SV oligopoly. Period.
Anon2April 26, 2018 08:52 am
Mark GrahamApril 26, 2018 08:32 am
This whole thing has regrettably mushroomed into a “wicked problem.”
The unfortunate AIA spawned a hydra in the form of IPR proceedings and the associated nonsensical disharmony of materially different patent claim construction standards employed by the non-Article III-empowered PTAB and the Article III-empowered district courts with respect to the same claims of the same issued US patents. How many more millions of dollars and untold human resources will continue to be poured into this ongoing ultra vires activity in the PTAB?
Institution of IPRs was clearly one of those instances in which Congress was unwittingly misled into turning the gun against itself (and the “people” it represents) in derogation of what used to be the finest system of patent laws and procedures the world has ever known. It needs to be undone.
We all need to calm down, and learn to more powerfully resist the temptation to fix what is not actually broken, just because people criticize how it is functioning. So much criticism of the federal court system’s handing of patent cases arises from erroneous and/or agenda-driven perceptions. Legitimate criticisms tend to get lost in the “noise,” which has become deafening.
The simple fact of the matter is that once a US patent is issued, the USPTO has done its job. Sure, some patents are going to be found to be flawed, but that does not warrant trying to turn the USPTO into its own self-correcting judicial body. We all know that never can work. But it does not need to.
Let the USPTO do its job. And let the federal court system do its job of adjudicating matters of patent infringement/validity and fashioning appropriate remedies. Let’s stop trying to meld them together. They are immiscible.
Night WriterApril 26, 2018 08:13 am
@8 >> For that period, the infringer will have to make his defense under §282 in a real court.
What about IPRs and PGRs? Why can’t they use those?
AnonApril 26, 2018 08:10 am
Whatever you think that you are describing – that “winking” in and out of existence at the whim of he executive branch is NOT a property.
Invention RightsApril 26, 2018 01:31 am
The authors missed the the open door. @Taking? has inadvertently stumbled upon it. Oil States holds that the Executive branch can grant a “franchise” and can later revoke it. What happens in the interim? In the interim it is a property right – clear as can be according to this decision. During the period between the grant and the revocation the inventor enjoys his exclusive right. For that period, the infringer will have to make his defense under §282 in a real court.
Eric BerendApril 25, 2018 08:44 pm
At this stage of affairs, one would be hard-put to find a sacrificial lamb for that quixotic venture. The matter deserves to be heard and adjudicated, of course; however, who among the dismayed and nearly destroyed ‘inventor class’ in the United States, has the temperament and wherewithal required to carry forth prosecution of such a case?
Nay: the whole realm is now the sport of the new kings, the digerati elite and their corrupt sycophants. Let one of that ilk, see if there can be something of interest for The New Tech Corp Gods, if by chance this issue should somehow arise in one of their cosseted and judicially predetermined decisions.
Us “mere mortal” inventors, need not apply. That is, if any of us even considers the whole stinking giant racket, a veritable shooting gallery of inventors at infringers’ every whim and behest, to be worth trying that approach.
Once again, it is the inventors who are expected to be harmed and choked to death, while attorneys sit back and hypothesize about potential case issues their colleagues work just as earnestly to promote lies and distortions of facts and interpretations for the sake of.
Thus, the carousel of exploitation spins ’round and ’round, again and again, viciously; even when the inventors are already pounded to such oblivion that they might as well be entirely underground. Some used to recognize ‘beating a dead horse4’, when they would see it.
At this point, the magnitude of pile-on against inventors has reached a maniacal level. Hysteria abounds, the SCOTUS cannot even cite nor understand its own references and precedents for the sake of wholly unwarranted deference to “amici curae”, and systemic confidence and competency is at an all-time low.
As I have advocated for the past two years plus: it will have to be attorneys to help turn the tide, if that is even pissblesome core group or association of you attorneys, to have a chance to redress these gross imbalances and constraints,
Night WriterApril 25, 2018 08:28 pm
>> Nor has Oil States raised a due process challenge
So what. There is no chance that a due process challenge would work. Maybe the argument that patent was granted before the AIA would work. Might. I’d have to see the case law on what is now a public right (which pretty much means the government can adjust the right or remove it anytime they feel like it.)
Night WriterApril 25, 2018 08:22 pm
Taking? >>The determination of invalidity is a determination that there was no valid patent claim ab initio and thus no property to being with.
Try again. This is absurd.
IPdudeApril 25, 2018 07:16 pm
While I can see how you can infer that from the opinion (seems glaringly obvious and seemingly asking for someone to make another challenge), this Court has proven to be very hostile to patents and small business. Unless Citizens United is overturned, and it will not, the corporations (namely big tech) run this country by way of our legislative and judiciary branches (Google previously also controlled Obama). I am an entrepreneur and inventor with over ten patents but will not invest another dollar in a patent application, it is worth nothing. Gene correctly pointed out that the new normal is trade secrets. Goodbye patents and all the money I invested.
ValuationguyApril 25, 2018 03:16 pm
Considering the specific line of questioning at orals made by Kagan….I would put her and Kennedy as the primary targets of this part of the decision….kinda of a passing comment to help cement their very reluctant support for the currently unbalanced (and due process lacking) IPR process.
Taking?April 25, 2018 02:54 pm
I see a problem with the taking argument. The invalidation of a patent claim is not actually taking property away from someone. The determination of invalidity is a determination that there was no valid patent claim ab initio and thus no property to being with.
The taking claim would actually work in reverse. An invalid patent claim takes a process, machine, manufacture, or composition of matter that was in the public domain away from each citizen and gives it to the “patentee”. Actually, the USPTO should pay each citizen for taking from the public domain.
AAA JJApril 25, 2018 02:49 pm