Supreme Court, Patent Saviors?

The Supreme Court just agreed to decide a profoundly important question in patent law right now.

Supreme Court of the United States SCOTUS at sunsetOn its face, the question of whether a patent is the property of its inventor seems a simple one. If queried, we would assume that the average person would assume that since the patent is issued in the name of its inventor(s), it is the private property of those inventor(s) to do with as they see fit. Indeed, there is a robust, if somewhat depressed due to the current pressure on the value of patents, market in this country for the sale, licensing, and enforcement of patents. We see that patents are treated as private property, at least with respect to how they are used by their putative owners to generate revenue, or as defensive measures against allegations of infringement lodged by others.

IP lawyers and those familiar with the Constitution know that patents are referenced in Article 1, Section 8 of the United States Constitution, which provides Congress with the right to pass laws granting “inventors… the exclusive right to their… discoveries.” While there is some dispute on this point, the prevailing sentiment at the time of the Constitution’s drafting was apparently that patents were common law rights granted to “inventors” — and that the patent itself was considered the inventor’s private property.

In that vein, the Supreme Court itself recognized, way back in the 1856 decision Brown v. Duchesne, that “by the laws of the United States, the rights of a party under a patent are his private property.” At the same time, it has always been the case that patents are issued in this country by an executive agency, the United States Patent & Trademark Office (USPTO). And the current position of the USPTO, as espoused in its opposition to a recent certiorari petition before the Supreme Court, is that patents are not private rights but rather are “quintessential public rights.”

Seems like we have a conflict, doesn’t it? On one side are those who view patents as private property, and on the other is the USPTO’s position that patents are public rights, granted by the USPTO pursuant to its statutory authority.

Why is this seemingly abstract exercise in labeling “rights” so important, and why do I expect this debate to garner more attention in the months ahead? The answer lies in the Supreme Court’s decision to grant certiorari in the case that the USPTO put the opposition brief containing the “public rights” quote in, Oil States Energy Services LLC, v. Greene’s Energy Group, LLC. According to the Supreme Court’s June 12, 2017 Order List, the Court will address Question 1 of Oil States’ certiorari petition, which asks: “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.” It is hard to think of a more momentous question in patent law right now, and the Supreme Court’s upcoming decision could have serious economic ramifications across numerous industries — especially if the inter partes review (IPR) process is ruled unconstitutional.

Let’s boil things down. We know that the USPTO has the exclusive authority to grant patents. Under the current IPR regime, administrative law judges in the USPTO also have the right to cancel issued patents — to the great joy of many existing patent lawsuit defendants, who much prefer the IPR process to defending themselves before a judge and jury in U.S. District Court. But one’s sides joy is the other’s dismay, and many patent owners have seen what they consider their property taken away from them by the same agency that granted them those rights in the first place — rights they obtained at great cost, in terms of legal and filing fees, not to mention ongoing maintenance fees. They argue that revoking someone’s patent actually requires adjudication before an Article III court, and that patent owners are entitled under the Seventh Amendment to have juries make factual findings as part of those proceedings. In contrast, those favoring the current IPR system, the USPTO included, think that just as the agency has the right to issue patents, so should it have the ability to review — and potentially even overturn — the decision to grant a patent in the first place.

It is hard to overstate the importance of the case, considering how the IPR system has completely changed the practice of patent law — and more importantly, public conception of the value of patents. In some respects, the Supreme Court’s decision to investigate the constitutionality of the IPR system is not surprising, especially in light of a recent decision by the Federal Circuit not to consider the issue en banc. Since there were strong dissents by several judges who recommended that the en banc Federal Circuit decide what they thought was a pivotal and timely issue, the Supreme Court can rightly point to an existing “circuit split” (of the intra-circuit variety, which is what we get with the Federal Circuit’s exclusive jurisdiction over patent matters) that calls for higher court review and adjudication.

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What can we expect in the time that the case is pending before the Supreme Court? A lot of punditry on how the case might go, of course. But also litigants who seek to use the pending Supreme Court ruling as a means of delaying (or perhaps accelerating) their pending cases. Smart patent lawyers will explore any possible angle to benefit their clients while the Supreme Court does its work. While I don’t want to speculate on the outcome, I must admit my first thought was to recall that as recently as 2011 the Supreme Court (in i4i v. Microsoft) took a strong stance in favor of patent validity, by upholding the presumption of validity that attaches to patents by virtue of our expectation that the USPTO does its job well when it issues patents. I question, based on that case, whether the current Court will be as sanguine about leaving the IPR system in place, considering it is in tension with the presumption of validity the Court just recently endorsed. We will see.

Ultimately, there are definitely segments of the patent community who may feel a bit blindsided by the decision to grant certiorari, and it will take some time for the interim consequences of the Supreme Court’s action to play out. But there is no doubt that this is an explosive issue, and the ultimate decision will have serious economic ramifications for the country. We will either have a system where patent rights are considered public and under the IPR system in a state of perpetual flux, or where patents are considered private property, which can be taken from owners only through an Article III court proceeding.

Over the past decade, the Supreme Court has often been criticized for its patent decisions, especially by those who are in favor of strong patent rights. It is too early to predict how this new case will go, but there is no doubt that if the Supreme Court strikes down the IPR system, those former critics would probably salute them as patent saviors. Those who have benefited from IPR’s, however, will be praying for a different sort of salvation — maintenance of the status quo.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Earlier: 3 Things To Watch For Post-TC Heartland

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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique. The firm’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.