SCOTUS Upholds Constitutionality Of System To Challenge Bad Patents

Why should a government agency not be able to correct its own mistakes?

This week, SCOTUS released opinions in two patent cases involving inter partes review. As I noted in this blog post on Oil States Energy v. Greene’s Energy Group, an attack on the inter partes review system would make it more difficult to challenge bad patents, strengthen patent trolls, and ultimately harm innovation. Luckily, seven justices agreed that the inter partes review system is constitutional, upholding the portion of the America Invents Act that allows the U.S. Patent and Trademark Office (USPTO) to correct mistakes when it has erroneously granted a patent.

Under the inter partes review system, a challenger can ask the Patent Trial and Appeal Board (PTAB) to revoke a patent, if it should never have granted in the first place because one or more claims failed the standards for novelty or nonobviousness. Inter partes review provides an important safeguard in a patent system in which the USPTO is overwhelmed with applications and patent examiners are pressured to quickly determine patent eligibility. The USPTO receives more than 600,000 patent applications a year and some estimates suggest that 70 percent of examiners have less time than necessary to perform a complete examination. While a better system would provide patent examiners with sufficient time and resources to thoroughly examine a patent application, inter partes review provides an opportunity to challenge erroneously granted patents. Without the inter partes system, dubious patents would be less likely to be challenged because of the high expenses and resources needed to litigate the patent through the traditional court systems.

Although the inter partes review system is designed to protect the public, making it easier to challenge bad patents, this process is not without safeguards to protect the patent holder in the inter partes review system: 1) once a petition is filed, the patent holder can file a preliminary response objecting to the review; 2) the Director of the USPTO must determine the challenger has a reasonable likelihood of success before allowing inter partes review to go forward; 3) the petitioner has the burden of proof by a preponderance of the evidence; 4) the patent holder can voluntarily cancel or amend the claims; and 5) the decision is reviewable by the Court of Appeals for the Federal Circuit.

Justice Thomas, writing for the seven-justice majority, notes the distinction between a public right and private right, finding that because a patent is a public right, the USPTO can reconsider a grant of that public right. Thomas concedes that the Supreme Court’s precedent on the public rights doctrine has “not been entirely consistent,” but states that inter partes review squarely falls within this doctrine. The parties did not dispute that the granting of a patent involves public rights, and “inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration.” Thomas notes:

Inter partes review involves the same basic matter as the grant of a patent. So it, too, falls on the public-rights side of the line . . . [and] inter partes review involves the same interests as the determination to grant a patent in the first instance. The primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued. But that distinction does not make a difference here.

The majority opinion seems to follow a certain logic: patents or a public right and the agency granting that right can reconsider its decision and revoke it through an administrative procedure. The agency is simply correcting a mistake that it has made in the process of granting the patent. Thomas is careful to note the narrowness of the holding, pointing out that the decision does not address whether infringement actions can be heard in a non-Article III court, nor does it address the due process or takings clause.

Justice Gorsuch dissents, joined by Chief Justice Roberts. Gorsuch criticizes the inter partes review system, asserting that only through an Article III court can a patent holder have a fair and independent hearing because of the involvement of the Director of the USPTO, a political appointee.

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Gorsuch’s dissent seems to rely heavily on the theory that the ownership of real property is the equivalent of ownership over intellectual property, at least as a policy matter. There are many critics of the term “intellectual property” for this very reason: there is a bias in the term “property.” Analogizing real property with intellectual property ignores fundamental differences between the two. One is rival in consumption — the use of real property can deprive another person of that use — whereas one is non-rival in consumption — the borrowing or use of intellectual property does not diminish its supply. Real property ownership is typically for an indefinite period of time; I own my car and it continues to be mine until I sell, give, or donate it to someone else. Patents, by contrast, are a right granted by the government as a limited time monopoly, the term of which is set by statute and will expire. Patents, like other forms of intellectual property, are a form of ownership granted solely by law.

These important distinctions between intellectual property and real property are precisely why Gorsuch’s analogies to land are a fallacy. Gorsuch asserts that “[u]ntil recently, most everyone considered an issued patent a personal right—no less than a home or farm—that the federal government could revoke only with the concurrence of independent judges.” But a patent is not comparable to a home or a farm, not only because patents are poor analogies for real property. Gorsuch’s opinion doesn’t seem to properly acknowledge the role the government plays in granting the public right of the patent. Why should the government agency — which is granted with the competence to determine whether an application for a patent is valid in the first place — not be able to correct its own mistakes?


Krista L. Cox is a policy attorney who has spent her career working for non-profit organizations and associations. She has expertise in copyright, patent, and intellectual property enforcement law, as well as international trade. She currently works for a non-profit member association advocating for balanced copyright. You can reach her at kristay@gmail.com.

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