Supreme Court Preview -- Oil States Energy Services, LLC v. Greene's Energy Group, LLC

By Andrew Williams --

On November 27, 2017, the Supreme Court will hear arguments in two cases that were ultimately appealed from IPR Final Written Decisions issued by the PTAB.  The first of these, Oil States Energy Services, LLC v. Greene's Energy Group, LLC, will analyze whether IPRs (and presumably other post-issuance proceedings) are constitutional.  Specifically, the sole question to be considered by the Court is:

1.  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.

This case was appealed from a Federal Circuit Rule 36 affirmance, so there is no appellate decision for the Supreme Court to reference.  However, as we reported at the time, the Federal Circuit did previously consider this constitutional issue in MCM Portfolio LLC v. Hewlett-Packard Co.  In that case, a three-judge panel concluded that because patents are public rights and "the grant of a patent is primarily a public concern," Congress was able to create administrative procedures for assessing their validity.  The outcome was similar to that in the Patlex Corp. v. Mossinghoff case, in which the Court had determined that patents were primarily a public concern, and correspondingly ex parte reexaminations did not violate Article III of the constitution.  Nevertheless, not everyone agrees that patents are public rights, and this case will likely turn on whether the Supreme Court instead determines that issued patents are private rights that can only be reviewed in Article III courts.  And what will be the outcome?  On the one hand, it is not often that the Supreme Court affirms the Federal Circuit, which would suggest the Court will find the proceedings unconstitutional.  But it is also difficult imagining this Court taking a decidedly pro-patent position by dismantling the very post-issuance procedures that are responsible for invalidating large numbers of allegedly "bad" patents.  Perhaps the oral argument will provide some clarity.

The MCM Portfolio case may have been the last time the Federal Circuit spoke on the constitutionality issue, but various judges expressed their opinions in concurrences and dissents to a denial of a petition for initial hearing en banc.  In Cascades Projection LLC v. Epson America, Inc., the Appellant had sought initial en banc review on the constitutionality issue because it believed that the MCM Portfolio case would be controlling on any other panel.  Judge Newman concurred because even though she believed that the issue should ultimately be decided by the en banc Court, it would benefit from full consideration by another panel.  Judge Dyk, author of the MCM Portfolio opinion, joined by the other two members of the panel (Chief Judge Prost and Judge Hughes), wrote in support of the denial because he believed the prior case was correctly decided (naturally), and wrote to address issues raised by the dissents.  Judge O'Malley dissented without expressing any definitive opinion on the merits.  Instead, she thought it was far from certain that patent rights are public rights, and therefore this issue deserved the attention of the full court.  Finally, Judge Reyna provided a well-reasoned dissent advocating strongly for unconstitutionality.  First, he believed that the Supreme Court precedent was clear that only Article III courts had the authority to set aside or annul a patent right.  Second, he found the MCM Portfolio and Patlex Corp. decisions to be inconsistent and irreconcilable.  Finally, he believed that separation of powers needs to be addressed, adding that the Court "should consider the constraints Article III imposes on the adjudication of patent rights by administrative authority."  Of course, all of these opinions will be moot once the Supreme Court decides the present case.

Ultimately, this case may come down to how the Court understands the 1898 case of McCormick Harvesting Machine v. Aultman.  In that case, the patentee had sought the add claims via reissuance.  However, the Examiner found that at least some of the issued claims were invalid and sought to revoke the patent right.  The Supreme Court at the time determined that the Patent Office did not have the authority to do so:

It has been settled by repeated decisions of this court that when a patent has received the signature of the secretary of the interior, countersigned by the commissioner of patents, and has had affixed to it the seal of the patent office, it has passed beyond the control and jurisdiction of that office, and is not subject to be revoked or canceled by the president, or any other officer of the government.  It has become the property of the patentee, and as such is entitled to the same legal protection as other property.

The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.

Moreover, the Court stated that "to attempt to cancel a patent upon an application for reissue when the first patent is considered invalid by the examiner would be to deprive the applicant of his property without due process of law, and would be in fact an invasion of the judicial branch of the government by the executive."  The Petitioner in the present case, as well as others that believe IPRs are unconstitutional, has taken the position that the statements in McCormick suggest that Congress could not establish any statutory process capable of cancelling or revoking patents once issued by the Office.  On the other hand, Respondent Greene's Energy and the Federal Respondent, as well many others arguing for the persistence of IPRs, point out that Congress had not provided the Patent Office with the ability to revoke patents.  As a result, the holding in that case turned on a lack of statutory authority, not constitutional authority.  In addition, due process can be satisfied (according to this position) by the administrative proceedings, especially because there is the opportunity for appellate review by an Article III court.  Interestingly, the McCormick case does not mention or invoke the constitution per se.  Nevertheless, it does invoke due process concerns, and many of the cases it cited dealt with the constitutionality of property rights.  Cynically, it would seem that the Supreme Court could defensibly adopt either position.  Indeed, there are commentators that have noted that this case might be more about the Court's desire to make a pronouncement about the administrative state rather than its desire to control abuses by the Patent Office.

There was significant amicus support for both parties, as well as briefs filed in support of neither party.  In the days leading to the argument, we will highlight some of the arguments made.  Below is a listing of the filed briefs in the case, as well as links to copies of the briefs (copies of most briefs made available by the American Bar Association)

Merits Briefs

Brief of Petitioner Oil States Energy Services, LLC

Brief of Respondent Greene's Energy Group, LLC

Brief of Federal Respondent

Amicus briefs in support of Petitioner

Brief of 27 Law Professors

Brief of AbbVie, Inc. et al.

Brief of Alliacense Limited LLC

Brief of Biotechnology Innovation Organization (BIO) et al.

Brief of Cato Institute and American Conservative Union Foundation

Brief of Eagle Forum Education & Legal Defense Fund

Brief of Evolutionary Intelligence LLC

Brief of Gary Lauder et al.

Brief of IEEE - USA

Brief of InterDigital, Inc. et al.

Brief of J. Kenneth Blackwell et al.

Brief of LiquidPower Specialty Products Inc.

Brief of Pacific Legal Foundation et al.

Brief of the Pharmaceutical Research and Manufacturers of America

Brief of Professor Dmitry Karshtedt

Brief of Professor James W. Ely, Jr. et al.

Brief of Security People, Inc.

Brief of Thirty-Nine Affected Patent Owners

Brief of Unisone Strategic IP, Inc.

Brief of University of New Mexico

Brief of US Inventor, Inc. et al.

Amicus briefs in support of Respondent

Brief of 72 Professors of Intellectual Property Law

Brief of AARP and AARP Foundation

Brief of Act I The App Association

Brief of Alliance of Automobile Manufacturers

Brief of America's Health Insurance Plans

Brief of Apple Inc.

Brief of Arris Group, Inc. et al.

Brief of Askeladden LLC

Brief of BSA I The Software Alliance

Brief of Dell Inc. et al.

Brief of General Electric Company

Brief of Initiative for Medicines, Access & Knowledge (I-MAK)

Brief of Intel et al.

Brief of Internet Association et al.

Brief of Knowledge Ecology International

Brief of Mylan Pharmaceuticals Inc.

Brief of Professors of Administrative Law et al.

Brief of Public Knowledge et al.

Brief of Professor Lee A. Hollaar

Brief of Retail Litigation Center, Inc. et al.

Brief of SAP America et al.

Brief of Taiwan Semiconductor Manufacturing Co., Ltd.

Brief of U.S. Golf Manufacturers Council

Brief of Unified Patents Inc.

Brief of Volkswagen Group of America

Amicus briefs in support of neither party

Brief of 3M Company et al.

Brief of American Intellectual Property Law Association

Brief of Association for Accessible Medicines

Brief of the Association of Amicus Counsel

Brief of Boston Patent Law Association (BPLA)

Brief of The Civil Jury Project at New York University School of Law

Brief of H. Tomás Gómez-Arostegui and Sean Bottomley

Brief of Houston Intellectual Property Law Association

Brief of Intellectual Property Law Association of Chicago

Brief of Intellectual Property Owners Association

Brief of The Patent Trial and Appeal Board Bar Association

Brief of Shire Pharmaceuticals, LLC

Comments

[EG]

Hey Michael,

For all those who believe SCOTUS will uphold IPRs constitutional in Oil States, I ask these two questions: (1) how do you address the SCOTUS holding in McCormick Harvesting that says only an Article III court can invalidate an issued patent?; and (2) does 35 USC 261 mean what it says and says what it means (i.e., patents are “personal property”)? In particular, for those who believe that the holding in McCormick Harvesting wasn't based on constitutional "due process" and separation of powers grounds, the very words you've quoted from that case completely belie that belief.

[EG]

Hey Andrew,

My apologies, I should have addressed my comment to you, not Michael.

[MaxDrei]

Back in 1898, the time of McCormick, had the Congress by then set up any sort of post-issue review by the Patent Office?

I thought not. In which case, it was a fact that the only way, back then, to get a duly issued patent cancelled was by the courts. So the McCormick court was quite right, back then, to declare:

"The only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent."

But things have changed since then, right?

The patents clause gives the Congress the power to regulate patent law, right. And regulate it they have, right. On many occasions since 1898.

So I guess Ned Heller is right, that it all comes down to the 18th century in England, and the activities of the Privy Council.

Fascinating. Popcorn please.

[EG]

"But things have changed since then, right?"

Wrong, MaxDrei. Like I suggested above, read the language quoted by Andrew from McCormick Harvesting. SCOTUS in that case clearly stated that only an Article III court could adjudicate validity, both as a "due process" issue under the 5th Amendment, as well as a separation of powers issue. The meaning of the express language in our Constitution does not change over time, no matter what certain SCOTUS justices may (wrongly) believe.

[skeptical]

MaxDrei,

I am sure that you have seen the reasoning on other blogs. Even Cognress, being the correct branch of the government to write (or change) the statutory law that is patent law may not do so in a vacuum.

Not everything written by Congress survives Constitutional scrutiny (witness the recent Slants case in the domain of trademark law).

The item under question here is whether or not patents are property.

Patents start out as inchoate property rights of the inventor. The inchoate right becomes a full legal property right at the time of grant. Once that point is reached, other Constitutional protections of property kick in.

One should (really, must) remember that our sovereign started with a deep aversion to the government dipping in and taking personal property (due in no small part to the Crown's insistence on doing that very thing in a number of ways).

ANY post-grant changes to law are suspect, and thus must pass scrutiny. The idea that Congress may do something - purely as a legislative issue outside the purview of a Constitutional scrutiny is a fallacy. NOT EVEN the new presence of the "statutory authority" saves THAT authority from scrutiny.

This very much is similar to admonitions provided elsewhere: the right questions must be asked. Often previously, parties were asking if the PTAB could do this or that under the AIA. Such were wrong questions, as it was clear that under the AIA, the PTAB was following what Congress provided. The right question was whether or not Congress could provide that in the first place. THAT is the thrust here in Oil States.

Sadly, some still want to think of this as NOT a Constitutional issue, and think that if they label this a "statutory" issue, then everything is fine.

This is merely trying to make the question into the wrong question (again). FOCUS is needed to keep the issues clearly in the spotlight. And that spotlight is not whether or not the PTAB is doing what Congress has provided, and instead is very much MAY Congress itself provide what it has attempted to provide.

[Paul F. Morgan]

Thanks Mr. Williams for a thorough and balanced summary. [Including your noting the interesting fact that the old Sup. Ct. McCormick decision does not specifically mention or invoke any specific provisions of the Constitution.]
P.S. EG, quoting only a part of 35 USC 261 rather than the whole statutory provision is not the kind of argument that the Supremes will like.

[EG]

Hey Paul M.,

You (and others) can believe what you/they will about what McCormick Harvesting says-the express language quoted by Andrew from that case clearly says the Article III issue is a Constitutional one, not a statutory one as you and other seem to believe.

I also take great umbrage at your comment about "quoting only a part of 35 USC 261 rather than the whole statutory provision." The "part" I refer to says that patents are "personal property"-in what way does the other unquoted "part" not say that? None of the arguments I've seen so far about that unquoted "part" are in anyway persuasive to me and others that patent rights are anything other than "personal property" which is subject to "due process" under the 5th Amendment. And I frankly don't care that it may "not [be] the kind of argument the Supremes like." When I see Our Judicial Mount Olympus twist the express language of the patent statutes to mean something that they're not (i.e., in 35 USC 101), I'm also am frankly not impressed.

[Jack Russo]

When one reads all the briefs (50+ hours) what becomes clear is this: historical law supports patent owners and the AIA should have given patent owners who lose in the PTAB some type of "de novo" right to a trial by jury but with the "kicker" that special FRCP Rule 68-type fee shifting consequences would result from another loss there. Seventh Amendment would be protected and respected and only the most persistent litigants with the most valuable patents would likely exercise those rights after losing in the PTAB. Perhaps this is the coming amendment that must occur through Congress -- not SCOTUS, right? (smile) ps. Does In re Micron "set the stage" for what may now happen?

[MaxDrei]

I haven't read all the Briefs, no.

But if I read the 5th amendment right, it speaks of "private" property. To my mind, an issued US patent is the very antithesis of private. Its very existence is to enable the entire world to put an invention into effect.

Now, in McCormick, the Decision referred to "personal" property. There are intellectual property rights in an issued US patent, for sure, invented by The Congress and bestowed exclusively on the patent owner by the USPTO. So of course the owner of the patent has, in the patent, some "personal property". But is that enough to settle it, that any "property" in the patent that its owner enjoys for the time being is "private property" within the meaning of the 5th Amendment? What is "personal" and what is "private" are, generally, not the same. Must they be taken, here, as identical in scope?

[skeptical]

MaxDrei,

I am not sure that you are looking at the word "private" in the proper context.

As used here, it is NOT to be confused with the notion of "behind closed doors."

You further stray away from the recognized legal meaning with your comment of "What is "personal" and what is "private" are, generally, not the same." Where did you develop that notion?

[MaxDrei]

Where? The dictionary. The two words are not synonyms. I have been supposing that the writers of the Constitution chose their words carefully. If they wrote "private", they meant "private" and not "personal". "Personal property. Keep out. Trespassers will be prosecuted" Something not quite right there, surely.

Now you tell me that the "legal meaning" of "private" in the 5th Amendment is "recognised". But given the present referral to the Supreme Court, it looks to me like it is still not free from ambiguity.

[skeptical]

It does not have the ambiguity that you wish to inject with some reference to a standard dictionary.

Are you no the one that oft uses the phrase "with a mind willing to understand?" It appears that you are doing the opposite with an attempt to not recognize the context here.

[Skeptical]

"The two words are not synonyms."

Actually, according to a quick google search and Thesaurus.com, Synonym.com, Oxford Dictionary and Merriam-Webster.com, they ARE synonyms.

So you are incorrect both in context and otherwise.