Is a Patent a Private or Public Right? -- Supreme Court Hears Oral Arguments in Oil States Energy Services, LLC. v. Greene's Energy Group, LLC

By Andrew Williams --

Leading up to the Supreme Court oral argument for Oil States Energy Services, LLC. v. Greene's Energy Group, LLC on November 27, 2017, there was a lot of discussion regarding whether patents were a private or public right.  Of course, that question is relevant to whether the Patent Office as an administrative agency can be given the authority to cancel a patent after it has issued, or whether the Constitution requires that the validity of an issued patent be determined by an Article III court.  If patents are indeed private rights, then IPRs and related proceedings are likely unconstitutional grants of authority to the executive branch from Congress.  As we had been reporting for the weeks leading up to the argument, the arguments that patents are private rights appear to be grounded in what the Supreme Court said in the 1898 case McCormick Harvesting Machine v. Aultman, 169 U.S. 606 (1898).  We presented an analysis of that case and concluded that the language in McCormick Harvesting can be used to support both interpretations, whether alleging that the case refines the Constitutional limits of Congress with regard to issued patent rights, or whether alleging that McCormick Harvesting rests solely on the lack of statutory authority at the time.  That post generated a lot of debate, with many well-reasoned (and much appreciated) viewpoints.  Did the Justices see McCormick Harvesting to be as clear-cut as some of the comments to our post suggested it was?  Justice Gorsuch certainly thought that McCormick Harvesting already settled the issue.  But many of the other Justices that asked questions on this topic did not seem to share this view.  If the questions that the Justices asked are any indication, it seems unlikely that a majority will find IPR proceedings per se unconstitutional.  Instead, if the Supreme Court finds any fault with the current system, it will likely base that on due process considerations.

The position of Justice Gorsuch seemed clear from his questions.  In his first statement on the issue, addressed to Allyson N. Ho, counsel for petitioner, Justice Gorsuch indicated that he believed this issue had already been addressed by McCormick Harvesting and related cases:

JUSTICE GORSUCH:  Ms. -- Ms. Ho, we have a number of cases that have arguably addressed this issue already, like McCormick, for example, in which this Court said 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.  We have cases -- and American Bell is another one.  We have that wonderful quote from Justice Story indicating that any correction to a patent has to go to a court.

Justice Gorsuch then appeared to deride the position of the United States by stating:  "The United States takes the position, as I understand it, that some of those decisions are purely statutory interpretation."  Interestingly, Petitioner, while arguing that McCormick Harvesting was decided on constitutional grounds, did not rest its case solely on the private-right notion that a grant of authority to the Patent Office to cancel an issued patent would always be unconstitutional.  This did not appear to sit well with Justice Gorsuch:

JUSTICE GORSUCH:  Why not -- why not, though, Ms. Ho, just simply say the question is whether there's a private right involved?  In answering Justice Kagan's questions and Justice Breyer's questions, you struggled with how much of an adjudication does an inquisitorial process have to have before it becomes an adjudication.  Why does that matter at all?

If -- if you really want to stake your ground and think McCormick's right, why not just say any time a private right is taken by anyone, it has to be through an Article III forum?

Of course, Petitioner likely took the more moderate position because such a stance will likely be necessary for Oil States to convince enough of the Justice to decide the case in its favor.  In other words, it would be surprising if Justice Gorsuch does not side for Petitioner in this case, but whether he will be writing a concurrence or a dissent will likely turn on whether enough Justices believe that there are due process concerns with the current state of IPR proceedings.  The problem that Petitioner found itself in, as referenced by Justice Gorsuch, is that it took the position that ex parte reexaminations are constitutional, but that IPRs are not.  Justice Kagan took great interest in this distinction:

JUSTICE KAGAN:  Can -- can I take you back to this question of where you would draw the line -­

HO:  Yes.

JUSTICE KAGAN:  -- between ex parte and inter partes reexamination on the one hand and this?  Because, as I understand what you would permit, those proceedings too can be initiated by a third party -- you know, can be at the request of a third party, and -- and those -- in those proceedings too, the third party can participate in some way, can file a reply to the patentee's statement, can make known its views.

So what's the line?  Where would you -- what are the procedures that are here that you think make this essentially adjudicatory that are not in those other proceedings?

In an effort to draw more support, Petitioner may have created a distinction to which no real difference is found.  Ms. Ho responded to Justice Kagan's questioning by stating:  "Yes.  I think -- I think certainly the existence of -- of discovery, of a hearing, all of these things show that what you have here is -- is trial -- is trial-like."  Unless Justice Kagan finds this response satisfactory, she may find that Petitioner's entire argument has essentially unraveled.

Justice Ginsburg also noted the concession by Petitioner, but was clearly in support of it:

JUSTICE GINSBURG:  I think Ms. Ho conceded that there can be an examination -­ reexamination.  Some of the questions raised in the last few minutes suggest that no -- no reexamination, it's a private right, it can't be taken away.

But Ms. Ho, I think, wisely, recognized that the reexamination procedure between the government is okay.  But -- but the problem here is it looks too much like a court proceeding.

Christopher M. Kise, counsel for Respondent, responded to Justice Ginsberg's observation by agreeing that the issue had already been conceded by Petitioner, turning this into a process question, not a power issue:

KISE:  May I respond, Mr. Chief Justice?

Justice Ginsburg, what you're hearing from the Petitioner is a process versus power argument.  The quarrel is with the process.  The Petitioner has conceded that the power exists, the power of revocation, even though there are -- there are citations in the brief that -- that make that argument seem -- their argument inconsistent, this is a process versus power argument.

With regard to the questioning from Justice Sotomayor, she appeared to agree with Justice Gorsuch that the private-right argument should foreclose the constitutionality of any post-issuance "correction" procedure at the Patent Office:

JUSTICE SOTOMAYOR:  If this is a private right, as you claim, what does it matter in terms of whether the process is adjudicatory or not?

If I own something, which is what your basic position, I understand, is, that this is a personal right, how can a government agency take that right away without due process of law at all?  Isn't that the whole idea of Article III, that only a court can adjudicate that issue?

Nevertheless, Justice Sotomayor did not think that the holding in McCormick Harvesting was so clearly constitutional.

JUSTICE SOTOMAYOR:  Ms. Ho, I'm sorry, I thought in McCormick, that -- why did the Court even bother looking at the statute?  What it did, I understood, was look at the statute and say the statute basically defines the issue of a new patent being issued as one -- before the old patent expires.

And so they were really doing a statutory analysis of whether or not, by that process, the old patent was expired, and they were saying, no, if you want it to expire now, you have to go to court, because there's no statutory authority for doing it currently.

So I'm not quite sure how -- how you get to the constitutional holding.

As previously suggested, based on the questioning and statements of the Justices (including those provided above), this case will likely not turn on the public versus private right issue, but rather whether there is a due process concern with the current framework for IPR proceedings.  We will address that line of questioning from the Justices in an upcoming post.

Comments

[skeptical]

On another blog, Ron Katznelson dismantles the fallacy that "patents as public rights" can be defended in McCormick.

See http://www.ipwatchdog.com/2017/11/30/patent-bargain-fiction-administrative-error-correction-inter-partes-reviews/

[EG]

" We presented an analysis of that case and concluded that the language in McCormick Harvesting can be used to support both interpretations, whether alleging that the case refines the Constitutional limits of Congress with regard to issued patent rights, or whether alleging that McCormick Harvesting rests solely on the lack of statutory authority at the time."

Hey Andrew,

Sigh, with all due respect, McCormick Harvesting is not only controlling in Oil States but clearly bases its holding on the constitutional (Article III) ground that it "would be in fact an invasion of the judicial branch of the government by the executive." Gorsuch clearly understands that (two big thumbs up the new Associate Justice). For the other Justices not to understand that simply undermines the meaning of stare decisis, although Our Judicial Mount Olympus seems feel free to do so in the patent law arean, as evidenced by Alice which in no way comports with Diehr. Ron Katznelson, who's logic on this issue is impeccable, has made that clear on your earlier post, and his article posted yesterday on IPWatchdog is must reading, including by at least 8 Justices of SCOTUS.

[Andrew Williams]

Dear EG and Skeptical,

I first want to thank you both for commenting, and for pointing me to Ron’s blog post and article. EG – I sense you are getting frustrated. I want to be clear that I am not advocating for either position in any of these posts about the Oil States case – I have been attempting to understand why people on both sides of the issue (and people I respect) are so sure they are correct. So far, as I hope I have made clear, I think there are good (and bad arguments) on both sides. Clearly Justice Gorsuch sides with the private-rights camp, and Justice Sotomayor thinks McCormick Harvesting was not a constitutional case. I do agree with Justices Gorsuch, Sotomayor, and Ginsberg that if patents are a private right such that IPRs are unconstitutional, than reexams should be also.

With regard to Ron’s blog post and article, I did find it very interesting. However, I found his use of the word “rights” to not be as rigorous as it should have been, and I think this distracts from his conclusion. The term “right” has many meanings, but from what I learned in law school, for every legal right there is a correlative legal duty. Therefore, if I have a property right in my patent, there is a correlative duty not to infringe that property right. And, of course, that property right is not a right to use, but instead a right to exclude. In other words, a patent does not give me a right to do anything, it gives me the right to keep others from practicing the invention. This is no clearer than in the pharmaceutical space – a drug composition-of-matter patent without FDA approval does not give me the “right” to gives me no right to sell my invention.

My difficulty with Ron’s post and article are best exemplified with this paragraph:

“Before the patent issuance, from the moment of first possession and reduction to practice of a patentable invention, the inventor in fact has an exclusive right to the invention. Indeed, exclusivity nominally begins even before an application for patent is filed. This is because a patentable invention is novel and non-obvious to the world; it would not have been previously known or available to the public and the inventor could have kept it secret to himself and therefore necessarily would have remained the exclusive user to exploit the invention, at least for a while. However, although the inventor created the exclusive right, that right would not have remained secure. Enter Congress.”

It is true that an invention is “exclusive” while it is a trade secret, but what is the “right”? And what is, or who has, the “duty” to allow you to have that right. Until a patent issues, there is no “right” in the invention to exclude others from practicing it (notwithstanding provisional rights for published application, which only become effective once the patent issues anyway). There is simply no correlative duty to such a “right.”

Again, with that said, I’m not saying Ron’s ultimate conclusion is wrong. To the contrary, I think his arguments are compelling (and I am going to continue to mull this over). And the use of the term “right” has likely changed since the founding of the country. However, I think Ron’s ultimate conclusion is somewhat clouded by his lack of rigor in the use of the word “right,” at least with regard to current understanding.

In conclusion, I want to reiterate that I appreciate your comments and that I find this discussion very interesting (and a nice change of pace from subject-matter eligibility and the like).

Andrew

[skeptical]

Andrew,

The term you may be looking for is "inchoate right."

This is part and parcel of the fact that the patent bargain - the Quid Pro Quo - is an exchange between TWO parties, and not some one-sided "license"

[MaxDrei]

Ron states:

"Before the patent issuance, from the moment of first possession and reduction to practice of a patentable invention, the inventor in fact has an exclusive right to the invention"

I agree with Andrew, that the use in this sentence of "right" is dubious. It is not clear to me what Ron means by "right to the invention". Ownership? Right to practice the invention? Right to publish?

In a lottery, as soon as the tickets go on sale, I have an inchoate "right" to the prize money. To make my right real, all I need to do is purchase the winning ticket. In patents, the "right" is the right to exclude, and that doesn't arrive till the day the patent issues.

But, in any case, some inventors are employees, paid to invent, and never possess or enjoy any "right to the invention" which they just conceived.

[Ron Katznelson]

Andrew, MaxDrei,
Good comments about “right,” which deserve clarification.
The inventor’s exclusive right to the invention prior to patent issuance is tangible and can remain exclusive by the “correlative duty” of the inventor to himself not to disclose it to others. Another “correlative duty” is also upon a second party to refrain from using force, for example, to extract from the inventor against his will a disclosure of the invention so as to enable that party to exploit it. These are clearly non-trivial “correlative duties” that preserve the exclusive use of the invention by the inventor.

This is a “right” because it can be denied of others: for example, when the second party acquires a compound from the inventor that was produced by the secret inventive process and asks the inventor to disclose the inventive process so he may use it, the inventor can refuse by saying “you do not have a right to use my process – only I have that right.” And that statement of the allocation of the right is about a well-defined term.

More importantly, regardless of how one defines this term, it is a “right” because without it, Congress cannot *create on its own* the exclusive patent right; “the patentee receives nothing from the law which he did not have before.” Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 510 (1917). Thus, unlike rights originating in Congress such as social security entitlements, rights to compensation for injury during employment, or grant of land the government owns, the government or the public do not *originate*, and therefore have no public claim over, the patented technology that was created from start to finish by private labor. Therefore the “public right” exception that narrowly applies to some of the Congress-originated rights does not apply to the private patent right.

To be sure, securitization of private property historically depended heavily on legislative enactments to flesh out the various rights of acquisition, transfer, and avoidance of trespass. Those requirements often include filing applications or registration with the government. To accept the underlying theory of the IPR as adjudicating “public right” is to make any property that is protected by a system of application or registration—which is virtually all real and intellectual property—a federal resource rather than a private resource.

[Ron Katznelson]

Andrew,
I appreciate your consideration of arguments on both sides, leading to your acceptance “that the language in McCormick Harvesting can be used to support both interpretations.” I wonder if you would still hold this view were one of the “good arguments” predicated on fictional account of McCormick.

Such is Justice Sotomayor’s explanation of McCormick, stating that it is “saying, no, if you want it to expire now, you have to go to court, because there's no statutory authority for doing it currently. So I'm not quite sure how -- how you get to the constitutional holding.”

It is fictional because of what Justice Sotomayor contends McCormick does not say as well as what it does say. I can find nowhere in McCormick where it says anything to the effect of, or like: “you have to go to court, because there's no statutory authority for doing it currently.” Can you quote a citation to it? And what Justice Sotomayor contends is lacking in McCormick, cannot be missed: it "would be in fact an invasion of the judicial branch of the government by the executive." – a purely Constitutional argument.

[skeptical]

MaxDrei,

Your comment of "In a lottery, as soon as the tickets go on sale, I have an inchoate "right" to the prize money." is not even close to reality.

You confuse merely the ability to buy a ticket with the actuality that an inventor HAS invented.

Your last paragraph does NOT represent the understanding under the US Sovereign, and I recommend that you read again the Stanford v Roche case.

As I stated - the concept that should be on the table here is "inchoate right." MaxDrei's comment is NOT to what an inchoate right means. His "Euro" view is explicitly what this Sovereign had deliberately sought to NOT have in place when this Sovereign contemplated and created the Patent right.

[MaxDrei]

The inventor has a "correlative duty", to himself, not to disclose the invention to others? This proves that the inventor enjoys a "right" in the invention, even from the moment of its conception?

If you say so, Ron. But it does seem to me all a bit contrived. I'm curious whether Andrew takes the trouble to reply.

[Skeptical]

MaxDrei,

It is not a surprise at all (given the predilections that attach to your stated views concerning what you think an inchoate right is) that you would find our Sovereign's decisions to be "a bit contrived."

May I suggest that you do not attempt to use your "Euro glasses" to view this issue, and instead, seek to understand the US perspective and what "inchoate right" actually means? It certainly does NOT mean what you posted above.

[Andrew Williams]

Again, thank you all for the continued conversation, and for a relatively civil discussion of the issue.

Skeptical – yes, I had “inchoate right” in mind (but I was avoiding using another technical legal term). The issue is that, by definition, an inchoate right has not yet matured. Of course, this plays into the “securing” argument presented by Ron, which is an interesting take on the wording of the constitution. Nevertheless, until the patent issues, the inventor or its assignees have no actual property right in the invention (so I still think this part of the argument is problematic). But I agree that the lottery ticket analogy doesn’t seem to fit.

Ron – I am still having problems with accepting that an inventor has a legal right in its invention. In essence, your position is that there is a legal right in a trade secret. The problem is that no one has a legal duty to not practice your undisclosed invention. You may have protections via a NDA or the like, but nothing is going to protect such a “right” from independent and/or simultaneous invention. Also, I don’t think you are quoting Motion Pictures correctly – the entire sentence you quoted cite is: “It has long been settled that the patentee receives nothing from the law which he did not have before, and that the only effect of his patent is to restrain others from manufacturing, using, or selling that which he has invented.” This is true – as we have discussed, a patent does not give you the right to affirmatively do anything, all it does is give you the right to stop other people from using your invention during the period of exclusive use. So, for example, a patentee does not receive the right to sell a drug because it received a COM patent, but it can restrain use of that drug with the patent. Finally, McCormick was about the current reissue statute, and how it differed from the former one. As such, of course the Court was dealing with whether there was statutory authority to revoke a patent – which there was not. Without that statutory authority, the Court was considering whether the patent office could nonetheless cancel the issued claims – which we all agree that it could not (and I think we all agree it could not because of the constitutional concerns of the separation of the branches). What is unresolved in the case is whether the same constitutional concern would have existed if the patent office did have statutory authority. I still believe that the language you quote from McCormick can be used to justify either interpretation (as I have explained in previous posts and comments). With all of that said, I think your argument and paper are compelling (notwithstanding my reservations about the “rights” issue).

MaxDrei – it is no trouble for me to respond – although sometimes it doesn’t happen (or doesn’t happen as fast as I would like) because other duties get in the way. Thanks for your viewpoint also. In general I agree with your comments. I do think the lottery ticket example doesn’t work well. Also, I believe that an inventor-employee in the U.S. does have a right in his/her invention, but they also have the ability to assign away that right. But otherwise, I think we are looking at the Oil States problem in a similar fashion.

Thanks again all.

Andrew

[MaxDrei]

Thanks Andrew. Yes, of course the lottery ticket analogy is not perfect. But if you look up "inchoate" in the dictionary and give it a broad interpretation, it does. I suggested lottery tickets to force more focus on what "right" means, and what "inchoate" means in the context of an invention, like Dolland's, that is for the time being, kept within the inventor's closet.

You write two sentences that look to me like they contradict each other. First you write "Ron, I still.....". Later you write "I believe that an employee inventor....does have a right". Or is there no contradiction?

[Skeptical]

Andrew,

I had to chuckle at your comment of "(but I was avoiding using another technical legal term)."

I am reminded of the Einstein quote: "Everything should be made as simple as possible, but not simpler."

The point remains: the fact of the matter is that the US Sovereign set-up for patents is premised on the Lockean concept of inventions as being something created by - and thus owned - by the individual (whether one likes it or not). One CANNOT make the discussion simpler as one then removes a foundational view of the US patent system.

NOT recognizing the role of the inchoate right - and everything that THAT means - is trying to be TOO "simpler."

I will offer that this foundational view is NOT shared by the "Euro" view; hence, it is no surprise at all that MaxDrei's contributions fall short in this critical context.

[maxdrei]

Why should something I create be "thus" (ie inevitably) owned by me. If I'm working in a branch of McDonalds,for example, and in response to a customer order create a brand new thing, piece of property, namely a Big Mac with (though I say it myself) particularly tastefully and artistically arranged components in between its bun halves, when did I ever "own" that piece of property?

Or is an "invention" that I create incomparable with a hamburger that I just conceived in my mind's eye and with my own hands just reduced to practice.

Still, this "thus" line of thought might help to explain the problematic contrary thinking, between the USA and the rest of the Member States of the Paris Convention, on what is the foundation of the Paris "right of priority".

BTW, the notion of an "inchoate" right to a patent is even more characteristic of ROW's First to File patent system than it is of a FtInvent system. In the moment of filing a the PTO, it's only a matter of time before the inchoate rights in any new, enabled and non-obvious subject matter content of your filing, created by the act of filing, mature into enforceability.

[Skeptical]

MaxDrei,

The inchoate right is NOT created by "filing it." (far too much "state" interaction in your views).

You continue to show a complete lack of appreciation for the concept.

Perhaps you can venture into some of the classics (like Locke).