Supreme Court to Decide Whether Inter Partes Review Is Unconstitutional

Supreme Court at Night

Can the Supreme Court eliminate Inter Partes Review and destroy the patent killing machine that is, quite ironically, run by the same agency that gives them life?

 

by: Dominion Harbor Staff | June 12, 2017

This week, the Supreme Court agreed to review, and potentially overturn, lower court decisions upholding the Inter Partes Review procedures of the America Invents Act, in a petition filed by Oil States Energy Services.

The petition concludes, quite concisely, that “[t]he Constitution prohibits inter parties review.” The two grounds on which Oil States bases its argument include the Seventh Amendment’s guarantee of a jury trial, and the structure of Article III of the US Constitution.  Although intertwined into a single issue presented to the high court, these are two separate and distinct arguments.

 

Right to A Jury Trial In Civil Matters

Unfortunately, despite the relatively simple language of the Seventh Amendment, its application to the type of invalidity trials is far from certain. Whether the right to a jury trial is guaranteed in any given type of case is determined based on whether or not the case is one that would have been heard in English courts of law in 1791. Seriously. (Just take our word for it on this one because the explanation as to why this is the case would take far more than one blog post and honestly doesn’t make much sense anyway).

Fortunately for Oil States, however, their argument is fairly succinct and straightforward. First, the Supreme Court has already held that patent cases “must be tried to a jury” in the landmark case of Markman v. Westview Instruments.  Although something called a “writ scire facias” could have been filed in the old Chancery Courts, “even in those instances, any disputed facts were tried to a jury in the common law courts.” As a result, what essentially amounts to a trial over an affirmative defense to patent infringement must, according to the petitioner, be guaranteed an opportunity for a jury trial.

Opposing this, Respondent Greene’s Energy Group makes the circular argument that a jury trial is only guaranteed in matters that are brought in court. Literally, Green’s response asserts, “The Seventh Amendment guarantees the right to a jury trial only of those claims that are adjudicated in Article III courts.”

Similarly, the Solicitor General, presenting the views of the US Government, also claim that the precedent established by Oil States is irrelevant because “Congress has since provided the statutory authority that was previously lacking.”  In other words, the Seventh Amendment only applies if Congress decides it should. Obviously, it seems crazy that a constitutional amendment should operate that way, but there’s an even-money chance that it ultimately will.

 

Court’s Exclusive Jurisdiction Over Patent Revocation

The petitioner’s second argument relies on the structure of Article III of the Constitution and the notion that only a Federal Court may revoke a property right that a federal agency has granted. This aspect of their argument actually provides for a square public debate over a patent’s status as a property right vs merely being the subject of public rights. Of course, those who study the issue with a serious, critical eye already determined this question long ago. Citing the USPTO’s own statements, the petitioner argues “patents are a property right, complete with the most important characteristic of private ownership—the right of exclusion.” Amusingly, the government now advocates against this position, but more on that below. The petitioner continues:

Even more important is that the private right exists wholly apart from the government once granted. See United States v. Am. Bell Tel. Co., 128 U.S. 315, 370 (1888) (“[The subject of the patent] has been taken from the people, from the public, and made the private property of the patentee * * * *”). That is why “[o]nce a patent is issued, the patentee must enforce the patent without aid of the USPTO.” General information concerning patents, USPTO, supra. If the patent were as tied to a public regulatory scheme as the PTO contends, the agency would also be responsible for violations of the patent. But that has never been the case.

Not only have scholars long known this, but the Supreme Court already recognized this principle back in 2015. Chief Justice Roberts’ majority opinion in Horne v. Dept. of Agriculture stated:

Nothing in this history suggests that personal property was any less protected against physical appropriation than real property. As this Court summed up in James v. Campbell, 104 U.S. 356, 358 (1882), a case concerning the alleged appropriation of a patent by the Government:

“[A patent] confers upon the patentee an exclusive property in the patented invention which cannot be appropriated or used by the government itself, without just compensation, any more than it can appropriate or use without compensation land which has been patented to a private purchaser.”

Two years ago, legal scholar Adam Mossoff explained that the Supreme Court’s opinion in Horne “confirms my own historical research that has revealed deep flaws in the current conventional wisdom that early courts did not protect patents as constitutional private property. … I applaud the Court for recognizing that intangible property such as patents deserve constitutional protection the same as any other type of property.” Now it seems the Supreme Court will have the chance to reaffirm that proposition.

Ironically, the defense of the absurd regulatory scheme that is Inter Partes Review requires the government to now take a contrary position, asserting that patent rights are not property that stems from common law, while ignoring the substantial body of research proffered by the likes of Professor Mossoff and his contemporaries.

 

What’s at Stake?

Oil States’ petition concludes with a discussion of important policy considerations regarding the impact of Inter Partes Review. According to research cited in the petition, the Board has invalidated almost ten thousand patent claims through March of 2016, wreaking an untold economic impact.  Citing research from Richard Baker, the petition notes that “inter partes review has, thus far, destroyed $546 billion of the United States economy by invalidating patents, and wiped out about $1 trillion in value by devaluing the companies holding those patents.”

With the stakes high and the arguments strong, court watchers will undoubtedly tune in next year to see what happens. If the current trend of reversing the Court of Appeals for the Federal Circuit continues, the Supreme Court will eliminate Inter Partes Review and destroy the patent killing machine that is, quite ironically, run by the same agency that gives them life.

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