On November 27, 2017, the U.S. Supreme Court heard oral arguments in the Oil States Energy Services, LLC v. Greene’s Energy Group, LLC.[1] This case is discussed in a previous blog posting, but as a recap, the two parties in the litigation are both oil & gas companies, in which Oil States owned a patent for protecting wellheads during the oil fracking process. Greene’s petitioned for inter partes review (IPR) before the PTAB, which invalidated Oil States’ patent. Upon appeal, the Federal Circuit rejected Oil States’ arguments and affirmed the PTAB’s invalidation. Upon grant of certiorari, Oil States argued that the IPR system acted to deprive it of its private property since patents, it argued, is private right and not a public right.
From the get-go, Justice Ginsburg, outlined her position clearly and succintly:
Ms. Ho [Oil States counsel], you outlined your position, but there must be some means by which the Patent Office can correct the errors that it’s made, like missing prior art that would be preclusive.[2]
Justice Ginsburg’s exchange with Allyson Ho discussed the ex parte and inter partes reexamination processes, in which Ho argued there was a fundamental difference between examinational and adjudicational processes, where examinational were allowed under Article III but adjudicational would not.
Justice Kagan interjected with inter partes reexamination, and Ho responded:
I think inter partes reexamination presents a closer case, but it is still fundamentally examinational.[3]
Both Justices Ginsburg and Kagan, based on their questions, seemed inclined to retain the IPR system, as both were forceful in their inquiry about why the IPR system is unconstitutional. Justice Kagan further opined:
It’s the government trying to figure out whether it made a mistake by granting the patent, which the government sometimes does and knows it sometimes does, but the government wants to put in place a set of procedures that will actually increase the government’s accuracy in figuring out whether it made a mistake.
And that involves listening to a third party that has some interest in the proceeding. So it seems a bit odd to say, sure, the government can reexamine this, the government can allow a third party to request it, can allow the third party to do some things, but there’s some line that falls short of what the government thinks of the procedures that enable the greatest accuracy.[4]
Justice Breyer also tipped his hand by saying:
. . . I thought it’s the most common thing in the world that agencies decide all kinds of matters through adjudicatory-type procedures often involving private parties. So what’s special about this one, or do you want to say it isn’t special and all agency proceedings are unlawful? Because a lot of them would fit the definition, I think, that you propose.[5]
And, when Ho tried to argue the rarity of administrative adjudications where the government was not acting in the position of “enforcer,” Justice Breyer countered:
. . . if the airlines loses your umbrella, for example, and the CAB used to say, you go to the CAB, you complain, they lost my umbrella. The airline says, no, we didn’t. Oh, that was unconstitutional? . . . And, by the way, it didn’t say that your rights, when you fly on an airplane or truck or some other thing regulated, it didn’t say as it does here, subject to the provisions of this title, the matter, your umbrella, or in this case patents, shall be private property. Uh-huh. So you have a statute that says you only get the private property if, in fact, you survive the provisions of the title, of which this is one.[6]
Justice Sotomayor also mentioned, regarding the common law Privy Councils which was the historical predecessor of the PTAB:
. . . But in fact that it waned didn’t mean it was eliminated, and it didn’t mean that the Privy Council or the crown though that it no longer had those rights.[7]
And further inquired to Chris Kise, counsel for Greene’s Energy:
. . . I mean, for me, this – what saves this, even a patent invalidity finding, can be appealed to a court. There’s deference with respect to factual matters, but there is de novo review as to legal matters. So how can you argue the – the crown, the executive, the PTO, here has unfettered discretion to take away that which it’s granted?[8]
Justice Kennedy weighed in, questioning of Ho that the Patent Clause in the U.S. Constitution grants patents for “limited times”:
. . . [D]oesn’t that show that the patent owner has limited expectations as to the scope and the validity of the property right that he holds?[9]
However, Justice Kennedy also queried of Kise about the Patent Clause, and his argument that IPRs implicate a public purpose:
Securing for limited times authors and inventors the exclusive right, securing to them, not to the [general public].[10]
It appears from his questioning that Justice Kennedy may be the swing vote, as usual.
On the other side, Chief Justice Roberts and Justice Gorsuch vehemently argued that issued patents were private property and generally antagonistic about IPRs. Chief Justice Roberts noted to Kise:
. . . it strikes me, is simply that you’ve got to take the bitter with the sweet. If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point . . . [H]aven’t our cases rejected that . . . proposition? We’ve said you . . . cannot put someone in that position. You cannot say, if you take public employment, we can terminate you in a way that’s inconsistent with due process. [11]
Chief Justice Roberts made this point when Kise tried to argue that Congressional authority gave the USPTO the almost absolute authority to determine the outer limits of patent protection.
Justice Gorsuch tried to make the analogy to land patents (that is, property is deeded by the sovereign (e.g., U.S. government) to a private entity, and it is published for all the world to know) to argue his point that invention patents are private property, by stating:
Do you think it would work if — if we had land patents subject to the same circumstances, that they could be reexamined at any time over hundreds of years, even after the farmer had sold the land to the developer who built the houses and that the land patent could be revoked by the government by bureaucracy . . . [which amounts to ] [a] monopoly in the use of land. What’s – what’s the difference between – operative difference, other than obviously one isn’t land?[12]
Needless to say, it was a rather clumsy attempt to equate Fuji apples to Granny Smith apples.
Justice Alito spoke very little, except to pointedly query the historical aspects of whether a patent right was a private right.[13] All three would appear to be a part of a very rambunctious minority opinion. [14]
The session ended after an hour of arguments.
I do not believe the Court will find IPRs unconstitutional, partly because the Court has already found IPRs, at least in dicta, to be valid extensions of the executive branch, proper delegations by the legislative branch, and therefore, constitutional. In the recently-decided Cuozzo case, the Count found:
Although Congress changed the name from “reexamination” to “review,” nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision. Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protec the public’s “paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.” (citations omitted.)[15]
Coupled with the questioning from the justices, it seems unlikely that the PTAB “death squads” will meet their end. Rather, there may be some tweaking of the IPR system. After all, it has worked very well in controlling the patent trolls which was the original aim when the IPR system was started in the AIA. However, the system may have worked too well. All new legislation must be tweaked to improve its process. Five years after its enactment, it may well be time for the IPR process to make some fine-tuning changes.
A decision should be rendered by June 2018.
[1] 639 Fed. App’x 639 (Fed. Cir. 2016), cert. granted, 198 L. Ed. 2d 677 (U.S. Jun. 12, 2017) (No. 16-712).
[2] Oral arguments at 3-4, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 198 L. Ed. 2d 677 (2017) (No. 16-712).
[3] Id. at 5.
[4] Id. at 21-22.
[5] Id. at 20-21.
[6] Id. at 19-20.
[7] Id. at 26.
[8] Id. at 34.
[9] Id. at 11.
[10] Id. at 38-39.
[11] Id. at 32.
[12] Id. at 36-37.
[13] Id. at 24-25.
[14] No discussion is made on Justice Thomas’ comments, only because, characteristically, he does not usually say anything during oral arguments, although given his jurisprudential ideology, it would be logical to conclude that he would side with C.J. Roberts and Justices Gorsuch and Alito on this case.
[15] Cuozzo Speed Technologies, LLC v. Lee, 579 U.S.___, 136 S.Ct. 890 (2016) (slip op. at 16).