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 McDonnell Boehnen Hulbert & Berghoff LLP

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.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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