The Most Important Patent Case in Modern History: Oil States Energy Services and the Constitutionality of IPRs

Yesterday, June 12, 2017, the U.S. Supreme Court surprisingly granted cert to hear the Oil States Energy Services v. Green’s Energy Group’s case (Notably, a Rule 36 affirmance by the Federal Circuit which means there is not an opinion—the Federal Circuit is just affirming without giving reasons.).  The U.S. Supreme Court has limited its review to one question: “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.”  Could this case completely wipe out inter partes review proceedings (IPRs)?  That is certainly the hope of some.  Notably, the U.S. Supreme Court refused cert to hear the MCM Portfolio v. HP case in 2016 which raised a very similar issue.  As stated by Judge Dyk in the below Federal Circuit opinion: “On the merits, we reject MCM’s argument that inter partes review violates Article III and the Seventh Amendment, and we affirm the Board’s decision that claims 7, 11, 19, and 21 of the ’549 patent would have been obvious over the prior art.”

Notably, that particular case was graced with several amicus briefs, including by 13 law professors, the Houston Inventors Association and the University of New Mexico.  The conservative Heritage Foundation has a piece discussing the importance of the MCM Porfolio case and a call for congressional action on IPRs after the U.S. Supreme Court denied cert in 2016.  Part of the attack on IPRs includes the argument by the University of New Mexico that it essentially devalues university patent rights.  The amicus brief by 13 law professors, led by Professor Adam Mossoff, specifically confronts the question of whether patent rights are public rights or private rights:

By resting its decision on the premise that “patent rights are public rights,” MCM Portfolio LLC, 812 F.3d at 1293, the Federal Circuit directly contradicts these numerous, longstanding, and binding decisions of this Court. Furthermore, the two primary administrative law cases relied on by the Federal Circuit, see id. at 1292–93, are inapplicable in determining whether the PTAB is respecting vested property rights secured under the separation of powers doctrine and under other substantive constitutional provisions, such as the Due Process Clause of the Fifth Amendment or the Seventh Amendment. These two modern cases address solely creatures of modern administrative statutes—procedural entitlements solely created in and adjudicated by modern regulatory regimes. See, e.g., Atlas Roofing Co. v. Occupational Safety & Health Review Comm’n, 430 U.S. 442, 455–56 (1977) (addressing procedural rights within the administrative regime created by the Occupational Safety and Health Act of 1970); Tull v. United States, 481 U.S. 412, 425–27 (1986) (addressing procedural rights within administrative regime created by the Clean Water Act of 1972). Decisions by this Court addressing modern regulatory procedural entitlements are distinct from the constitutionally protected private property rights in patents long recognized by this Court and by Circuit Courts for over two hundred years. This Court recently and repeatedly confirmed the principle that patents are private property rights that are secured under the Constitution. See, e.g., - 10 - Horne, 135 S. Ct. at 2427; Fla. Prepaid, 527 U.S. at 642. This Court also warned the Federal Circuit in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 739 (2002), that it must respect “the legitimate expectations of inventors in their property” and not radically unseat such expectations by changing doctrines that have long existed since the nineteenth century. Moreover, Chief Justice John Roberts specifically stated in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), that nineteenth-century patent law should be accorded significant weight in modern patent law in determining the nature of the private property rights secured to patent-owners. Id. at 393–94 (Roberts, C.J., concurring).

So, the question is why now?  Why does the U.S. Supreme Court grant cert now (especially a Rule 36 affirmance without a written opinion below) and not in 2016?  For sure, inter partes review proceedings, perhaps intended to wipe out bad software patents has been used surprisingly against biotech/pharma patents.  Could it be new Associate Justice Neil Gorsuch?  Assuming the timing works out, it takes four justices to take a case by writ of certiorari. (Gorsuch, Thomas, Alito and Roberts?)  Would Kennedy swing?  Curiously, over the years, I have heard many complain about the loss of the American jury system.  

Trump's Nomination of Neil Gorsuch and Intellectual Property

Recently, President Donald Trump nominated Neil Gorsuch of the U.S. Court of Appeals for the 10^th Circuit to the U.S. Supreme Court.  Many have expressed disappointment at the nomination because of his close comparison to the late Associate Justice Antonin Scalia, but it certainly could have been worse to some.  Interestingly, BuzzFeed discusses a survey which finds that based on citations to Scalia opinions there is one justice who is supposedly closer to Scalia of the group considered by Trump: Merrick Garland.  Yes, Merrick Garland, who was former President Obama’s pick. 

What of Neil Gorsuch’s impact on IP should he be confirmed?  There’s some speculation and some have reported that we don’t have enough information.  Interestingly, the Congressional Research Service (CRS) released an initial report yesterday (February 1, 2017) on Judge Gorsuch.  On what area may he have the most impact on IP: his views on executive power and administrative law.  Judge Gorsuch has apparently criticized the Chevron doctrine which essentially provides that courts should provide deference to an agency’s interpretation of law.  The CRS notes:

Nonetheless, at least in one area of considerable congressional interest, Judge Gorsuch’s views on the law could be seen to be quite distinct from those of Justice Scalia: administrative law. For much of his career on the bench, Justice Scalia was a proponent of Chevron deference, the doctrine that when statutory language is ambiguous or silent on an issue, federal courts should defer to an agency’s reasonable interpretation of a statute it administers. He argued that the doctrine operated as a clear, bright-line rule against which Congress could legislate. In contrast, Judge Gorsuch, in a concurring opinion in Gutierrez-Brizuela v. Lynch, argued that Chevron and its progeny allow “executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.” In so writing, Judge Gorsuch suggested that the Supreme Court should reconsider Chevron, an action which, if taken by the Court, could upend decades of administrative law and potentially alter the role of Congress in drafting laws for implementation by administrative agencies.

Overturning Chevron could move some power from the United States Patent and Trademark Office back to the U.S. Court of Appeals for the Federal Circuit—think Couzzo and the broadest reasonable interpretation standard.  Law Professor Jonathan Turley at George Washington University Law School has been one of the loudest critics of executive overreach—including excesses in the George W. Bush and Obama administrations.  (Hat tip to my colleague, Professor John Sims, for the reference to the CRS report).