Oil States Energy Services v. Greene's Energy Group
In the 2018 decision Oil States Energy Services v. Greene's Energy Group, No. 16-712, the U.S. Supreme Court held that patents are public rights rather than private rights. By a 7-2 margin, the Court held that as public rights, patents can be extinguished by an administrative procedure without the protections of an Article III court. This was a devastating blow to the rights of small inventors which have been instrumental in building the American economy for more than two centuries. Three Justices wanted to go further and declare that private rights can also be extinguished by administrative procedures. Two Justices dissented and said that although patents are, in their view, public rights, a mere administrative proceeding should not be able to eliminate those rights.
The issue posed to the Court on its grant of the petition for certiorari was the following:
- 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.
In a decision filled with anti-inventor assertions, the Court held that the answer to the above question is "no". The Court did so by insisting that a patent somehow takes rights away from the public:
| “ | By “issuing patents,” the PTO “take[s] from the public rights of immense value, and bestow[s] them upon the patentee.” United States v. American Bell Telephone Co., 128 U. S. 315, 370, 9 S. Ct. 90, 32 L. Ed. 450, 1888 Dec. Comm'r Pat. 558 (1888). Specifically, patents are “public franchises” that the Government grants “to the inventors of new and useful improvements.” Seymour v. Osborne, 78 U.S. 516, 11 Wall. 516, 533, 20 L. Ed. 33 (1871); accord, Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 63-64, 119 S. Ct. 304, 142 L. Ed. 2d 261 (1998). The franchise gives the patent owner “the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States.” 35 U. S. C. §154(a)(1). That right “did not exist at common law.” Gayler v. Wilder, 51 U.S. 477, 10 How. 477, 494, 13 L. Ed. 504 (1851). Rather, it is a “creature of statute law.” Crown Die & Tool Co. v. Nye Tool & Machine Works, 261 U. S. 24, 40, 43 S. Ct. 254, 67 L. Ed. 516, 1923 Dec. Comm'r Pat. 651 (1923). | ” |
200 L.Ed.2d 671, 680 (U.S. 2018)
Justice Clarence Thomas wrote the misguided opinion for the Court. He embraced a liberal, expansive view of "public rights" to include patents:
| “ | This Court has not “definitively explained” the distinction between public and private rights, Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U. S. 50, 69, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982), and its precedents applying the public-rights doctrine have “not been entirely consistent,” Stern, 564 U. S., at 488, 131 S. Ct. 2594, 180 L. Ed. 2d 475. But this case does not require us to add to the “various formulations” of the public-rights doctrine. Ibid. Our precedents have recognized that the doctrine covers matters “which arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.” Crowell v. Benson, 285 U. S. 22, 50, 52 S. Ct. 285, 76 L. Ed. 598 (1932). In other words, the public-rights doctrine applies to matters “‘arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.’” Ibid. (quoting Ex parte Bakelite Corp., 279 U. S. 438, 451, 49 S. Ct. 411, 73 L. Ed. 789, 1929 Dec. Comm'r Pat. 279 (1929)). Inter partes review involves one such matter: reconsideration of the Government’s decision to grant a public franchise. | ” |
200 L.Ed.2d 671, 679-80 (2018). Once the Court held that patent rights are "public rights," it concluded that "the public-rights doctrine covers the matter resolved in inter partes review. The Constitution does not prohibit the Board from resolving it outside of an Article III court." 200 L.Ed.2d 671, 682 (2018).
Once the Court embraced administrative adjudication of patent rights, in circular fashion it rejected the challenge to the deprivation of the Seventh Amendment right to a jury trial: "Thus, our rejection of Oil States’ Article III challenge also resolves its Seventh Amendment challenge. Because inter partes review is a matter that Congress can properly assign to the PTO, a jury is not necessary in these proceedings." 200 L.Ed.2d 671, 687 (2018).
This landmark decision was a setback both to patent rights and to the right to a jury trial for private rights. Three Justices -- Breyer, Ginsburg, and Sotomayor -- concurred to say that the ruling did not go far enough and should be clarified that private rights can be stripped of their rights to a jury trial too:
| “ | Justice Breyer, with whom Justice Ginsburg and Justice Sotomayor join, concurring.I join the Court’s opinion in full. The conclusion that inter partes review is a matter involving public rights is sufficient to show that it violates neither Article III nor the Seventh Amendment. But the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies. Our precedent is to the contrary. Stern v. Marshall, 564 U. S. 462, 494, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (2011); Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833, 853-856, 106 S. Ct. 3245, 92 L. Ed. 2d 675 (1986); see also Stern, supra, at 513, 131 S. Ct. 2594, 180 L. Ed. 2d 475 (Breyer, J., dissenting) (“The presence of ‘private rights’ does not automatically determine the outcome of the question but requires a more ‘searching’ examination of the relevant factors”). | ” |
200 L.Ed.2d 671, 687 (2018) (Breyer, J., concurring).
Commentary before the decision
Commentators declared that this case has the potential to bring down the changes wrought by the AIA against small inventors.[1]
Gene Quinn astutely observed:[2]
| “ | [T]he truth is any decision by the Supreme Court in Oil States simply cannot make things any worse for patent owners than they already are. Patents rights are currently be extinguished by an Article I tribunal that fundamentally refuses to provide even a modicum of due process. The PTAB refuses to consider evidence timely submitted, they refuse to allow amendments despite the statute saying there is a right to amend, they refuse to issue final decisions on all the claims challenged, they make up their own standards rather than follow statutory tests, there are no judicial rules of ethical conduct for PTAB judges, PTAB judges decide issues where there are serious conflicts of interest, and much more. Therefore, things could hardly get any worse, yet Oil States presents the very real possibility that the Supreme Court will rule that post grant proceedings at the USPTO violate the Constitution. | ” |
