The Supreme Court Deems IPRs Constitutional—For Now

Today the Supreme Court affirmed the Federal Circuit’s decision that IPRs do not violate either Articles III or VII of the Constitution. Oil States Energy Services, LLC v. Greene’s Energy Group, LLC[1] Justice Thomas wrote the majority opinion, to which Justice Breyer concurred, joined by Justices Sotomayor and Ginsburg. Justices Gorsuch dissented, to which Chief Justice Roberts joined.

Regarding the Article III mandate that only federal courts can revoke private property rights, the Court agreed with the Federal Circuit that IPRs are not private rights, but are “public franchises” that fall “squarely within the public-rights doctrine.”  The decision relied on Crowell v. Benson, 285 U.S. 22, 50 (1932) for the holding that granting patents is one of the constitutional functions of the executive or legislative department, to find that the PTO has authority, from Congress, to reconsider “the government’s decision to grant a public franchise.”  The Court opined that IPR “involves the same basic matter as the grant of a patent” and is “a second look at an earlier administrative grant of a patent.”  Surprisingly, the court found no difference between pre-and post-issuance of patents.

Notably, the decision distinguished three prior Supreme Court decisions that held that patents are private rights, not public rights, as applying only to the existing statutory scheme at that time (from 1870), which did not provide for post-issuance administrative review.  The Court seemed to be persuaded by the fact that the current patent laws did not exist at common law, but are now a creature of statute. The Court gave little weight to arguments based on the historical practice of courts revoking patents, stating that “matters governed by the public-rights doctrine may be assigned to the Legislature, the Executive or the Judiciary.”  Importantly, the decision emphasizes that it is limited to “inter partes review only,” and states that the Court did not decide whether infringement actions or other patent matters can be heard in non-Article III courts.

The Court disposed of the Seventh Amendment challenge by holding that, when Congress properly assigns a matter to a non-Article III tribunal, “the Seventh Amendment poses no independent bar to adjudication of that action by a non-jury factfinder.”
The dissenting justices would have reversed based on the principle that an issued patent is a “personal right, no less than a home or farm-that the federal government could revoke only with the concurrence of independent judges” such that depriving the applicant of his property is a due process violation. “Just because you give a gift doesn’t mean you forever enjoy the right to reclaim it.” The dissent also would have disposed of the case based on historical precedent,  i.e., that only courts could revoke patents under English common law.  The Justices note that “from the time it was established the American patent system in 1790 until about 1980, Congress left the job of invalidating patents at the federal level to courts alone.”  As was evident from the oral argument, the dissenting justices appeared especially bothered by the fact that the director of the patent office is a political appointee, and not an independent member of the judiciary, who can wield power over APJ panels, and questioned whether this power was a retreat from the promise of judicial independence.

Finally, the majority decision expressly makes the point that, as Petitioner Oil States did not challenge under either the Due Process or Takings Clause, the holding should not be “misconstrued as suggesting that patents are not property for the purposes of the Due Process or the Takings Clause.”  As such, we can certainly expect further challenges based on these two Constitutional clauses and the points raised by Justices Gorsuch and Roberts in the dissent.
[1] No. 16-712, Argued November 27, 2017, decided April 24, 2018.


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