Patents and the Public-versus-Private-Rights Distinction: Oral Argument in Oil States Energy Services v. Greene’s Energy Group

Post by John Golden

On November 27, the United States Supreme Court heard oral argument in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712, a case that gives prominence to a question flagged in prior posts of May 30 and June 13: namely, whether patents involve public or private rights for purposes of the constitutionality of administrative cancellation of issued patent claims.  Article III of the U.S. Constitution states, “The judicial Power of the United States, shall be vested in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.”  The Supreme Court has held that, despite this assignment of “judicial Power” and the more general principle of separation of powers, “a matter of ‘public right’ … can be decided outside the Judicial Branch.”  Stern v. Marshall, 564 U.S. 462, 488 (2011).  The Court has recognized that this “public rights exception” extends beyond “actions involving the Government as a party” and encompasses “cases in which the claim at issue derives from a federal regulatory scheme, or in which resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective within the agency’s authority.”  Id. at 490.

In Oil States, the Court confronts the question “[w]hether inter partes review—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents [whose claims have been challenged by a third party]—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”  The Petitioner argues that the answer is “Yes” because issued patent rights are private property whose validity “Article III permits only courts to adjudicate.”  Brief for Petitioner 3.  Respondent Greene’s Energy Group argues that the answer is “No” because “[p]atent rights are public rights, that is, derived from a ‘federal regulatory scheme’ and ‘integrally related to particular Federal Government action.’ ”  Brief for Respondent Greene’s Energy Group, LLC 9 (quoting Stern, 564 U.S. at 490–91).  The U.S. government as “Federal Respondent” likewise argues that inter partes review addresses matters of public right and contends that the Petitioner’s “argument confuses the distinct concepts of private property and ‘private rights’—those rights that are not integrally related to federal government action.”  Brief for the Federal Respondent 18, 21

Over fifty amicus curiae briefs were filed in Oil States.  These briefs are, in general, too numerous to have their contents described in this blog posting, but you can find discussions of various amicus briefs in separate postings by Dennis Crouch on the Patently-O blog dated August 20, August 28, September 1, and November 1.  For purposes of disclosure, I should note that I participated in the filing of an amicus brief in support of the Respondents contending that questions of patent claims’ validity are matters of public right.  Brief of Amici Curiae Professors of Administrative Law, Federal Courts, and Intellectual Property Law in Support of Respondent 18–26.  This brief also noted a long-held (albeit not unanimously held) scholarly view that, under the Court’s precedents, even questions of “private right” may, generally speaking, be subjected to administrative adjudication as long as the rights in question are creatures of federal statutory law and as long as the results of administrative adjudication are subject to judicial review that is de novo on questions of law and at least in the nature of substantial-evidence review on questions of fact.  Id. at 28–29.  Under this view, Article III constraints seem satisfied by the Patent Act’s provision of a right to appeal the results of inter partes review to the U.S. Court of Appeals for the Federal Circuit.  Id. at 29–31.

Given the apparent centrality of the public-versus-private-rights distinction to party contentions in Oil States, one might have expected much of the November 27 oral argument to revolve around questions of what makes for a “private right” as opposed to a “public right” for purposes of Article III.  Consistent with such an expectation, Justice Gorsuch asked counsel for Greene’s Energy whether, at one point, counsel was “question begging about what’s a private right,” adding, “Isn’t that the very question this Court has to decide?”  Transcript of Oral Argument at 37 ll. 15–18.  In a related vein, Chief Justice Roberts suggested potential interest in reconsidering the Court’s multi-factored “Schor test for whether something is or is not a public right,” “wondering if that is a sufficiently stable and predictive test when you’re talking about something like a property right” that might be the basis for substantial investments.  Id. at 53–54.  Justice Sotomayor mused that the public-rights nature of the questions decided in inter partes review is indicated by the fact that, even “if the third party [challenging patent validity] settles with the patent owner,” the PTO may continue to a decision on the merits and may defend such a decision before the Federal Circuit.  Id. at 7 ll. 12–19.  In contrast, Justice Gorsuch asked counsel for the Petitioner whether prior decisions of the Court such as that in McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606 (1898), should be understood to have already determined the private-versus-public-rights question definitively in favor of the Petitioner.  Id. at 15–16, 23–24.  Justice Breyer opined that, although “a vested right theory” for delimiting the bounds of what an administrative agency might adjudicate “had great popularity in the 19th century,” this viewpoint  “ha[d] happily sunk from sight.”  Transcript, supra, at 50 ll. 11–14.

Nonetheless, the Justices’ engagement with the question of what constitutes a materially private, as opposed to a public, right was relatively isolated and sporadic.  This circumstance at least partly reflected the Petitioner’s decision to concede that ex parte reexamination, another form of administrative review by which the PTO can cancel issued patent claims, is “perfectly consistent with Article III.”  Id. at 4 ll. 11–14.  This decision led the Court to consider what, for purposes of Article III, the material procedural differences between ex parte reexamination and inter partes review might be.  Id. at 4–6.  The Justices also considered the extent to which administrative cancellation of patent rights might be challenged under the Due Process and Takings Clauses, e.g., id. at 45, 55, 64–65, and the extent to which Congress may effectively condition the administrative grant of patent rights on acceptance of the possibility of later administrative reconsideration, e.g., id. at 9–10, 24, 31–32, 41–45.  

With this menagerie of issues in contemplation, the Justices gave little indication that they were poised to bring much new clarity to the distinction between public and private rights for purposes of Article III.  But efforts to divine the states of the Justices’ minds based on an oral argument transcript can be a fool’s errand.  We will presumably (hopefully?) have a better understanding of their thinking when the Court issues an opinion in Oil States in the next couple to several months.

Leave a Comment