Post by John Golden
In an April 24 decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U.S. __ (2018), the United States Supreme Court addressed a question previously highlighted on this blog (see posts of May 30, June 13, and December 4, 2017): the extent to which patents involve public or private rights for purposes of U.S. constitutional law. Specifically, the Court held that whether a patent claim should be canceled for lack of novelty or nonobviousness is “a matter involving public rights” and therefore may be determined by an administrative agency, the U.S. Patent and Trademark Office (USPTO), rather than an Article III court. With Justice Thomas writing for a seven-Justice majority, the Court emphasized its view that, although patents are a “form of property,” the decision to grant a patent—a matter long consigned to the USPTO—is a decision on “the grant of a public franchise” and thus liable to congressional reservation of administrative power “to revoke or amend” the grant. The Court thereby signals the existence of a subcategory of privately held property—namely, public franchises granted to private persons—that is particularly susceptible to administrative adjudication.
But what is a “public franchise”? The Court does not give a crisp definition. Nonetheless, by pointing to aspects of patents that apparently support their classification as public franchises, the Court provides some hints. First, the Court notes that the right to exclude provided by a patent “ ‘did not exist at common law’ ” (quoting Gayler v. Wilder, 51 U.S. (10 How.) 477, 494 (1851)), and is instead “a ‘creature of statute law’ ” (quoting Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 40 (1923)). Further, Congress has authorized such rights by exercising its constitutionally granted “power ‘[t]o promote the Progress of Science and useful Arts’ ” (quoting U.S. Const. art. I, § 8, cl. 8). In other words, Congress has provided for patents pursuant to a public purpose. These observations comport with a definition of “public franchise” that Justice Thomas has proffered before: a right or set of rights “ ‘which public authorities ha[ve] created purely for reasons of public policy and which ha[ve] no counterpart in the Lockean state of nature.’ ” Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831, 848 n.2 (2015) (Thomas, J., dissenting) (quoting Caleb Nelson, Adjudication in the Political Branches, 107 Colum. L. Rev. 559, 567 (2007)).