Posted on 04/24/2018 6:00:08 PM PDT by MarvinStinson
Inventors' rights can be revoked through a controversial administrative process, the Supreme Court ruled by a seven-to-two margin on Tuesday, a move that promises to continue the trend of invalidation of hundreds of existing patents.
The case, Oil States v. Greene's Energy, concerns an administrative tribunal called the Patent Trial and Appeal Board (PTAB). As the Free Beacon has previously reported, the PTAB is responsible for reviewing patents whose validity have been challenged. The PTAB runs on a host of procedures alien to federal court proceedings: lower evidentiary standards, the ability of anyone to challenge a patent right, and a broad interpretative standard for PTAB administrative judges.
Because of these procedures, the PTAB has a track record of striking down more or less every patent that passes in front of it: A former federal judge once called PTAB tribunals "patent death squads."
Oil States argued in its brief, and in oral arguments last November, that in practice the PTAB was actively depriving American inventors of their property rights, an institution normally held sacrosanct under the Constitution. Furthermore, they argued, those property rights were being deprived by administrative courts. These are importantly not under the federal court system, to which the Constitution explicitly reserves the "judicial power." In other words: Americans losing their property rights without due process in a real court of law.
But the Supreme Court's majority didn't agree with this analysis. Justice Clarence Thomas wrote for the majority, joined by his conservative colleague Samuel Alito, swing-vote Anthony Kennedy, and the Court's four liberal justices.
The Court's majority opinion centered around the distinction between "private" and "public" rights. Patent rights are public rights, the Court argued, in that they are extended as a government franchise, and so are subject in their form to the terms laid out by the legislature. In the case of patent rights, if Congress stipulates that a patent can be retroactively reviewed and struck down, even under the zealous rules of the PTAB, then that is a necessary feature of the extension of the patent right to its holder.
Patent rights are not a private or natural right, Thomas wrote, and the right they confer—the exclusion of others from making or selling the invention—are not common law rights. "Rather, it is a ‘creature of statute law,'" he wrote, referring to standing precedent.
Importantly, the majority "emphasize[s] the narrowness of our holding," stipulating the ruling only covers the constitutionality of a certain form of PTAB review, rather than more expansive questions of patent law. This matters in part because, had Oil States been decided in the opposite direction, it would have struck a substantive blow to administrative tribunals—it is likely that at least the conservative members of the majority would like to revisit the thorny issue of administrative law.
Justice Stephen Breyer seems to signal this future conflict in a concurring single-paragraph opinion.
"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," Breyer, joined by Justices Ginsburg and Sotomayor, wrote.
Still, the narrowness of the ruling is cold comfort to American inventors who have lost their patents at the PTAB. Josh Malone, the inventor of a water-balloon filling system, claims to have spent $2 million litigating in front of the PTAB. Speaking on behalf of other U.S. inventors, Malone decried the ruling to the Free Beacon.
"Inventors, aspiring inventors, and patriots of all kinds are devastated by today's Supreme Court ruling," Malone said. "Following its radical disregard for private property rights in Kelo v. City of New London, today the Court obliterated the Fifth and Seventh Amendments to the Constitution. Now if a big corporation wants your patents or your land, they only need to convince their friends in the administrative tribunal or city council to do the job. No judge, no jury, no America."
Malone's distress was mirrored in Justice Neil Gorsuch's dissent, joined by Chief Justice John Roberts. Gorsuch decried the administrative law process, which he argued led to judges only accountable to their appointing patrons, precisely the situation the Founders sought to avoid with the separation of powers.
"No doubt [the PTAB] is well intended," Gorsuch wrote. "But can there be any doubt that it also represents a retreat from the promise of judicial independence? Or that when an independent Judiciary gives ground to bureaucrats in the adjudication of cases, the losers will often prove the unpopular and vulnerable? Powerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies. But what about everyone else?"
Adam Mossoff, a law professor at George Mason University whose writings were frequently cited in Gorsuch's dissent, told the Free Beacon that the majority's opinion departed from a substantive history of viewing patents as private property.
"For the first time, the Supreme Court holds that patents for new inventions are regulatory grants similar to monopoly grants for bridges or toll roads. The decision ignores the Supreme Court's own substantial case law over the past two centuries that patents are private property rights that secure the fruits of productive labors under the Constitution—like all other property rights in homes, farms, and animals," Mossoff said.
"As the dissenting Justices point out, this turns the Constitution and the U.S. patent system on their heads. It perverts the function of the constitutional protections afforded to the property rights of all U.S. citizens, an increasingly commonplace occurrence today under the expanding and all-encompassing administrative state," Mossoff added.
This is bad news for small inventors... and business as usual for Big Tech “efficient infringers” who game the IPR, PTAB system and bleed small firms to death.
Big Tech steals IP, SCOTUS drives the getaway car.
IPwatchdog on Oil States:
“If patents are public rights that can be challenged at any time and revoked that necessarily means they are not property,” said patent attorney and IPWatchdog publisher Gene Quinn. “Property rights vest and title quiets. Without that fundamental attribute, patents are nothing more than a government franchise. It is hard to believe innovators will spend hundreds of thousands of dollars and up to a decade fighting the Office to obtain a government franchise that can be stripped at will.”
“Trade secrets will become far more important until Congress overrules Oil States,” Quinn said. “In the meantime, it will be hard for innovators to justify spending billions necessary to achieve disruptive innovation only to be awarded a government franchise that can and will be revoked by the PTAB once proven valuable.”
“Trade secrets will become far more important until Congress overrules Oil States,”
Those used to be more prevalent before the days of crazy software patents and the necessity to have a ton of patents in hand to do some licensing trading to avoid litigation.
Howard Hughes dad was even more of a visionary than thought. Only his people allowed on site as the drill bit was lowered into the hole as well as when it came up.
The only case example given was a Water Balloon Filling System?
Something straight out of Atlas Shrugged.
Congress listens to donors and patent attorneys: this is the kind of law that has to result.
Patent law is skewed from the inventor to the exploiter. Just the opposite of what the Constitution intended.
Gene is 100% spot on. But hey, at least we cut down all the laws to get those evil patent trolls. What’s that? Now anyone can simply know knife tpur imvention and laugh in your face? Why innovate ladies and gentlemen when you can immitate.
There are many- the Water Balloon patent is just an early example and one that is easy to understand- the PTAB death squad has a pattern of declaring after the fact that the patents that they are killing were “obvious”.
The court was basically correct. Patents are granted as a license to exclusively use an invention. To claim that they are property means that they can only be revoked by a jury full of know-nothings who are usually swayed by the David (patent troll) versus Goliath (big company claiming patent is invalid) argument. t’s about time to reign in the patent trolls, administratively.
Obvious, but no one ever saw it until the inventor did.
My brother-in-law’s brother made such an observation and got his patent.
I loaned him money to pursue getting his product to market. Now I worry about getting paid back.
Well I’d be curious by what rationale these patents are getting struck down.
Perhaps the field of ideas is today so crowded that the rule, rather than the exception, is to collide. In that case, losing patents altogether would ironically be unable to stop progress.
“Litigation continues until the weaker party runs out of money to continue the fight”
It has become a vastly larger problem since Obama signed the America Invents Act that created the PTAB and IPRs.
Obama is very closely tied to Silicon Valley and the big tech firms who wanted this bill, in order to further their strategy of ‘Efficient Infringement’- a fancy way of saying “let’s steal the patents of small firms because they’ll die before the courts force us to pay”.
IPRs permit a nearly endless string of challenges to your patents, and that can be done by parties that would have no standing in court- such as hedge funds that are shorting your stock, which benefit by means of using the PTAB to cost the patent owners a fortune in defending their patents against the very USPTO that granted it.
The PTAB has none of the protections offered by an Article III court. They can pick “judges” who were employees of the firms challenging your patent, they can stack the panel to get the outcome that the head of the PTAB wants, they can deny you the ability to offer evidence, to appeal. It’s something that Kafka would recognize.
“Obvious, but no one ever saw it until the inventor did.”
You’re not supposed to notice. The PTAB certainly doesn’t.
They have a patent killing ratio of 80-90%.
It is a creation of the Silicon Valley lobby. They wrote it, and Michelle Lee was the head of the USPTO, appointed by Obama.
What did Michelle Lee do before she ran the patent office? Glad you asked- she was deputy general counsel and head of patents and patent strategy for Google.
” losing patents altogether would ironically be unable to stop progress.”
So... you think that people will spend the time and money to create new technology that others can simply take at will?
Correct. patents are not property and they never have been. They are merely monopolies setup by the government for a presumed public good. They bear no resemblance to property rights, which exist to allocate rivalrous goods with a minimum of violence. Patents exist to artificially inflate the price of a good.
“Property rights vest and title quiets. Without that fundamental attribute, patents are nothing more than a government franchise."
Yes. Exactly. Ask yourself why, if patents are property, do patents expire after a certain period? Property rights do not.
"It is hard to believe innovators will spend hundreds of thousands of dollars and up to a decade fighting the Office to obtain a government franchise that can be stripped at will.”
Name for me any property right that cannot be stripped at will by the government we live under. All it takes is a vote, or a verdict.
Ever heard of the fashion industry?
People innovate in pursuit of profit, not exclusivity. This is perfectly demonstrated by the fact that almost no inventors wind up owning the patent for the inventions they create. Most patents are owned by the companies that employ those who do the innovating. Yet those engineers and scientists and others keep on working.
Only certain types of economic activities can benefit from patents and the patent system tends to redirect investment into those areas. But that is a distortion of the market. Who is to say what would have been done with those investments if the economy had not been distorted to favor patentable innovations?
“Name for me any property right that cannot be stripped at will by the government we live under. All it takes is a vote, or a verdict. “
Do you know why we have Article III courts?
“Who is to say what would have been done with those investments if the economy had not been distorted to favor patentable innovations? “
Let’s see.... Alexander Hamilton and the Founders versus the wisdom of SeeSharp...
it’s a tough call. I’ll have to think about it.
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