Patent lawyers forced to refresh their Constitutional Law recollection

September 18, 2017 – Article

Patent lawyers forced to refresh their Constitutional Law recollection

As a law school student sitting in Constitution Law class at Georgetown Law School, almost 20 years ago, I had no idea how this topic could permeate through patent law.  I knew that Article I, Section 8, of the U.S. Constitution enumerated very few powers granted to Congress and that one of such powers was to promote the progress of technology by securing to inventors the exclusive rights to their inventions for a limited time.  But beyond this clause, nothing else in the Constitution seemed to relate to patent law.  How wrong I was.

Standing to file a patent litigation is of course controlled by the Case or Controversy Clause of Article III.  Under this clause, a federal court can only consider cases where a controversy exists between the parties.  This limitation of the federal judicial power is based on separation-of-powers principles.  In the patent context, this issue often comes up when a patent owner sends a warning letter to a perceived infringer.  If the letter is drafted strongly enough, it might create a “controversy” between the parties and thus create standing for the perceived infringer to file a declaratory judgement (DJ) action in federal court asking the court to declare the patent non-infringed and/or invalid.  Conversely, if the letter is too soft, no controversy exists and the potential infringer does not have standing to file the DJ action.

Still in the patent litigation context, the right to a trial by jury is a global oddity.  In most countries, only judges decide such complex matters.  The right to a jury in U.S. patent infringement litigations is mandated by the Seventh Amendment to the Constitution, which provides that “the right of trial by jury shall be preserved.”  This amendment has been interpreted under a “historical test” to mean that all issues that required trial by jury under English common law also require trial by jury under the Seventh Amendment.  And since patent litigations were handled by juries in 18th century England, the right to a patent trial by jury is preserved in the U.S. today.

More recently, the Seventh amendment has come back in the context of Inter Partes Reviews (IPRs), forcing some of us to go back to our Constitutional Law books.  In June 2017, the Supreme Court agreed to consider the constitutionality of IPRs.  In Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC, the Court will answer the following question:

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.

Article III also states that the judicial power of the U.S. is vested in the federal courts and judges.  In its brief filed in August 2017, Oil States argued that IPR proceedings are unconstitutional because they are set up as adversarial judicial trials (as opposed to examination proceedings) of granted private property rights, and as such should be handled by Article III judges and not “administrative agency employees who are beholden to Executive Branch officials.”  Oil States also argued that IPR trials resolve questions of novelty or obviousness, which “are precisely the same questions that English jurors resolved,” such that “they fall within the Seventh Amendment’s scope.”

The Eleventh Amendment of the Constitution has also made the patent headlines lately.  This amendment bans lawsuits against individual states of the union, unless the immunity is waived.  The immunity stems from the principle that states entered the federal system on the condition of keeping their sovereignty intact.  In 1999, the Supreme Court interpreted the immunity of the Eleventh amendment as extending to state universities and agencies, recognized as arms of the state.  As such, state universities cannot be sued for patent or trademark infringement (unless the immunity is waived or abrogated by Congress).

Earlier this year, in Covidien v. University of Florida, the PTAB refused to institute an IPR because it held that the patent owner, the University of Florida, should benefit from the immunity afforded to the States by the Eleventh Amendment.  The PTAB reasoned that the “considerable resemblance” between IPR proceedings and civil litigation justified application of the sovereign immunity to the administrative proceeding.  If this decision is affirmed, it would place state universities in the very enviable position of being able to sue for patent infringement in a federal court—without being subject to IPRs before the PTAB, and without being subject to infringement lawsuits.

Earlier this month, it was reported that a patent owner (Allergan) transferred patents to an Indian tribe in an effort to benefit from the sovereign immunity within the constitutional framework.  In the arrangement, Allergan reportedly paid the Indian tribe to own and defend the patents by claiming sovereign immunity, and to grant an exclusive license back to Allergan.  The strategy is to maintain the revenue source from the patents, while immunizing them from IPR proceedings.  It is too early to gauge the chances of success of such a strategy. 

Other constitutionality issues intersect patent law.  For example, the First Amendment Freedom of Speech Clause is sometimes mentioned as a limit on the USPTO’s ability to grant patents on ideas and software.  It has also been argued that the Fifth Amendment’s Takings Clause, requiring the government to pay just compensation when taking personal property away from citizens, should apply to patents.  The Constitution is the foremost American Institution.  It is omnipresent in contemporary American life, from presidential elections, to gun rights, to abortion rights, to the ability of police to search a criminal suspect’s smart phone, and to patent practice.

As we learned in our law school Constitutional Law class via the 1803 case, Marbury v. Madison, the Supreme Court has the ultimate power to declare statutes unconstitutional.  The America Invents Act (AIA) of 2011, which introduced IPR proceedings, will therefore be the subject of such federal judicial review, as will any other patent legislative reform.  The upcoming decisions addressing these constitutional issues will continue to generate considerable debate within the patent community.  In the meantime, I will continue to review of my old constitutional law book.  When I started practicing patent law, I asked my late mentor, Greg Maier, what book I should read to prepare myself.  He pulled a small booklet from his jacket and handed me a copy of the U.S. Constitution.  “Start with this,” he said.  How right he was.

© 2017 Philippe Signore