Readers of this blog may recall that in the past year, I wrote extensively about the U.S. Supreme Court case of Oil States v. Greene’s Energy. But I paid little attention to another important case decided around the same time: SAS Institute v. IancuOil States centered on whether the USPTO’s inter partes review (“IPR”) process (challenging a patent at the USPTO, rather than in court) was constitutional. SAS followed up with a seemingly less-pressing issue: whether, when the USPTO institutes an IPR to reconsider a patent by accepting an IPR petition, the USPTO must decide the patentability of all of the claims of the patent that the IPR petitioner challenged in the IPR petition. The Supreme Court ruled that IPR is constitutional in Oil States and that the USPTO must decide the patentability of all of the claims which were challenged in the accepted IPR petition in SAS.

Just this week, I was attending a “Supreme Court Preview” event hosted by the Eighth Circuit Bar Association. One of the topics was upcoming patent cases before the Supreme Court. I’ll admit; they’re not as juicy as last term (but perhaps only lawyers would have salivated over last year’s cases). However, one gave me a squirrelly thought: Return Mail v. United States Postal Service. The major issue in Return Mail is whether the federal government is a “person” who may petition to institute review proceedings before the USPTO.

Credit: Channel 3000

Technically, Return Mail doesn’t involve IPR, but rather a different proceeding called covered business method (“CMB”) review. CMB review, as its name implies, is limited to review of business method patents–that is, patents that claim a method or apparatus for performing data processing or similar operations relating to the practice, administration, or management of a financial product or service. But CMB review is very similar to IPR; a person files a petition with the USPTO seeking review, and the USPTO decides whether to institute proceedings. For example, in the Return Mail case itself, Return Mail, Inc. sued the United States Postal Service (“USPS”) for infringement of a business method patent described as: encoding information about the name and address of intended recipients in the form of a barcode, returning undeliverable mail to a processing location, scanning the barcode, obtaining the corrected information, and then providing that information to the sender to choose whether to resend with correct addressee information. (Description in the Federal Circuit opinion.)

Credit: Postal Reporter

Does Return Mail’s patent seem a little…obvious? Sounds like USPS might have a good shot at challenging the patent via CMB review, right? That’s what the USPS thought, so it petitioned for CMB review of certain claims of the patent. There’s just one problem: current patent law says that only a “person” can institute CMB review, and that person must meet certain other requirements, which include being sued or charged with infringement. Is the USPS–an arm of the government–a person? Current patent law does not define the term. In a short opinion, the Federal Circuit held that the federal government is a “person” for the purposes of CMB review. There was a fiery dissent. The Supreme Court granted cert on this specific question.

And here is where the squirrely thought arises. Just like CMB review, IPR review starts with a petition by a “person.” But unlike CMB review, an IPR petitioner need not have been sued or charged with infringement. Indeed, an IPR can be instituted by any person “who is not the owner of a patent.” 35 U.S.C. § 311. The USPTO must review all claims challenged in a petition if the USPTO accepts the petition. But the USPTO might not want to do that in every case–as in SAS. If the government is a person, can it escape SAS‘s mandate by filing its own petition for IPR limited to the claims it actually thinks should be evaluated?

The process would go something like this: (1) the USPTO receives an IPR petition from a third party and reviews the petition, (2) the USPTO determines it would like to institute review on some of the claims of the patent challenged in the petition, but perhaps not the same claims as those listed in the petition, (3) the USPTO works in collaboration with another governmental agency (say, for example, the Attorney General or USPS), (4) the other governmental agency files a petition for IPR of the same patent, but on the claims and grounds desired by the USPTO, and (5) the USPTO accepts the governmental petition, achieving the goal of escaping SAS‘s mandate that it decide the patentability of claims listed in the third party petition that the USPTO thinks need not be considered. And voila! Return the earlier petition for IPR as uninstituted to sender.

Thus, affirming the Federal Circuit could provide the government an escape from SAS, so to speak. While reversal could preclude agencies like the USPS from seeking cost-effective review of patents with the USPTO. What do you think?

Credit: Federal Circuit (what it looks like to argue there)

One week ago, the Federal Circuit Court of Appeals issued its decision in Saint Regis Mohawk Tribe v. Mylan Pharmaceuticals, Inc., 18-1638 (Fed. Cir. July 20, 2018)–by all accounts, one of this decade’s most important decisions concerning the America Invents Act and the patent system. The primary issue in the case was whether the Saint Regis Mohawk Tribe (or any tribe, for that matter) is immune from the USPTO’s inter partes review (“IPR”) proceeding, which can result in cancellation of a patent. Allergan, a pharmaceutical company, had transferred title to certain patents to the Tribe after its competitor, Mylan, had instituted an IPR of the patents. The Tribe claimed that the USPTO could not review the patents due to sovereign immunity.

The Federal Circuit held that tribal sovereign immunity does not apply to IPR proceedings. It cited the Supreme Court’s recent Oil States decision (I wrote about the case earlier this year), which explained that IPRs arise “between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.” Thus, IPR is “simply a reconsideration of” the original patent grant by the federal Government. Although initiated by a private party, the Director of the USPTO must decide to institute the proceedings, and the USPTO acts “as the United States in its role as a superior sovereign to reconsider a prior administrative grant and protect the public interest in keeping patent monopolies ‘within their legitimate scope.'” The federal Government being supreme, tribes cannot invoke sovereign immunity.

The Federal Circuit’s final reference to protecting the public interest resonated with me, as well as Judge Dyk’s concurring opinion, which provided insightful context about the importance of reviewing patents post-grant. Certainly no one expects that the USPTO will perfectly examine every patent application and grant patents without error, but striving to achieve perfection is vital–even if impossible under current circumstances. As Judge Dyk illuminated:

[T]he USPTO–then and now–is an agency with finite resources that sometimes issues patents in error. Currently, for instance, the USPTO receives over 600,000 applications a year. Patent examiners receive roughly 22 hours to review each application, an amount of time that 70% of examiners report as insufficient.  And the USPTO struggles to attract and retain examiners with the technical competence required to understand the inventions being reviewed and to perform sufficiently thorough prior art searches.

The USPTO “is under pressure to make speedy determinations on whether or not to grant patents.” As such, “pre-grant patent examination was–and still is–an imperfect way to separate the good patents from the bad. Resource constraints in the initial examination period inevitably result in erroneously granted patents.” A glut of bad patents–or the perception thereof–negatively affects the public’s view of the patent system’s fairness and credibility. Thus, Congress created IPRs to combat pre-grant examination constraints, creating a streamlined procedure to challenge patents, in the hopes of restoring trust in the patent system. As an initial matter, I’m not sure attempting to solve the effect of the USPTO’s constraints was better than solving its cause.

In a recent article, I wrote about similar concerns as those expressed by Judge Dyk:

The USPTO, as the agency tasked with examining patent applications, is the first line of defense against patent fraud. But some point to the USPTO’s examination policies as potentially inviting fraud. By way of background, the USPTO’s patent examiners (those who review applications) are evaluated on a quota system, which encourages them to examine as many applications as possible. Some commentators have questioned whether this policy has turned the USPTO into a rubber-stamp institution. In the meantime, the number of patent applications and grants since 2000 has almost tripled. This has led to an even greater need for the USPTO to quickly accept or reject patents so as not to fall behind. The cycle is further incentivized by the increasing economic and financial value of patents. And it is also enabled by the difficulty, high cost, and/or impossibility of investigating every representation made by patent applicants. The USPTO simply does not have the wherewithal to investigate every claim of inventorship, utility, novelty, and other issues related to patentability. Thus, along with the important interests at stake, the complexities of patent law and the USPTO’s current weaknesses combine to create a situation in which fraud is less likely to be identified and thwarted.

In the context of the Mohawk Tribe appeal, the overwhelming public interests in reviewing potentially-invalid patents were brought to bear against the amorphous concept of sovereign immunity. It was absolutely necessary that tribes be subject to IPRs, lest private parties be enabled to take advantage of the USPTO’s constraints and “rent” the protection of sovereign immunity. Indeed, in a recent article, another commentator argued that the Federal Circuit’s decision had an “inescapable wisdom” because, had the result been any different, “every holder of questionable U.S. patents would have been rushing to one Native American tribe or another seeking deals to shelter possibly bogus rights.”

Going further, though, one can imagine more than just deals between tribes and private parties, but also the emergence of an entirely new form of patent assertion entity, patent troll (which some, but not all, criticize), and perhaps even a hybrid form of “patent privateer.” A tribe could, itself, become a mass aggegator of patents with a huge advantage: that the avenues for challenging its patents are more limited than a traditional patent holder. And one can imagine patent alliances renting tribal sovereign immunity for large market players. Any of these could exacerbate the David-and-Goliath scenario some defendants find themselves in after being sued for infringement. But, if the Federal Circuit’s decision holds–and I predict it will, especially in view of Oil States–such possible negative effects will not come to pass. However, as Judge Dyk implied (and it bears repeating), the patent system is imperfect and still has a way to go.

Five months ago to the day, I predicted that the U.S. Supreme Court would uphold inter partes review (“IPR”) proceedings at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (“PTAB”) as constitutional in Oil States v. Greene Energy. On April 24, 2018, the Court so-held.

Back in November, the questions at oral argument in Oil States raised numerous intriguing issues:

  • Whether IPR proceedings are “examinational” rather than “adjudicatory.”
  • Distinctions between “public rights” and “private rights.”
  • The relevance of 19th-century cases on patents, such as McCormick v. Aultman.
  • The interplay of due process, given a patentee’s usually-substantial investment in the patented invention and reliance on the patent grant.
  • Opportunities for subsequent appellate review.

So which of these became the deciding issues in the Court’s opinion? Ironically, Justice Thomas–who has been known to refrain from questions at oral argument and was the only Justice not to ask a question during oral argument in this case–wrote for the 7-Justice majority. Justice Gorsuch wrote a dissenting opinion.

First, the majority held that IPR proceedings do not violate separation of powers by invading the sphere of the Judiciary under Article III of the Constitution:

When determining whether a proceeding involves an exercise of Article III judicial power, this Court’s precedents have distinguished between “public rights” and “private rights.” Those precedents have given Congress significant latitude to assign adjudication of public rights to entities other than Article III courts.

Recognizing that the Court has not been clear on this distinction, the Court provided some clarity:

[T]he public-rights doctrine applies to matters “‘arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.’” Inter partes review involves one such matter: reconsideration of the Government’s decision to grant a public franchise.

Inter partes review falls squarely within the public-rights doctrine. This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

The Court went on to incorporate Article I, Section 8, Clause 8 of the Constitution, which gives Congress the power to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”:

Congress can grant patents itself by statute. And, from the founding to today, Congress has authorized the Executive Branch to grant patents that meet the statutory requirements for patentability. When the PTO “adjudicate[s] the patentability of inventions,” it is “exercising the executive power.”

Inter partes review is “a second look at an earlier administrative grant of a patent.”  The Board considers the same statutory requirements that the PTO considered when granting the patent…. So, like the PTO’s initial review, the Board’s inter partes review protects “the public’s paramount interest in seeing that patent monopolies are kept within their legitimate scope,” Thus, inter partes review involves the same interests as the determination to grant a patent in the first instance.

The primary distinction between inter partes review and the initial grant of a patent is that inter partes review occurs after the patent has issued. But that distinction does not make a difference here. Patent claims are granted subject to the qualification that the PTO has “the authority to reexamine—and perhaps cancel—a patent claim” in an inter partes review. Patents thus remain “subject to [the Board’s] authority” to cancel outside of an Article III court.

This Court has recognized that franchises can be qualified in this manner. For example, Congress can grant a franchise that permits a company to erect a toll bridge, but qualify the grant by reserving its authority to revoke or amend the franchise.

The Court then went on to distinguish 19th-century cases appearing to state that patents are private, not public, rights:
To be sure, two of the cases make broad declarations that “[t]he only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” (citing McCormick) But those cases were decided under the Patent Act of 1870. That version of the Patent Act did not include any provision for post-issuance administrative review. Those precedents, then, are best read as a description of the statutory scheme that existed at that time. They do not resolve Congress’ authority under the Constitution to establish a different scheme.

The Court also noted that even the English legal system, from which the U.S. derives many of its principles, contained a similar patent revocation process by petition to the Privy Council:

The Patent Clause in our Constitution “was written against the backdrop” of the English system. Based on the practice of the Privy Council, it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council. The parties have cited nothing in the text or history of the Patent Clause or Article III to suggest that the Framers were not aware of this common practice. Nor is there any reason to think they excluded this practice during their deliberations.

For similar reasons, we disagree with the dissent’s assumption that, because courts have traditionally adjudicated patent validity in this country, courts must forever continue to do so.

The Court also rejected the argument that because IPR “looks like” the exercise of Article III judicial power, it is infringing on that power. And it “emphasize[d] the narrowness of [its] holding,” noting that appellant Oil States had not raised a due process challenge. Finally, the Court held that IPR proceedings do not abridge the “right of trial by jury” under the Seventh Amendment because Congress properly assigned the matter of patent rights to adjudication before the PTAB.

Justices Breyer, Ginsburg, and Sotomayor concurred, stating only that the 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.”

Justices Gorsuch and Chief Justice Roberts dissented:

Today, the government invites us to retreat from the promise of judicial independence. Until recently, most everyone considered an issued patent a personal right—no less than a home or farm—that the federal government could revoke only with the concurrence of independent judges. But in the statute before us Congress has tapped an executive agency, the Patent Trial and Appeal Board, for the job. Supporters say this is a good thing because the Patent Office issues too many low quality patents; allowing a subdivision of that office to clean up problems after the fact, they assure us, promises an efficient solution. And, no doubt, dispensing with constitutionally prescribed procedures is often expedient. Whether it is the guarantee of a warrant before a search, a jury trial before a conviction—or, yes, a judicial hearing before a property interest is stripped away—the Constitution’s constraints can slow things down. But economy supplies no license for ignoring these—often vitally inefficient—protections. The Constitution “reflects a judgment by the American people that the benefits of its restrictions on the Government outweigh the costs,” and it is not our place to replace that judgment with our own.
This dissent is not at all surprising, given that during oral argument both Justices asked questions that suggested they doubted that patents were public rights. It goes on to say:
Article III, explains that the federal “judicial Power” is vested in independent judges. As originally understood, the judicial power extended to “suit[s] at the common law, or in equity, or admiralty.” From this and as we’ve recently explained, it follows that, “[w]hen a suit is made of the stuff of the traditional actions at common law tried by the courts at Westminster in 1789 … and is brought within the bounds of federal jurisdiction, the responsibility for deciding that suit rests with” Article III judges endowed with the protections for their independence the framers thought so important.
The dissent disputed the relevance and value of the references to the Privy Council, colorfully stating that the cases cited by the majority “represent the Privy Council’s dying gasp in this area.” And Justice Gorsuch embarked on a history lesson about the early years of our Republic. Wrapping up, the dissent expressed concern:
Today’s decision may not represent a rout but it at least signals a retreat from Article III’s guarantees. Ceding to the political branches ground they wish to take in the name of efficient government may seem like an act of judicial restraint. But enforcing Article III isn’t about protecting judicial authority for its own sake. It’s about ensuring the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before. And the loss of the right to an independent judge is never a small thing. It’s for that reason Hamilton warned the judiciary to take “all possible care … to defend itself against” intrusions by the other branches. It’s for that reason I respectfully dissent.
As demonstrated by the Court’s opinion and the dissent, the primary issue was whether patents were public or private rights. The majority held they were public, between the government and the grantee, and its other holdings flowed from that decision. The dissent deemed patents private, akin to land grants and other personally-held rights, citing cases such as McCormick. In the end, due process did not play a role in the majority’s decision, but seemed to justify the dissent’s view that IPR proceedings are a form of Executive Branch encroachment. Given the majority’s explicitly-narrow holding and the dissent’s concerns, my guess is that the Court will be revisiting Oil States on a related issue in the near future. As always, stay tuned!

 

In an age of rising healthcare costs, pharmaceutical companies can be an easy target in calls for patent reform.  Patent protection helps drug manufacturers recoup their investment in developing the new drug,.  It also prevents generic manufacturers from releasing the same drug formulation at lower cost.  The Hatch-Waxman Act provides a pathway for generic manufacturers to challenge branded drug patents, but this type of challenge requires costly litigation.

 

Inter Partes Review

Enter the Inter Partes Review.  An Inter Partes Review (IPR) is a procedure before the Patent Trial and Appeal Board (PTAB) for challenging the validity of a patent.  IPR proceedings provide an expedited and cost-effective alternative to litigation.  The IPR process was introduced in 2012, and since then, hundreds of patents have been invalidated using this process.  In the pharmaceutical industry, IPRs provide generic drug manufacturers with an additional or alternative path to challenge branded drug patents.

 

The Allergan Case

In 2016 and 2017, generic drug manufacturers filed IPR petitions seeking to invalidate patents owned by drug maker Allergan on its branded prescription eye drops, Restasis.  In response, and less than a week before a scheduled hearing before the PTAB, Allergan transferred its patents to the Saint Regis Mohawk Tribe.  Like states, Native American tribes have sovereign immunity, and therefore are not subject to private lawsuits.  The idea of sovereign immunity is codified in a Constitutional Amendment, and it stems from the basic notion that you cannot sue a monarch.

The Allergan-Tribe agreement provides for an initial payment of $13.25 million, plus an annual royalty of $15 million paid to the Tribe.  In exchange, the Tribe agreed to exclusively license the patent rights back to Allergan.

Shortly after the agreement was finalized, the Tribe moved to terminate the IPR proceedings on the basis of its sovereign immunity.

There are many opinions about both the legal and moral implications of this agreement, with some calling it a sham transaction.  In a highly unusual move, the PTAB authorized interested third parties to file amicus curiae briefs.  A total of 15 briefs from outside parties were filed, including some from other Native American Tribes.  Seven briefs were filed in support of the Tribe’s (and Allergan’s) sovereign immunity argument, while eight argued against it.  Briefs siding with the Tribe cited prior PTAB decisions recognizing sovereign immunity for states, and dismissing IPR proceedings initiated against state universities.  Briefs arguing against the Tribe’s motion cited a lack of precedent with respect to tribal-specific sovereign immunity, and asserted the question should be left for Congress.

 

The PTAB’s Sovereign Immunity Decision

Ultimately, the PTAB decided last month to deny the Tribe’s motion to terminate the proceedings.  See the decision here, courtesy of Patent Progress.  The PTAB differentiated tribal sovereign immunity from state sovereign immunity, and broadly held that tribal sovereign immunity does not insulate a patent from an IPR proceeding.  The Tribe and Allergan are seeking to appeal the decision.

What do you think?  Just as a matter of policy, should companies be permitted to transfer their IP to sovereign entities to avoid this type of challenge?  The PTAB’s distinction between tribal and state sovereign immunity suggests that if Allergan had made this same agreement with a state university instead of a tribe, the IPR would have been terminated.  Is that the right distinction to make?

On Monday, November 27, 2017, the U.S. Supreme Court heard argument in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712. The case presents a direct challenge to the U.S. Patent and Trademark Office’s (“USPTO’s”) “inter partes review” (“IPR”) process, under which third parties can petition the USPTO’s Patent Trial and Appeal Board (the “PTAB”) to cancel one or more claims of an already-issued patent.

Photo Credit: Fox

ScotusBlog recently offered a brief introduction to Oil States’s “remarkably pedestrian” backstory:

Petitioner Oil States sued respondent Greene’s Energy, contending that Greene’s Energy was infringing a patent that Oil States holds on technology useful for preserving wellhead equipment in the oil and gas industry. Predictably, Greene’s responded by seeking inter partes review, hoping that the PTO would invalidate the Oil States patent. When the PTO concluded that the patent in fact was invalid, Oil States raised the stakes, arguing that Congress violated Article III and the Seventh Amendment when it authorized an administrative agency to invalidate the patent without affording Oil States an opportunity for a jury trial.

If the Supreme Court decides that IPR is unconstitutional, the holding will have major consequences. As an initial matter, many would-be litigants have chosen to pursue IPR petitions instead of patent defenses or claims in court because the IPR process is faster and more cost-effective than federal litigation. For example, a typical medium-sized patent dispute costs around $3M to litigate in federal court, but IPR proceedings are one-tenth the cost. The average time to trial is around 2 years, 3 months, whereas IPR proceedings take just over half as long to conclude. In addition to offering advantages to litigants, IPR proceedings have played a significant role in lightening the federal patent docket, addressing more than 1,000 patent cases with dispositive effect. Usually, patent cases are stayed pending an IPR proceeding. Thus, the IPR process in many cases eliminated the need for protracted federal litigation.  

As Oil States neared oral argument, several commentators offered their take on how the case might turn out. But the Justices’ questions at oral argument provide better hints at whether affirmance or reversal will result:

Right out of the gate, Chief Justice Roberts asked the petitioner, Oil States, to explain its distinction between the USPTO’s post-grant procedures that are “examinational” in nature, versus those which are adjudicative. The distinction relates to the federal government’s separation of powers between its three branches, with the judiciary serving the role of adjudicating disputes–as provided by Article III, which vests the “judicial power” in the federal courts. Getting to the heart of the matter, Justice Sotomayor asked, “What is so fundamentally Article III that changes [the IPR] process into an Article III violation?” Suggesting an answer to her own question, the Justice stated, “Both [IPR processes and other post-grant processes] are just informing the PTO of the nature of its error and giving it an opportunity to correct its error.” Justice Ginsburg later chimed in: “[IPR] is geared to be an error correction mechanism and not a substitute for litigation.” Justice Breyer appeared to agree, stating, “I thought it’s the most common thing in the world that agencies decide all kinds of matters through adjudicatory-type procedures often involving private parties. So what’s so special about this one…?” Justice Kagan remarked, “it seems a little bit odd to say, sure, the government can reexamine this…but there’s some line that falls short of what” is constitutional.

Justice Gorsuch suggested that the distinctions between permissible examination and impermissible adjudication could be avoided by focusing on whether there is a private or public right involved, the idea being that public rights (e.g., licenses) need not be adjudicated by an Article III court. Justice Kennedy asked, “[C]ould Congress say…we will grant you a patent on the condition that you agree to this procedure; otherwise, we don’t give you the patent?” Justice Alito later asked a similar question. Justice Kennedy followed up, “Could Congress say that we are reducing the life of all patents by 10 years?” When counsel for Oil States answered yes, he responded, “Well, then that–doesn’t that show that the patent owner has limited expectations as to the scope and the validity of the property right that he holds?” Justice Gorsuch begged to differ, however, stating “we have a number of cases that have arguably addressed this issue…in which this Court said the only authority competent to set a patent aside or to annul it or to correct it for any reason whatever is vested in the courts of the United States.” But Justice Sotomayor, seemingly rejecting that argument, stated that at least one of the cases cited by Justice Gorsuch (McCormick v. Aultman) did not involve determinations of constitutional law, nor did it involve statutory analysis of post-grant procedures because none were applicable or available at the time that case was decided.

Turning to the respondent, Greene’s Energy, Justice Breyer fired off the first question, asking whether it was a “problem” that a company could invest $40B in developing a patent and could have it for 10 years before an IPR proceeding cancelled the patent. He asked, “Is there something in the Constitution that protects a person after a long period of time and much reliance from a reexamination at a time where much of the evidence will have disappeared,” suggesting a due process-flavored argument. Chief Justice Roberts followed up, asking whether Greene’s Energy’s position is that “If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point.” Finding agreement, he said, “Well, haven’t our cases rejected that…proposition? I’m thinking of the public employment cases, the welfare benefits cases. We’ve said you…cannot put someone in that position.”

The discussion shifted to whether the availability for subsequent judicial review of the PTAB’s IPR decisions bears on IPR’s constitutionality. Justice Sotomayor remarked, “That..was what troubled me deeply about you telling Justice Kagan that, without judicial review, that this would be adequate. I mean, for me, this–what saves this, even a patent invalidity finding, [is that it] can be appealed to a court….[H]ow can you argue that the…PTO…has unfettered discretion to take away that which it’s granted?”

Justice Gorsuch again brought up the public-private rights distinction, noting that “there’s an abundance of law going back 400 years. Justice Story says it. I mean, you know, this is not a new idea, that once [a patent is] granted, it’s a private right belonging to the inventor.”

Finally, the Court turned its attention to the Government’s argument. Justices Gorsuch and Roberts asked about the “bitter with the sweet” argument. The Government responded that employment and welfare decisions are often made by executive officials and must always comport with due process, but need not be adjudicated by courts in the first instance.

Justices Breyer and Roberts then steered the conversation toward factors that might help distinguish private rights from public rights. Justice Breyer expressed the view that the large investment underlying a patent might justify a due process or takings clause argument, but the Government responded that there is no as-applied challenge in this case.

The Government also brought up the adjudication versus examination point, arguing that IPR is distinct from typical judicial functions, which involve determining liability between private litigants and assessing monetary damages. For example, an infringement action involves determining liability for use of a patented idea and the reasonable royalty damages that should be paid for that use. IPRs, on the other hand, merely address patentability and do not involve liability or damages. The Government also noted that the executive frequently employs adjudicative proceedings to take appropriate executive action. IPR is no different.

In the end, as always, divining the eventual decision from the Justices’ questioning is more art than science–no puns intended. Justices Sotomayor, Ginsburg, Breyer, and Kagan all appear to endorse the view that IPR proceedings do not violate separation of powers. Justices Kennedy and Alito also seem to fall in the same camp. On the other hand, Justices Breyer, Roberts, and Sotomayor’s questions suggest that these Justices think there may be serious due process concerns. Only Justices Gorsuch, Breyer, and Roberts were interested in the public rights versus private rights distinction, but two of those Justices expressed doubts about the distinction’s defining features. If I had to call it, I would guess that the Court will find that IPRs, as currently structured, do not violate separation of powers or due process and are therefore constitutional. Stay tuned for updates on this important case.