CHAPTER 6 - STUDY MATERIALS

Constitutional Challenges - Patent Law Edition

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ABSTRACT

Questions arise about whether the examination system itself is constitutionally valid. Can an administrative agency (USPTO) grant exclusive rights that look like private property? Does PTAB adjudication violate Article III's requirement that federal cases be decided by Article III judges? Does patent cancellation without a jury trial violate the Seventh Amendment? This chapter explores the constitutional foundations and limits of the U.S. patent system.

The chapter examines the Patent Clause (Article I, § 8, cl. 8) as the constitutional source of patent authority, the "public rights" doctrine that allows administrative adjudication of patent validity, due process concerns in patent prosecution, and the ongoing tension between patent rights as private property versus government-granted privileges.

This chapter teaches the constitutional framework for patents, major Supreme Court cases addressing challenges to USPTO and PTAB authority, the distinction between public rights and private rights, and the constitutional limits on Congress's power to create patent rights.

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SUMMARY - PATENT LAW CONCEPTS TAUGHT

1. The Patent Clause - Article I, § 8, Clause 8

Constitutional foundation for U.S. patent system:

• Text: "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"
• Two grants: Copyright ("Authors" and "Writings") + Patents ("Inventors" and "Discoveries")
• "Limited Times": Patents cannot be perpetual. Currently 20 years from filing (§ 154(a)(2)). Congress could extend/shorten, but cannot eliminate time limit.
• "Progress" limitation: Patent system must promote progress, not hinder it. This limits what can be patented and how patents are enforced.
• "Inventors" requirement: Only actual inventors can be granted patents. Cannot grant to non-inventors (though rights can be assigned after grant).
• "Discoveries": Interpreted broadly to include inventions - anything useful, novel, and non-obvious within statutory categories.
• Exclusive congressional power: States cannot grant patents (preempted by federal law). Only Congress can create patent system.

2. Public Rights Doctrine

Why administrative agencies can adjudicate patent validity:

• Article III requirement: Federal judicial power vested in Article III courts (life tenure, salary protection). Generally, federal cases must be decided by Article III judges.
• Public rights exception: Matters "arising between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments" can be adjudicated by non-Article III tribunals.
• Patents as public rights: Patent grant is government conferral of privilege, not recognition of pre-existing property right. Government can reconsider grant through administrative process.
• *Oil States* holding: IPR does not violate Article III because patents are public franchises created by government, subject to administrative review.
• Limits: While validity can be administratively reviewed, infringement suits (between private parties) must be in Article III court.

3. Article III and Non-Article III Adjudication

Constitutional requirements for federal adjudication:

• Article III judges: Appointed by President with Senate confirmation, life tenure, salary cannot be diminished. Ensures independence from political pressure.
• Administrative Patent Judges (APJs): Not Article III judges. Appointed by Secretary of Commerce, removable, no life tenure.
• *Northern Pipeline* test: Congress can create non-Article III tribunals for (1) territorial courts, (2) courts-martial, (3) public rights cases
• Patent prosecution: Application examination by USPTO examiners (non-Article III) is constitutional - applicant voluntarily seeks government benefit
• PTAB review: IPR/PGR conducted by APJ panels (non-Article III) constitutional under public rights doctrine
• Core private rights: Cannot be adjudicated administratively. Infringement between private parties must be in Article III court with jury trial option.

4. Seventh Amendment Right to Jury Trial

When jury trial is required in patent cases:

• Seventh Amendment text: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved"
• Historical test: Jury trial required for actions that were tried to jury at common law in 1791 (when 7th Amendment ratified)
• Patent infringement: Patent suits existed in 1791 and were tried to juries. Jury trial right preserved.
• IPR/PGR proceedings: No jury trial right. *Oil States* held these are not "Suits at common law" but administrative proceedings to review government grant.
• Validity in district court: When accused infringer raises invalidity defense in infringement suit, jury decides validity issues (fact questions). Judge decides legal questions.
• Policy tension: Same patent can be held valid by jury (clear and convincing evidence standard) but invalid by PTAB (preponderance standard, no jury)

5. Due Process in Patent Proceedings

Fifth Amendment Due Process Clause applies to USPTO:

• Notice requirement: Patent owner must receive notice of IPR/PGR petition and opportunity to respond (§ 313 preliminary response)
• Hearing right: Parties entitled to oral hearing before PTAB (§ 316(a)(10))
• Written decision: PTAB must issue written decision addressing parties' arguments (§ 318(a))
• Appeal right: Either party can appeal PTAB decision to Federal Circuit (§ 319)
• Impartial tribunal: APJs must be neutral - cannot have financial interest in outcome, cannot have prejudged case
• Multiple IPR problem: Concern that patent owner facing serial IPRs on same patent is denied due process. Director has discretion under § 314(a) to deny institution if earlier proceeding adequately addressed issues.

6. Takings Clause and Patent Cancellation

Fifth Amendment: "nor shall private property be taken for public use, without just compensation"

• Are patents "property"? Yes and no. Patents have property-like characteristics (assignable, devisable, exclusive rights) but are government-granted privileges subject to reconsideration.
• *Oil States* analysis: Patent cancellation through IPR does not constitute "taking" because patent grant is contingent - subject to PTAB review. Patent owner never had absolute right immune from administrative challenge.
• Inventor's labor vs. patent right: Inventor's effort creating invention is not taken. Only the government-granted monopoly is reconsidered.
• No compensation required: If PTAB cancels patent claims, no just compensation owed. Patent owner's investment in R&D, prosecution costs not protected by Takings Clause.
• Compare to land: Government cannot seize land without compensation (private property right). But can revoke liquor license (government privilege) without compensation. Patents closer to privilege than property for Takings purposes.

7. Patent Clause Limits on Congress

Constitutional constraints on patent legislation:

• "Inventors" only: Congress cannot grant patents to non-inventors. Patent must be granted to actual inventor (though rights can be assigned). See *Bd. of Trustees v. Roche* (2011).
• "Limited Times": Congress cannot create perpetual patents. Current 20-year term (§ 154) satisfies this. Could Congress extend to 50 years? Probably. To 200 years? Arguably violates "limited."
• "Promote Progress": Limits what can be patented. Cannot patent laws of nature, natural phenomena, abstract ideas - wouldn't promote progress, would hinder it.
• "Discoveries": Must be something new, useful, non-obvious. Congress cannot eliminate novelty/utility requirements - would violate constitutional purpose.
• Trade secrets alternative: States can protect trade secrets under state law (not preempted) because trade secrets are different mechanism than patents. *Kewanee Oil v. Bicron* (1974).

8. Preemption of State Patent-Like Protection

Supremacy Clause limits state IP laws:

• Express preemption: States cannot grant patents - exclusive federal power under Patent Clause
• Conflict preemption: State laws that conflict with federal patent policy are preempted. *Bonito Boats v. Thunder Craft* (1989) - Florida statute prohibiting boat hull copying preempted because conflicted with federal policy that unpatentable designs enter public domain.
• Trade secret protection allowed: Not preempted because trade secrets require secrecy (patents require disclosure), different policy objectives
• Contract law allowed: Licensing agreements, NDAs, employment contracts enforceable under state law even if involve patented/unpatented inventions
• Tort law complications: State unfair competition law can protect against copying, but cannot provide patent-like exclusive rights for unpatentable subject matter

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DISCUSSION QUESTIONS

1. Public Rights vs. Private Rights Distinction

Question: *Oil States* held that patents are "public rights" subject to administrative cancellation. But patents are assignable, devisable, and can be licensed - characteristics of private property. How can they be both?

Analysis Points:

• Public rights doctrine focuses on SOURCE of right (government grant vs. pre-existing common law right)
• Patents created by statute, granted by government agency - not pre-existing property
• Once granted, patents have property-like characteristics for transfer/enforcement purposes
• But government retains authority to reconsider grant through administrative review
• Compare to land patent (government grants land) - can be reviewed administratively for fraud/error in grant
• Distinction matters for adjudication forum: Validity can be administrative, infringement must be Article III court

2. Seventh Amendment and IPR Proceedings

Question: Patent infringement suits have jury trial right under Seventh Amendment. Accused infringer raises invalidity defense. Jury finds patent valid (clear and convincing evidence). Same accused infringer files IPR petition. PTAB cancels same claims (preponderance standard, no jury). How is this constitutional?

Analysis Points:

• Different proceedings, different standards - IPR is not same as infringement suit
• IPR is government reconsidering its own grant (administrative), not suit between private parties
• No Seventh Amendment right in administrative proceedings - only "Suits at common law"
• Patent owner chose to seek government benefit (patent grant), accepted condition of administrative review
• Policy tension: Different forums can reach different results on same patent
• *Oil States* endorsed this system - jury trial for infringement, administrative review for validity

3. "Limited Times" Requirement

Question: The Patent Clause requires "limited Times." Current term is 20 years from filing. Could Congress extend patent term to 100 years? To 500 years? At what point does "limited" become "perpetual"?

Analysis Points:

• No Supreme Court case defines maximum permissible term
• Comparison to copyright: *Eldred v. Ashcroft* (2003) upheld life+70 years copyright term as "limited"
• Copyright terms much longer than patent terms - suggests flexibility
• But patents vs. copyright serve different purposes - inventions become obsolete faster
• 500-year term arguably "effectively perpetual" - would violate constitutional purpose
• Congress has flexibility but not unlimited discretion - must promote progress, not hinder it

4. Due Process and Serial IPR Petitions

Question: Patent owner faces first IPR petition, survives (claims upheld). Different petitioner files second IPR on different prior art. Then third IPR, fourth IPR, etc. Does this violate patent owner's due process rights?

Analysis Points:

• Each petitioner entitled to challenge patent under § 311 (if not estopped)
• But multiple proceedings on same patent impose costs, create uncertainty
• Director has discretion under § 314(a) to deny institution - can consider burden on patent owner
• § 325(d): Director can reject IPR petition if same or substantially same prior art already considered
• No absolute due process violation - patent owner gets notice, hearing, decision, appeal for each IPR
• But policy concern about harassment - Director discretion is safety valve

5. State Trade Secret vs. Federal Patent Preemption

Question: *Kewanee Oil* held that state trade secret protection is not preempted by federal patent law. But trade secrets can protect unpatentable inventions indefinitely. How is this consistent with federal patent policy that unpatentable things enter public domain?

Analysis Points:

• Trade secrets require secrecy - no disclosure to public (unlike patents)
• Trade secrets lost if reverse-engineered or independently discovered (unlike patent exclusivity)
• Different policy objectives: Trade secrets reward secrecy, patents reward disclosure
• Trade secret holder forgoes patent protection (must choose one path)
• No conflict with patent law - inventor can choose trade secret (keep secret) or patent (disclose in exchange for limited monopoly)
• State law providing patent-like protection WITHOUT disclosure requirement would be preempted (*Bonito Boats*)

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CASE STUDY: Oil States Energy Services, LLC v. Greene's Energy Group, LLC

Supreme Court, 2018

FACTS

Oil States owned U.S. Patent No. 6,179,053 covering a system for protecting wellhead equipment used in hydraulic fracturing. After Oil States sued Greene's Energy for infringement, Greene's filed an inter partes review (IPR) petition challenging the patent's validity.

The PTAB instituted IPR and held all challenged claims unpatentable as obvious. Oil States appealed to the Federal Circuit, arguing that IPR violated Article III (requiring federal cases be decided by Article III judges with life tenure) and the Seventh Amendment (requiring jury trial).

The Federal Circuit rejected these challenges, and the Supreme Court granted certiorari to address whether IPR violates the Constitution.

ISSUE

Does inter partes review - where Administrative Patent Judges (non-Article III officers) reconsider patent validity without a jury - violate Article III's vesting of judicial power in Article III courts or the Seventh Amendment's jury trial guarantee?

HOLDING

NO. The Supreme Court held 7-2 that IPR does not violate Article III or the Seventh Amendment. Patents are "public rights" that can be adjudicated through administrative processes.

REASONING

Justice Thomas wrote for the majority:

I. Public Rights Doctrine

• Article III applies to "Cases" and "Controversies": But Congress can assign some matters to non-Article III tribunals without violating separation of powers
• Public rights exception: Matters "arising between the Government and persons subject to its authority" in connection with "performance of constitutional functions of executive or legislative departments" can be resolved administratively
• Patents as public franchises: Patent grant is not recognition of pre-existing property right. Government creates patent right through statutory scheme. Government can condition grant on reconsideration through administrative review.
• Historical practice: Since 1790, patent validity has been subject to administrative review (interference proceedings, reexaminations, now IPR). Long-standing practice supports constitutionality.

II. Seventh Amendment

• "Suits at common law" test: Seventh Amendment applies to suits that were tried to jury in 1791
• IPR is not common law suit: IPR is administrative proceeding to reconsider government grant, not suit between private parties over established rights
• Patent owner voluntarily sought patent: By seeking government-granted privilege, patent owner accepted condition that USPTO retains authority to review validity
• No jury trial right in administrative proceedings: Government acting in sovereign capacity to protect public interest, not resolving private rights dispute

III. Limits on Holding

• Court emphasized IPR is limited to validity grounds under §§ 102/103 based on patents/publications
• Did not decide whether Congress could eliminate all Article III review (noted right to appeal to Federal Circuit)
• Did not address whether OTHER patent rights (infringement) could be administratively adjudicated (likely NO - those are private rights)
• Left open questions about retroactive application to patents granted before AIA

DISSENT

Justice Gorsuch (joined by Chief Justice Roberts) dissented:

• Patents are private property: Once granted, patents have all hallmarks of private property - assignable, inheritable, exclusive rights
• Revocation requires Article III adjudication: Government cannot take private property without due process in Article III court with jury
• Public rights doctrine too broad: Majority's interpretation could allow administrative adjudication of ANY government-created right (Social Security, veterans benefits, etc.)
• Historical evidence mixed: While patent validity sometimes reviewed administratively, infringement suits (which often raised validity) were always in court with jury

SIGNIFICANCE FOR CHAPTER 6

This case resolved the fundamental constitutional challenge to PTAB:

• IPR system validated: Administrative patent review constitutional, no Article III or Seventh Amendment violation
• Public rights framework: Patents are public franchises created by statute, subject to administrative reconsideration
• Dual nature of patents: "Public rights" for validity challenges but "private property" for infringement/licensing
• Practical impact: IPR remains primary mechanism for challenging issued patents - faster, cheaper than district court litigation

CONNECTION TO THE NARRATIVE

Questions about whether the examination system itself is constitutionally valid mirror *Oil States*' challenge to PTAB. The narrative presents the Old Law system as ancient and unquestioned - but in reality, the modern USPTO's administrative adjudication authority was constitutionally contested until *Oil States* resolved it.

Malacar's (Director's) authority to reconsider patent grants through Guardian Queen re-examination parallels PTAB's IPR authority. *Oil States* held this is constitutional because patents are government grants, not pre-existing private property.

ANALYSIS QUESTIONS

1. The dissent argued that patents are private property once granted. Is there a principled distinction between patent grants (which *Oil States* says can be administratively revoked) and land grants (which arguably require Article III adjudication for revocation)?
2. Could Congress create a system where ALL patent infringement suits are decided by USPTO administrative judges rather than federal courts? Would *Oil States* support this? Why or why not?
3. *Oil States* relied partly on historical practice of administrative patent review. But IPR is much broader than prior reexamination procedures. Should this matter constitutionally?

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COMPLETE STATUTORY TEXT

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STATUTORY REFERENCE INDEX

Primary Constitutional Provisions Taught in Chapter 6:

• U.S. Const. Art. I, § 8, cl. 8 - Patent and Copyright Clause
• U.S. Const. Art. III, § 1 - Judicial Power (Article III Courts)
• U.S. Const. Amend. V - Due Process and Takings Clauses
• U.S. Const. Amend. VII - Right to Jury Trial

Primary Statutes:

• 35 U.S.C. § 1 - Establishment of USPTO
• 35 U.S.C. § 282 - Presumption of Validity; Defenses

Key Cases:

• Oil States Energy Services v. Greene's Energy (SCOTUS 2018) - IPR constitutional
• United States v. Arthrex (SCOTUS 2021) - Appointments Clause (covered Ch 5)
• Bonito Boats v. Thunder Craft (SCOTUS 1989) - State law preemption
• Kewanee Oil v. Bicron (SCOTUS 1974) - Trade secret not preempted
• Eldred v. Ashcroft (SCOTUS 2003) - "Limited times" in copyright context

Related Concepts:

• Public rights doctrine
• Article III adjudication requirements
• Seventh Amendment jury trial in patent cases
• Due Process in administrative proceedings
• Takings Clause and patent cancellation
• Patent Clause limits on Congress
• Federal preemption of state IP laws