Supreme Court Weighs Streamlined Patent Challenges

Supreme Court Weighs Streamlined Patent Challenges

WASHINGTON — The Supreme Court appeared divided on Monday over the constitutionality of a procedure that makes it easier to challenge questionable patents.
The procedure, created by Congress in 2011, resembles a trial in federal court but is conducted by an executive-branch agency. Supporters say it helps combat “patent trolls,” or companies that obtain patents not to use them but to demand royalties and sue for damages. Opponents say the procedure violates the Constitution by usurping the role of the federal courts, violating the separation of powers and denying patent holders the right to a jury trial.
The case grew out of a dispute between Oil States Energy Services, which owned a patent for protecting wellhead equipment during hydraulic fracturing of oil wells. A competitor, Greene’s Energy Group, successfully challenged the patent under the procedure, called “inter partes” review, which is Latin for “between the parties.”
An administrative tribunal created by the 2011 law, the Patent Trial and Appeal Board, ruled that the patent was invalid. According to a brief filed by the federal government, the tribunal had, as of July, canceled all or part of more than 1,300 patents.

Oil States appealed its administrative loss to the United States Court of Appeals for the Federal Circuit, which is part of the judicial branch, arguing that its constitutional rights had been violated by the tribunal procedure. The appeals court rejected the arguments.
On Monday, the court’s more liberal justices appeared generally untroubled by the procedure. They noted that there was nothing new about administrative re-examination of whether patents were validly granted.
“There must be some means by which the patent office can correct the errors that it’s made,” Justice Ruth Bader Ginsburg said.
Allyson N. Ho, a lawyer for Oil States, said there was a difference between re-examination, which is the job of an executive-branch agency, and adjudication, which is the job of the courts.

Justice Elena Kagan said that allowing an agency to conduct something like a trial made it more likely that it would come to the correct conclusion.
“The government wants to put in place a set of procedures that will actually increase the government’s accuracy in figuring out whether it made a mistake,” she said.
Justice Sonia Sotomayor added that the administrative tribunal’s rulings were subject to judicial review. “What saves this,” she said of the tribunal procedure, is that “even a patent invalidity finding can be appealed to a court.”
But one member of the court’s liberal wing, Justice Stephen G. Breyer, expressed a concern.
“Suppose that the patent has been in existence without anybody re-examining it for 10 years and, moreover, the company’s invested $40 billion in developing it,” he said. “And then suddenly somebody comes in and says, ‘Oh, want it re-examined, not in court but by the patent office.’”

He later suggested that the Supreme Court could uphold the procedure in the case before it but “leave open the question of what happens if there has been huge investment.”
Chief Justice John G. Roberts Jr. appeared troubled by the tribunal procedure. He asked Christopher M. Kise, a lawyer for Greene’s Energy, whether his position was that “you’ve got to take the bitter with the sweet.”
The chief justice elaborated. “If you want the sweet of having a patent,” he said, “you’ve got to take the bitter that the government might re-evaluate it at some subsequent point.”
Mr. Kise agreed with that characterization of his position.
Chief Justice Roberts responded that the court’s precedents have said that “you cannot put someone in that position.”

Malcolm L. Stewart, a deputy solicitor general who was defending the tribunal procedure, said it was not unusual for administrative agencies to act like judicial bodies. “It happens all the time that executive-branch agencies get input from private people before making their decisions,” he said.
“When the solicitor general is deciding whether to file an amicus brief,” he said, referring to friend-of-the-court briefs, “we will read the papers that were submitted to this court. We’ll have meetings with the parties that resemble oral arguments.”
“Even though our procedures may resemble the court’s procedures,” Mr. Stewart said, “the decision that we make is the decision to file an amicus brief on behalf of the United States. So long as that’s an appropriate exercise of executive-branch authority, the fact that we get input from private parties can’t render it constitutionally infirm.”