Is Administrative Review of Granted Patents Constitutional? | Impact on the Administrative State
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Is Administrative Review of Granted Patents Constitutional? | Impact on the Administrative State


[Arti Rai] Alright, great, so we’re going to– [Man] John is an
original when it comes to– [Arti Rai] We’re going to start up– (man laughs) again, again with the webcast,
so everyone has to follow the same rules that we
followed for the first panel, which means that folks in the
audience should wait to speak until they have a
microphone in front of them, and there will be roving microphones. So, same logistics as last
time, except everyone will speak for about five to seven minutes,
Steve will keep the time, and I will interject,
probably, after a few speakers because this, as was the last panel, will also be a lively panel,
I’m sure, with opportunity for participation by
panelists from Panel One and from the audience more generally. So, we will start with
John Golden and move down. John, take it away. [John Golden] Okay. So, the panel is onOil States‘ significance for the administrative state, and my basic answer is, “It depends.” (panelists chuckle) We don’t know what motivated
the justices to grant full merits review in this case, so we don’t know exactly
what they’re contemplating in terms of the nature
of the particular outcome in this case, or the general
scope of what they might say about Article III
jurisprudence or jury rights. We do know that the law in these areas is not a model of clarity and coherence, so there are many opportunities
for the Supreme Court to say something which
could have a fair amount of significance for the
administrative state generally. We could have some clarification of this public-versus-private
rights distinction to which the Court often refers with regard to the Article III
separation-of-powers issues; we could get clarification
about the extent to which there are
important formal aspects of what the Court has
commonly characterized as a kind of pragmatic
separation-of-powers analysis. We can get clarification,
as Greg Reilly suggested in the prior panel, of how
relevant historical facts and concerns, historical contingency is to the Article III analysis. Of course, we do know
there’s a historical test applicable in the jury-rights situation. And finally, we could
also get clarification on the role of consent
with respect to subjection to a non-Article III adjudicator, and also, what constitutes consent. There’s some language in the
Thomas v. Union Carbidecase about how entry into a regulatory scheme such as might be
accomplished, you might think, by applying for a patent,
essentially is a way of consenting to the procedures put in
place under that scheme. So, there are many
opportunities for the Court to bring some clarification
to how the law works quite generally in these areas. A second point is that if
the Court does strike downinter partesreview, that
would be a quite extreme step in the history of
jurisprudence in this area; it’s probably the most extreme step since theNorthern Pipeline
decision a few decades ago. The courts generally,
when they raise concerns, they’re often reluctant to
question Congress’s decisions as to how legislatively-generated regimes are going to be administered, so it could signal a much
more aggressive approach to the Article III
separation-of-powers questions. On the other hand, for the reasons, again, that Greg indicated, the Court could write a relatively narrow,
historically-conditioned opinion that might be relatively
peculiar to patent law, because patent law does,
because of its pre-dating the modern administrative
state, allow the opportunity for that, and then the
general significance might not be so great. Beyond this, there’s a question
of what the fix would be, and we saw that raised in the last panel with the opportunities this
could offer for lawyers after the fact.
(panelists chuckle) As I suggested then, the Court might, followingNorthern Pipeline,
try to restrict this to having perspective effect; there still could be some question about what exactly that means with respect to still-pending cases or not-totally-final cases, et cetera. One could imagine that the fix that Congress would put in place would be to be relatively
straightforward and simple, it might be simply allowing
for the civil action in the district courts
to challenge the result ofinter partesreview,
and if private parties don’t often choose to go that route, as opposed to taking a direct
appeal to the Federal Circuit, the practical forward implications
might not be so great, even though there would
be immediate disruption. So, as I said, it depends;
I’ll be very interested to see if we get any hints as to
what the Court is thinking when they have oral arguments
whenever those occur, I don’t think they’ve been scheduled yet. [Arti Rai] Thank you John, that lays
out, I think, the territory very nicely, and we’ll
move next to Mark Freeman. [Mark Freeman] Arti, thank you so much for having me. I’m counsel for the United States, I’m not representing
the government directly in the Supreme Court, but my colleague, Will Havemann, who’s
in the back here, and I have handled these issues
in the Federal Circuit in theMCM v. HPcase, and in the other cases that
have raised the Article III and Seventh Amendment questions. I hope you’ll forgive
me, it’s necessary for me to state emphatically at the outset, I’m not here speaking on behalf
of the federal government, I am not here giving an
official position in any regard. My former boss, Don
Verrilli’s down at the end of the line here. As he will attest, anything I say can well be overruled tomorrow by the Solicitor General
of the United States, (panelists laugh) in which case, the very
next day, I will be in court saying, “Yes, that, and
not what that moron said the day before.” And particularly so in this
case, because the matter is before the Supreme Court
of the United States. So, I’m relatively
circumscribed or limited in what I can say, and
I apologize for that, but I think it would be useful
if we just take a step back. I remember when the AIA was enacted from the perspective of a litigator. It’s my great privilege
to represent the Patent and Trademark Office in
the Courts of Appeals, along with lots of other federal agencies. I think that the PTO has an
incredibly difficult job, I think people don’t pause and appreciate their job is to figure out
what is new and non-obvious in every field of human
technological endeavor in the world. That’s just an extraordinary
task, and they do it, I think, particularly given all of the constraints they operate under, they
do it exceedingly well, admirably, day after day. When Congress enacted the AIA,
we all foresaw immediately that there would be a number of statutory and constitutional challenges. We, you know, sat down and looked at some of those. We expected litigation over the broadest reasonable interpretation; we expected litigation over the institution-reviewability issues; in additionWi-Fi OneandCuozzo; of course there would be
questions after the AIA about the new definition of
prior art in Section 102; all of those things. But we, I sort of, at least in my mind, identified a couple of legal questions that I thought were gonna be, I sort of describe them as the
nuclear-bomb questions. They were very unlikely to go
off, but if the bomb went off, it could be really bad. One of those was the
constitutional challenge under the IP Clause of
the Constitution itself to the change from a
first-to-invent system to a first-inventor-to-file system. That suit was brought by Jonathan Massey, (panelists laugh) and he and I met one fateful
day in the Federal Circuit, and I won on standing, as the
government likes to try to do. (panelists laugh) So that question, I
think in the last panel, someone mentioned that
that issue petered out; it petered out because there wasn’t a plaintiff with standing, no offense. (panelists laugh) That may come up someday. Another challenge that we
identified, not immediately but fairly early on, as
a potential big question, was the issue many of
you are familiar with inEthicon v. Covidien, about whether the Director’s
delegation of the authority to institute to the Patent
Trial and Appeal Board was a permissible exercise of
executive delegation authority and a permissible act under
the terms of the statute. That was a very interesting
matter, we litigated that, and then, of course,
there’s what we now know as theOil Statesquestion,
at the time was theMCM v. HPquestion,
and speaking solely, solely for myself, I have to say I didn’t think
that much of the issue, I thought, “Ah, that’s creative.” (panelists chuckle) Obviously, I was wrong that
far, because now here we are in the Supreme Court of the United States. So, I think everything I have to say on the merits of the question is said in the government’s brief
in opposition inOil States, also in our somewhat
longer brief in opposition in theMCM v. HPcase,
where cert was denied. Our brief on the merits
is due on October 23rd, so stay tuned, (chuckles) but I can say a couple things. As a general matter, there’s
a lot of different frames for this case, but one
that I find intuitive is, again, in our brief in opposition, is that putting aside the formalities, this
is a–the IPR process is about a process that allows the
Patent and Trademark Office to correct patentability
mistakes that it made at the time that it granted a patent. Now, they may not have been mistakes in the sense that there
was something in the record in front of the agency that
they erroneously decided; in fact, most of the
time, these are prior art of which the agency wasn’t aware. What the IPR process does is it harnesses the incentives and
knowledge of third parties who are affected by the patent grant to bring information
to the PTO’s attention so that it knows whether it made a mistake in the original grant. And it’s why I find it ironic that some of the objections to the PTO process
are framed in terms of, the IPR process are framed in terms of,
“Well, why are we using BRI?” I mean, of course, that issue is now resolved by a unanimous Supreme Court, but even aside from that, what
we are doing in these cases is deciding if the examiner had
been aware of this prior art at the time that the
application came to the office, what would the answer have been? And what should the answer have been, under the standard that the
examiner would have applied at that time? You don’t have a right to a patent just because you slip it by the examiner and they’re not aware of the key prior art that shows it’s not novel
or it’s not obvious. As people have observed,
the right is conditioned upon satisfaction of those
requirements in the Patent Act. So, I think, you know, that’s
just a helpful way to think about what’s going on here,
and I think informative of the Article III questions. Again, there’ll be more
on that and other points in our merits brief. The other thing I’d say is
that a lot of the arguments, including today, a lot of the observations talk in terms of private property, and, you know, I often wonder to myself, and this is in our brief as well, in what respect are
those arguments different if what we’re talking about is
the government grant of cash? Okay, so, let’s just take my salary. All right, I’m a federal employee. If the, it’s actually the
Department of Agriculture, for obscure reasons,
that manages my salary, I have no idea why. (panelists laugh) But that’s where my check comes from. If they inadvertently wire me $100 million in the next payday, okay, cash, that’s property, right? I mean going back to the repo
man versus car thief. You know, if somebody came in and
stole that $100 million, they would be a thief. But I tell you what,
there is a federal statute that says if the government
inadvertently, mistakenly, it comes to their attention,
mistakenly at the time give you money to which
you are not entitled as a federal employee, they take it back. And so I wouldn’t expect to
be able to keep that money. Agencies, Congress has, for generations,
given federal agencies the authority to correct
the mistakes they made, at the time they made them, through administrative processes, subject to judicial review. If it was my $100 million,
I could go to court and say, “I get that back.” I getde novoreview
of the legal questions in a court of law, but the
authority of federal agencies to correct their mistakes is
a fairly time-honored process, and in some respects,
we think what’s going on in the IPR processes is exactly that. So, I guess that’s all
I should say for now, and the other thing I’ll say is, whatever happens in this case, if IPR process goes down,
there’s been a lot of talk about things, I know I will
have a lot of work to do, and if the IPR process stays, I mean, I think, I guess all that happens
is all patent owners assign their patents to Indian tribes. (audience laughs) At least I read that in
the papers, I don’t know. (panelists laugh) [Arti Rai] Well, all patent lawyers become constitutional lawyers, it seems. Yeah, Jonathan, next. [Jonathan Massey] Well, I’m Jonathan Massey, I filed a brief, an amicus brief
supporting the petitioners in this case on behalf of the
Biotech Industry Association and the Association of
University Technology Managers. I’d just like to go on record as saying, Mark, if you get overpaid,
I will represent you, (attendees laugh) and our theory will be
that it is a vested right to not be taken away. No, so, the topic of this panel is the implications ofOil States
for the administrative state, which I think is a brilliant idea, because the whole
Article III jurisprudence is really underdeveloped
in the Supreme Court, and there are multiple conflicting
strands of jurisprudence which come into play. And it’s just, you’re all undoubtedly familiar, the old chestnut was a case
calledCrowell v. Bensonin 1932 that upheld a system of
administrative compensation for maritime workers’ comp, and
it said the Congress, or the legislature could create a system that took what heretofore
were common-law claims and have them be adjudicated through an administrative system, and that was kind of a
damages-computation scheme, because it was a no-fault
workers-comp scheme, and it was kind of a relatively
small but important step for the Court to say that a
damages-computation question which seemed relatively ministerial could be done through
an administrative scheme rather than a judicial one. And that case kind of chugged
along and created precedent, and then in the ’80s, the Supreme Court really started grappling
again with these questions, and they permeated several
different areas. One we’ve heard, I’m not going to go through
the case, but you all know the Thomas against Union Carbide case about compensation scheme
among pesticide manufacturers under FIFRA, the federal act
for getting pesticide approval, theCFTC v. Schorcase which involved the state law counterclaim
that someone would raise if someone brought a CFTC
complaint against a broker, theNorthern Pipelinecase,
and just to summarize, the Court was all over the place in not particularly predictable
ideological fashion. In other words, so Justices, Justice
Scalia was kind of on his own, saying, “I believe that
when administrative agencies exercise Article I authority,
they’re not exercising the judicial power of the United States,” and he had other theories, for
the unitary executive theories and other ideas for why
administrative agencies might need to be cut back
and should be restricted, but Article III wasn’t a
big part of his thinking. Justices White and O’Connor
had a very pragmatic approach to giving agencies authority,
and those were the opinions inSchorand inThomas. And they had this functional list
of questions and factors, the kind of multifactor balancing test that Justice Scalia hated,
but that was their approach, and it was really the
liberals, led by Brennan, who said there should be a sharp limit to the authority of Congress
to assign Article III authority to administrative agencies,
and Brennan had a case calledGranfinancieralater, which imported the Seventh
Amendment into this, which was an additional
layer of complication. And then that sort of has chugged along, and the court, in recent
decades, has used this in bankruptcy cases, really, to establish that there are limits
on bankruptcy judges, and the need for consent
for federal magistrates to exercise certain powers. And it’s not been a
particularly smooth ride, and on top of this,
there was a series of… a lot of the conservative justices on the current court
have serious questions, reservations, about agency authority, mostly because ofChevron
and associated doctrines which seem to cede a lot
of law-articulating power to agencies, and so, the
Chief, even Justice Kennedy, certainly Justice Alito,
all have reservations about the growth of agency power. So, while this issue came up, and while theOil Statesissue
has come up several times inMCMand other cases, and
has been denied repeatedly by the Supreme Court,
after Justice Gorsuch got on the Court, the Court grants it. So a lot of people on
the Bar are thinking, “Is this a coincidence? Maybe not such a coincidence,” and it’s interesting because of course, Justice Gorsuch is a
fierce critic ofChevron. He went to the extent, when
he was on the Tenth Circuit, he went to the extent of
writing a majority opinion that relied onChevronand
then writing a separate opinion sayingChevron‘s a bad
doctrine. (chuckles) So, you don’t do that,
you don’t write separately when you’re writing the majority unless you have strong views. So, could it be that people
who don’t likeChevronalso don’t like Congress’s power to assign adjudicatory
authority to agencies ’cause they think it makes
agencies too powerful? It’s hard to say, but I
think what this case means for the administrative
state is significant, because Congress, Congress
has obviously created a… the patent system has chugged
along since the 19th century in a kind of separate parallel
track to the growth of the administrative
state, and this will be the Court’s opportunity, really, to deal with that
intersection, and I think the kinds of schemes that
the Court has looked at under Article III, like
the scheme inSchor, the scheme in Thomas
against Union Carbide, the scheme inCrowell v. Benson,
are all different, really, from this kind of scheme, the
IPR scheme, because those were really ancillary to federal, limited
schemes that were ancillary to other federal programs that involved not rights that were sort of
enumerated in the Constitution or had deep historical
roots, they involved schemes that had different
adjudicatory procedures, that didn’t seek to imitate courts, they didn’t have… The Court in every instance
addressed the fairness and the impartial nature
of the decision-maker; here, the PTAB judges
are Title V appointees by the Department of Commerce that pursue a particular agenda. So anyway, those are all
really interesting questions that the Court’s going to grapple with, and I think Arti, you’re to be applauded for recognizing the intersection here of Article III and IP law in a way that will shed, illuminate both areas of law. [Arti Rai] Well thank you, Jonathan. I have written on these issues,
as have many of the people on this panel, so I’ll just
highlight two points that I’d love people’s responses to. The first is, it is a very
interesting origin story, if you will, with Justice
Brennan really being the creator of these formalist distinctions, and that’s sort of an interesting
piece of the puzzle and I wonder if anyone would want to comment on that question. The other point that I
think is interesting is you mentionedChevron; one
of the pieces of this puzzle that John Golden and I
have actually debated in the literature is the
fact that, as it happens, these adjudicatory procedures,
the results of which might be seen asChevron-worthy,
the Justice Department and the PTO have not soughtChevron. So, it sort of, may be, again,
patent-specific administrative law, or it may be, as John Golden has said, that they don’t deserveChevron, but on legal issues, the
Federal Circuit does review these adjudicatory resultsde novo. [Jonathan Massey] Right. Well, I wasn’t usingChevronin that way. [Arti Rai] Right, right. [Jonathan Massey] What I mean is there’s
this broader strand on the Court that is suspicious of
Chevron, because they worry that agencies have too much power, and that strand of concern, I
think, intersects IP law here, because I think one of their
issues is agencies, if agencies are too powerful, then that same concern comes here not because of the
Chevrondeference point, but just because the PTAB is doing stuff that they, the Court doesn’t
think it should be doing, right? It’s just a general concern. I think we’re seeing on the Supreme Court more concern about the growth
of the administrative state than a lot of people expected. [Arti Rai] Great. Erica, you wanted to chime in? [Erica Arner] Yeah, I don’t
have a mic near me. So, just something that we
encountered in our PTAB cases that I think kind of goes to this
point ofChevrondeference or deference to the agency decisions, and maybe one of the things
that the Board chose to do in its rule-making
process that made things maybe worse than they
need to be, and that is on the motions to amend practice,
which is one of the areas that’s gotten a lot of
press and a lot of concern by patent owners, in particular,
and now has an en banc case at the Federal Circuit. The agency decided affirmatively,
according to the agency, that they were not going to do a notice-and-comment rule-making, that instead they were going
to do adjudicatory rule-making, and so they didn’t actually issue rules on how to amend your claims
in these proceedings, and so what we ran into
representing patent owners who had trouble, weren’t
allowed to amend their claims, when we got to the Federal Circuit and really dug into the standard of review that the agency was seeking there, it wasn’t evenChevrondeference, I guess, when you’re reviewing an
agency’s own interpretation of its own regulations, so
you’re adding another layer of even more deference,
so I think our deference– [Jonathan Massey and Others] Our deference, exactly. [Erica Arner] All of you know
much more about than I do. But from the practitioner’s
standpoint, and motions to amend being one of the really hot-button issues that have bubbled up as part of the PTAB, I think the agency’s choice to
use adjudicatory rule-making, I don’t know if it was
intentional to give themselves even more deference,
but it really, I think, led to even more problems for the agency and kind of an interesting collision with, I mean, they’re not even
looking for regular, so it made the motions
to amend that much worse. I point that out as
something we experienced. Didn’t really realize it when we heard the adjudicatory rule-making, “Oh, okay, we’ll have decisions
and that’ll explain it,” but when you actually
look at what that means once you get on review
to the Article III part, it became quite different. [Arti Rai] Great. John Duffy. [John Duffy] Thank you, Arti; thanks for inviting me. This is very exciting to
me as an ad-law teacher. (panelists chuckle)
Extremely exciting. Because every year,
when I teach Article III in the administrative state, I start out with telling my students
one pole-star data point, which is that there is no
administrative adjudicatory system that has ever been
declared unconstitutional. That’s something you can take to the bank, and I’ll say, “And that’s
actually why we’ve got to look at some bankruptcy cases,”
and everybody groans. (panelists laugh) They’re like, “(sighs) You
know, administrative law is boring enough, but bankruptcy too?” And I say, “I apologize for
that, but we have no cases on the other side of
the line, and therefore, to give you some sense of
where the line might be, we’ll look at some of
these bankruptcy cases, because perhaps that tells us
something about Article III, and we have to study
Article III a little bit.” Now, as much as an ad-law
teacher, I’d love to see another case on the
other side of the line. Every case that Jonathan
Massey just mentioned,Crowell v. Benson,Thomas
v. Union Carbide
,Schor, all the big cases; I
teach all those cases, and who wins in that case?
[Jonathan Massey] Right, exactly. [John Duffy] Every time, the agency
wins in that case. So, I’d love to have another case, it would make my job, my primary job easier. But I’m here to tell you that this case is the absolute worst place
you could possibly imagine finding the case on the
other side of the line, that of all administrative areas, the one area that the Supreme Court is, for the first time in its entire history, gonna find that administrative
adjudication doesn’t work is in the patent system, where we’ve had
administrative adjudication, indeed, it’s been dominated by
administrative adjudication, for the entire history of the country. And indeed, I’ll say something
else, and this is important to understand just how backwards,
and I think upside-down, this whole case is. For the past 150 years, there
has been a tremendous shift of power, from the courts
to the executive branch in this agency. Somebody on the earlier panel said, “Oh, this is a tremendous
shift away from the courts.” That’s already been happening
with something called the presumption of validity. The presumption of
validity tells the courts they cannot overturn the
executive branch decision, even if it’s completely
unreasoned, unless there’s clear and convincing evidence that it was wrong. This is radical in all administrative law. In every other facet
of administrative law, if you can prove that the
agency failed to engage in what’s called reasoned decision-making, that’s quote directly quote from
Supreme Court opinions by Justice Scalia and Justice Kagan, bipartisan support for that view, codified in the
Administrative Procedure Act. If the agency is not engaged in that, then the agency’s
decision must be vacated. And then it gets remanded to the agency to see if they can come up with some
better reasoning. That does not… according to Federal Circuit precedent, and actually, the Supreme
Court’s never decided this, that can’t happen with the patent grant. The agency’s decision,
no matter how unreasoned, has to be respected by the courts, and that’s quite a radical
accumulation of executive power that did not exist at
the time of the framing. At the time of the framing,
and I just read the statutes from 1790, 1793, it said at most, the grant of the patent
wasprima facieevidence, which is not a presumption, it just means that if there were no other evidence, that would prove your case,
that you were the original and true inventor, but the plaintiff,
sorry, the defendant got to plead the general issue. In other words, there was no presumption. There was no presumption. At most, maybe the defendant
had the burden of proof; I’m not even sure the defendant
did have the burden of proof on that, but nonetheless,
that was what happened then. So, in that case, if you
ask is there a jury trial right, you know you could fight one
way or the other about that, but we are miles away from that system. We are having an extreme
constraint on the jury function and the court’s function
already, and the question now is what does this new statute do? What does the IPR process do? And the IPR process puts patents, really, back into the mainstream, and it’s a constraint on executive power. It’s a constraint because
for the section of patents that are subjected to IPR,
the courts will ultimately get to decide whether the agency engaged in reasoned decision-making
for the first time. That is actually the norm elsewhere, and that’s an accumulation of
power to the judicial branch, and I think that in some ways,
you can think about this, people talk about are
patents property or not. What’s really going on in this case is that the presumption of validity which exists after the grant of the patent is being flipped to a
presumption of invalidity, and that certainly is
not a property right. Even if you could say and
prove to me nine ways to Sunday that patents are property, I would say, “Surely, the presumption of validity which grows out of an
administrative concept of deference to the agency, that is not a traditional
form of property,” and all that happens is that if
your patent, if the agency rules against your patent, well
then, you have to go to court to prove that they’re wrong,
but the patent actually is not vacated until the court
acts, until the court acts, and you have a right to judicial review. So, all we’re doing is replacing
the presumption of validity with a presumption of invalidity, and that surely is something
that is not something that is a traditional form of property. I’ll just say one last word about
the right of, the jury trial right; that, again, is completely upside-down. The Supreme Court has repeatedly said that there’s no right to juries in review of an
administrative-agency action, and indeed, for the plaintiffs
and the petitioners, the topside people, it is true,
they want to draw an analogy between this and mining claims
and other things like that, and in that area, the Supreme Court ruled that you could not, you could not use a jury to
overturn the agency action, you had to use an equitable
action with a judge sitting. So the idea that there’s
a jury-trial right to overturn an
administrative determination is, I just think, radically upside-down, and actually cuts against
numerous Supreme Court doctrines. So, that’s my view.
(panelists chuckle) I come out on one side
in this case, I think, intellectually, but I think
as much as I’d love to see another case, this is clearly not the case to be on the other side
of the constitutionality of administrative adjudication. [Arti Rai] Great, thank you John. Are there any responses immediately to John’s clever argument? (panelists laugh) [Adam Mossoff] Well, John waded into
my bailiwick, which is the history, and that’s because you won’t find the presumption of
validity in the statute, which is why John finds it so odd, because the presumption of validity, as I showed in my 2007 articleWho Cares What Thomas Jefferson
Thought About Patents
, in reference to Judge
Smith’s earlier reference, that it was actually created by the courts in the early 19th century by analogy to titled deeds and land. They said that when there
are ambiguities and questions about how you interpret
a title deed and land, and as for anyone who
teaches property law knows there’s tons of litigation about
what’s the meaning of terms in title deeds, they said that
the interpretive presumption is in favor of the property owner, and the Supreme Court explicitly said, “Patents are title deeds, we are adopting this interpretive canon
from the common law and interpretation of
title deeds of land,” long before the 1836 examination process. So, the original justification
for presumption of validity in favor of patents had
nothing to do with examination. It had to do with that these
were actually analogized, and more than analogized,
they were conceptually and doctrinally linked
to title deeds and land, and the codification of this presumption in the 1952 Patent Act
is just a codification of the judicially-created presumption, which after 1836 comes
to be also buttressed by the point that you also give deference to agency review of the
patent application itself. So you ended up with, in the 19th century, two justifications for the presumption. The one comes to dominate our conception particularly in the modern age, as we adopt a more
administrative approach, which John has, to patents. [Arti Rai] John gets a quick point– [Adam Mossoff] Sir, reply? (chuckles) [John Duffy] For more than 150 years,
there has been this shift. I think that the presumption
of validity might have had some early antecedents, and
it certainly was created over the course of the 19th century, and it was created in the
courts before it was codified. But I don’t really think that that changes that if we take a historical test and we go back to the time of the framing, whether basic issues that
are in the IPR system, which is not the
construction of the patent in terms of, you know, exactly
where do the claims end, but really, questions of if
there was a piece of prior art that was totally missed;
that was the general issue that was adjudicatedde
novo
in the pre-19…1836 Act. Now, even that got a
presumption of validity that the courts created out
of whole cloth, I think, in the later 19th century
and in the 20th century and then codified in the 1952 Act, but that’s where we’re
all basically, if that’s, if it’s constitutional to do that. If it’s constitutional to give
the executive that much power to have a presumption of
validity on these things, I think it’s completely
constitutional for the executive to come back and say, “Well,
for that, we’re gonna flip that to a presumption of invalidity ’cause we’ve taken a second look at it and we no longer believe it,
and if you can prove us wrong in the courts, that’s fine,
but the burden’s gonna be on you and it’s gonna
be a weighty burden, just like the presumption of
validity is a weighty burden.” [Arti Rai] Okay, Greg, and
then we’ll have to move on. [Greg Reilly] Just to add to my point about so much getting
thrown in to these issues that have nothing to do with Article III, inNorthern Pipeline, the plurality, one of the strongest opinions against administrative,
non-Article III adjudication, the Court specifically
says, “Well clearly, if Congress creates the right, they can assign burdens of proof.” So, the burden-of-proof issue
really doesn’t have anything to do with Article III issues. [Arti Rai] Okay. Melissa. [Melissa Wasserman] Okay,
thank you, Arti, very much for inviting me here today. So I wanted to talk, obviously,
about the implications of this case to the administrative state, and as others have said on this panel, the Supreme Court jurisprudence
on when you adjudicate in a non-Article III court, it’s
not a picture of clarity, and so in order to understand
the implications, obviously, it’s going to depend on how
the Supreme Court comes out, but it’s also the analytical approach, I think, that it takes. So, there’s sort of two
strings that Jonathan, I think, talked about, was
a more formalistic approach and the bankruptcy context where they’ve held things unconstitutional to adjudicate state claims,
and then a line of cases withSchor,Union Carbide, andWellnesswhere they’ve taken a more
pragmatic, functional approach and then in their analysis
have really sort of asked, “Is this an encroachment
on the federal judiciary? Are there separation-of-power concerns to this multifactor
test if we removed this from Article III and put
it in an agency tribunal or an Article I court?” So, to really understand
or to think about it, I’m really playing with this idea of what if they do find
it unconstitutional, what other boards or adjudicatory agencies may also be in peril? If they take a very formalistic approach, which, it’s the history,
it’s the uniqueness, historical view of patent law, then yeah, I think it’s a more limited view. I think that cuts back, or
that’s a hard road, I think, to find, in part because I think
some of the other justices, like Justice Thomas, has sort of hinted, at least, in trademarks, for example, that these are quasi-property rights that clearly can be adjudicated in these non-Article III forums. But, if they took a more, that
pragmatic line of cases and found it unconstitutional, which, I think, just reading those cases, it should come out that
it’s constitutional, but if they went the other
way, I just want to think about what would happen to
other agency adjudications of private disputes, in
particular in the IP system. So, most obviously, the TTAB, the Trademark Trial and Appeal Board. Would we have any concern that that would be unconstitutional? So I think even if PTAB
falls, which is unlikely, there are other reasons that
TTAB would still hold up to be constitutional, arguably. So, one, with the trademark rights, remember trademark rights
obviously come from use, they’re state common law, and the trademark-registration system came about with the Lanham Act and created these extra
registration rights, so you could have argued that
this is more closely tied to the implementation of
the regulatory structure, it doesn’t have the unique history on the trademark-registration
side as patent rights, but also, one of the
factors that the Court takes into account in this
pragmatic, multifactor test is the plenary power the courts still have over adjudication in the agency, which is why John thought
one of the fixes here was just to do a trialde
novo
associated with PTAB, and one of the interesting
things, I think, in TTAB when they had this
inter-party cancellation of trademark-registration rights, that you can either appeal
both to the Federal Circuit or get a trialde novo
in the district courts. So I think both of those
things would shield that more from the constitutional challenge. I think the other interesting
one to think about is the Copyright Royalty
Board, which also adjudicates, it sets rates and terms
and distributes royalties payable under government-established
licensing schemes, and it’s also private
disputes between individuals. There, they don’t have
a trialde novoappeal, like a do-over which, if your
concern is taking power away from the Article III, as long as you give your agency adjudication a
do-over in an Article III court, that is not as pressing. You can only, there, the decisions are
reviewed to determine if they are arbitrary,
capricious, abuse of discretion, or otherwise not in accordance in the law, but I think you can make arguments that that’s more tightly wound to the… or more narrow, limited jurisdiction that may not give rise to
as many Article III concerns because although they
make really significant and million-dollar, sometimes, disputes, with the rates that they
set, they are determining the various statutory licenses under that are clearly enumerated
in the Copyright Act. So, that’s all (panelists chuckle)
that I wanted to say today. [Arti Rai] So Melissa, you’re
saying that basically, in both those cases, you think
they could be distinguished? [Melissa Wasserman] Yeah, and
the one thing I would say, the one in the IP regime
that would have been the most concerning,
that never got created but there was a lot of talk about, was the copyright small-claims court. ‘Cause in that sense,
that mimics more of PTAB and you have these broader
rights that you can bring in and damages and any sort of things that you would argue more are
usurping Article III power– [Mark Freeman] Wasn’t that
supposed to be entirely– [Melissa Wasserman] Voluntary? [Mark Freeman] By consent? [Melissa Wasserman] Yeah, that’s
what I was just gonna say. So, the way that they
had largely fixed that was just to say it’s
voluntary, and if you can, underWellness, where the
Supreme Court suggests consent can cure all in the
bankruptcy, state claim– [Arti Rai] Of course, there
was a vigorous dissent by Justice Roberts, so consent
is an interesting question, I think, in the context of Article III, which I’d love to get
other people’s opinions on at some point, although we
don’t have to address that right now, but are there any
tribunals that you think if, that if the court takes a functional approach, that would fall, in addition to the PTAB? [Melissa Wasserman] I mean, I haven’t,
I’ve been looking outside of this, are there tribunals that
are doing private disputes, in the agricultural area and some other, and I haven’t necessarily
found one that I think is, on these sort of realms of
arguments, not more tightly bound or the sort of more plenary
trialde novoreview. [Arti Rai] Interesting. Anyone else think that if they did take a functional approach, that
anything else would fall? [Panelist] I think it’s all fine. (attendees laugh) [Arti Rai] Yes. Josh. Maybe Josh has some
ideas on what would fall. [Josh] One on that and
then on another topic. So, on what would fall, unless
one is gonna distinguish between exclusive rights and use rights, you can think of drug-approval licensing as property rights that could
fall on a formalist ground; similarly, TOSC and FIFRA approvals. That means that Congress
would have to legislate claims for the government to
go to court, in theory, to invalidate drug
approvals, which seems to me a really bad idea. On the dispute between John and Adam, there’s actually a tie back
to what Mark was saying that I wanted to point out, and
that is the characterization of this as either a deed
or as a invalidation or mistake correction is really important, so, if you think of this
as a sign or estoppel and the government shouldn’t
be assigning to one person and then pulling it back,
there’s still the property if it’s land, there’s still
the property if it’s cash. If it’s a patent, it goes away,
there’s no property at all, and that, I think, makes a huge difference to how you view this, and
we’ll see if the Court does. [Arti Rai] Great. John, did you want to respond to that? [John Duffy] No, no, I think we should carry on further discussion again. [Arti Rai] Okay. John Thorne. [John Thorne] So, is this fun or what? (panelists laugh) By my count, according to
SCOTUSblog, before I left to come over here, there are
now 30 amicus briefs filed. There is even an amicus brief by something I’d never heard of before called the Council of
Amicus Brief Writers. (audience laughs) It says it’s in support of neither party, but in fact, it supports the petition because it generates so much business for amicus brief writers. If you’re looking for a field guide to some of the better amicus
briefs, I want to call out one in particular, because
the author’s not in the room and he’s not represented,
so I can talk about him without embarrassing
anybody, but Josh Segal at Jenner & Block wrote a brief for the PTAB Bar Association, which is I think is just
terrifically well done. There’s also a good brief by pharma,
for pharma by Jeff Lamken, but the Josh Segal brief
makes in particular a point about the trade-off
between the initial grant and the ability to
correct an improper grant, and this is an area where
the ability to correct is just hugely important. I think we’re now up to something
north of 650,000 applications per year at the Patent Office. The Patent Office staff has not grown commensurate with the burden imposed; technologies change, making
it, frankly, much harder to understand when a technology
is really novel or something that all the software
engineers believe is obvious. The law has changed, you’ve got
the Supreme Court’s decision inAliceandNautilus, the changes in the law of the
development of technology, the sheer volume of what the Patent
Office has to deal with leads to, it’s inevitable to make a few mistakes. IPRs have been used for good. I like as one example, there was a case file in the Eastern District of Texas against 15 or 16 broadcasters over a concept that most
people in the audience will not be familiar with,
and that’s where you take a single story told by
audio and you break it up into serial components, and
you cast or podcast them into separate units. I’ve learned that there was
something called theLone Ranger, where this guy on a horse had a story, it was told on radio but it
was broken up into segments. It’s not a new idea, the PTAB crushed it. That’s exactly what ought to be done in correcting the agency’s action; that’s the patent piece
of what’s at stake. Good news for the pharma
folks is the pharma patents are much less challenged
and much more often upheld, and of course, you’ve got
Article III review afterward, but something that seems to
be working, being challenged that’s the patent concern. The Constitution specifically
gives Congress the right to set up a patent system. Congress made findings
that the system set up had allowed a lot of bad
patents out of the barn and they needed to be
corralled and brought back in. Congress set up this system. If Congress can’t do this,
if Congress can’t assign an additional bureau of corrections to fix some of these problems,
then you gotta change it at the other end. Back when one of my
friends was in grad school, I think I’ve got the sequence right, Justice Breyer was his professor, then-Professor Breyer
supervised a paper calledGatekeepers versus Exorcists,
the administrative law choice of do you let things loose,
and with what standards of care in letting them loose, and
are you able after the fact to exorcize the ones that
shouldn’t have gotten loose? It’s a general administrative law problem. So, I actually think this is a good case as a general administrative law question, and it’s mostly not about patents though. The geniuses that, some
in the back of the room, that got cert granted,
that’s a hard thing to do, approached this not from the point of view of are the patent judges
uniquely bad in some way, but is all administrative law bad? Philip Hamburger, one of the very bright administrative and constitutional scholars that’s thought about this
problem for many, many years writes about patents in his, can you see this in the webcast? His book isIs
Administrative Law Unlawful?
That’s just one of a bunch of books. He writes about the patent
system, saying that the problem, he’s almost like Jefferson,
the problem with patents is if you don’t confine them
to things that are truly new and important, you’ve impinged
on somebody else’s right. So he says that assigning
to the Patent Office the function of granting
duplicative patents, somebody else already got a patent that they’re operating under,
or a technology is obvious and it belongs to the
public, assigning a patent that reads on somebody else’s
previously patented business or something that is in the public domain, he says that’s unconstitutional. The worry about the administrative state is not about canceling patents,
as I read Philip Hamburger, it’s about patents that interfere with other people’s existing rights, described in prior publications of patents or things that belong to the
public because they’re obvious. So, I think it’s a great
case to be involved in, you’ve got a good panel, Arti,
for putting this together, and I thought I had one other
thing I wanted to say quickly. Oh, taxi licenses. (panelists laugh) What a great label for this,
because think how taxi licenses are impeding the free flow of the economy, which is gonna move beyond taxi licenses. Anyway, thanks for inviting me here. [Arti Rai] So, John Thorne, you raise a question that I think John Duffy would
like to speak to as well, which is, is the real problem
that Congress has not set up some way to challenge the
patent before it’s granted? Because there is no really robust– [John Duffy] When it is granted, let’s say. [Arti Rai] Or before, or when it is granted. [John Duffy] So, I
think that’s exactly right, that if you’re worried
about executive power, you should be concerned
not about this case, you should be concerned about the grant, and then there’s no
Supreme Court precedent but there’s Federal Circuit precedent that says there’s no APA review, and let me just describe
an alternative system here. Imagine if the grant of patents
is a public-rights function and that can constitutionally
be assigned to the executive. No one’s challenging that. No one’s saying–
[Arti Rai] Is that right? Is anyone saying that pre-grant– [John Duffy] Everybody thinks the executive branch can grant patents, right? [Arti Rai] And pre-grant, they can determine in any way, shape, or form how to do it. [John Duffy] So, let’s say that– [Arti Rai] Is anyone disagreeing with that? [John Duffy] Adam’s nodding, and if Adam’s nodding, it’s gotta be that no one else is…. (panelists laugh) That’s my acid test. [Jonathan Massey] It’s tough to say
any way, shape, or form, I think that goes too far. [John Duffy] Well, let’s just say the
way they’re doing it now, and let me add one more thing, let’s say that the
Federal Circuit is wrong that there is APA review,
or that the Congress legislatively overrules
Federal Circuit precedent and says the Patent Office
grants are agency action and they’re subject to
traditional APA review, just like every other agency. Okay, now the Patent Office
gets sued, and I know Mark, you don’t like this.
(Arti chuckles) The Patent Office gets sued– [Mark Freeman] I gotta do something. [John Duffy] Yeah, that’s right;
you’ll get more money from the Department of Agriculture. (panelists laugh) The agency gets sued
and they sit in a room, let’s say it’s just three of them. They sit in a room and
they read over the briefs, and they say now, “By golly,
it’s more likely than not that one of these claims
is going to be invalidated based on the filings,
so we’re going to seek a voluntary remand,” which,
under lower-court precedent and Supreme Court precedent,
is something that you give to an agency if they request it. Those are just three
steps: grant the patent, APA review, then seek a voluntary remand when it meets the standard
that’s actually set forth in the statute here, which
is it’s more likely than not or there’s a substantial
chance that one of the claims is going to be invalidated
by the reviewing court. Then you get back to the agency,
and then all you have to do is say, “It’s okay for
other people, at this point, to come in and set their arguments.” If you think about it in those four steps, and this is a formalist
way of thinking about it, I know people are saying, “Oh,
if the court’s functionalist, it should uphold this,
but formalist maybe not.” I’m a formalist, and I
think this is utterly a backwards suit, because
I think those four steps are completely consistent. They’re consistent with the traditions of the administrative state, they’re consistent with
separation of powers, each and every one of
them, and what you do is you wind up with
exactly what you have now. That’s, I think, the alternative,
and I think that would be an alternative to this. If it did, crazily, get
held unconstitutional, Congress should grant APA review, and then the agency just seeks a voluntary remand back to the agency, and it then starts doing the adjudication with third parties involved. [Arti Rai] John, you
wanted to say something. [John Golden] Yeah, I just wanna shirk
on, just because, of course, we have to have all the
Johns come together. So (panelists laugh) I just think, when you look at, say, Thomas’s dissent in
Wellness, when he says, historically, public
rights were understood as rights belonging to
the people at large, I think consistent with these comments, you can think, well, at
least on set of public rights that may be understood
to be an issue at IPRs are the public rights
of the general citizenry of the United States to
use their property in ways that aren’t encumbered by
invalidly-issued patent rights, and I think that’s kind of
consistent with the statements that are being suggested here about how patents can, the
issuance of patents can actually be an imposition on the
public, which otherwise we don’t necessarily have
an ability to challenge unless you’re threatened with suit. [Jonathan Massey] Well, can I?
[Arti Rai] Yeah. [Jonathan Massey] Well, the public rights
is an interesting category, that is where history comes in
on the Article III component, and of course, the Court’s
categorization is sort of slapdash, but we know things like
customs duties, taxes, membership in Indian
tribes, things like that are public-rights disputes,
and it seems a little odd to throw patents into that category, because they do have the
whole, as Adam points out, the whole analogy to land and
traditional forms of property in a way that really
does seem quite different from the way the Court has
treated, you know, customs duties. [John Duffy] Well, how did they get
granted in the first place, then? [Jonathan Massey] Well, I think
the notion of patent rights, the constitutional clause is secure. So the I think the framers,
the evidence is pretty clear that the framers, and this is sort
of Story and Marshall and so on, that the patent right is an inchoate right when it’s in the sort of
the mind of the inventor, it’s the sweat and
ingenuity of the inventor that is the ultimate
foundation, and then the role of the government is to secure
the right by perfecting it. But it’s not– [John Duffy] The executive branch adjudicates that. [Jonathan Massey] Right, but I think, yes,
except it was quite clear that the one thing the
patent clause was meant to do was to get away from the
system of royal prerogatives that the British Crown had
and that European systems had. I think the Constitution
is sort of a clear repudiation of the positivists’ view that
patents have an existence only insofar as the
government says they do. Because otherwise, there could
never be a takings claim against the government. We know that when Congress
abrogates patents, there is a takings claim,
or at least a court has said that that would be a constitutionally-
relevant, constitutionally questionable– [Adam Mossoff] But you don’t even need
to go that point though, to answer John’s question,
because the fact of the matter is every property right
in land in this country starts with a patent grant,
and there’s conditions imposed upon that patent grant,
and that patent is issued, they’re called land patents,
and that patent is issued on conditions: you’ve done,
you are the first possessor, you’re the discoverer of it;
this isJohnson v. M’Intosh, the great case that we all studied in our first property class
that I teach here every year, and that’s issued by
the executive agencies. So, some of these arguments
are just a little too neat and pat, that don’t actually match onto, actually, our constitutional practice, either with respect to
property rights tangibly or property rights intangibly. [Arti Rai] Adam, why don’t you go next? (panelists chuckle) [Adam Mossoff] It’s interesting. My bailiwick is history
and constitutional issues and patents as private property rights, but I’m actually here
to speak more generally about the PTAB as an
administrative agency, and how it is, I think, possible
for the Supreme Court to, I don’t think it can dodge
the private versus public, because that’s kind of a
primary predicate question, that’s the anteroom question, because if it’s a public right, then you can’t do
anything you want with it. So if they’re going to find some type of constitutional protection for it, they have to, as a
predicate matter, I think, find it private. They could mess with the categories and say it’s quasi-private,
which is what Justice Scalia and Justice Thomas did in an opinion with respect to the TTAB, and then say maybe validity is public and
the rest of it is private or something of that sort,
but they have to, I think, address that issue in some
way, but I don’t think that striking down the PTAB
necessarily will wreak havoc throughout the rest of
the administrative state. I find it very revealing that Melissa, you had some trouble finding some cases because the PTAB really is very unique. You’ll have trouble finding, throughout the administrative
state, an adversarial process where any third party, anyone in the world can file a petition, and
it sets forth a process where there’s an adversarial hearing that involved the cancellation
of a vested property right and it’s a full adjudicatory-type hearing. It’s very different from what came before, and I know there’s been
allusions to review, but the reviews of patents
under prior systems, even theex partereview
andinter partesreview that existed before the AIA were not full adversarial adjudicatory processes that were dedicated to the cancellation of the patent right as such. That was not how they were viewed and that was not how they were structured, and I think this is one of the reasons why the PTAB has presented
such a huge issue to the various stakeholders
in the innovation industries. I believe that what
happened is that you have the classic nirvana fallacy from the AIA where they said, “Look,
we have a few bad actors in the system, and we
have a few bad patents that are clogging the gears
in the innovation economy. We should get rid of them, so
we’re going to create an agency, and by the way, we’re not going
to impose any limits on them. The point of the agency
is to cancel patent rights; go to it.” And without
any structural, procedural, or substantive limits
imposed upon this agency, I’m shocked, shocked to
discover an agency has started to run amok a bit, and is
classified as a death squad for patents, something that Judge Smith, you said if we weren’t
doing some death-squadding, we wouldn’t be doing
our job under the AIA. In a recent discussion
with some admin-law experts and some patent-law
experts that Arti was at and Melissa was at and a couple others, we were kicking around,
getting our heads around what is the PTAB, trying to place it within the administrative
law and administrative state, and eventually, I was like…. I love that Hans earlier said,
“If it quacks like a duck,” raising the duck metaphor. Because I said the PTAB’s a platypus. It’s unique unto itself. It’s not really a duck,
it’s not really a beaver, it’s a really unique type of agency (panelists laugh) that was created by the AIA.
And so a lot of what you see as the procedural and substantive problems that have been inherent in the PTAB in that patent owners have been, I think, legitimately complaining
about now for several years are presented by the PTAB, and
the problem is structural, right. You have the stacking of panels by the Director of the Patent Office after a panel comes with a decision. The Director of the Patent Office says, “I don’t like that decision, you held the patent to be valid. I’m going to add two
more judges to your panel.” They came out with the
decision again, saying no, the patent is valid, and
the Director again said, “I don’t like that decision. I’m going to add two more
judges to the panel because you didn’t reach
the right decision,” and then on seven judges,
they now found the patent to be invalid, and the Director
said, “Okay, I accept it.” We have packing of judicial panels, and no one is batting an eye at this, except, recently, the Federal Circuit when it was brought to their attention and they were very shocked to hear this, especially given that it’s
not evenex antepacking, this is not FDR’s court-packing plan, this is actually packing
after a decision came down and they were unhappy
with the actual decision and they’re actually
working to reverse it. You have de facto denial
of the right of amendment of the patent, which is
provided explicitly in the AIA, and the PTAB has used
the 12-month time limit to justify denying virtually
every single request to amend, the right to amend. You have serial filings
of these petitions, many times for purposes
having nothing to do with the validitiy of the patent. You have Ken Bass, who is shorting stock of pharmaceutical companies, because why? Because the market pays
attention to the fact that the PTAB has a kill
rate ranging anywhere between 70% and 98%, depending
upon which program you’re in, so if a patent is a primary
part of your business model and you have a petition filed against you, big surprise, your stocks going to drop. So, we shouldn’t be surprised that sophisticated market actors have taken advantage of this. This isn’t in doubt,
there’s explicit evidence of people filing petitions
specifically to harass inventors, extortion of inventors, where
evidence was submitted, here’s the letter saying, “If
you don’t pay me $10,000, I’m gonna file a petition
against you at the PTAB.” [Panelist] That sounds like
an Article III problem. (Adam chuckles) [Arti Rai] Also, one of the
questions we may ask of you, Adam, is why are these Article III problems as opposed to problems for Congress? [Adam Mossoff] So what I’m trying to say is that you have stuctural problems at the PTAB where the Supreme Court
could still find the PTAB to be an unconstitutional violation of the cancellation of a
private property right, and it could uniquely hold
that this exists in the given the structure and the
nature of the PTAB as it exists as it was structured
and created in the AIA, and I think you’ve had a lot
of interesting discussions and proposals about how
Congress could fix that, and by the way, this happens all the time. I mean, the bankruptcy act
withStern v. Marshall, where they said, “Look, you created an unconstitutional regime,”
because it interferes with private rights, and it throws it back into Congress’s court to fix it. They could potentially fix
this by making it perspective, notex ante, because there’s
Supreme Court precedent going back to 1843,McClurg v. Kingsland, that you can’t statutorily
take away rights that are issued under previous patent acts that are now vested
private property rights and they cited and relied
upon as the, quote, Well-established principles
of this court, end quote, land patents and land rights,
to hold that for patents, and so that’s why the analogy
to cash is a bit strange to hear, because the people
who would disagree with that are people like Chief Justice Marshall, Justice Story, James Madison, (chuckles) and many, many others,
so it’s a little odd to hear that analogy initially. [Arti Rai] Alright, I
think Don has to be able to give his full opening statement. (audience chuckles) We will continue until
4:10 since we started late, so Don, don’t feel under any pressure because we have plenty of time. [Don Verrilli] No, it’s really fun
to be hear with all these IP mavens, I’ve learned a huge amount, and because of my immense respect and affection for you,
Arti, I will forgive you for having me be the last speaker (audience laughs) Friday afternoon at four o’clock. [Arti Rai] It was the keynote speech. [Don Verrilli] Yeah yeah yeah, I got that, right. (panelists laugh) So, let me just offer a few observations that are more general in nature. We had a lot of really
interesting discussion here about the PTAB and the way it operates, and the patent system, and
the nature of a patent right and all that, and it may be that all this gets brought to bear on
the decision, ultimately, that the Court renders, but I don’t think that’s what this is about at all, at least as of this moment. It may evolve into that as the
Court digs into the briefing, but as Jonathan Massey
said, and I completely agree with this, there’s a very
large-scale movement going on in the Supreme Court
to address the question of what’s the proper relationship between the administrative
state and the judicial branch. It’s played itself out mostly in the realm of how much deference
under theChevrondoctrine courts should give to
administrative agencies’ interpretations of law. One thing, I would just acutely
conscious of this as SG, just watching this evolution:
I argued aChevroncase, I think it was in January of 2013,City of Arlington v. FCC,
it was a five-to-four decision upholding an agency action
onChevrondeference. Justice Scalia wrote the opinion, it was the only opinion in
five years that he wrote in a case that I argued, for the majority. (audience laughs) For me, I guess I should say; he wrote some for the majority against me, but for me, that was the only one. But there were four dissenters,
led by the Chief Justice, who basically took issue
with the fundamental premises of theChevrondoctrine and the relation between courts and agencies. Justice Scalia has passed away, Justice Gorsuch has replaced him; he wrote the opinion
that Jonathan mentioned in theGutierrez-Brizuela
case in the Tenth Circuit in which he went even further
than the Chief Justice did in his dissent in the FCC
case and basically said “This whole thing’s out of
whack,” not only the relationship between the courts and
administrative agencies in terms of interpreting law, but even between Congress
and administrative agencies and that we need not only
to get rid ofChevronbut to reinvigorate the
Non-Delegation Doctrine so that Congress does the
job of actually specifying exactly what executive actors should do and judges do the job of deciding whether what the
executive actors have done conforms to the law or not. And
this case has plopped itself right down into the middle of that fight, that discussion that’s going on. And I don’t think a lot
of people saw it coming, ’cause everybody was focused on this idea of judicial review of agency action in the sense of what
standards do you apply. But this case came along, and it was like, “Whoa, it’s not only about that, it’s also about this question
of what agencies can do and what courts can do.” And to me, it wasn’t entirely
a surprise that this happened, because there was a
moment in oral argument, I’m embarrassed to say I can’t remember which of the patent cases it was, one of the PTAB cases
during my time as SG, and I was sitting there
listening to the argument, and there was some back and
forth at the oral argument, and at one point, the advocate made clear that the PTAB would have the
authority to declare invalid a patent that a court had
previously declared not invalid, and the Chief Justice’s face screwed up and he was clearly offended by that, you could just see it on his face. It was, I think, at that moment
that a light bulb went off for the Chief Justice, at least, that there was an issue here,
at least as far as he saw it. Now, having said all that and having described all these trends, and they’re obvious from my description that they’re moving in one direction, I guess what I think
about this case is that with these issues, like the thought about reviving the Non-Delegation Doctrine and with issues like
the question of whether the Article III authority of
the judiciary is being invaded, and I say this, I clerked
for Justice Brennan and I hope he will forgive
me looking down from Heaven for saying this: those opinions are not
very comprehensible. They’re extremely hard to apply. (audience chuckles) And so I think as with
non-delegation, as with Article III, a lot of times, I think what
happens is the Court thinks there’s an issue like they did
in theSchorcase and others, and they get to the
precipice and they look down and all they see is an
abyss, and they decide, “You know what, I’m gonna
back away from the precipice,” because the problem here, and
maybe you can fashion opinions that focus on the particular
qualities of the PTAB, and maybe you can fashion opinoins that focus on the fact that
there’s something different about the grant here
that’s moved the patent from the public-rights space
into the private-rights space such that it can’t ever come back, and maybe that’s
different from other kinds of post-grant examinations;
you are the experts in this stuff, I’m not. But boy, they leap off that
cliff and they don’t know where they’re gonna land,
and one thing will be clear is that there are a lot more cases that will be coming their
way, a lot more cases in the patent sphere, a lot
more other kinds of cases, and I’m not sure that, at
least what I’ve seen so far in the briefing, is giving them, would
give them a significant degree of confidence that they could craft rules that could be applied in the future in a way that was gonna be
anything other than chaotic. So I wonder whether, really, they’re gonna jump off that cliff. [Arti Rai] So, Don, I want to
ask you, and this truly is because I think that
you’re obviously the voice of extreme institutional wisdom: do you think if they were
to jump off the cliff, they would craft a very different test than either the formalist
or the functionalist test they’ve used thus far? If there are five justices,
say, who want to head in a very anti-administrative-state
direction. [Don Verrilli] Yes, but I
don’t know what it would be, I think that’s kind of
part of the problem. It’s just hard to see
exactly what it would be. Particularly given, I’m
betraying my sympathies here to some extent here, but particularly
given some of the points that John Duffy made, I just think, actually, how are you
going to craft a test about invasion of the judicial prerogative that comes to terms with those and still strikes the provision down? I’d like to think that’s
a hard thing to do. [John Duffy] I agree. (attendees laugh) [Arti Rai] So, James, you have
your hand up for a while. [James Smith] Just a very quick apology. One morning, I was feeling way too clever, well beyond my capabilities, when I said the PTAB should be doing
some death-squadding. (panelists laugh) But I think no one will
disagree with the proposition that if these cases arose, and every patent had been determined to have patentable claims,
people would have said what is the PTAB doing, it
can’t be that every patent was issued properly. So, to have people now take that statement and presuppose that there
was some pre-decision to go after the slaughter of patents and to talk about kill rates, I wonder about whether
that might be language a little too extreme to the circumstance. [Arti Rai] Let’s see. Dmitry, and then Peter Thurlow. [Dmitri Karshtedt] I
have a couple questions just for anybody on the panel. Just try to speak louder, or the mic. So, patent infringement, as you know, is also a creature of statute, you got 261, right to
exclude, 271 through 281, so under the arguments that we’ve heard, what constitutional limit
is there to the claim for patent infringement not
having to be adjudicated in an Article III tribunal, given that it’s a creature of statute? The other question maybe goes
to Don’s couple of points. Is there an intermediate
solution that can be crafted? So my concern, the brief that I
filed has to do with finality and maybe district courts
may not have to defer if there’s been several
years of proceedings and a jury verdict and so on. Maybe in that case, a district
judge and a trial proceeding can decide the invalidation won’t apply. Can the Supreme Court do that,
given the question presented? [Arti Rai] John? John? One of the Johns. (panelists laugh)
[John Duffy] Just call John and somebody will start talking. Go ahead, John. [John Golden] Well,
just on the first point, I mean I think infringement
can be distinguished as a claim of private
liability between individuals. As I was trying to say
before, validity is a question of the ability of the patent owner to have a government-issued
right to prevent other people from use of their otherwise lawfully held and used private property,
so that’s where I think you can argue there’s a public right that’s not talked about so much when you’re just thinking that
those are the gnereal public in order to use their property
and go about their lives without the encumberance of
invalidly-issued patent rights, so I just thought I would
respond to that point. I don’t know if John’s going
to respond to that point. [John Duffy] Yeah, I was going to respond to that point. I do think infringement is different, because the classic
statement of private rights is the payment or the owing of money
from one private party to another, so I think a lot of the arguments about it being private rights make sense if you’re talking about infringement, but the predicate question
of “is this a valid patent,” especially if you look at the way I do, is can the government switch the right from being presumed valid
to presumed invalid? If you look at it that way, that sounds very much like
something that’s built into the administrative state already. It seems hard to say that that’s
some sort of conventional, pre-existing private right. So, I wasn’t sure what
your second point was, maybe somebody else had a– [John Thorne] Question
was on invalidation rates. [Dmitry Karshtedt] Yeah, it’s can
the Supreme Court craft an intermediate solution
that says district courts don’t always have to defer
to PTAB determination in collateral or pending proceedings? [John Duffy] I don’t think that’s possible, because if the PTAB
decision is not overturned in judicial review, then
the agency issues a notice of cancellation, which means
that under the statute, assuming the statute’s constitutional, that means there’s no
more patent right anymore. [Dmitry Karshtedt] With respect
to patent infringement, they’re arguing it was made inTranslogic, served the petition way back in– [John Duffy] Oh, you could say it’s only perspective. That’s not really presented
in the question presented. I think they’ve got enough on their plate, they’ve got Seventh
Amendment and Article III, both of which are not clear areas. I think they will not reach
out and decide new issues. I’d put money on that one. (audience chuckles) [Peter Thurlow] Is this on? I just wanna thank Arti,
coming to the end of the day, I really enjoyed the presentation. I’ve been practicing for 20 years, have clients that are
independent inventors, small businesses, large companies; I had the pleasure of being
on a committee called PPAC, Patent Public Advisory Committee, and I remember the committee,
go back many years ago with Judge Smith, plenty discussions about setting up the
practice and claim amendments and things, and we’re still
friends, so it’s a good sign. My concern with this
panel, I guess overall was, having practiced and
been in this area is that this case has nothing to do
about patent law. YOu know, just to kind of lead, I’m reading
from the 2016 annual report for the Patent Office,
and there’s a few things, but I’ll read one: “The
IP-intensive industry has directly and indirectly
supported 45.5 million jobs in 2014, and nearly 1/3
of all US employment.” From my perspective, dealing
with all these companies, the importance of the
intellectual property to all different shapes and
sizes, this is critical. I surely wish that they
took a bankruptcy case or something,
(panelists laugh) but this is, Hans mentioned
it, I kind of agree with Hans after all these hours, and
I hope they throw it back and say, “We should have
never taken this case.” But thank you very much. [Arti Rai] Another hand? Yes. Oh, I’m sorry. There are hands over here as well. [Audience Member] Yes,
just a quick question. Has anyone thought about
what the implications will be on the FCC and allocation of spectrum? [John Thorne] I have thought very
briefly about the parade of agencies whose own processes will be affected, so I’ve got a list that
complements Melissa’s. FCC reclaims spectrum licenses, the Federal Aviation Authority
reclaims landing rights, lots of agencies have a
Bureau of Correction-like function that’s outside the courts. Mostly subject to
judicial review afterward that make them comparable,
but in the first step, the agency is doing the work. [John Duffy] I’ll add one to that
list, which is even though people are making these
analogies to mining rights and other physical property rights, the Supreme Court has
allowed the agencies to, with mining leases, which
of course are property; I was taught that a lease
is a piece of property. They’ve allowed them to be corrected, so even though there is
some Supreme Court precedent that said that the court, the
agency can’t take back a grant in fee simple, they
can take back something that’s just a lease, and a lease
is maybe 20 years long, right, so if you look at what’s a patent like, is it more like fee simple
or is it more like a lease? I would say it’s more like a lease, and then you’d have to
rethink things like that, too. [Adam Mossoff] I think it’s more like
fee simple for the 20 years. [Arti Rai] We had some hands over here, yeah. [Audience Member] I have three comments that we’ll try to wrap
up from end to beginning. First, Don, the case you
were referring to wasCuozzo, and it came after a long soliloquy between Chief Justice Roberts
and the man who was arguing, and at the end, he had that
quizzical look on his face and he said, “That’s a strange
animal on the law, isn’t it?” [Don Verrilli] I wouldn’t
call it quizzical, actually. (attendees laugh) [Audience Member] Angry?
[Don Verrilli] Yeah. [Audience Member] But
then, to Adam’s point about the inconsistencies and the morass that, I don’t know what word you used, but basically, that’s a synonym: the Board has been trying
to gain consistency, and one of the ways they were
doing that was to stack panels to sort of force the law in the
direction where there were splits, and if you don’t have some
way to recitfy those splits, the Federal Circuit’s
not gonna do it for you because they’re gonna say
that the Board’s decision and institution are
final and non-renewable. Now, maybe stacking panels
isn’t the right way to do it, which brings me to my last point, is getting some changes in the law, and Judge Smith, at the beginning, suggested a stronger patents act, maybe change the construction standard and other ways we could change the law. That’s one way of doing it,
but another way to do it is, as Erica suggested, is clarify the law through notice-and-comment rule-making, which I think would be
a very good thing to do. The Board under Director Lee
had the PTAB Reform Initiative, which was sort of rescinded when she left, and now hopefully Director
Iancu will re-establish that, will get some more notice-
and-comment rule-making, and the PTAB will make
some substantive changes without the sort of judicial rule-
making processes that they’ve used that really haven’t been the
best way of doing things, and in addition to the stacking of panels, notice-and-comment rule-making in statutes is probably the better way to go. [Arti Rai] Great, thank you, Kevin. We have a bunch of
additional hands back here, I think Todd and then Josh. [Todd] First of all, the
retroactivity question, the death-squad question
came up; just to comment. It’s a little hard to beat
the PTAB for killing patents, but to beat out the Supreme
Court who’s killed tens if not hundreds of thousands
with their 101 jurisprudence. (attendees laugh) My question is actually
a little tongue-in-cheek, but not a lot. Now that we do have a Director nominated, the Director is the
principal IP-policy advisor for the administration,
shouldn’t the Justice Department hold off for a while until
that IP policy function is in place, and make sure
that the Trump Administration agrees with whatever your brief
is going to say next month? They may differ from your point of view, and that might be important. I know you might say it
applies in all cases, but here, you’ve got some known facts that would be an additional reason to maybe have the Court
pull back for a year. [Mark Freeman] Can I answer that? I want to make very clear, I have no view other than what the Trump
Administration’s view is. (audience chuckles) (audience member speaks away from mic) (attendees laugh) There will be a confirmed
Solicitor General who will sign the brief that
the United States files– [John Thorne] There is a
confirmed Solicitor General. [Mark Freeman] No, I said
the confirmed Solicitor General will sign the brief, yes. (audience member speaks away from mic) (Arti laughs) [Audience Member] This is for Adam, and this is a little bit
unrelated to all of this, but let’s just assume that patents are full private property rights,
similar to land grants. Would you then support
mandatory recordation of all transfers? [Adam Mossoff] Of all assignments? [Audience Member] Of all assignments and transfers of that right? [Adam Mossoff] Well, assignments are supposed
to be recorded. [Arti Rai] Most are not– [Audience Member] There’s
nothing mandatory about recordation for patents. (Audience member speaks away from mic) Right, there’s been a
huge fight about this, and the only thing that
happens if you don’t record, and most patent owners don’t
record their new assignments if they’re gonna assert them, is a bona fide purchaser
problem, which only affects it if they specifically sell to someone else, so there’s actually
incentive not to record that people have tried
to deal with in the past. (Another Audience Member speaks away from mic) Exactly. [Adam Mossoff] Well, it was put into
the early patent statutes that assignments should be recorded, and that was in part, they
were adopting title recordation from real property at the
time, because they were saying, “We need to treat this differently,” because John and you,
you’re exactly right, this was enacted in the context of an understanding of
the abuses of the Crown, just like our entire government was, and so they said, “The
English did it wrong, they treated this like
monopoly royal privileges. These are property rights. We should have easy
access to an institution that functions under the rule of law with title deeds that are
publicly made available and title recordation, with
full assignment in licensing,” which are terms from the common law for real property of these property rights in the marketplace, which none
of that you had in England, and the results are… The show of results, I
think, speak for themselves. Unfortunately, the PTAB is taking us back to a system where it’s more
being treated like privilege and treated through prerogative, and we don’t have rule of
law, and this is a problem. [Audience Member] Is that
a yes, you would be for– [Adam Mossoff] Yeah, I said that, yeah. [Arti Rai] Alright, I think
that Josh has the last– [Adam Mossoff] Well, not mandatory,
because it’s not mandatory for real property. There’s no law that
says you have to record, there’s just consequences that follow from failure to record. The recording should be required– [Audience Member] Are you
for the legislative changes for consequences for failure to record? [Adam Mossoff] That, I don’t know. I’m not here to comment on that. [Josh] Okay, I’m sorry Don had to leave, because I think it goes to his concern about the agency-court struggle, so I’m gonna channel Adam
in response to John Duffy before showing why that
would be ridiculous. (panelists laugh) So, remember that when you
bring the action in the PTAB, the challenger can drop out and
the PTAB still has the power to bring it forward. So, John’s set of hypotheticals assumes that either in the
court, it’s a challenger with Article III standing already or Congress can grant statutory standing for the APA claim to someone
who otherwise doesn’t have it. That’s why it’s a full substitute for the proceeding in the IPR. So, I actually think
that Article III standing is a whole mess and unconstitutional
for various reasons, but the key issue here is, again, is the public able to trigger this, the general public, not the
specifically-affected public, and I think that responds to
both why Adam has a challenge and why that challenge is probably wrong. Last thing I’ll say is on the idea that patents are always property rights that can’t be taken away
without compensation, look at theUS v.
Chemical Foundation
case from World War I where
the government seized under the Alien Property
Custodians Powers under the Trading With The Enemy Act, Swiss, not German, and we
weren’t at war with Switzerland, patents, and then the Supreme
Court said explicitly, no legislative obligation to compensate. So, seems like there’s some
sort of an odd property here if Congress can authorize
the taking of property without any compensation. I’ll leave it at that. [John Duffy] I have a follow-on.
[Arti Rai] Sure. [John Duffy] If you can
indulge me for just one moment, because the issue of judicial review, I’d like to actually engage
Adam directly and just say could Congress, or the Supreme Court, say the APA fully applies to
the grant of a patent, its agency action, and it’s
subject to judicial review? Is that constitutional in your view? And if so, could the agency
seek a voluntary remand where they think one or
more claims was not granted with reasoned decision-making? [Adam Mossoff] Well, maybe I’m
misreadingDickinson v. Zurko, but they basically say– [John Duffy] Well, the Federal Circuit
has held to the contrary. The Federal Circuit has held, in a case calledPregis v. Kappos,
that the Patent Act impliedly precludes judicial review as it’s currently configured. [Arti] Of patent grants. [John Duffy] For patent grants. So, yes, they say the
APA applies, but they say there’s no judicial review
under Section 701 to 706 for the grant of a patent, and that, I think that may be
wrong as a matter of law but it certainly could certainly
be overruled by Congress. Do you think that’s unconstitutional? Because if it isn’t, then
I wonder what you do when the agency says,
“Gee, we think one or more of these claims might be invalid, so we’re gonna seek a voluntary remand,” and then they start an
administrative process. [Adam Mossoff] Yeah. [Jonathan Massey] But your
example shows how different the IPR process is from the Court’s. We know that afterSpokeo, there has to be a concrete and particularized injury in order to have an
Article III controversy, so it’s simply– [John Duffy] But certainly, this
claimant can’t say that. [Jonathan Massey] So, Ken Bass, when
he’s doing his short selling, you know that can’t create an
Article III controversy. One of the problems, I
think, with the IPR process is that it has generated a
large number of reverse trolls where there would be no clear
Article III controversy. [John Duffy] That’s not presented in this case, because both parties– [Jonathan Massey] No, but I’m just saying, the example that you’re
presenting shows the difference between IPRs and typical infringement actions. Because
there isn’t simply, the Congress couldn’t simply achieve, the IPR process is not
a mirror of APA review is what I’m trying to say. [John Duffy] It is true that, at least
with respect to this case, though, the parties all have standing and could seek judicial review. [Jonathan Massey] Correct, but that’s not the
way the administrative process necessarily works all the time. [John Duffy] Necessarily works, but
that’s the way it worked in this case, so if you’re gonna have– [Mark Freeman] I believe in the Ken Bass circumstance, if the patent is impaired in any way, there would be an appeal, and
then you could go to court. [Adam Mossoff] I mean this
was, look, in the 1840s– [Arti Rai] Sorry, could you say that again? In the Ken Bass situation? [Mark Freeman] Well even in the Ken Bass situation– [Audience Member] Kyle Bass. [Mark Freeman] Sorry, sorry, excuse me. (panelists chuckle) Kyle Bass. In the circumstance in
which you have a party who does not have Article III standing who commences an IPR, if the
agency in any way impairs the patent right, then the
patent owner has standing, and it can go to a court,
so you can end up in court even though the original
complaint could not have. That’s aASARCO v. Kadish. [Adam Mossoff] Well, this was my point about
PTAB is platypus (chuckles), is that it doesn’t really fit
into our current understanding of administrative law and the
APA in how it’s functioning, and moreover, to go back
to, I guess, the predicate of your question, I mean in the
1840s there was a great case, I apologize, I’m blanking
on the name at the moment, but the Supreme Court
justice riding the circuit where they were faced with
an affirmative argument where the public domain
is a positive right that you can assert in court
against a patent owner, and the Circuit justice
just stomped on that and said no, that’s not a right that you can take into court. You can’t assert, “I am here
on behalf of the public domain being hurt by this patent.” And I think that kind of classic
structure helps us understand how to address these types of issues. [Mark Freeman] That was before
the Declaratory Judgment Act was thought to be constitutional. I mean, people can come
to court all the time now and say, “I have an
interest in this patent, it is wrongly granted, and
it should be held invalid.” [John Duffy] Certainly
if they’re a competitor they could have such interest. [Mark Mossoff] And most invalid patents,
because people widely know that they’re invalid, they
end up being useless patents. Everyone made great hay about the wonderful– (panelists laugh) [Arti Rai] I think that’s a whole
‘nother day of discussion. (panelists laugh) [Adam Mossoff] The exercising
a cat with a laser pointer, no one’s ever been
concerned about that one. (laughs) [Arti Rai] Alright, I think on that note, I want to thank a wonderful audience for your great interventions, the panelists for their
fabulous, fabulous statements and discussion, and I hope that all of you have gained something from being here. Love to know any comments that you have regarding how this was structured, because we will, depending
on how things evolve with this case, probably
have what happened after the Supreme Court.
(panelists laugh) Not Hillary Clinton’s what happened, (panelists laugh) but what happened after
the Supreme Court decided, and so if there are any
improvements that you would suggest in this kind of format, I would
appreciate hearing them. I’m [email protected] Panelists, please don’t take
off your microphones yet until you are allowed
to do so by our AV team, and thank you again for coming. The webcast has been taped
and it will be available in two weeks, so in case you
missed any of the proceedings or you would just like to
hear our fabulous presenters once again, it will be on our website, which is
www.law.duke.edu/InnovationPolicy. Thank you again. (attendees applaud) [Various] Thank you, Arti.

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