Amicus Curiae Brief — Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC, 138 S. Ct. 350 (2017) (No. 16-712)

Supreme Court brief2017

Ask Donna

What actually matters in this document.

Text

No. 16-712 FILED |

<< AUG 31.2017 |

eRe COURT OS.

; ALUS. |

Iu The PREM

Supreme Court of the United States

OIL STATES ENERGY SERVICES, LLC,

Petitioner,

Vv.

GREENE’S ENERGY GROUP, LLC, et al.,

Respondents.

—_--

On Writ Of Certiorari To The

United States Court Of Appeals

For The Federal Circuit

BRIEF OF PROFESSOR DMITRY KARSHTEDT

AS AMICUS CURIAE SUPPORTING PETITIONER

—__—_—__—_#¢

DMITRY KARSHTEDT

Counsel of Record

GEORGE WASHINGTON UNIVERSITY

SCHOOL OF LAW

2000 H Street, N.W.

Washington, DC 20052

dkarshtedt@law.gwu.edu

(202) 994-5725

August 31, 2017

COCKLE LEGAL BRIEFS (800) 225-6964

WWW COCKLELECALBRIEFS.COM

Laxey of Congas

TABLE OF CONTENTS

Page

I iscock cttccecsnsdanisecsnenciessessumanpaesnensous i

ee IIS canine sccusncnitctcriatencdeatanspundaieatcine iv

BOSONS GE AICI CONTEND onscccccecescsvciseesuicnneneesencions 1

| A AT 1

Pe ctccncsariscetndousndvniaceenniascninsseindiemiguaneasmeinion 4

I. Adjudication Of Claims of Private Rights Is

The Exclusive Province Of The Judiciary..... 4

Plo tcncteiscnsteghioanitn diecvaden tuennniemanetiddecsitinionsiiaban: 6

A. Patent Infringement Claims Sound In

Common-Law Trespass, A Private

BN achackecspahe cetemeddiiresaiteomhsansnmeascindanasbdtns 6

B. Patent Infringement Claims Kear Little

Resemblance To Causes Of Action That

Have Qualified For The Public Rights

I iicttctinnncncinsaiindacentnaetinibechdaimiaicense 9

III. Invalidity Is An Affirmative Defense To A

Claim For Patent Infringement, Which Con-

gress Has Unconstitutionally Delegated To

eT Tae Fe i iiivccntenescictiniaminceeniveceses i3

A. Invalidity Is Inextricably Tied To Claims

For Patent Infringement In District

I Sciineniemnsnmeninectenetiendeiiisincestecesesati 13

1. Invalidity, Which The IPR Statute

Empowers The PTAB To Resolve,

Can Be Charged In Patent Cases

Only If There Is Actua] Or Threat-

ened Infringement..................-...--. A

TABLE OF CONTENTS — Continued

Page

2. PTAB Proceedings Typically Take

Place In Parallel With Litigation.....

3. By Resolving Invalidity, The PTAB

Takes Infringement Suits Away From

Re EE RR ORT Et

B. PTO Expertise Docs Not Justify The

PTAB’s Authority To Bind Federal

Ee accccuuiakiacisthainineindacepudednandiatiadebiaenees.ta

1. Expertise Does Not Allow Agencies

To Take The Place Of Courts When

Private Rights Are At Issue .............

2. ‘The PTAB’s Role In IPRs Extends

Beyond Functions That Expert Agen-

cies Have Traditionally Been Permit-

I i cecceciteniosicnsin

3. The Statutory Scheme At Issue Breaks

With The Historical Practice Of De

C. The PTAB’s Invalidity Determinations

Are Not Collateral, But Central, To In-

fringement Suits, And Are Designed To

Preempt District Court Adjudication Of

The Same Questions.....................-:20000+

IV. The IPR Statute Offends The Principle Of

Separation Of Powers By Allowing An

Agency To Direct A Court How To Decide A

I IIE <.ccosecnsoseaecieuesgaremcaciusonnneneseneee

ili

TABLE OF CONTENTS —- Continued

Page

A. PTAB Determinations Of Invalidity Func-

tion As “Rules of Decision” That End

I I inieccccakvusoscstentoniiehabeccoisatons 31

B. Rather Than Amend Applicable Law,

The IPR Statute Delegates To The PTAB

The Power To Pick Winners And Losers

Ne SE OI tleicccusinscitsainiadinesvesdstianhanien 32

V. Adjudication Of Cases Involving Private

Rights In Article III Courts Effectuates The

Values Protected By The Doctrine Of Sepa-

Ie ID ictertavccenssshensedvanbepesdeenttinvaesas 34

ee 36

TABLE OF AUTHORITIES

Page

CASES

Arris Grp., Inc. v. British Telecomme’ns PLC, 639

Fe ee Ts EE SE OP nkvibnndscicasnnrwviscddscnccnndassecens 14

B & B Hardware, Inc. v. Hargis Indus., Inc., 135

RE EER yea SA te ean SEES Ne ae vee 25

Bank Markazi v. Peterson, 136 S. Ct. 1310

STREET Pe LARA Ae ies Co REE, Dee 32, 33, 34

Biook wu Birehk, 366 UB. 196 (IGE) ..0s.0000seccckcccsess.0.00: 10

Brown v. Kendall, 60 Mass. 292 (1850)..............:cceeseees 6

Butterworth v. United States ex rel. Hoe, 112 U.S.

RAE RARE Se Rg ESN DDD AIRE Re Gd 8a ME» 27

Carbice Corp. v. Am. Patents Dev. Corp., 283 U.S.

og: SRR BORGES, 6 BAS vee Eh ee lee SELES: 8

Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S.

i 13

Ctr. for Sci. in the Pub. Interest v. Regan, 727 F.2d

Fe Geis CE BOND vriiseedcececascntdnses SEE So 29

Clark v. Time Warner Cable, 523 F.3d 1110 (9th

8 Re SI SOE SPEND Sd Rar ect Re A Oe 24

Commil USA, LLC v. Cisco Sys., Inc., 135 8. Ct.

| EL ea alee Sasa Be tation REN AS SE Mi 13

Commodity Futures Trading Comm’n v. Schor,

ee He Eo riericsadioscctieacccnsnedadsabauiaens 12, 21, 22

Consumer Watchdog v. Wis. Alumni Research

Found. , 753 F.3d 1258 (Fed. Cir. 2014), cert. de-

OC, See Ts Ce A CD acts cnsnecsetecercscscnensssnisnes 15

TABLE OF AUTHORITIES — Continued

Continental Paper Bag Co. v. Eastern Paper Bag

i eee HR EE III osc catigdccgacaccunpececssessiusntsimensy cans 8

Crowell v. Benson, 285 U.S. 22 (1932) ...4, 11, 13, 20, 26

Cuozzo Speed Techs., LLC v. Lee, 1386S. Ct. 2131

i ctsicinnsedycsnsdodipmnnntgsesvectinnaiutgipnste 15, 16, 22, 30

Dickinson v. Zurko, 527 U.S. 150 (1999)..................... 27

Dowagtiac Mfg. Co. v. Minn. Moline Plow Co., 235

EE NE IIE vec nisschaxuvcdvauieederindsateephibiecateckapedesesns vies 8

Envtl. Processing Sys., L.C. v. FPL Farming Ltd.,

ABT Te. Wee GEG CH, BORG oi ncccecescccnscvesssscccseccssssecees 20

ePlus, Inc. v. Lawson Software, Inc., 789 F.3d

1349 (Fed. Cir. 2015), cert. denied, 136 S. Ct.

IIIS isvtnsssihigitiacateceeersstsbomedpiaieoumnenineieaies 18

ePlus, Inc. v. Lawson Software, Inc., 790 F.3d

1507 (Ped. Cir, 2016) CeO.) ...0c00ccsccccccccccccesese. 18, 25

Ex Parte Bakelite Corp., 279 U.S. 438 (1929)............. 11

Executive Benefits Ins. Ag’cy v. Arkison, 134

ee EEE cinictdcnd ics sianceckarsicpeitshesnehiniesinbesstacee 28

Fresenius USA, Inc. v. Baxter Int'l, Inc., 721 F.3d

1330 (Fed. Cir. 2013), cert. denied, 134 S. Ct.

|: RESP Sree aire mY Hot setae, See 14, 18, 19, 30

Graham v. Goodcell, 282 U.S, 409 (1931)... 22

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33

a ie a ee, a eagandgonaadeaas 4,12

TABLE OF AUTTIORITIES — Continued

Page

Greene’s Energy Grp., LLC v. Oil States Energy

Servs., LLC, Case IPR2014-00216, 2015 WL

2089371 (Patent Tr. & App. Bd. May 1, 2015),

aff'd, 639 Fed. App’x 639 (Fed. Cir. 2016)

nc ci tatesapeunndbiandaaabpepsbauietcainante 17

In re Baxter Int'l, Inc., 678 F.3d 1357 (Fed. Cir.

SEES ae Ea an SOE ante eee eR 19, 26

Kappos v. Hyatt, 132 S. Ct. 1690 (2012)............... 21, 27

Markman v. Westview Instruments, Inc.,517 US.

ih 6 aaiaeueaniedamcanicitaneines 6

McCormick Harvesting Mach. Co. v. C. Aultman

ee A Ce OI ecenicrecessncinincossonsensesececeseee 20

MCM Portfolio LLC v. Hewlett-Packard Co., 812

F.3d 1284 (Fed. Cir. 2015), cert. denied, 137

SEE III nos tecsadesouaeuinnsncetasiccnnsatandiecenent veined 5, 21

MedIimmune, Inc. v. Genentech, Inc., 549 U.S. 118

SRR RSS SR RE a ae ee Ree 14

Mistretta v. United States, 488 U.S. 361 (1989) .........34

Murray’s Lessee v. Hoboken Land & Improve-

ment Co., 59 U.S. (18 How.) 272 (1855).....4, 9, 10, 11

Muskrat v. United States, 219 U.S. 346 (1911).......... 36

N. Pipeline Constr. Co. v. Marathon Pipe Line

Ca., 458 U.S. 50 (1962) ...........ccccrccceesssccceerenrees 4, 5, 34

Oil States Energy Servs., LLC v. Trojan Wellhead

Protection, Inc. and Greene’s Energy Grp., LLC,

No. 6:12-cv-00611-RWS, 2014 WL 12360946

Ee See, cE Is TINIE Srrnripncicrcinsancuceustsovnenecsersuneaes 17

Vii

TABLE OF AUTHORITLES — Continued

Page

Organic Seed Growers & Trade Ass’n v. Mon-

santo Co., 718 F.3d 1350 (Fed. Cir. 2013), cert.

OREO, SIG Ge Ce. Be CD eve csacanesvvncccenseesscesesees 14

Plaut v. Spendthrift Farm, Inc., 514 US. 211

Precision Instrument Mfg. Co. v. Auto. Maint.

Mack. Co. ; SB4 UG. GEG CABG) ......ncevercsscccccccscsssesss 22

Reiter v. Cooper, 507 U.S. 258 (1993)..............cceeseeceees 24

Robertson v. Seattle Audubon Soc., 503 U.S. 429

0 lie tad tl sate eet cE NE: SOUS RE eS 31

Stein v. Goddard, 22 F. Cas. 1233 (C.C.D. Cal.

ERIE TT a eS eee ee tee 8

Stern v. Marshall, 564 U.S. 462 (2011)............... passim

St. Joseph Stockyards Co. v. United States, 298

A a ca eta pnansinennien 10

Tandon Corp. v. U.S. Int'l Trade Comm'n, 831

pe 8 oy gi Re % | eee 25

Theodore Roosevelt Conservation P’ship v. Sala-

Br, SE Fae ee Cakes GR DEED scoscnccccsinccestsssscncsss 29

Thomas v. Union Carbide Agric. Prods. Co., 473

I es cal 4,5,9, 10

Thomson-Houston Elec. Co. v. Ohio Brass Co., 80

6, . ___, Re RRR SSS eet ES meee 8

Translogic Tech., Inc. v. Hitachi, Lid., 250 Fed.

App’x 988 (Fed. Cir.), cert. denied, 555 U.S.

Vill

TABLE OF AUTHORITIES — Continued

Troy v. Samson Mfg. Corp., 758 F.3d 1322 (Fed.

IIE Tia ta hears cab tli cenidcedeaeehiaiiiiatenasecdaeimaliahepemeennsonaion 28

Ultratec, Inc. v. CaptionCall, LLC, Nos. 2016-

1708, 2016-1709, 2016-1715, 2017 WL 3687453

CI Ss NE IG, SITE OP occscstnchesecnics-cseccodiicsvunsatetnocesessd 30

Union Sugar Refinery v. Mathiesson, 24 F. Cas.

686 (C.C.D. Mass. 1865) (No. 14,399) ........0.... 7

United States v. Klein, 80 U.S. (13 Wall.) 128

aD rat RE ESE LFS PRIUS ie Seat ed OE 31, 32

United States v. Sioux Nation, 448 US. 371

SREP RID Brot ean OSS SSA Siva ee etd ore eee em 31, 32

Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct.

PE I cigs shaadanita cits crnadaabetbinrsselseanmeiicetunseedietunhas 12

CONSTITUTIONAL PROVISIONS

HN I acecatesscsectsdiicscedmncceteopn-aiennecsocepeseened passim

STATUTES

Be I in centers cenineecnnemndiacmecvelcatuiadmnbeninenssiniinsanies 23

BE OI ais cncddacenyaivunnuoenangalnavastneyeelsadidenniaareseion 17

I sip tienen siemanisucncsaimdditeenennaiinciniorentussieclnsiianeiie 27

Be Ns Ot I aaa iid scicrninivenininmaenencasiibanemcnnetogs 27, 28

RR a pene eee MEN PRS SLE 28

a aa ict nosinatoncatasep Uiritpricnideeiecdiialeedeaietinpianientsaianisail 28

Be Ne OF A Seecteek cerned denis deeninetingetchoccncaunniideidinelanen 6

TABLE OF AUTHORITIES - Continued

Page

es I Abid ccccaduihninaes onedotasansenunbeeniiiasesiinbcensnandegl 6

Ee i iteriicrccnitanidindadnbsanmianswdtemreinauiatouaes 13, 16

Be ee I aietrcvtsciccsoeoietenstanterirreninerpiss 15, 16, 23, 30

BN IIT IES nr scaccniniee tpt aceeasineniie naan helices amipegeaieneaelia 16

Be Pe I oid iccaiehccenesinisindncdeksindesosslensticinienaetaseneuberesteomses 15

Be RN I a sn.cncatoetnahdirevieneiteniip eahinaesimecumoeaneabenenain 10

Act of Apr. 10, 1790, 1 Stat. 109 (1790)........0000.0.. 6, 22

Act of Feb. 21, 1793, 1 Stat. 318 (17993)..................e000+. 7

Act of July 8, 1870, 16 Stat. 198 (1870) ............0.......... 6

Act of July 19, 1952, 66 Stat. 792 (1952) ..........0.00... 28

Title 35, United States Code Annotated (1954

ee I NED sai dcicidnaenensrecccomescensiccescnienes 28

TREATISES

A. LaLonde, Gilson on Trademarks (2014)................25

William C. Robinson, The Law of Patents for

EP UMUC EIN sic sibetticsinennhcadneverencactesaes 7

Arthur Underhill et al., Principles of the Law of

Torts; or, Wrongs Independent of Contract 612

(1st American ed. from 2d English ed., Albany,

William Gould & Son 1881)....................cceeeeeeeeeee eee 7

TABLE OF AUTHORITIES — Continued

OTHER AUTIIORITIES

Ralph Brubaker, Non-Article Ill Adjudication:

Bankruptcy and Nonbankruptcy, With and

Without Litigant Consent, 33 Emory Bankr.

I oi i eT Oa oe

Complaint, Oil States Energy Servs., LLC v. Tro-

jan Wellhead Protection, Inc. and Greene’s En-

ergy Grp., LLC, No. 6:12-cv-00611-RWS (E.D.

Pe ls ANT I occidibttidatctctenctcintinsubdsaanssodee

Dennis Crouch, RIM v. NTP Continues to Trou-

ble Patent Office, Patently-O, https://patentlyo.

com/patent/2008/05/rim-v-ntp-conti.html (May

ayn che RCRA EO SF MOAB 90 SSS 2

Frank H. Easterbrook, Presidential Review, 40

Case W. Res. L. Rev. 905 (1989) ......0.......0. ee.

Richard H. Fallon, Jr., Of Legislative Courts,

Administrative Agencies, and Article lif, 101

ee in, Se I ico kaa ticsnlusss Shueceaates

P.J. Federico, Commentary on the New Patent

Act, 75 J. Pat. & Trademark Off. Soc’y 161

Catherine Fredenburgh, Reading the Bilack-

Berry Tea Leaves, Law360, https:/Awww.law360.

com/articles/5509 (Mar. 1, 2006)........................

Paul R. Gugliuzza, (njvalid Patents, 92 Notre

NS Sn, SNS GE te MII caccsicecricdasinceninchesnanaonddeces

Page

ine

TABLE OF AUTHORITIES - Continued

Page

Mark D. Janis, Rethinking Reexamination: To-

ward a Viable Administrative Revocation Sys-

tem for U.S. Patent Law, 11 Harv. J. L. & Tech.

PITT at scntscccapinndidipadndataenninaninampdansincdegibannsrncsinie’s 22

Joint Stipulation of Dismissal, elcommerce.com

v. SAP AG, 745 F.3d 490 (Fed. Cir.), vacated,

564 Fed. App’x 599 (Fed, Cir. 2014) (en banc)

RS Oo caaumamaceantebids 26

Amy L. Magas, Comment, When Politics Inter-

fere with Patent Reexamination, 4 J. Marshall

Rev. Intell. Prop. L. 160 (2004).............000.... 34, 35, 36

Adam Mossoff, Who Cares What Thomas Jeffer-

son Thought About Patents? Reevaluatiny the

Patent “Privilege” in Historical Context, 92

SIE Bas SNe SP INET oricrncicscnsscescecpetnecesesessenécesones 8

Caleb Nelson, Adjudication in the Political

Branches, 107 Colum. L. Rev. 559 (2007)......... 11,12

Peggy P. Ni, Rethinking Finality in the PTAB

Age, 31 Berkeley Tech. L.J. 557 (2016) ..........0000..., 19

Kevin E. Noonan, What the Director’s Letter Did

Not Say, Patent Docs, http:/Avww.patentdocs.org/

2008/06/what-the-direct.html (June 15, 2008)............ 35

Note, “Moot” Administrative Orders, 53 Harv. L.

atten PIE a TPT GRE RSS ew SEE ao PD ST 29

Lynda J. Oswald, The “Strict Liability” of Direct

Patent Infringement, 19 Vand. J. Ent. & Tech.

Re at See. EARN IR Sh NS aera eer 6

Restatement (Second) of Judgmenis (1980)............... 25

TABLE OF AUTHORITIES - Continued

Sidney A. Shapiro, Abstention and Primary Ju-

risdiction: Two Chips Off the Same Block - a

Comparative Analysis, 60 Cornell L. Rev. 75

(RIPPED. snscaicccconnscsenes tvessssesesesdscideshunadimmapammianaaani 24

Saurabh Vishnubhakat et al., Strategic Deci-

sionmaking in Dual PTAB and District Court

Proceedings, 31 Berkeley Tech. L.J. 45 (2016) .......17

INTEREST OF AMICUS CURIAE

Amicus is a full-time law professor who has pub-

lished several articles exploring the relationship be-

tween patent law and tort law. This brief describes the

historic connection betwee patent infringement and

common-law trespass, and addresses the bearing of

this connection on the question presented.’

SUMMARY OF THE ARGUMENT

Petitioner Oil States Energy Services sued respon-

dent Greene’s Energy Group in a district court on sev-

eral counts, including patent infringement. Greene’s

then petitioned the U.S. Patent and Trademark Office

(PTO) to challenge the validity of the patent claims as-

serted in the litigation. The PTO cancelled the claims,

and the Court of Appeals for the Federal Circuit sum-

marily affirmed that determination. Had this Court

not granted certiorari, the petitioner’s patent infringe

ment cause of action would have been extinguished by

the PTO’s decision.

The error made by the Federal Circuit in the opin-

ions that bound the court in the instant case, and re-

peated by respondents in certiorari briefing, lies in the

attempt to classify patents as either public or private

' No counsel for a party authored this brief in whole or in

part and no counsel or a party made a monetary contribution in-

tended to fund the preparation or submission of this brief. The

parties have all consented to this filing, and the consents are on

file with the Clerk.

rights in a categorical manner ~ that is, in isolation

from any particular cause of action. This framing is im-

proper because, under this Court’s precedents, the

question whether a case involves a private right that

must be adjudicated by an Article III tribunal relates

to a particular legal action or claim, not the underlying

privilege or property interest. Under the correct ap-

proach, which takes into account the context in which

the PTO makes its invalidity decisions, the Inter Partes

Review (IPR) statute at issue in this case should be

held unconstitutional because it empowers an agency

to resolve a claim of private right: an action for patent

infringement.

The cause of action for patent infringement is a

private right because it has long been recognized as a

species of trespass claim by which the plaintiff typi-

cally seeks, among other remedies, monetary relief for

past harm from another private party. Because of its

historic characterization as a trespass, infringement

has a close kinship to common-law claims that this

Court has recognized as private rights that cannot be

adjudicated outside Article III courts.

Invalidity is one of several, enumerated affirma-

tive defenses that a defendant in a patent case may

plead in response to an allegation of patent infringe-

ment. The IPR statute effectively removes this affirm-

ative defense to infringement from Article III courts,

and empowers the Patent Trial and Appeal Board

(PTAB), an arm of the PTO, to decide it. In many cases,

including one involving these very litigants, a deter-

mination of invalidity by the PTAB has extinguished

parallel district court actions for patent infringement.

This delegation of judicial power over such causes of

action to a body that is not a part of the judiciary, and

not an adjunct to an Article III court, is constitution-

ally forbidden by this Court’s precedents.

The IPR statute offends the doctrine of separation

of powers for another, closely related reason: It effec-

tively grants to the PTAB the power to direct that

pending cases be dismissed. Although Congress can

constitutionally abate extant claims by amending ap-

plicable law while the litigation is pending, Congress

in this case delegated to an agency the power to extin-

guish a claim by adjudicating an affirmative defense

in favor of a defendant. Because the PTAB here fully

resolved a claim concurrently pending in a district

court, it violated the rule that coordinate branches can-

not direct Article III courts to dispose of specific cases

in a particular way.

The doctrine of separation of powers exists in part

to prevent abuses that might eventuate if claims of pri-

vate rights are adjudicated outside Article LII courts.

By empowering the Executive Branch to resolve such

disputes in the patent infringement context, the IPR

statute weakens Article III safeguards of impartial ad-

judication, and therefore contravenes separation of

powers principles.

ARGUMENT

I. Adjudication Of Claims Of Private Rights Is

The Exclusive Province Of The Judiciary.

Article 0] requires that claims of private rights be

adjudicated in Article III courts. Stern v. Marshall, 564

U.S. 462, 488-92 (2011) (collecting cases). As this Court

explained, a “private right” is one that implicates “the

liability of one individual to another under the law as

defined.” Jd. at 489 (quoting Crowell v. Benson, 285 U.S.

22, 50, 51 (1932)). Although this Court allowed certain

claims involving private parties to be adjudicated by

specialized tribunals, e.g, Thomas v. Union Carbide

Agric. Prods. Co., 473 U.S. 568 (1985), claims sounding

in common law are core private rights that have his-

torically been, and must continue to be, resolved in

Article III courts. Stern, 564 U.S. at 497-99 (tortious

interference claims must be adjudicated in an Article

III court); Granfinanciera, S.A. v. Nordberg, 492 US.

33, 438-46 (1989) (same for fraudulent conveyance);

N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458

U.S. 50, 71-72 (1982) (plurality op.) (same for breach of

contract).

In opposing certiorari, neither respondent dis-

putes that claims of private rights must be adjudicated

in the Judicial Branch. Rather, both contend that the

PTAB adjudications at issue in this case fall under the

“public rights” exception to this requirement because

patent rights are granted by the government. Greene’s

BIO at 6-7 (citing Murray’s Lessee v. Hoboken Land &

Improvement Co., 59 U.S. (18 How.) 272, 284 (1855);

Thomas, 473 U.S. at 587); Fed. BIO at 8-9. In so doing,

respondents repeat the error of the Federal Circuit in

MCM Portfolio LLC uv, Hewlett-Packard Co., 812 F.3d

1284 (2015), cert. denied, 137 S. Ct. 292 (2016), by

imagining that the PTAB’s patent invalidation deci-

sions exist in isolation from infringement litigation.

Respondents and the Federal! Circuit overlook the fact

that, in both structure and practice, the IPR statute

charges the PTAB with deciding important, often dis-

positive questions in cases involving private rights.

In contrast, petitioner correctly notes that “patent

infringement cases — complete with invalidity defenses

— were ‘traditional actions at common law’ and there-

fore ‘the responsibility for deciding that [type of] suit

rests,’ if not with juries then at a minimum, ‘with Arti-

cle III judges in Article III courts.’” Petition for a Writ

of Certiorari at 19 (alteration in original) (emphasis

added) (quoting Stern, 564 U.S. at 498 (quoting N. Pipe-

line, 458 U.S. at 90 (Rehnquist, J., concurring in the judg-

ment))). Under petitioner’s proper framing of the Article

III question, the IPR statute creates a fatal separation

of powers problem because it enables an agency to

usurp the exclusive power of the judiciary to adjudi-

cate claims of private rights.

li. Patent Infringement Is A Claim Of Private

Right.

A. Patent Infringement Claims Sound In

Common-Law Trespass, A Private Right.

A suit for patent infringement involves the de-

termination of one party’s liability to another, see 35

U.S.C. §§ 271, 281 (2012), and patent infringement

claims have long been the province of the judiciary. Pa-

tent disputes, including validity challenges as defenses

to claims of infringement, have been heard in courts

since the first federal patent laws, see Act of Apr. 10,

1790, ch. 7, §§ 4-5, 1 Stat. 109, 111 (1790), and one can

easily trace the “descent of today’s patent infringement

action from the infringement actions tried at law in the

18th century.” Markman v. Westview Instruments, Inc.,

517 US. 370, 377 (1996).

Patent law has a historic kinship to common-law

trespass, both in the sense of writs of trespass and tres-

pass on the case that constitute the foundation for

modern tort law, see Brown v. Kendall, 60 Mass. 292,

295 (1850), and of the property torts of the same name.

“Trespass, and the role of writs as the basis for tres-

pass actions, played a key role in early understandings

of patent infringement liability.” Lynda J. Oswald, The

“Strict Liability” of Direct Patent Infringement, 19

Vand. J. Ent. & Tech. L.. 993, 1000 (2017). This connec-

tion is not merely a similarity, but a substantive link

that has done real work in the law of patents. For ex-

ample, the 1870 Patent Act stated that “damages for

the infringement of any patent may be recovered by

action on the case.” Act of July 8, 1870, ch. 230, § 59, 16

Stat. 198, 207 (1870) (emphasis added); see 3 William

C. Robinson, The Law of Patents for Useful Inventions

§ 992, at 203 (1890) (comparing pleadings in patent

cases to those “in other common-law actions”); id.

§ 1082, at 392 (noting that “[t]he acts of Congress, prior

to 1819, made no provision for any suit in equity by the

owner of the patent .. . in connection with his action

jor damages at common law”) (emphasis added).”

Reflecting these common-law roots, examples of

treatment of patent infringement as trespass abound.

A nineteenth-century treatise classified patent in-

fringement as a species of “particular torts,” explaining

that “infringement... is a wrongful act, in the nature

of a trespass,” and noting that “of course the defendant

in any such action or suit may plead the invalidity of

the patent.” Arthur Underhill et al., Principles of the

Law of Torts; or, Wrongs Independent of Contract 612,

652, 653 (1st American ed. from 2d English ed., Albany,

William Gould & Son 1881) (quoting Union Sugar Re-

finery v. Mathiesson, 24 F. Cas. 686, 689 (C.C.D. Mass.

1865) (No. 14,399) (Clifford, Circuit Justice) (charging

the jury)). An 1856 circuit court decision explained that

“(tlhe infringement of a patent is a tort; but as the

2 In contrast to the 1870 Act, the Patent Act of 1793 referred

to “trespass on the case founded on this act.” Act of Feb. 21, 1793,

ch. 11, § 5, 1 Stat. 318, 322 (1793) (emphasis added). Understood

in conjunction with the Robinson treatise, this additional lan-

guage must refer to the statutory source of the property right that

the common-law writ of trespass un the case was meant to vindi-

cate. In addition, as the absence of the “founded on this act” phase

in the parallel provision of the 1870 Act confirms, a plaintiff’s

ability to enforce its patent did not turn on that language.

wrongful act is not committed with direct force, and

the injury is the indirect effect of the wrongful act of

the defendant, the form of action is that description of

tort called ‘trespass on the case.’” Stein v. Goddard, 22

F. Cas. 1233 (C.C.D. Cal. 1856) (No. 13,353); see also

Thomson-Houston Elec. Co. v. Ohio Brass Co., 80 F. 712,

721 (6th Cir. 1897) (“An infringement of a patent is a

tort analogous to trespass or trespass on the case.”).

These are but a few examples; a large number of ninc-

teenth-century cases describe infringement as a spe-

cies of trespass. See Adam Mossoff, Who Cares What

Thomas Jefferson Thought About Patents? Reevaluat-

ing the Patent “Privilege” in Historical Context, 92 Cor-

nell L. Rev. 953, 993 & n.192 (2007) (collecting cases).

Consistent with this history, this Court has long

discussed patent infringement in trespassory terms.

For example, in Continental Paper Bag Co. v. Eastern

Paper Bag Co., the Court referred to remedies for

patent infringement as “reparation for the trespass.”

210 US. 405, 430 (1908). [n Carbice Corp. v. American

Patents Development Corp., the Court stated that

“(ilnfringement, whether direct or contributory, is es-

sentially a tort, and implies invasion of some right of

the patentee.” 283 U.S. 27, 33 (1931); see also Dowagiac

Mfg. Co. v. Minn. Moline Plow Co., 235 U.S. 641, 648

(1915) (“ITlhe exclusive right conferred by the patent

was property and the infringement was a tortious tak-

ing of a part of that property. . . .”). Thus, although pa-

tents are granted by an agency created by Congress,

the infringement cause of action is closely linked to ac-

tions at common law. Patent infringement is a claim to

vindicate a property right by an action deriving from

the writ of trespass, and is the patent counterpart of

the trespassory property torts.

Once this connection to common-law trespass is

recognized, the die is cast: This Court has never sug-

gested that one private party’s claim of trespass

against another could be adjudicated within the Exec-

utive Branch. To the contrary, the Court in Murray’s

Lessee made clear that “we do not consider congress

can either withdraw from judicial cognizance any mat-

ter which, from its nature, is the subject of a suit at the

common law, or in equity, or admiralty.” 59 U.S. (18

How.) at 284.

B. Patent Infringement Claims Bear Little

Resemblance To Causes Of Action That

Have Qualified For The Public Rights

Exception.

The close relationship between claims of patent in-

fringement and claims of trespass comes into focus

when infringement is contrasted with causes of action

that have qualified for the public rights exception. For

example, claims for compensation under the Federal

Insecticide, Fungicide, and Rodenticide Act (FIFRA),

see Thomas, 473 U.S. at 582-83, lack connection in form

or history to claims known to common law. Unlike the

Patent Act, FIFRA is a modern regulatory statute that

implemented “an essentially Icgislative function” of

“ratemaking,” which Congress accomplished by au-

thorizing subsidies for firms that submitted research

data to the federal government via a system that “per-

mits the parties to fix the amount of compensation,

with binding arbitration to resolve intractable dis-

putes.” Jd. at 590 (citing St. Joseph Stockyards Co. v.

United States, 298 U.S. 38, 49-53 (1936)). Similarly, in

upholding a commission’s power to set reasonable

rents and regulate rights of landlords vis a vis holdover

tenants, this Court observed that “if public interest be

established the regulation of rates is one of the first

forms in which it is asserted... .” Block v. Hirsh, 256

U.S. 135, 157 (1921) (cited in Thomas, 473 U.S. at 589).

Indeed, the government has numerous statutory com-

pensation schemes — the Social Security system, for ex-

ample —that are just as far removed from common law

causes of action as they are from a claim of patent in-

fringement. See 42 U.S.C. § 405(g) (2015) (providing for

deferential judicial review of the decisions of the Com-

missioner of Social Security).

As another cxample, the Treasury Department’s

issuance of a distress warrant to recover property pur-

chased with federal funds embezzled by a customs of-

ficer also lacked any antecedent private cause of action

under the common law. See Murray’s Lessee, 59 U.S. at

284. This Court concluded that Article III courts were

not constitutionally required to issue such warrants

based on historical practice in England and the consti-

tutional commitment to Congress of the power to lay

and collect taxes, which Congress had authorized the

Executive Branch to bring into effect via appointment

of customs officers. Jd, at 281-82. Likewise, in Ex Parte

Bakelite Corp., this Court allowed the Court of Cus-

toms Appeals to adjudicate appeals of the Tariff Com-

mission’s exclusion orders after observing that this

legislative court “was created by Congress in virtue of

its power to lay and collect duties on imports and to

adopt any appropriate means of carrying that power

into execution.” 279 U.S. 438, 458 (1929). The Court ex-

plained that “[t]he full province of the [customs] court

under the act creating it is that of determining matters

arising between the Government and others in the ex-

ecutive administration and application of the customs

laws” and noted that the customs court was empow-

ered to decide “matters the determination of which

may be, and at times has been, committed exclusively

to executive officers.” Jd. Finally, as this Court in Crow-

ell observed in its discussion of Murray’s Lessee, claims

relating to immigration status and veterans benefits

would similarly be committed to Executive and Legis-

lative Branches. 285 U.S. at 51. None of these claims

resemble causes of action at common law.

As these cases illustrate, the question of whether

a right at issue is public or private turns on the nature

of the cause of action being adjudicated, not on the type

of the underlying property interest in the abstract.

Thus, while the Treasury Department could constitu-

tionally issue distress warrants with respect to land, it

could not adjudicate causes of action relating to that

same land sounding in common law, such as trespass.

Cf Caleb Nelson, Adjudication in the Political Branches,

107 Colum. L, Rev. 559, 588-89 (2007) (discussing Mur-

ray’s Lessee and concluding that “even if the traditional

power of taxation enabled the government tu take

authoritative actions adverse to core private rights

without any ‘judicial’ involvement, and even if the

power of cminent domain was cut from the same cloth

in some respects, these deviations from the traditional

framework were quite limited. Whatever their precise

contours, they did not spill over to the broad areas

of governmental authority that nineteenth-century

jurists grouped under the loose rubric of the ‘police

power.’”). But see Greene’s BIO at 7 (stating that “[pla-

tents are quintessential public rights” without consid-

ering the context of infringement litigation); Fed. BIO

at 9 (same). A causc of action for patent infringement,

a tort-like claim between private parties, cannot be

fairly analogized to a ratemaking, a distress warrant,

or a claim for compensation from the government, and

therefore belongs only in an Article ILI court.*

3 This Court allowed adjudication of a common-law claim,

sounding in contract, in a non-Article III tribunal in Commodity

Futures Trading Commission v. Schor, 478 US. 833 (1986). In

Schor, however, respondent consented to resolution of that claim

in the very tribunal he was complaining about, and this Court’s

later cases emphasized Schor’s consent rationale. See Wellness

Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932, 1939 (2015); Cranfi-

nanciera, 492 U.S. at 59 n.14 (“The |Schor| Court reached this con-

clusion . . .on the ground that Congress did not require investors

to avail themselves of the remedial scheme over which the Com-

mission presided. The investors could have pursued their ciaims,

atbeit less expeditiously, in federal court. By electing to use the

speedier, alternative procedures Congress had created, the Court

said, the investors waived their right to have the state-law coun-

terclaims against them adjudicated by an Article LI court.”);

Ralph Brubaker, Non-Article ITI Adjudication: Bankruptcy and

Nonbankruptcy, With and Without Litigant Consent, 33 Emory

Il. Invalidity Is An Affirmative Defense To A

Claim For Patent Infringement, Which Con-

gress Has Unconstitutionally Delegated To

An Agency To Resolve.

A. Invalidity Is Inextricably Tied To Claims

For Patent Infringement [n District

Courts.

1. Invalidity, Which The IPR Statute

Empowers The PTAB To Resolve,

Can Be Charged In Patent Cases Only

If There Is Actual Or Threatened In-

fringement.

Under the Patent Act, invalidity is an “affirmative

defense” to a claim for patent infringement. Commil

USA, LLC v. Cisco Sys., Inc., 135 S$. Ct. 1920, 1929

(2015); 35 U.S.C. § 282(b)(2) (2012). Accordingly, if es-

tablished, invalidity precludes the defendant’s liability

to the plaintiff in an infringement case, and so resolves

“the liability of one individual to another under the law

as defined.” Crowell, 285 U.S. at 51.

Although invalidity can also be styled as a “coun-

terclaim,” Cardinal Chem. Co. v. Morton Int'l, Inc. , 508

U.S. 83, 96 (1993), it is not a separate cause of action.

Invalidity can be asserted at the outset of a patent case

Bankr. Dev. J. 11, 39 (2016) (“[T] he Court has never upheld as con-

stitutionally valid, in the face of a clear constitutional challenge

thereto, a fina] judgment non-Article II] bankruptcy adjudication

without consent of the litigants.”) (emphasis removed). In the in-

stant case, there was no consent to PTAB adjudication. Petitioner

chose the forum of a district court to pursue its patent infringe-

ment claim.

only to counter a charge of infringement or as a claim

for relief under the Declaratory Judgment Act, and the

party asserting invalidity must face at least a “threat-

ened enforcement action,” i.e., a suit for infringement.

MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 130

(2007). In the absence of “adverse legal interests” be-

tween parties arising from an actual or threatened

infringement claim, there is no case or controversy,

and a district court has no subject matter jurisdiction

over an assertion of invalidity. Jd. at 127 (citations

omitted). Invalidity defenses and counterclaims in dis-

trict courts are thus inextricably tied to claims of in-

fringement. See Organic Seed Growers & Trade Ass’n

v. Monsanto Co., 718 F.3d 1350, 1359 (Fed. Cir. 2013),

cert. denied, 134 S. Ct. 901 (2014) (declaratory judg-

ment plaintiff must allege “significant, concrete steps

to conduct infringing activity”) (citation omitted); Arris

Grp., Inc. v. British Telecomme’ns PLC, 639 F.3d 1368,

1381 (Fed. Cir. 2011) (finding subject matter jurisdiction

based on an “implied assertion” that the declaratory

judgment plaintiff “was committing. . . infringement”).

The IPR statute empowers the PTAB to decide

questions of validity in an adversarial proceeding in

the shadow of a district court. The effect of patent in-

validation at the PTAB on court proceedings is that

“the patentee’s cause of action is extinguished and the

suit fails.” Fresenius USA, Inc. v. Baxter Int'l, Inc., 721

F.3d 1330, 1340 (Fed. Cir. 2013), cert. denied, 134 S. Ct.

2295 (2014);* see also Cuozzo Speed Techs., LLC v. Lee,

136 S. Ct. 2131, 2143 (2016) (“[A]} decision to cancel a

patent normally has the same effect as a district

court’s determination of a patent’s invalidity.”). The

IPR proceeding, therefore, in operation allows the

PTAB to take the adjudication of an affirmative de-

fense to a private-right claim out of the courts and, in

so doing, vests resolution of the action for infringement

in an administrative agency.

The close connection between assertions of inva-

lidity in district courts and at the PTAB is reflected in

the IPR statute itself, which precludes IPR institution

if the potential defendant in an infringement suit “filed

a civil action challenging the validity of a claim of

the patent.” 35 U.S.C. § 315(a)(1) (2012); see also id.

§ 315(aX(2). Moreover, Congress spelled out the rela-

tionship between IPR and future infringement actions,

id. § 315(e), and provided for appellate review of the

PTAB’s decisions on the assumption that the peti-

tioner would, as a party facing an actual or potential

infringement suit, have standing to appeal the PTAB’s

confirmation of the patentability of the claims at issue,

id. §319.° Finally, a closely related statute setting

* This case dealt with another type of PTO post-issuance pro-

ceeding, but the suit-extinguishing effect of patent invalidations

during IPR is the same.

5 This statutory design raises serious Article III problems of

another kind in those rare cases in which an IPR petitioner is not

facing a threatened enforcement action. See Consumer Watchdog

v. Wis. Alumni Research Found., 753 F.3d 1258, 1262 (Fed. Cir.

2014), cert. denied, 135 S. Ct. 1401 (2015) (analyzing the prede-

cessor to the IPR statute and concluding that, given the absence

forth so-called “Post-Grant Review,” adopted in the

same legislation as IPR, explicitly ties PTAB actions to

assertions of invalidity defenses in district court. It

states that “[a] petitioner . .. may request to cancel as

unpatentable 1 or more claims of a patent on any

ground that could be raised under paragraph (2) or (3)

of section 282(b),” the Patent Act’s “Defenses” section.

Id. § 321(b). Although “the purpose of the [IPR] pro-

ceeding is not quite the same as the purpose of district

court litigation,” Cuozzo, 136 S. Ct. at 2144, statutory

design reveals a close tie between the two.

Thus, as a matter of Article 111 standing and stat-

utory structure, private allegations of invalidity are

inextricably linked to claims of infringement. The func-

tion of invalidity determinations is often to resolve

these claims.

2. PTAB Proceedings Typically Take

Place In Parallel With Litigation.

The connection between allegations of infringe-

ment and assertions of validity is borne out in the ex-

perience of the PTAB. The typical [PR takes place in

the shadow of a district court, thus enabling the PTAB

to moot the entire patent case by resolving the defense

of invalidity. Parallel proceedings that might lead to

such results were explicitly contemplated by Congress,

35 U.S.C. § 315, and are the norm in practice. A recent

of adversity of legal interests between patentee and petitioncr, pe-

titioner lacked Article ITI standing to appeal its PTAB loss to the

Federal Circuit).

empirical study found that approximately 70% of IPR

petitioners have challenged before the PTAB the same

patents that they had been accused of infringing in dis-

trict courts. Saurabh Vishnubhakat eft al., Strategic

Decisionmaking in Dual PTAB and District Court Pro-

ceedings, 31 Berkeley Tech. L.J. 45, 73 (2016) (“We find

that, overall, [Covered Business Method] and IPR

petitions are in fact predominantly assertions of the

petitioners’ own direct interests with respect to in-

fringement liability on the particular patent being

challenged.”).

The devclopments that brought the instant case

to this Court are typical and illustrative. Petitioner

Oil States sucd respondent Greene’s for patent in-

fringement in a district court and sought monetary

and injunctive relief. Complaint at 6-7, 12-13, O7/

States Energy Servs., LLC v. Trojan Wellhead Protec-

tion, Inc. and Greene’s Energy Grp., LLC, No. 6:12-cv-

00611-RWS (E.D. Tex. Sept. 10, 2012), ECF No. 1. The

trial judge construed the asserted claims and denied

Greene’s motion for summary judgment of invalidity of

the claims under 35 U.S.C. § 112(b), 2014 WL 12360946

(E.D. Tex. June 23, 2014), discovery closed, and the

date for jury trial was set, ECF No. 173 (Mar. 16, 2015).

Greene’s, however, had filed a petition for an IPR. In

an administrative ruling that was summarily affirmed

by the Federal Circuit, the PTAB invalidated the very

patent claims that Oil States had alleged Greene’s was

infringing. Greene’s Energy Grp., LLC v. Ou States

Energy Servs., LLC, Case IPR2014-00216, 2015 WL

2089371 (Patent Tr. & App. Bd. May 1, 2015), aff’d, 639

Fed. App’x 639 (Fed. Cir. 2016) (mem.). In so doing, the

PTAB effectively resolved the infringement case in fa-

vor of Greene’s, and the patent suit would have been

fully extinguished had this Court not granted certio-

rari in this case.

Given the commonality of these parallel proceed-

ings, the prospect of conflicting decisions between the

agency and Article III courts is real. And when the

PTAB and the courts reach opposing conclusions with

respect to validity, the agency supersedes the courts.

For example, as long as the district court has issues left

to address in a case and all the appeals have not been

resolved,® the PTAB’s decision to invalidate a patent

can wipe out a judgment for past monetary damages,

even if that judgment was affirmed by the Federal Cir-

cuit in a prior opinion. Fresenius, 721 F.3d at 1340-44.

Moreover, the PTAB’s invalidity decision can undo a

judgment of contempt against an infringer for disre-

garding an injunction, as long as the injunction was

not final. ePlus, Inc. v. Lawson Software, Inc. , 789 F.3d

1349, 1356-58 (Fed. Cir. 2015), cert. denied, 136 S. Ct.

1166 (2016).’

® See Paul R. Gugliuzza, (invalid Patents, 92 Notre Dame L.

Rev. 271, 295-307 (2016) (discussing the “absolute finality” rule).

? Questioning this result, a dissent filed in ePlus explained

that the dual-track system “encourages defendants to scrap and

fight to keep underlying litigation pending in the hope that they

will fare better with the PTO and then be able to unravel the dis-

trict court judgment against them.” ePlus, Inc. v. Lawson Software,

Inc., 790 F.3d 1307, 1314 (Fed. Cir. 2015) (Moore, J., dissenting

3. By Resolving Invalidity, The PTAB

Takes Infringement Suits Away From

District Courts.

In creating the IPR system, Congress dissected a

cause of action that is rooted in the common law and

has long been the exclusive province of the judiciary,

and vested a particular aspect of that cause of action,

the affirmative defense of invalidity, in an agency. Once

the PTAB establishes invalidity, it does not matter

what conclusion the courts have reached with respect

to validity or infringement of the same patent in a case

between the same parties — the suit is resolved in favor

of the defendant.* Cf Fresenius, 721 F.3d at 1339

(“[T]he language and legislative history of the reexam-

ination statute show that Congress expected reexami-

nation to take place concurrent with litigation, and

that cancellation of claims during reexamination

would be binding in concurrent infringement litiga-

tion.”).? Such a scheme — which renders a district court

a mere adjunct to the PTAB in the resolution of a claim

from denial of rehearing en banc); Peggy P. Ni, Rethinking Final-

ity in the PTAB Age, 31 Berkeley Tech. L.J. 557, 586 (2016)

(“(A]ileged infringers arc incentivized to prolong district court lit-

iyation in hopes of receiving a favorable PTO determination.”).

® Because of “a lower standard of proof and the broadest rea-

sonable interpretation standard of claim construction” at the

PTO, In re Baxter Int'l, Inc., 678 F.3d 1357, 1360-61 (Fed. Cir.

2012), it does not matter that the patent’s validity was upheld in

a parallel district court proceeding, even if that decision was af-

firmed on appeal, id. at 1364-65.

® Even if the patent survives PTO review with amended

claims, the original claims are cancelled, i.e., rendered invalid. See

Fresenius, 721 F.3d at 1339-40.

for liability in a patent case — offends Article III be-

cause it allows an agency to dispose of “a private right,

that is, the liability of one individual to another under

the law as defined.” Crowell, 285 U.S. at 51.

The fact that district courts might still adjudicate

whether the defendant infringes the patent and

whether the patent is valid — if the PTAB happens to

uphold the challenged claims — does not cure the con-

stitutional problem. An example will illustrate why.

Suppose a trespass claim arises under the law of a ju-

risdiction in which consent is an affirmative defense."

Given that the prima facie trespass claim must be ad-

judicated in an Article III tribunal, it would be odd to

conclude that Congress could nonetheless delegate to

an agency the question of consent with the effect that

a trespass suit must be dismissed if the agency found

that the plaintiff consented to entry. When agencies de-

cide questions that require the dismissal of a case,

courts are Ieft with nothing to adjudicate, and the

plaintiff is denied its day in an Article II{ forum.

The cifect in the patent context is the same: Con-

gress impermissibly enabled an agency to “oust the

jurisdiction of [a] court to which the [patent] owner

might apply for an adjudication of his rights.” Mc-

Cormick Harvesting Mach. Co. v. C. Aultman & Co., 169

U.S. 606, 611-12 (1898), Even if district courts might

1” Cf Envtl. Processing Sys., L.C. v. FPL Farming Ltd., 457

S.W.3d 414 (Tex, 2015) (reversing a lower court’s holding that con-

sent to trespass is an affirmative defense in ‘Texas after conclud-

ing that the lack of consent is part of the plaintiff’s prima facte

case).

have something meaningful left to do in some infringe-

ment cases running in paralle! with PTAB proceedings,

and even though some decisions in parallel infringe-

ment cases are not rendered null by the PTAB, the IPR

scheme still cannot stand. “A statute may no more law-

fully chip away at the authority of the Judicial Branch

than it may eliminate it entirely.” Stern, 546 U.S. at

502-03.

B. PTO Expertise Does Not Justify The

PTAB’s Authority To Bind Federal Courts.

1. Expertise Does Not Allow Agencies To

Take The Place Of Courts When Pri-

vate Rights Are At Issue.

A counterargument respondents are likely to ad-

vance is that the PTO possesses expertise with respect

to patent validity that makes agency adjudication per-

missible in this case. The PTO does play an important

role in a “particularized area of law,” Stern, 564 U.S. at

489 n.6, and this specialization was central to the Fed-

eral Circuit’s rejection of a prior Article III challenge

to IPR, see MCM Portfolio, 812 F.3d at 1291 (“It would

be odd indeed if Congress could not authorize the PTO

to reconsider its own decisions.”). And, to be sure, this

Court has referred to the PTO’s “special expertise.”

Kappos v. Hyatt, 132 S. Ct. 1690, 1700 (2012).

Nonetheless, while this Court has deferred to

agency expertise in deciding whether a claim may be

adjudicated outside an Article III court, e.g., Schor, 478

U.S. at 855-56, it has done so when “the magnitude of

any intrusion on the Judicial Branch can only be

termed de minimis,” id. at 856. This is not such a case.

When a plaintiff is attempting to exercise its rights un-

der a patent, it is asserting a property right via a claim

stemming from the common law, necessitating an Arti-

cle III forum for the claim’s resolution. Cf Nelson, su-

pra, at 578 (describing the “vest[ing]” or rights granted

by land patents, whereby rights could not be taken

away without a judgment of a court, even though an

agency was responsible for the initial grant); see also

Act of Apr. 10, 1790, § 5, 1 Stat. 109, 111 (empowering

“defendant|s|” in patent infringement cases to make

pleas to “repeal. . . patents” via an “oath or affirmation

made before the judge of the district court”). Infringe-

ment causes of action, therefore, do not fall within the

sphere of “a limited regulatory objective within the

agency's authority.” Stern, 564 U.S. at 490.

That is not to say that the P'l'O’s expertise can

never be invoked to address validity of a patent after

its grant. Indeed, post-issuance proceedings can “help| |

protect the public’s ‘paramount interest in seeing that

patent monopolies... are kept within their legitimate

scope.” Cuozzo, 136 S. Ct. at 2144 (quoting Precision

Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 US.

806, 816 (1945)). More generally, certain “curative”

statutes have withstood constitutional scrutiny. See,

e.g., Graham v. Goodcell, 282 U.S. 409, 428-31 (1931);

see also Cuozzo, 136 S. Ct. at 2144; cf Mark D. Janis,

Rethinking Reexamination: Toward a Viable Admin-

istrative Revocation System for U.S. Patent Law, 11

Harv. J. L. & Tech. 1, 93-122 (1997) (discussing possible

post-issuance review schemes that are unlikely to

raise constitutional! problems). For example, Congress

could create an opposition proceeding that would pre-

vent a patent from being enforceable until it undergoes

third-party challenges to validity within a defined pe-

riod after a provisional grant. Cf 15 U.S.C. § 1063

(2006) (setting forth the process of opposition to trade-

mark registration).

But the IPR scheme goes well beyond empowering

the PTO to correct its own mistakes, instead installing

the PTAB as a kind of specialized quasi-court au-

thorized to make determinations that are binding on

Article II] courts in which these questions have tradi-

tionally been adjudicated. In addition to the effects al-

ready discussed, supra Section III.A, the IPR statute

includes an estoppel provision stating that an IPR pe-

titioner “may not assert either in a civil action arising

. under section 1338 of title 28 or in a proceeding

before the International Trade Commission .. . that

the claim is invalid on any ground that the petitioner

raised or reasonably could have raised during that

{IPR].” 35 U.S.C. § 315(e)(2). This subsection reinforces

the conclusion that the IPR statute has gone beyond

error correction and empowered the PTAB to function

as an alternative adjudicatory forum for cases in the

district courts.

2. The PTAB’s Role In IPRs Extends Be-

yond Functions That Expert Agencies

Have Traditionally Been Permitted

To Exercise.

The PTAB’s role under the IPR statute with re-

spect to private rights is unlike those exercised even

by expert agencies in other contexts. The PTO’s singu-

lar power to effectively decide patent infringement

suits in a plenary fashion by invalidating patents lies

in stark contrast to, first, the role of an agency under

the doctrine of primary jurisdiction, under which “the

federal courts have developed the practice of using

their discretionary power to decide that certain issues

otherwise properly in federal court must be litigated

before a federal administrative agency,” Sidney A.

Shapiro, Abstention and Primary Jurisdiction: Two

Chips Off the Same Block - a Comparative Analysis, 60

Cornell L. Rev. 75, 79 (1974) (emphasis added); see

Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th

Cir. 2008) (“The primary jurisdiction doctrine allows

courts to stay proceedings or to dismiss a complaint

without prejudice pending the resolution of an issue

within the special competence of an administrative

agency. A court’s invocation of the doctrine does not in-

dicate that it lacks jurisdiction. Rather, the doctrine is

a ‘prudential’ one, under which a court determines that

an otherwise cognizable claim implicates technical and

policy questions that should be addressed in the first

instance by the agency with regulatory authority over

the relevant industry rather than by the judicial

branch.” (quoting Reiter v. Cooper, 507 U.S. 258, 268-69

(1993)). Under the IPR statute, however, courts lack

any discretion whether or not to defer to the agency,

and effectively lose jurisdiction upon PTAB invalida-

tion of the asserted patents.

Second, the PTAB’s role extends beyond that

played by agency determinations that could foreclose

litigation in courts under traditional issue or claim

preclusion principles. For example, a preclusive effect

of a prior determination by an agency is subject to

standard rules of res judicata, such as identity of is-

sues, B & B Hardware, Inc. v. Hargis Indus., Inc., 135

S. Ct. 1293, 1305-08 (2015), and might be avoided if

there is a “compelling showing of unfairness,” id. at

1309 (quoting Restatement (Second) of Judgments § 28,

Comments g and j, at 283-84 (1980)); see also id. at 1306

(“Ultimately, [Trademark Trial and Appeal] Board deci-

sions on likelihood of confusion . . . should be given pre-

clusive effect on a case-by-case basis.” (quoting A.

LaLonde, Gilson on Trademarks § 11.08(4]{ijLiii iB),

p. 11-319) (2014)) (emphasis added). But under the IPR

scheme, PTO decisions of invalidity effectively bind

district courts even if the specific issues litigated were

not the same, and there is no case-by-case analysis or

an unfairness out. Cf ePlus, 790 F.3d at 1315 (conclud-

ing that finality gamesmanship under the current re-

gime can be “just plain unfair”) (Moore, J., dissenting

from denial of rehearing en banc).’' In addition, while

“! In contrast, the International Trade Commission’s invalid-

ity determinations are not binding on future tribunals. Tandon

Corp. v. U.S. Int'l Trade Comm'n, 831 F.2d 1017, 1019 (Fed. Cir.

1987).

PTAB determinations of invalidity dispose of concur-

rent litigation in the federal courts, court determina-

tions of invalidity have no preclusive effect of any kind

on the PTO. See Baxter, 678 F.3d at 1360-61.

Third, the role of the PTAB under the IPR system

extends far beyond that of agencies functioning as “an

adjunct to the [district] court” in cases involving pri-

vate rights, whereby “the ‘essential attributes’ of the

judicial decision must remain in an article ILI enforce-

ment court.” Richard H. Fallon, Jr., Of Legislative

Courts, Administrative Agencies, and Article HI, 101

Harv. L. Rev. 915, 924 (1988) (citing Crowell, 285 U.S.

at 50-51); see Stern, 564 U.S. at 489 n.6 (“[T]he ad-

ministrative adjudicator had only limited authority to

make specialized, narrowly confined factual determi-

nations regarding a particularized area of law and to

issue orders that could be enforced only by action of the

District Court.”) (discussing Crowell). Under the IPR

statute, the PTAB is more than an adjunct and more,

even, than a district court’s equal. Instead, the PTAB

makes determinations that bind the courts. See supra

Section IT].A. Notably, the PTAB’s decisions are not

subject to de novo review by a district court and require

no court action for enforcement. See, e.g., Joint Stipu-

lation of Dismissal at 2, elcommerce.com v. SAP AG,

745 F.3d 490 (Fed. Cir.), vacated, 564 Fed. App’x 599

(Fed. Cir. 2014) (en banc) (mem.) (No. 11-1369), ECF

No. 50 Gointly moving to dismiss an appeal of an in-

fringement case where the PTAB invalidated the as-

serted patents and “no appeal {of the PTAB’s decision]

was filed”).

3. The Statutory Scheme At Issue Breaks

With The Historical Practice Of De

Novo Review Of PTO Determinations.

Before the advent of recently adopted post-issuance

proceedings, Congress has long given parties aggrieved

by PTO determinations an option to challenge the

agency in a district court. Thus, the PT'AB’s power to

decide validity of issued patents subject only to defer-

ential appellate review, 35 U.S.C. § 141(c) (2012); see

Dickinson v. Zurko, 527 U.S. 150, 152-53 (1999), can be

contrasted — for example — with challenges to the

PTO’s decisions under § 145, the section of the Patent

Act at issue in Hyatt, 132 S. Ct. at 1700. That section,

titled “Civil action to obtain a patent,” grants patent

applicants the right to challenge the PTO’s rejection of

their desired patent claims in a district court, and em-

powers the court to take evidence that was not before

the PTO and make de novo determinations of validity.

Hyatt, 132 S. Ct. at 1694-95; see id. at 1696 (“The PTO,

no matter how great its authority or expertise, cannot

account for evidence that it has never seen.”). In con-

trast to the IPR scheme, § 145 provides a model for the

PTO’s functioning that is consistent with the role of

the agency as an adjunct to an Article IIT court.

Notably, de novo review of PTO determinations

has deep historical roots. See Butterworth v. United

States ex rel. Hoe, 112 U.S. 50, 61 (1884) (discussing the

predecessor statute to § 145); see also Hyatt, 132 S. Ct.

at 1697-98. When the 1952 Patent Act granted to the

PTO, for the first time, the power to cance! claims of an

issued patent without the applicant’s consent” in a so-

called interference proceeding, Congress allowed for de

novo review in district court of that decision under 35

U.S.C. § 146," the section that paralleled, and was con-

sistent with, § 145; see Troy v. Samson Mfg. Corp., 758

F.3d 1322, 1325-28 (Fed. Cir. 2014); cf Executive Bene-

fits Ins. Ag’cy v. Arkison, 134 S. Ct. 2165, 2171 (2014)

(upholding the power of bankruptcy courts to adjudi-

cate Stern claims because of availability of de novo

review in district courts, which also enter final judg-

ments). As noted by one of the 1952 Act’s drafters, this

power of “cancellation of the claims involved from the

patent. . .is new in substance and is made possible by

the amplification of the right of review of the patentce

provided for in section 146.” P.J. Federico, Commentary

on the New Patent Act, 75 J. Pat. & Trademark Off,

Soe’y 161, 193 (1993) (reprinted from Title 35, United

States Code Annotated (1954 West Publishing Co.

ed.)). The IPR statute breaks with this long practice.

‘2 A patentee can voluntarily request that the PTO replace a

patent with a reissued one that reflects a correction of some error

in the original patent. See 35 U.S.C. § 251 (a) (2012). This proceed-

ing, by which the PTO correcta a defective patent with the pa-

tentee’s consent, is not relevant here.

'S Act of July 19, 1952, Pub. L. No. 82-593, § 146, 66 Stat. 792,

803 (1952). This section was amended in 2011, as interferences

were replaced with so-called “derivation” proceedings. 35 U.S.C.

§ 146 (2011). The new § 146, however, still allows the party ag-

grieved by the PTO’s decision a “remedy by civil ac‘ ion” in district

court. Id.

Under the challenged scheme, the PTAB wields signif-

icant power vis a vis Article III courts, and doves so in a

context in which private rights are implicated.

Cc. The PTAB’s Invalidity Determinations

Are Not Collateral, But Central, To In-

fringement Suits, And Are Designed To

Preempt District Court Adjudication Of

The Same Questions.

Another argument likely to be advanced in sup-

port of the IPR statute is that court proceedings can

sometimes be mooted by collateral actions of agencies

without offending Article [II]. For example, a case

might become moot when an agency withdraws a prior

decision that is subject to a court challenge and re-

places it with another decision. See, e.g., Theodore Roo-

sevelt Conservation P’ship v. Salazar, 661 F.3d 66, 79

(D.C. Cir. 2011) (holding that it is “impossible to grant

any prosnective relief” for alleged non-enforcement of

an agency decision that was superseded, and dismiss-

ing the appeal as moot); Ctr. for Sct. in the Pub. Interest

v. Regan, 727 F.2d 1161, 1164 (D.C. Cir. 1984) (dismiss-

ing as moot an appeal challenging a rule that was su-

perseded); see Note, “Moot” Administrative Orders, 53

Harv. L. Rev. 628 (1940).

The statutory scheme at issue in this case, how-

ever, is different. Here, an agency resolves the very

same issues of patent validity that district courts are

empowered to adjudicate in the course of infringe-

ment suits. Under the statutory design, the PTAB

proceeding is not collateral to, but can be intimately

connected with and frequently triggered by, “Action[s]”

for patent infringement. 35 U.S.C. § 315(b). PTAB de-

cisions are made in trial-like proceedings often impli-

cating, as here, the same two parties that are involved

in parallel district court litigation. See supra Section

III.A. This Court, indeed, acknowledged the IPR’s func-

tion of “helping resolve concrete patent-related dis-

putes among parties.” Cuozzo, 136 S, Ct. at 2144. But

the PTAB can do a lot more under the IPR statute than

merely “help.” It can make determinations that a dis-

trict court in a parallel proceeding has no discretion to

reject, even if the suit already reached advanced stages

and even if the court already entered judgment that

the patentee is entitled to retrospective relief. See, e.g.,

Ultratec, Inc. v. CaptionCall, LLC, Nos. 2016-1708,

2016-1709, 2016-1715, 2017 WL 3687453, at *1 (Fed.

Cir. Aug. 28, 2017); Fresenius, 721 F.3d at 1340-44;

Translogic Tech., Inc. v. Hitachi, Ltd., 250 Fed. App’x

988 (Fed. Cir.) (unpublished), cert. denied, 555 U.S.

1045 (2008).

In such circumstances, the PTAB steps into the

shoes of a court on certain questions of invalidity and

takes over its role to “render dispositive judgments.”

Frank H. Easterbrook, Presidential Review, 40 Case W.

Res. L. Rev. 905, 926 (1989). The dispositive effect of

PTAB determinations on co-pending cases is not hap-

penstance of agency vicissitudes, but a part of the stat-

utory design. The Constitution cannot countenance an

adjunct role for Article III courts in the adjudication of

the private rights embodied in the patent infringement

cause of action.

IV. The IPR Statute Offends The Principle Of

Separation Of Powers By Allowing An

Agency To Direct A Court How To Decide A

Specific Case.

A. PTAB Determinations Of Invalidity Func-

tion As “Rules of Decision” That End

Pending Cases.

Coordinate branches may not “prescribe rules of

decision to the Judicial Department of the government

in cases pending before it.” Plaut v. Spendthrift Farm,

Ine., 514 U.S. 211, 218 (1995) (quoting United States v.

Klein, 80 U.S. (13 Wall.) 128, 146 (1872)). Although this

principle does not prohibit Congress from amending

applicable law so as to affect outcomes in pending

cases, Robertson v. Seattle Audubon Soc., 503 U.S. 429

(1992), this Court suggested that Congress may “over-

step[] its bounds by granting [a court] jurisdiction to

decide the merits of [a] claim, while prescribing a rule

for decision that left the court no adjudicatory function

to perform.” United States v. Sioux Nation, 448 U.S.

371, 392 (1980) (citing Klein, 80 U.S. (13 Wall.) at 146).

Congress has done just that here. While allowing

courts to retain jurisdiction over patent cases, it also

empowered the PTAB to make determinations that

make courts superfluous.

Sioux Nation is instructive on the reach of the sep-

aration of powers principles relevant here, and shows

why IPRs violate them. As characterized in Plaut, the

statute under consideration in Sioux Nation “required

the Court of Claims. . . [to] review on the merits, with-

out regard to the defense of res judicata or collateral

estoppel, a Sioux claim for just compensation from the

United States — even though the Court of Claims had

previously heard and rejected that very claim.” 514

US. at 230 (citing Sioux Nation, 448 U.S. at 391-92).

The Court in Sioux Nation concluded that this statute

did not offend separation of powers because “it neither

brought into question the finality of [the Court of

Claims’ earlier judgments, nor interfered with that

court’s judicial function in deciding the merits of the

claim.” 448 U.S. at 406. Here, however, the PTAB intcr-

fered with the judicial function by effectively terminat-

ing a patent case via adjudicating the defense of

invalidity, thereby taking away a court’s ability to de-

cide the case. Under this scheme, the courts have been

relegated to the role of a stalking horse.

B. Rather Than Amend Applicable Law,

The IPR Statute Delegates To The PTAB

The Power To Pick Winners And Losers

In Patent Cases.

This Court’s recent decision in Bank Markazi v.

Peterson reiterated the long-held principle that amend-

ments to applicable law during the pendency of litiga-

tion do not offend separation of powers. 136 S. Ct. 1310,

1317 (2016). The law whose constitutionality was up-

held in Bank Markazi made certain assets subject to

attachment for the execution of judgments in a specific

set of cases. Jd. at 1332-33. This Court reasoned that

“a statute dues not impinge on judicial power when it

directs courts to apply a new legal standard to undis-

puted facts.” Id. at 1325. The Court made clear, how-

ever, that “Congress could not enact a statute directing

that, in ‘Smith v. Jones,’ ‘Smith wins.’” Jd. at 1323 n.17.

In addition, the Court noted that the statute under dis-

pute “facilitates execution of judgments in 16 suits,”

rather than a single suit, id. at 1326, and explained

that its decision was driven in part by the tradition of

the courts’ deference to the coordinate branches in

matters of foreign policy, id. at 1328-29.

But here, there was no amendment of applicable

law, passed by Congress and signed by the President,

that had the effect of terminating some group of pend-

ing cases. Instead, Congress has delegated to the Exec-

utive Branch an unprecedented power, subject only to

deferential appellate review, to effectively decide partic-

ular patent infringement suits. As discussed through-

out, that power has the character of directing a court

to decide that, in “Patentee v. Infringer,” “Patentee

loses,” if the PTAB concludes that the claims that are

also asserted in litigation are invalid. The intervening

determination is not a change in governing law that

embodies a new legal standard, but a legal conclusion

made by an arm of the Executive Branch that effec-

tively terminates individual patent cases.

V. Adjudication Of Cases Involving Private

Rights In Article III Courts Effectuates The

Values Protected By The Doctrine Of Sepa-

ration Of Powers.

In part because of its independence from political

whims, the federal judiciary serves as an important

safeguard of liberty in its role as a neutral arbiter of

private disputes. “This Court consistently has given

voice to, and has reaffirmed, the central judgment of

the Framers of the Constitution that, within our polit-

ical scheme, the separation of governmental powers

into three coordinate Branches is essential to the

preservation of liberty.” Mistretta v. United States, 488

US. 361, 380 (1989). In contrast, a system that reposes

the ability to end lawsuits involving private rights in

the Executive Branch is fraught with potential of fa-

voritism and raises the specter of a coordinate branch’s

power to pick winners and losers that has been this

Court’s concern. Bank Markazi, 1368S. Ct. at 1323 n.17;

N. Pipeline, 458 U.S. at 58 (plurality op.) (characteriz-

ing Article III “{a]s an inseparable element of the con-

stitutional system of checks and balances, and as a

guarantee of judicial impartiality”).

Patent law itself provides an example. Over a dec-

ade ago, the PTO Director decided to order reexamina-

tions of patents at issue in high-stakes infringement

cases involving lesser-known plaintiffs (Eolas and

NTP) and high powered defendants (Microsoft and

RIM — the maker of BlackBerry — respectively). See

Amy L. Magas, Comment, When Politics Interfere with

Patent Reexamination, 4 J. Marshall Rev. Intell. Prop.

L. 160, 160 (2004) (“The recxaminations were ordered

after an independent or small entity inventor received

a substantial judgment against a large company.”). Not

surprisingly, these decisions “created controversy among

patent practitioners,” id. at 168, and some have argued

that the PTO actions “disrupt[ed] the judicial system”

because patents were being reexamined “at the same

time as [their] validity is examined in a federal district

court,” id. at 170.

Worse yet, the NTP reexamination was marred by

allegations of ex parte contacts between PTO officials

and RIM representatives, and of other undue external

influence on the PTO. See, e.g., Dennis Crouch, RIM v.

NTP Continues to Trouble Patent Office, Patently-O,

https://patentlyo.com/patent/2008/05/rim-v-ntp-conti. html

(May 12, 2008) (“It is clear. . . that in the months lead-

ing up to the NTP settlement, the PTO was feeling a

tremendous amount of political pressure from RIM as

well as Congress and the Senate.”), Kevin E. Noonan,

What the Director’s Letter Did Not Say, Patent Docs,

http:/Awww.patentdocs.org/2008/06/what-the-dircct.html

(June 15, 2008). But in the courts, the picture was dif-

ferent. Judge Spencer, who presided over the NTP-RIM

infringement case, made it clear that he would follow

binding law even if it meant enjoining RIM from mak-

ing and selling the BlackBerry in the United States,

and would do so in spite of “the politics” and “the lob-

bying.” Catherine Fredenburgh, Reading the Black-

berry Tea Leaves, Law360, https://www.law360.com/

articles/5509 (Mar. 1, 2006) (quoting a transcript of the

permanent injunction hearing); id. (“[Judge Spencer]

is. . . telling the parties that he will not allow political

pressure or media limelight to sway his decision in any

way.”). Judge Spencer’s approach in the BlackBerry lit-

igation is the stuff that Article HII is made of.

Even before allegations of impropriety in the NTP

reexamination process surfaced, a proposal was made

“to minimize influences from the political arena” on

high-stakes patent cases. Magas, supra, at 179. But a

mechanism for doing so already exists. That mecha-

nism is the doctrine of separation of powers, which pre-

vents the political branches from stepping into the

shoes of the courts. Indeed, “|j]udicial power . . . is the

power of a court to decide and pronounce a judgment

and carry it into effect between persons and parties

who bring a case before it for decision.” Muskrat v.

United States, 219 U.S. 346, 356 (1911). The statutory

scheme at issue in this case contravenes the doctrine

of separation of powers because it empowers an agency

to decide cases in which private rights are at stake in

place of the courts, and it cannot stand in the current

form.

CONCLUSION

The IPR statute violates Article III of the Con-

stitution and the separation of powers doctrine by im-

permissibly entrusting adjudication of private-right

claims to an agency. The judgment of the Federal! Cir-

cuit should be reversed.

Respectfully submitted,

DMITRY KARSHTEDT

Counsel of Record

GEORGE WASHINGTON UNIVERSITY

SCHOOL OF LAW

2000 H Street, N.W.

Washington, DC 20052

dkarshtedt@law.gwu.edu

(202) 994-5725

August 31, 2017

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.