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

No. 16-712

3n The

FILED

AUG 29 2017

ERK

Supreme Court of the United States

¢

OIL STATES ENERGY SERVICES, LLv,

Petitioner,

Vv.

GREENE’S ENERGY GROUP, LLC, et al.,

Respondents.

+

On Writ Of Certiorari To The

United States Court Of

For The Federal Circuit

°

AMICUS CURIAE BRIEF OF SECURITY

PEOPLE, INC. IN SUPPORT OF PETITIONER

+

FREAR STEPHEN SCHMID

Counsel of Record

177 Post Street, Suite 550

San Francisco, CA 94108

Tel: (415) 788-5957

frearschmid@aol.com

Counsel for Amicus Curiae

i

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE .............c00c00008 1

SUMMARY OF ARGUMENT ..................-..sceseeeeees 4

I.

II.

Il.

IPR Violates Separation Of Powers By Un-

constitutional Impingement On Power Re-

served To The Judiciary By Article II1........

IPR Results In Deprivation Of The Right To

Pi FR ainckcnccearcvsbidsornceenisesesiayensntadeasacnvs

The Article III Violation Unfairly Empowers

Infringers By Applying Different Burdens

Of Proof, Presumptions, And Standards Of

Patent Interpretation Used In IPR Trials ....

TT sist cctenesicicesisntesrenseisntniaeninintamesvenaninets

I.

IT.

Patentees Are Entitled To Rely On Long-

Standing Supreme Court Precedent That

Has Always Treated Patents As Property

And Hence Patent Invalidation As Subject

Solely To The Judicial Power Under Article

Adjudications Of Validity Involves Seventh

Amendment-Protected Private Rights, Thus,

The Right To A Jury Tria] Is A Fundamen-

tal Part Of The Article [II Fact-Finding Pro-

~~

i

TABLE OF CONTENTS — Continued

Page

III. In The Name Of Efficiency, IPR Unfairly

Tilts The Scales In Favor Of Infringers By

Applying Different Burdens Of Proof, Pre-

sumptions, And Standards Of Patent Interpre-

tation In Contradiction Of The Constitutional!

Mandate To Promote Inventions................. 18

CNET sc sncscestictvonecepnsvcsecusuvedobesisosiciakinicunniies 19

ill

TABLE OF AUTHORITIES

Page

CASES

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

Be I viccnbesaySedapuievdovapperadesnmiucurcseccisesss 9,10

Crowell v. Benson, 285 U.S. 22 (1932) ..........cccseecseeeees 16

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

ges agri an ra oaths aul aan pewlieaacanaay 4,17

Hawes v. Gage, 11 F. Cas. 867 (C.C.N.D.NLY.

NU sis ckekn eet tag-teceaoncs aguuc garecseeaemmnpharmadomaesouincon 12

Horne v. Dep’t of Agriculture, 576 U.S. ___ (20195).......... 8

In re Lockwood, 50 F.3d 966 (Fed. Cir. 1995).............14

In re Mankin, 823 F.2d 1296 (9th Cir. 1987).............. 12

In re Tech. Licensing Corp., 423 F.3d 1286 (Fed.

SR I sa a ee rns eed oe eee nena el 5,14

James v. Campbell, 104 U.S. 356 (1882).......000. 8

Joy Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed.

Cir. 1992)... a aaananeebbisnpeieies ..@, 10, 16,17

Marbury v. Madison, 5 U.S. 137 (1803)... eee 7

Markman v. Westview Instruments, Inc.,517 U.S.

a ae a eee

McCormick Harvesting Co. v. Aultman, 169 U.S.

Rete alae waren AN ERG PER 4,7,8, 9,15

MCM Portfolio v. Hewlett-Packard Co., 2015 US.

EE aia cnciteen<cesentnsnriccsnntaselssctninresthonseitac 4

MedImmune, Inc. v. Genentech, Inc., 535 ¥. Supp. 2d

Se Ae RE I er ppeeienicnnce a Oeddieasdcaiidnihahibehs-setiidies 14

lv

TABLE OF AUTHORITIES — Continued

Page

Michigan Land & Lumber Co. v. Rust, 168 U.S.

NDI, noi ts cahem lal hide vayeiiciess tiaamabaecnenestwanciak )

Microsoft Corp. v. idi Ltd. Partnership, 131 S. Ct.

I cl os eo os cca pebacsansbbeesaotenen 6

Moore vu. Robbins, 96 U.S. 530 (1877) .... cece ceeeeeeeeeee Y

Northern Pipeline Constr. Co. v. Marathon Pipe

Se Shc, Se ee I OID hdiscntcsncdedessvcsnecdssenascnvess 12

Patlex Corp., Inc. v. Mossinghof/, 585 F. Supp.

Be I ncrtite cccticsacsceisaesneeiscbaniaieteccense 10

Patlex Corp., Inc. v. Mossinghoff, 758 F.2d 594

PI I I aCe edacséedinpeivackardaens 7, 14, 15, 17

Republican Party of Minn. v. White, 5386 U.S. 765

NN ede cn tas ig or aaa daninnupaeseities 12

Stern v. Marshall, 131 S. Ct. 2594 (2011) .............. 9,19

Swofford v. B & W, Inc., 336 F.2d 406 (Sth Cir.

Na a dar saauisianvagingnminsiesvacdeeses 17

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.,

RR ek Se I ilociisincecsnacesniscudecasivsivevenedsivinssis 11

U.S. CONSTITUTION

MN LO gree na ee a ates a Goee 10, 18

STATUTES, REGULATIONS, AND RULES

SN os aco co es ownacvsinevunnanntucvadunes agian lesiasTaatamtadl 6

sD oo ea bed seaneeuslonoedwecddnedioas 15

PS eID cicsisdccsnentidensicmntitanserivirsstahenuthasteopeseta 6

Vv

TABLE OF AUTHORITIES — Continued

Be CPR. 8 ELD E venice scevcessssvsecsecietineipaaeeien

Gee « Te. 5 Pry epee sees seme oe yo

Pad. F. Cov. F. BRLGK LE) ..csecscseccossdssecssevsisereansmianens

OTHER AUTHORITIES

Daily, James E. and Kieff, F. Scott, Benefits of

Patent Jury Trials for Commercializing Inno-

vation, 21 Geo. Mason L. Rev. 865 (2014)..........

Davis, Ryan, PTAB’s “Death Squad” Label Not

Totally Off-Base, Chief Says, Law360 (August

BS, BURG) os vcossrnnnsasasnccessonsinttoheseuniacetsnnisesseneniaaiae

Fieseler, R.W., Staying Litigation Pending Reex-

amination of Patents, 14 Loy. Univ. Chi. L. Rev.

BTW CIID 000s sscncicrnssssicesascisatadsnsenmphaneummmmmioraniila

Mossoff, Adam, Who Cares What Thomas Jeffer-

son Thought about Patents? Reevaluating the

Patent “Privilege” in Iistorical Context, 92

Carmen Ts. Tie GD Cee iio a sinc ces vv cnseconcesetdoucccuten:

Rothwell, Michael, After MCM, A Second Look:

Article I Invalidation Of Issued Patents For

Intellectual Property Still Likely Unconstitu-

tional After Stern v. Marshall, 18 N.C. J.L. &

Bes Be CIGE Spo cs snvecissnsersissnsvasdicnbsceusesias ina

neve 15

kena 16

INTEREST OF AMICUS CURIAE'

Amicus Security People, Inc. (“SPI”) is a closely

held California corporation, which holds over thirty

patents, the bulk of which it has actively practiced in

products that it manufactures, markets, and sells. SPI

has a petition for a writ of certiorari currently pending

before this Court (Security People, Inc. v. Matal, et al.,

17-214) that raises the identical question posed by the

instant petition.

SPI is currently involved in litigation in the

Northern District of California regarding infringement

on one of its patents (Security People, Inc. v. Ojmar

US, LLC, case number 3:14-cv-04968-HSG). SPI had

timely requested a jury trial. The defendant Ojmar an-

swered and filed a counterclaim seeking invalidity of

the subject patent and requested a jury trial. SPI

moved to dismiss the counterclaim. Before the hearing

on the motion to dismiss, Ojmar filed a petition for in-

ter partes review (“IPR”). Ojmar also sought a stay of

the District Court action pending the IPR. The District

Judge stayed the action, pending resolution of the IPR.

The stay of that action is currently still in place over

two years later and has thwarted SPI’s Article III liti-

gation. Also, due to the stay, the scheduled jury trial

» Pursuant to this Court's Rule 37.2(a), all parties have con-

sented to this filing and the consents are on file with the Court.

Pursuant to this Court’s Rule 37.6, amicus state that no counsel

for » party authored this brief in whole or in part, and no counsel

or party made a monetary contribution intended to fund the brief

‘s preparation or submission. No person other than amicus or its

counsel made 4 monetary contribution to the briefs preparation

ur submission.

2

that had been originally set for October 2016 was de-

railed. At issue in that case is SPI Patent No. 6,655,180

issued on December 2, 2003, which patent claims SPI

incorporated in its products starting in 2002. SPI has

actively practiced the patent at all times since, having

invested millions of dollars into the patent, product de-

velopment and its business built around the patent.

SPI is a classic small business success story, which

has invested in patent development in good faith reli-

ance that its property interest in its issued patents

would be protected by the United States Judicial Sys-

tem. In sum and substance, SPI has been deprived of

ils rights to hearings, trial, and the standards of proof

applicable in Article III courts. Due to the stay of

its Article III judicial rights, SPI brought a lawsuit

against the United States Trademark and Patent Of-

fice challenging the constitutionality of the America

Invents Act, which is the subject of SPI’s pending peti-

tion for certiorari, #17-214.

Amicus has long-standing and vested interests in

various patents, and the preservation of the property

rights secured thereby. Amicus is very concerned with

the complete chaos and clouding of title of patent

rights duc to the inter partes review process under the

America Invents Act. Specifically, amicus is very con-

cerned about patent owners being stripped of their

rights to have their patents adjudicated in Article [II

courts (with the attendant Seventh Amendment right

to a jury trial) instead of at the hands of the Patent

Office. The inter partes review process, as constituted,

has an absolutely destabilizing effect on long-term

3

patent innovations and development, and the remu-

neration for such efforts. And, as such, is profoundly

detrimental to the well-being and purpose of fostering

patents as envisioned by the U.S. Constitution.

As noted above, amicus has a significant interest

in the outcome of this case which tests the constitu-

tionality of the inter partes review as currently consti-

tuted by the America Invents Act. Inter partes review

applies and directly affects each and every patent and

the considerable time, effort, and energy inventors

have invested in said patents. IPR subverts patentees’

reasonable expectations that their patent, once issued,

would be protected as long-established under United

States Supreme Court precedent as a vested property

right which could not be taken without Article II

determination in the circumstances where entitled, a

right to a jury trial. Amicus strongly urges this Court

to grant review to reject the constitutionality of the IPR

as constituted under the America Invents Act which

disregards fundamental long-established cardinal prin-

ciples and underpinnings of the American constitu-

tional system, the tri-partite system of government, to

wit: the separation of powers, the rights and responsi-

bilities of the judiciary under Article III, the right to

property secured by the Fifth Amendment of the U.S.

Constitution, and the right to a jury trial secured by

the Seventh Amendment of the U.S. Constitution.

t —

4

SUMMARY OF ARGUMENT

I. IPR Violates Separation Of Powers By Un-

constitutional Impingement On Power Re-

served To The Judiciary By Article IIT

This case warrants this Court’s review. For the

first time, in MCM Portfolio v. Hewlett-Packard Co.,

812 F.3d 1284 (Fed. Cir. 2015), a circuit court labeled a

long recognized private property right (patents) as a

public right. It did so to justify Executive Branch

power (bestowed hy the Legislative Branch) that boldly

removes a type of traditional 1789-era adjudication

from the control of Article III courts. These private

property rights now go for final adjudication before Ex-

ecutive Branch employees. As noted in McCormick

Harvesting Co. v. Auliman, 169 U.S. 606 (1898), once a

patent is issued, it can only be cancelled or invalidated

py an Article Lil court, not the Executive Branch. Sim-

larly, as taught in Granfinanciera, S.A. v. Nordberg,

492 U.S. 33 (1989), Congress cannot conjure away the

Seventh Amendment fact-finding process employed in

Article LII courts by mandating that traditional legal

claims be tried to an administrative tribunal:

“Congress cannot climinate a party’s Seventh

Amendment right to a jury trial merely by re-

labeling the cause of action to which it at-

taches and placing exclusive jurisdiction in an

administrative agency... .”

Id. at 61. The effect of the IPR process is that Article

Ili courts now routinely stay the court proceedings

pending the conclusion of the IPR process with its

5

resulting res judicata effect. It is self-evident that each

day that the stay of an Article [II infringerncnt action

is in place, the plaintiff in such an action is being de-

prived of its right to proceed before an Article III court

as guaranteed by the U.S. Constitution, to wit: the ju-

dicial power as reserved to this Court to determine ac-

tual cases and controversies involving law and equity

arising under the Constitution.

Il. IPR Results In Deprivation Of The Right

To A Jury Trial

Attached to und inseparable from Article III adju-

dication is the Seventh Amendment right to a jury

trial: “[p)atent validity was a common-law action tried

to a jury in Eighteenth Century England. An action to

repeal and cancel a patent was pled as the common law

writ of scire facias.” In re Tech. Licensing Corp., 423

F.3d 1286, 1292-1293 (Fed. Cir. 2005) (Newman, J., dis-

senting). See Markman v. Westview Instruments, Inc.,

517 U.S. 370, 377 (1996): “there is no dispute that in-

fringement cases today must be tried to a jury.” Thus,

the IPR process is an unconstitutional and improper

deprivation of patentees’ established right to a jury

trial in an Article III court. The right to a jury trial is

not contingent upun any administrative process; it is

an absolute fundamental constitutional right in the

context of patent litigation.

6

lil. The Article III Violation Unfairly Empowers

infringers By Applying Different Burdens

Of Proof, Presumptions, And Standards Of

Patent Interpretation Used In IPR Trials

Part of this case’s importance is that this Court

may now correct needless destabilizing of the innova-

tion economy. Though adjudicatory, inter partes review

trials depart from adjudication standards that have

been developed over centuries in Article [11 courts. For

example, when invalidity is raised in a declaratory

judgment action or as a defense in an Article III court,

the patentee enjoys a presumption of validity that

must be overcome by the accused infringer or declara-

tory judgment plaintiff by clear and convincing evi-

dence. See 35 U.S.C. § 282 (“A patent shall be presumed

valid. Each claim of a patent ... shall be presumed

valid independently of the validity of other claims... .

The burden of establishing invalidity ... shall rest on

the party asserting such invalidity. ...”); Microsoft

Corp. v. i4i Lid. Partnership, 131 S. Ct. 2238, 2242

(2011) (reaffirming clear and convincing standard). By

contrast, the petitioner in an inter partes review trial

must only prove invalidity by a preponderance of the

evidence. See 35 U.S.C. § 316(e). It is the height of ca-

priciousness that the validity of a patent depends on

whether it is challenged in an IPR or in District Court.

The effect of the IPR process is to violate the constitu-

tional imperative to promote inventions.

.

7

ARGUMENT

I. Patentees Are Entitled To Rely On Long-

Standing Supreme Court Precedent That

Has Always Treated Patents As Property

And Hence Patent Invalidation As Subject

Solely To The Judicial Power Under Arti-

cle III

Patents have played and continue to play a huge

role in the economic and social development of the

United States and the world. Imagine a world without

American inventors Alexander Bell, Thomas Edison,

and Steve Jobs. Based upon long-established law, pa-

tentees have every right to expect that those patents

will be protected in Article III courts. The IPR process

completely undermines this expectation, which in turn

subverts the purpose of the Constitution’s patent

clause with its express intent to foster inventions. This

constitutional objective is greatly diminished if patent-

ees cannot be secure in their patent rights. It is diffi-

cult to exploit a patent, and build a product and/or

business premised on a patent when it is subject to in-

validation in a non-judicial setting.

In Marbury v. Madison, 5 U.S. 137, 154-156 (1803),

it was held that whether a property right may be re-

voked lies within the exclusive province of the courts.

Hence, a patent, upon issuance, is not subject to revo-

calion or cancellation by any executive agent (i.e., the

USPTO or any part of it, such as the PTAB). MceCor-

mick, 169 U.S. at 609. While ex parte reexamination

has so far been held to avoid a Separation of Powers

bar, see Patlex Corp., Inc. v. Mossinghoff, 758 F.2d 594

8

(Fed. Cir. 1985), that decision rested on classification of

the grant of a patent right in the reexamination con-

text as a “public” right. See Joy Techs., Inc. v. Manbeck,

959 F.2d 226 (Fed. Cir. 1992), cert. denied, 506 U.S. 829

(1992) (confirming that it is the “grant” or “issuance” of

a patent that is a public right, not the revocation or

invalidation of previously granted private property).

The Patent Office itself correctly believed, before the

America Invents Act, that McCormick imposed a con-

stitutional bar against commenting on the validity of

an issued patent. R.W. Fieseler, Staying Litigation

Pending Reexamination of Patents, 14 Loy. Univ. Chi.

L.. Rev. 279, 283 (1983), citing United States v. General

Elec. Co., 183 U.S.P.Q. (BNA) 551, 552 (Comm’r Pat.

1974). The MCM Court asserted that McCormick was

not premised on constitutional grounds. This erronc-

ous contention is thoroughly rebutted in Michael Roth-

well’s After MCM, A Second Look: Article I Invalidation

Of Issued Patents For Intellectual Property Still Likely

Unconstitutional After Stern v. Marshall, 18 N.C. JL.

& TECH. 1, 6 (2017), whore he establishes unequivo-

cally the constitutional roots and bases of McCormick.

In fact, as emphatically reiterated by this Court,

patent rights are and were considered by United

States courts to be constitutional private property sub-

ject to a takings analysis. Horne v. Dep't of Agriculture,

576 U.S. __, slip op. at 6 (2015) (citing James v. Camp-

bell, 104 U.S. 356, 358 (1882)); see also James, 104 U.S.

at 358 (“[WJhen [the Government] grants a patent the

grantee is entitled to it as a matter of right, and does

g

not receive it, as was originally supposed to be the case

in England, as a matter of grace and favor.”).

Given that a patent is property, the only authority

competent to set a patent aside, or to annul it, is vested

in the courts of the United States, and not in the de-

partment which issued the patent. Moore v. Robbins,

96 U.S. 530, 533 (1877); Michigan Land & Lumber Co.

v. Rust, 168 U.S. 589, 593 (1897). And in this respect a

patent for an invention stands in the same position

and is subject to the same limitations as a patent for a

grant of lands. McCormick, 169 U.S. at 609.

Supreme Court activity confirms the need to hold

inter partes review unconstitutional. In B&B Hard-

ware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293, 1316-

1317 (2015), Justices Thomas and Scalia sua sponte

raised the issue of the constitutionality of giving pre-

clusive effect to agency decisions involving private

rights so as to effectively deprive the party of a right to

a trial in an Article III court and to a jury. See Justice

Thomas dissenting, at 1316:

Because federal administrative agencies

are part of the Executive Branch, it is not

clear that they have power to adjudicate

claims involving core private rights. Under

our Constitution, the “judicial power” belongs

to Article III courts and cannot be shared with

the Legislature or the Executive. Stern v. Mar-

shall, 564 U.S. ___, __-__ (2011) (slip op., at 16-

17); sec also Perez, ante, at 8-11 (opinion of

THOMAS, J.). And some historical evidence

suggests that the adjudication of core private

10

rights is a function that can be performed only

by Article III courts, at least absent the con-

sent of the parties to adjudication in another

forum.

Although the majority in B&B Hardware did not

address the constitutional issue because it was not

raised below (Majority Opinion, p. 1304), the Court

noted the availability of Article III de novo review. Id.

at 1306. In the case of inter partes review, no district

court de novo trial right exists. The district court in

Patlex Corp., Inc. v. Mossinghoff, 585 F. Supp. 713, 725

(E.D. Pa. 1983), upheld the constitutionality of ex parte

reexamination in part because its results, at the timc,

were subject to a de novo district court trial.

In defending the America invents Act, the USPTO

has suggested that Justice Thomas's recent dissenting

opinions indicate that issued patents are public rights,

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

S. Ct. 1293, 1316, 1317 (2015) (Thomas, J., dissenting).

Justice Thomas noted in B&B Hardware “that trade-

mark infringement suits might implicate private

rights on the fact that the ‘exclusive right to use a

trademark was not created by an act of Congress’ but

rather ‘existed long anterior to [the Lanham Act].’”

(B&B Hardware, 135 S. Ct. at 1317 (Thomas, J., dis-

senting)). The same is true of patents. See Constitu-

tion, Article I, § 8, cl. 8 (“To promote the progress of

science and useful arts, by securing for limited times

to authors and inventors the exclusive right to their re-

spective writings and discoveries|.|”) (emphasis added).

ll

Both patents and trademarks rest on rights that ex-

isted “anterior” to the statutes that govern them — the

U.S. Constitution’s Intellectual Property Clause in the

case of patents, plus hundreds of years of English court

practice before then. At the very least, the right to ad-

judication of invalidity rested on such antecedents.

Presumably, Justice Thomas’ reasoning would be the

same in this case.

Indeed, Justice Thomas’ dissenting opinion in

Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., 135

S. Ct. 831 (2015) is informative. His use of the term

“public rights” referred to the administrative act of

granting a land patent. He described as a public right

the pool of real property within the government's own-

ership betore disbursement (in part) as a land patent.

Teva, 135 S.Ct. at 848, n.2 (Thomas, .!., dissenting)

(“Land patents ... dispose of public rights... .”). His

“public rights” terminology did not refer to post-issu-

ance land patents, and certainly not invention patents

in any respect. /d.

If anything, pre-disbursement land patents are

recognizably public whereas pre-patented inventions

are categorically private. The original] inchoate ideas

whose legal rights eventually are reduced to patent be-

long to private inventors as the fruits of their intcllec-

tual labor. See Adam Mossoff, Who Cares What Thomas

Jefferson Thought about Patents? Reevaluating the Pa-

tent “Privilege” in Historical Context, 92 Corneil L. Rev.

953, 992 (2007) (“Jefferson”) (“In this way .. . a patent

secured for an inventor the right to ‘enjoy the fruits

of his invention’ because ‘it is his property.’”) (quoting

12

Hawes v. Gage, 11 F. Cas. 867, 867 (C.C.N.D.N-Y.

1871)).

This Court has explained the harm to the rule of

law that arises whenever persons other than Article [11

judges wield the judicial power. See Northern Pipeline

Constr. Co. v. Marathon Pipe Line Co., 459 U.S. 50, 73-

74 (1982). Lifetime tenure and the prohibition against

salary reduction insulate Article III judges from polit-

ical influence. See id. at 64; In re Mankin, 823 F.2d

1296, 1309 (9th Cir. 1987) (“The purpose of the lifetime

tenure/no salary diminution requirement of Article ITI

is in part to ensure that federal judges are independent

of political pressure from the other branches of govern-

ment.”). Senate confirmation guarantees the most

thorough vetting possible, and ensures that only inde-

pendent jurists preside over cases. Republican Party of

Minn. uv. White, 536 U.S. 765, 795 (2002) (Kennedy, J.,

concurring) (“[T]he design of the Federal Constitution,

including lifetime tenure and appointment by nomina-

tion and confirmation, has preserved the independence

of the Fedcral Judiciary.”).

These protections do not exist for administrative

personnel who work within the hierarchy of the Exec-

utive Branch, and serve at the whim of agency heads,

the President, or even Congress. Agency capture — to

which federal courts are structured to be immune —

has also erept into PTAB outcomes,’ indeed resulting

2 James E. Daily and F. Scott Kieff, Benefits of Patent Jury

Trials for Commercializing Innovation, 21 Geo. Mason L. Rev. 865,

878-879 (2014) (“One reason for this is that larger firms generally

13

in the reputation as “patent death squads.” In addi-

tion, the Judiciary has always supervised and adjudi-

cated any deprivation of private property rights by the

government. Only the Judiciary has historically been

imbued with the power to adjudicate condemnation

proceedings for takings (real property), seizure of crim-

inal proceeds (personal property), nullification of land

grants (land patents), and (until recently) invalidation

of issued patents (intangible property). Placing such

judicial power in the hands of personnel who work for

the Executive offends the Constitution’s reservation of

such power to the Judicial Branch. The IPR process

also exercises core judiciary powers such as interpre-

tation of law and claim construction — areas that

should belong exclusively to the Judicia] Branch.

Ii, Adjudications Of Validity Involves Seventh

Amendment-Protected Private Rights, Thus,

The Right To A Jury Trial Is A Fundamental

Part Of The Article III Fact-Finding Process

As noted, IPR trials adjudicate patent validity, in-

cluding factual issues that otherwise would be tried

to a jury in district court. They therefore violate the

Article I] fact-finding process under the inextricably

are thought to be more effective at bringing political influence to

bear in agency determinations.”).

’ Both the erstwhile Chief Judge of the Court of Appeals for

the Federal Circuit and the Chief Patent Judge of the Patent Trial

and Appeal Board have publicly agrecd that “patent death squad”

is an accurate label. Ryan Davis, PTAB’s “Death Squad” Label Not

Totally Off Base, Chief Says, Law360 (August 14, 2014).

14

intertwined Seventh Amendment because they de-

prive patentees of jury trials. Patent infringement

suits have a long history in the common law, and thus

of a jury trial right. See, e.g., Markman v. Westview In-

struments, Inc., 517 U.S. 370, 377 (1996) (“Equally fa-

miliar is the descent of today’s patent infringement

action from the infringement actions tried at law in the

eighteenth century, and there is no dispute that in-

fringement cases today must be tried to a jury, as their

predecessors were more than two centuries ago.”) (ci-

tation omitted); Jn re Lockwood, 50 F.3d 966, 976 (Fed.

Cir. 1995), vacated, 515 U.S. 1182 (1995) (holding jury

trial right applies to adjudication of patent validity,

discussing eighteenth and nineteenth century patent

adjudication in England and the United States); In re

Tech. Licensing Corp., 423 F.3d 1286, 1289 (Fed. Cir.

2005) (citing Lockwovd for the proposition that under

both English and American practice it was the pa-

tentee who decided whether a jury trial on the factual

questions relating to validity would be compelled).

The Federal Circuit in Patlex excused ex parte

patent recxaminations in the USPTO from the jury

trial right only because “the grant of a valid patent is

primarily a public concern.” Patlex, 758 F.2d at 604

(emphasis added). Note that the public “right” was the

public’s “interest” in ensuring that the patent was

4 “After a grant of certiorari was mooted, Lockwood was va-

cated by the Supreme Court without explanation. However, the

Federal Circuit repeatedly confirmed the vitality of Lockwood's

reasoning in subsequent cases.” MedImmune, Inc. v. Genentech,

Inc., 535 F. Supp. 2d 1020, 1027 (C.D. Cal. 2008) (citations omit-

ted).

15

properly granted. Jd. The court held that because reex-

amination is directed to “correct crrors made by the

government, to remedy defective governmental (not

private) action, and if need be to remove patents that

should never have been granted,” id., re-doing the

examination process qualified as a public right. The

Court in Joy repeated this rationale. Joy, 959 F.2d at

228. Even assuming this legal fiction may survive scru-

tiny under McCormick, and above cited precedents, it

simply does not apply here, because the IPR process

is purely adjudicatory; an adversary trial! between pri-

vate parties, the patentee and the “petitioner,”> where

the USPTO is the judge.

inter partes reviews jack the very thing that al-

lowed ex parte reexamination to pass muster: a legal

fiction that the USPTO is restarting the examination

process by patent examiners to correct a governmental

mistake. The USPTO conducts a court-like trial be-

tween adversaries including taking of and weighing

testimony of witnesses. !n sum, it acts as an Article Ii

court, but without a jury to weigh the multitude of fac-

tual issues presented and without the protections en-

joyed by Article III courts (e.g., life tenure, protection

® The PTO cannot initiate an IPR. Under 35 U.S.C. § 311(a),

only a “persun who is not the patent owner” may file a petition for

IPR, and the PTO is not a “person” under the statute. Under 37

C.FR. § 41.101, the “person who is not the patent owner” is re-

ferred to as the “petitioner,” which is defined in 37 CLF_R. § 42.2 as

“the party filing a petition requesting that a trial be instituted.”

The regulations define “party” as “at least the petitioner and the

patent owner” and do not make any reference to the PTO. 37

C.F.R. § 42.2.

16

against salary reduction and involvement of the polit-

ical process, and Senate confirmation in appoint-

ments). The USPTO is not a party, but serves as judge.

For example, the trial includes initia) scheduling or-

ders, mandatory notices, initial disclosures modeled

after Fed. R. Civ. P. 26(a)(1), depositions, additional dis-

covery as the USPTO determines is otherwise neces-

sary “in the interest of justice,” cross-examination,

compelled testimony and document production, oral

argument, as well as objections, motions in imine, mo-

tions to exclude arguably inadmissible evidence, and

oral argument. After the parties have finished the en-

tire adversarial process, the USPTO’s Judicial Panel

issues a decision, which may cancel the patent.

In sum, inter partes review is virtually identical to

what would happen if the party challenging the valid-

ity of the patents chose to bring an action in an Article

I[I court instead with one key difference — no right to

a jury trial. The Federal Circuit in Joy (in dispensing

with a right to a jury trial) stated that a private right

involves the liability of one individual to another,

which contrasts with cases that “arise between the

Government and persons subject to its authority in

connection with the performance of the constitutional

functions of the executive or legislative departments.”

Joy, 959 F.2d at 229 (internal quotation marks omit-

ted) (citing Crowell v. Benson, 285 U.S. 22, 50 (1932)).

Inter partes review is the epitome of a private dispute,

and was designed by Congress to lack the features of

reexamination which made reexamination a proceed-

ing just between the Government and a person. In an

17

IPR trial, the USPTO assumes that the adversaries

(the petitioner and patentee) will bring the best prior

art and does not conduct any examination as part of

the proceedings. Its decision is based entircly on the

adversaries’ arguments and evidence. This stands in

stark contrast to ex parte reexaminations, which were

the only USPTO proceedings considered in Patlex and

Joy.

This is alse why patentees’ jury trial rights are be-

ing abridged in a way not present in Patlex or Joy. The

Seventh Amendment protects the right to a jury trial

on issues of patent validity that may arise in a suit for

patent infringement. Patlex, 758 F.2d at 603 (citing

Swofford v. B & W, Inc., 336 F.2d 406 (5th Cir. 1964),

cert. denied, 379 U.S. 962 (1965)). “Congress may de-

vise novel causes of action involving public rights free

from the strictures of the Seventh Amendment if it as-

signs their adjudication to tribunals without statutory

authority to employ juries as factfinders. But it lacks

the power to strip parties contesting matters of private

right of their constitutional right to a trial by jury.”

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 51-52

(1989) (emphasis added). Stated another way, the pub-

lic rights exception cannot apply where a right has a

long line of common-law jury-trial forebears. Jd. at 52.

“The Constitution nowhere grants Congress such puis-

sant authority.” Jd. Instead, the claim must “originate

in a newly fashioned regulatory scheme.” /d.

18

Thus, not only does inter partes review violate Sep-

aration of Powers principles, it also violates the patent-

ees’ inseparably intertwined right to a jury trial under

the Seventh Amendment.

Ill. In The Name Of Efficiency, IPR Unfairly

Tilts The Scales In Favor Of Infringers By

Applying Different Burdens Of Proof, Pre-

sumptions, And Standards Of Patent Interpre-

tation In Contradiction Of The Constitutional

Mandate To Promote Inventions

Patentees wrongly face significant lessened pro-

tections in the IPR process in the rules concerning bur-

den of proof and claim interpretation, in contravention

to long-established procedures in Article III courts. The

undeniable effect of the different rules applied in the

USPTO inter partes review is to put a patentee at a

distinct disadvantage and greatly increase the odds

that patents will be invalidated. The validity or inva-

lidity cannot rationally depend on whether the matter

is heard in U.S. District Court or in the Patent Office;

however, due to different standards of proofs, presump-

tions and rule of patent construction, such unfair, une-

qual application of the law and unfair results are

pre-ordaincd. This is in direct contradiction with the

constitutional mandate Article 1, Section 8 “to pro-

mote” inventions. IPR has created an expensive disin-

centive to invent. [t has created a new form of forum

shopping, whereby an infringer can opt out of Article

11f courts and seek protection in the Executive Branch.

19

Congress enacted the IPR process for the ostensi-

ble efficiency of trying issues of validity before a panel

of administrative judges instead of Article III courts.

Even if IPR were actually more “efficient,” “[i)t goes

without saying that the fact that a given law or proce-

dure is efficient, convenient, and useful in facilitating

functions of government, standing alone, will not save

it if it is contrary to the Constitution.” Stern v. Mar.

shall, 131 S. Ct. 2594, 2619 (2011) (quotation marks

omitted). “We cannot compromise the integrity of the

system of separated powers and the role of the Judici-

ary in that system, even with respect to challenges

that may seem innocuous at first blush.” Jd. at 2620.

.

CONCLUSION

For the foregoing reasons, the writ of certiorari

should be granted.

Respectfully submitted,

FREAR STEPHEN SCHMID

Counsel of Record

177 Post Street, Suite 550

San Francisco, CA 94108

Tel: (415) 788-5957

frearschmid@aol.com

Counsel for Amicus Curiae

August 29, 2017