Legal Battle Between Oil Companies Raises Structural Constitutional Issues

When Oil States Energy Services, LLC filed its patent-infringement suit against Greene’s Energy Group, LLC in federal court back in 2012, the far-reaching negative consequences of the new America Invents Act (AIA) were not yet readily apparent. As the private dispute between these parties has wound its way through the AIA’s legal labyrinth in the subsequent half-decade, however, the structural problems inherent in this new administrative scheme have become increasingly obvious. 

The passage of the AIA has resulted in a substantial transfer of power from the judiciary to the executive branch through the creation of the Patent Trial and Appeal Board (PTAB), an administrative-law body housed within the Patent and Trade Office (PTO) and vested with the extraordinary power to cancel already-issued patents. Although Congress has constitutional authority to determine the kinds of inventions that merit patents, patents themselves (whatever their legislatively determined scope and strength) are and have always been a form of private property. Patents cannot properly be characterized as public rights, as they neither involve the government setting conditions under which it waives its own sovereign immunity nor implicate a statutorily created cause of action that was unknown at common law. Patents are thus necessarily subject to the same protections as a piece of privately held land—and disputes over patents must be handled in the same manner as disputes over other kinds of property, with full judicial review rather than some lesser administrative process. 

This means that the PTAB is fundamentally incompatible with the purposes of Article III of the Constitution, in at least two important ways. First, the PTAB denies patent litigants their right to a fair and impartial adjudication, as the administrative patent judges who comprise the PTAB are fully under the control of the PTO director (a political appointee), and serve at his pleasure. Second, Article III was designed to protect the independence of the judiciary itself, but the creation of the PTAB draws power away from the judicial branch in favor of the executive. The inordinate powers exercised by the PTAB reach far beyond anything previously accepted by the Supreme Court, which concentration of power is further exacerbated by the lack of meaningful judicial review. Such a distortion of the separation of powers creates a sort of unevenness and instability akin to a three-legged stool after one leg has been cut short and then attached to the end of another. 

This tenuous arrangement cannot stand, and so the Cato Institute, joined by the American Conservative Union Foundation, has filed an amicus brief seeking to restore both the proper role of federal courts in patent disputes and the property rights of patent-holders. The Supreme Court will hear Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, this fall.