PTAB, Patents, and the Constitution

Tomorrow, the Supreme Court will hear arguments in Oil States vs. Greene’s Energy Group, et al. on whether the Patent and Trademark Office, acting through the Patent and Trial Appeal Board (PTAB), can decide the validity of existing patents. The question, in particular, is whether the PTAB is unconstitutionally extinguishing private property rights in a non-Article III forum without a jury. At stake, therefore, is a range of vital issues, including patents, property, and the right to be heard in a real court, with a jury.

In the debate over this case, what has not been sufficiently understood is the significance of the government’s granting property in form of a patent. This was a form of grant that ideally could be invalided only by a court of record.

As a preliminary matter, I should mention why I am turning my attention to the PTAB case. Just before the weekend, I learned that, at a Washington DC conference on Oil States, John Thorne held up my book Is Administrative Law Unlawful? and made a strange claim. He said that “the worry about the administrative state is not about canceling patents, as I read Philip Hamburger, it is about patents that interfere with other people’s existing rights.” (See the video at 48:34.) Well, not so fast.

It is true that my book discusses the executive’s issuance of patents, including the danger of issuing patents that interfere with existing rights. But rather than discuss contemporary patent law, it merely examines late eighteenth-century patent practices in order to illustrate that my constitutional objections to administrative power leave plenty of room for lawful executive power. In the case of patents, the point was simply that my objections do not stand in the way of executive decisions that mimic judicial hearings for purposes of allocating these grants of property rights.

In contrast, the question in Oil States is whether, after the executive has issued a patent, it can hold an adjudication to cancel the patent by declaring it invalid. This looks like an exercise of administrative power to take property rights, and it is difficult to understand why anyone would claim that my book suggests otherwise.

In the circumstances, it seems necessary not merely to reject the strange interpretation of my book but also to explore why the PTAB is unconstitutional. The word “patent” is revealing.

Patents were a form of grant, which could be used to grant a wide range of things. The Crown granted patents for land, for annuities, for offices, and for exclusive rights to inventions. In contrast, the Crown tended to grant other things in other forms—for example, it ordinarily granted personal property without a patent. And when it wanted to create a revokeable privilege rather than a property right, it could simply issue a license.

What was distinctive about the form of grant known as “letters patent”? The name alludes these letters being open, rather than sealed shut. More to the point here, they were issued by the Chancellor under the Great Seal and were understood to be acts of the Court of Chancery, and indeed were enrolled in its records. Echoing this practice, Congress in 1790 authorized the issuance of patents for inventions under the Seal of the United States. Why did these formalities matter? Being acts of record, patents were understood to put third parties on notice of what was granted. Moreover, in the absence of misrecitals, false suggestions, etc., they were considered dispositive evidence of the granted rights, and as a practical matter, their status as records meant they ideally could not be held void or otherwise invalidated except by a court of record.

Read more of this Notice & Comment blog post by Philip Hamburger by clicking here.

Photo: Columbia Law School