Notice & Comment

Oil States and Patent Adjudication at the USPTO

Last November the Supreme Court heard oral argument in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC to consider whether certain agency adjudications at the U.S. Patent and Trademark Office are unconstitutional because they strip parties of their private property rights in a non-Article III forum and without a jury.

At oral argument, the justices raised a number of additional concerns about this novel agency tribunal, including concerns about how the Patent Office Director attempts to overcome her lack of final decision-making authority by stacking panels on rehearing with administrative patent judges who share her substantive inclinations. Attempting to address those concerns, the Deputy Solicitor General referred to the Patent Office Director as the “chief judge.” Chief Justice Roberts seemed puzzled by this reference. He noted that “[w]hen we say ‘judge,’ we usually mean something else”: an Article III federal judge, not an “executive employee.” Justice Kagan came to the rescue with a seemingly friendly clarifying question: “There are administrative law judges all over this country, aren’t there?”

Justice Kagan’s reference to ALJs reflects the lost world of agency adjudication—the formal adjudication set forth in the APA that Professor Kagan no doubt taught in her administrative law classes. Today, however, most formal-like agency adjudication occurs outside of the APA—not before ALJs but a variety of other administrative judges, hearing officers, and other agency personnel. PTAB adjudication is one such example of this new world of agency adjudication.

Over the last few years these new agency adjudication proceedings at the Patent Office have just fascinated me, as they have a number of seemingly novel features. To highlight just a few, these agency adjudications involve adjudication of disputes between private parties regarding commercial interests, where the challenging party must pay the agency to gain access to the agency forum and there still exists the possibility of parallel civil litigation in an Article III court.

To explore this new terrain, patent law scholar extraordinaire Melissa Wasserman and I joined forces with the goal of situating this new agency patent adjudication in the modern administrative state. Earlier this week we posted to SSRN a draft of the paper from this project: The New World of Agency Adjudication. Here’s the abstract:

In 1946, the Administrative Procedure Act (APA) set forth the basics for “formal” adjudication, with the classic account requiring an administrative law judge to make the initial determination and the agency head to have the final word. Today, however, the vast majority of agency adjudications are not paradigmatic “formal” adjudications as set forth in the APA. That is the lost world. It turns out that there is great diversity in the procedures by which federal agencies adjudicate. This new world involves a variety of less-independent administrative judges, hearing officers, and other agency personnel adjudicating disputes. Like in the lost world, however, the agency head retains final decision-making authority.

In 2011, Congress created yet another novel agency tribunal—the Patent Trial and Appeal Board (PTAB)—to adjudicate disputes between private parties as to the validity of issued patents. Questions abound concerning the PTAB’s proper place in the modern administrative state, as its features depart from the textbook accounts of APA-governed “formal” adjudication. Many of these questions are working their way through the Federal Circuit and to the Supreme Court. Indeed, the Court will decide this Term whether PTAB adjudication unconstitutionally strips parties of their property rights in issued patents.

This Article situates PTAB adjudication within administrative law’s larger landscape of agency adjudication. By surveying this new world of agency adjudication, it becomes clear that PTAB adjudication is not that unusual. But we also identify one core feature of modern agency adjudication that is absent at the PTAB: the Director of the Patent and Trademark Office lacks final decision-making authority. To be sure, the Director has some power to influence outcomes, in her ability to order rehearing and stack the board with those who share her substantive vision. But these second-best means of agency-head control raise problems of their own, including constitutional questions. This Article concludes by exploring alternative mechanisms to remedy the lack of agency-head review at the PTAB.

The full paper can be downloaded here. This is an early draft, so comments are particularly welcome and appreciated!



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