ROBERT SIEGEL, HOST:
The U.S. Supreme Court heard arguments today in a patent case that could overturn a major patent reform effort. If that happens, it would ripple throughout the economy. NPR's legal affairs correspondent, Nina Totenberg, reports.
NINA TOTENBERG, BYLINE: The America Invents Act was aimed in part at stemming the flood of lawsuits filed by so-called patent trolls. These are shell companies set up to challenge patents in court. As Senator Patrick Leahy puts it...
PATRICK LEAHY: Trolls would just tie up the process as long as they could until they get paid off.
TOTENBERG: Indeed, many if not most companies holding a patent caved when faced with a challenge because it was cheaper to settle with the challenger than litigate the case for years in court. Eventually, overwhelming majorities of Democrats and Republicans in Congress passed a bill that created a new way to challenge patents. A company can now seek review by a panel of specialist administrative law judges within the patent office itself. The panel hears evidence and can revoke the patent if it decides it was wrongly granted. That judgment can then be appealed to the federal courts.
The new system has swung the pendulum decidedly against patent trolls with more cases going through the cheaper, faster patent review system and fewer going to court. But some critics of the law contend that at the same time, it's made it too hard for inventors to protect their inventions. One of those is the Oil States Energy Services company, which had a patent revoked after a rival presented evidence to the review panel that had been omitted from the initial Oil States patent application.
Today, Oil States lawyer Allyson Ho told the justices that the review panel exercises judicial powers not permitted by an executive agency. Justice Ginsburg noted that the law was aimed at error correction within the agency and that the patent panel's decision can then be appealed to the federal courts, as this case was. Justice Kagan asked what powers the patent review panel are unconstitutionally judgelike. Is it hearing evidence presented by the other side? Is it allowing the other side to seek evidence and file affidavits? All of those, replied the Oil States lawyer.
Justice Breyer - but it's the most common thing in the world for agencies to decide matters through these procedures. There are hearings about trucking rates, about utility rates. There have even been hearings when an individual challenges a broadcast license, he observed.
Next up to the lectern was the lawyer for the Oil States rival, Christopher Kise, who seemed to suggest that there was little Congress could not do in the area of patents. Justice Breyer moved in with a killer question. Suppose a patent has been in existence for 10 years and the company has invested $10 billion and then suddenly somebody comes in and says, we want it re-examined not in court, but by the patent office. That wouldn't change anything, replied Kise, because the question is whether the patent was properly granted.
Chief Justice Roberts - your position is that if you want the sweet of having a patent you've got to take the bitter, that the government might re-evaluate it at some time. Answer - yes. There was one aspect of the patent panels that did seem to stick in the justices' collective craw. That is that in a few cases the composition of the patent review panels has changed during the process.
Deputy Solicitor General Malcolm Stewart, defending the patent panels, said such reassignments had occurred only three times and that the reassignments took place because of concerns by the chief judge of the review panel. The chief judge, interrupted Chief Justice Roberts. You're talking about an employee of the executive branch. When we say judge, he observes sarcastically, we usually mean something else. Nina Totenberg, NPR News, Washington. Transcript provided by NPR, Copyright NPR.