Rethinking Patent Law in the Administrative State
Kerr, Orin S., William and Mary Law Review
This Article challenges the Supreme Court's recent holding that administrative law doctrines should apply to the patent system. The Article contends that the dynamics of patent law derive not from public law regulation, but rather from the private law doctrines of contract, property, and tort. Based on this insight, the Article argues that administrative law doctrines such as Chevron and the Administrative Procedure Act should not apply within patent law, and that such doctrines in fact pose a serious threat to the proper functioning of the patent system.
The Supreme Court recently tried to solve a riddle that has puzzled patent lawyers for decades. The riddle is this: if the Patent and Trademark Office (PTO) is an administrative agency, and patents bestow monopolies, then why have the courts refused to apply administrative law standards of review to PTO patent decisions?(1) As a 1942 Harvard Law Review article asked, why have the courts failed to treat the patent system "as a problem of administrative law?"(2) After all, courts routinely apply deferential administrative law standards of review such as Chevrons and Section 10(e) of the Administrative Procedure Act (APA)(4) to agency decisions involving licenses and permits. The same courts have rejected these administrative law standards in patent cases in favor of more rigorous standards of review.(5) Why the different standards for patents?
In Dickinson v. Zurko,(6) the Supreme Court offered an answer to this riddle by suggesting that past failures to apply administrative law standards to the PTO had been a mistake. Zurko raised a question with more symbolic than practical importance: When courts review PTO findings of fact in a patent appeal, should they apply the traditional "clearly erroneous" standard of review from outside of administrative law,(7) or should they switch to the APA's marginally more deferential administrative law "substantial evidence' standard?(8) Reversing the Federal Circuit, the Court held that the APA's administrative law standard should apply to review of the patent system. The Court reasoned that there was no particular reason to treat PTO patent rulings differently than other administrative agency decisions, and that "the importance of maintaining a uniform approach to judicial review of administrative action"(9) counseled strongly in favor of applying the administrative law standard to patent rulings. With Zurko, it seems, patent law's longstanding exclusion from the world of administrative law has come to an end.
This Article argues that the Supreme Court in Zurko chose the wrong answer to the riddle. I argue that the Zurko Court and the PTO overlooked a fundamental distinction that explains the patent system's unusual treatment: The patent system operates not through regulation, but rather through the private law mechanisms of contract, property, and tort.(10) Unlike licensing regimes, the patent laws express a unilateral contract offer. The government offers to grant a patent to any inventor who discovers a useful new invention and files a meritorious patent application with the PTO. The PTO's role is not to "regulate" the patent system, but merely to represent the government offeror by reviewing inventors' claims that they have accepted the offer. If an application satisfies the Patent Act, then the offer has been accepted; a binding contract exists, and the PTO must issue the property right of a patent as con-sideration. Conversely, if the application does not satisfy the Patent Act, the PTO must reject the inventor's claim to a patent because no contract exists. In short, the patent system is different from other areas of regulatory law: It is a private law patent system, rooted in contractual mechanisms that stand apart from the regulatory dynamic of administrative law.
The private law theory of the patent system that I present in this Article has important implications for both administrative law and patent law. …