Reckoning Patents as Public Franchises

By Evan Jones, Student, Northeastern University School of Law First Prize Winner of the 2020 BPLA Writing Competition

In the 2018 Oil States case, the Supreme Court described patents as “public franchises.” In doing so, the Court carefully tailored its opinion to avoid answering the constitutionality of “retroactive application” of inter partes reviews to pre-AIA patents. The Court also avoided addressing whether patents are property for the purposes of Due Process and Takings. Classical public franchises include railroads, toll bridges, and electric and water utilities. This ruling thus raises the questions: what, exactly, is a “public franchise,” and how is a patent an example of one? This excerpt will focus on just that. If we take the Oil States decision literally and understand patents as public franchises, patent rights have the potential to be stronger, despite a concern among pro-patent advocates that the Oil States decision ostensibly reduced patents to purely “public” rights. Public franchises, as a category of rights, have historically been understood as imparting private interests, and therefore, should not be viewed as purely public rights. As a result, the pro-patent advocate’s anxiety over patents being recently deemed public franchises would prove unfounded. On the other hand, if the courts deem the rights in a patent mutable after the patent has been granted and issued, that could change the well-established law surrounding public franchises. Therefore, the way courts view patents, as public franchises, has the potential to transcend patent law and reach broader property issues pertaining to all public franchises. Following the Oil States decision, it is now critical to explore public franchises as a broad class of rights in order to understand the true nature of patents. To define the term “public franchise,” we may look to the classical public franchise (i.e., systems which have a long history of being commonly referred to as public franchises). The descriptions of public franchises in classic public franchise jurisprudence allow comparison of a public franchise relative to the grantee’s interest. A public franchise is thus essentially a private interest, as illustrated in the following relationship:

Public Franchise ~ [Private] Interest*

where tilde denotes an equivalence and asterisks denotes a conditional attachment. This attachment is two-fold: the interest arises from a public right which (1) must have been conferred, and (2) can be conditioned or qualified by the grantor. The nature of the interest as public or private is also dependent on the nature of the grantee, and for this reason, “private” is bracketed. Furthermore, limitations exist on how the grantor may qualify the granting of the public franchise (i.e., the terms). The relationship between the grantor, the grantee, and the purpose of the grant, implies that a public franchise necessitates a transactional relationship where sources of value are exchanged between the parties. Moreover, all public franchises involve three basic sources of value, and it is from these sources of value and the transactions between the grantor and grantee that a pattern emerges. That pattern is a utilization of a real, territorial public medium for conveying a public benefit to the public through a privately-furnished architecture. The grantor, in all cases, excludes a portion of the public medium for a private use as an incentive for maintaining or promoting the respective public value. The grantor of a public franchise, by definition, will always be a public sovereign, whether it is Congress, a state legislature, or a city. It is thus possible to map the components of known public franchises, including patents, onto the proposed framework. This is accomplished in Table 1.

Table 1. Public franchises mapped onto a uniform model.

Public Franchise

Public medium [value to grantee]

Private arquitecture

Public benefit

Railroads

Land [surface rights]

Trains

Travel

Electric utilities

Land [sub-surface rights]

Power lines and electricity

Power

Water utilities

Land [sub-surface rights]

Pipe system

Water

Ferry routes

Water [rights to occupy Navigable Waters]

Ferries

Travel

Toll bridges

Land or Water [surface rights, rights to occupy Navigable Waters]

Bridges

Travel

FCC licenses

Electromagnetic frequencies [rights to a wavelength, within a geographical boundary]

Broadcasting system and programming

Entertainment

Patents

Within the United States [right to exclude]

Inventiones (i.e., disclosure, enablement)

Information (i.e., technological progress)

Equating a patent to a purely public right is effectively stating that a public franchise remains a public right, even after the public right has been conferred upon the individual. In doing so, the granting of the patent becomes conflated with the entire enforceable term of the patent, and the issue date is trivialized. Indeed, the idea that patents can be revoked at any point by any post-grant process runs contrary to the notion of traditional public franchises; a public franchise is granted when the rights are bestowed upon the grantee, and as a private interest, the grantee gains protections from common law, including possible contract theory and constitutional protection.

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Volume 52, Issue 1