United States: Supreme Court Case Could Have Huge Impact On Challenging Patents

Supreme Court of the United States

On November 27, 2017, the U.S. Supreme Court heard oral argument in Oil States Energy Services LLC v. Greene's Energy Group, LLC, a case examining the constitutionality of inter partes review proceedings before the United States Patent and Trademark Office ("PTO"). Specifically, the case addresses the question "[w]hether inter partes review . . . violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury."

The appeal arises from an affirmance by the Federal Circuit of an inter partes review conducted by the Board of Patent Trials and Appeals ("the Board") invalidating one of Oil States Energy Service's patents. Following the affirmance, Oil States petitioned for certiorari on three issues: (1) whether inter partes review violates the Constitution by "extinguishing private property rights through a non-Article III forum without a jury"; (2) whether the amendment process as implemented by the PTO conflicts with Supreme Court precedent and congressional design; and (3) whether traditional claim construction doctrines must be applied by the Board when construing claim under the broadest reasonable interpretation. The Supreme Court granted certiorari only as to the first question.

The petitioner, Oil States, maintains that the existing IPR regime—as created by the 2012 America Invents Act—is unconstitutional because it usurps the power of the judicial branch and because it violates the Seventh Amendment jury trial right. Petitioner's briefing argues principally that patent rights have long been considered private rights under Supreme Court precedent, and that such private rights must be adjudicated by Article III courts, not administrative agencies like the PTO. Moreover, petitioner and many of the amici supporting petitioner argue that patent validity issues typically were tried to juries at common law at the time the Seventh Amendment was ratified, and thus the right to jury trial for patent validity issues has been preserved.

For the respondent's part, it argues that patents are quasi-public rights because they involve a grant from a government agency, and there is an exception allowing such rights to be adjudicated administratively. Respondent and numerous amici supporting respondent's position also argue that there was no historic right to a jury trial at common law, and that administrative cancellation proceedings have long existed in patent law—both at common law and since the first codification of the U.S. patent statutes.

At oral argument, Justice Sotomayor took the early lead on questioning. She and Justice Kagan appeared to be particularly interested in the separation of powers issues, and the justices probed the differences between adjudication in an IPR as compared with reexamination and interference practice in the PTO (which Oil States concedes are constitutional). They also probed the distinction between IPR procedures and various other types of agency adjudicatory proceedings. At one point, Justice Sotomayor asked what was "fundamentally Article III" about the IPR procedure. She also appeared to tip her hand, suggesting that although she had some concerns about some of the procedures the PTO employed, the judicial review component of the AIA scheme "save[d] this" for her.

Justice Breyer asked several questions directed to issues of fairness and reliance. Justice Roberts appeared to have some due process concerns as well, particularly with respect to the prospect of the PTAB enlarging panels—an issue that seemed to trouble the entire court to some degree. At one point, Justice Breyer questioned whether pre-AIA patents would be subject to IPR without due process problems. Justice Gorsuch seemed quite interested in the "private rights" question, and indicated that he thought perhaps the petitioner should have relied more heavily on the line of Supreme Court precedents characterizing patent rights as private rights. Justice Kennedy made a comment that appeared to convey sympathy for that argument as well. Justice Ginsburg was interested in the ability of the PTO to correct its own errors, at one point suggesting that the IPR process was "narrow" and simply directed to error-correction.

This case potentially has broad implications for both patent holders and patent law practitioners. Oil States asserted that the implementation of inter partes review has resulted in the loss of hundreds of billions of dollars in patent value. A decision by the Court holding inter partes, and perhaps other forms of post-issuance review, to be unconstitutional could, according to Oil States, have a significant effect on the value of existing patents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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D. Stuart Bartow
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