Will Inter Partes Reviews Be Abolished By The Supreme Court?

On November 27, 2017, the Supreme Court heard oral arguments in a case that could undermine a key provision in the America Invents Act. Oil States Energy Services, LLC v. Greene’s Energy Group, LLC (Oils States). The issue raised in Oil States calls into question the Patent Trial and Appeals Board’s (PTAB) authority to conduct Inter Partes Reviews (IPRs).

Prior to enactment of the America Invents Act (AIA) in 2011, patent practitioners thought that the USPTO was issuing too many “bad” patents. In response, Congress created IPRs which were intended to be a less expensive and quicker (compared to district court litigation) means for a third party to challenge the validity of a patent. Since their creation, over 7,000 IPR petitions have been filed and the PTAB has issued final decisions on more than 1400 patents. All or some of the claims in 80% of these patents have been invalidated. Needless to say, given these statistics, IPRs are not very popular with patent owners who now contend that the proceedings are biased against them.

In Oil States, the patent at issue, U.S. 6,179,053, was directed to a well tool used to protect wellheads during fracking operations. The litigation began when Oil States filed an infringement suit against Greene’s in the Eastern District of Texas. Greene’s counterclaimed that the patent was invalid for lack of novelty over a Canadian patent published by the same inventor more than one year before the ‘053 application was filed. Greene’s also filed a petition for an inter partes review at the USPTO challenging the patentability of two of the patent’s claims over the Canadian patent. The PTAB construed the claims and agreed with Greene’s that they were anticipated. IPR2014-00216, May 1, 2015. The Federal Circuit affirmed without opinion in a Rule 36 action. 2015-1855, May 4, 2016.

Oil States petitioned for certiorari which was granted on a single question: “Whether inter partes review- an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents- violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”

Oil States argued that in creating IPRs, Congress improperly intruded on the separation of powers by giving Article III authority to adjudicate patent validity to an administrative agency. Oil States contended that an IPR proceeding is a “litigation-like adversarial proceeding” between private parties and is, therefore, unconstitutional. According to Oil States, patents are private property rights that for centuries have been adjudicated by courts, with juries deciding questions of fact. Oil States also argued that IPRs have no “meaningful” Article III supervision because the Federal Circuit gives deference to the PTAB and only reviews its findings to determine whether they are supported by “substantial evidence.” Thus, Oil States concluded that untenured APJs appointed by the Executive Branch are acting as the fact-finding body of the court.

In addition, Oil States argued that IPRs violate the Seventh Amendment right to a trial by jury. According to Oil States, patent validity disputes were historically tried before juries who resolved questions of fact about patents and IPRs improperly take questions of fact away from the jury.

In its merits brief, Greene’s pointed out that the Constitution gives Congress the power to provide for patents “of the proper scope to promote ‘the Progress of Science and the useful Arts.’” U.S. Const. Art. I, § 8, cl. 8. Thus, because Congress has the constitutional authority to promulgate statutes governing patent rights, a patent is a public right according to Greene’s “integrally related to particular Federal Government action.” Greene’s argued that because patents are public rights, IPR proceedings do not violate Article III. In any event, according to Greene’s, IPRs are subject to review by an Article III tribunal because patent owners have the right to appeal adverse decisions to the Federal Circuit. Greene’s also argued that IPRs are not truly judicial in nature because, inter alia, they only consider patentability based on a narrow subset of issues; namely, §§102 and 103. Accordingly, IPRs simply allow the USPTO to reexamine those issues and its own initial patentability determination. Greene’s also pointed out that the USPTO has had the right to correct errors with patents for decades by means of reissues, interference proceedings, and ex parte and inter partes reexaminations. Thus, Greene’s argued that IPRs are merely another means for the USPTO to have a second look at a patent and determine whether its issuance in the first instance was a mistake.

With respect to the Seventh Amendment right to a trial by jury, Greene’s pointed out the Court need not reach this issue if it determines that IPRs do not violate Article III. In any event, Greene’s argues that there is no right to trial by jury in cases involving private rights.

Oil States has garnered the attention of the patent community. 21 amici were filed supporting Petitioner Oil States, 25 supporting Respondent Greene’s and 12 were said to be in support of neither party. It is difficult to predict from the questions asked at oral argument which side will prevail. One concern practitioners have raised is what will happen to all of the claims that have been invalidated in IPR proceedings if the Court should decide that IPRs are unconstitutional. Oil States argued that the decisions in cases that have already been adjudicated should remain intact. This is a practical solution because it would preclude re-litigation all the previously decided cases in district court, but also surprising because it could be construed as a concession by Oil States that there was nothing improper in the way that IPRs have been functioning. Would this argument apply to their patent claims as well?

The Court’s decision is expected to turn on its determination that a patent is either a public or private right. If it is a private right, Oil States is expected to prevail and IPRs will be found unconstitutional. Conversely, if a patents conveys a public right, the status quo is expected to be maintained.