decided on April 24, 2018 by the Supreme Court of the United States
review by J. Matt Buchanan | published April 25, 2018 | updated April 25, 2018
tags: inter partes review
In Oil States Energy Services v. Greene's Energy Group, the Supreme Court considered whether the inter partes review (IPR) procedure, established in 2012 by the American Invents Act, violates one or both of Article III and the Seventh Amendment of the United States Constitution. Greene's Energy petitioned the Patent and Trademark Office to institute IPR of Oil States' patent, which was the subject of ongoing patent litigation between the parties. The Patent Trial and Appeal Board (PTAB) and the USPTO found that Greene's Energy had established a reasonable likelihood that claims of the patent were unpatentable and, under authority of the Act, instituted an IPR. Ultimately, the Board issued a final written decision concluding that the claims were, indeed, unpatentable. Oil States appealed to the Federal Circuit on several grounds, including a challenge to the constitutionality of the IPR statute. The Federal Circuit summarily affirmed the Board as it rejected the same constitutionality arguments in a different case (MCM Portfolio v. Hewlett-Packard). The Supreme Court granted certiorari solely to address the constitionality challenge. Before the Supreme Court, Oil States argued that any action to revoke a patent must be tried in an Article III court before a jury, making the IPR framework, which is implemented exclusively by the administrative structure of the USPTO, unconstitutional. The Court squarely rejected this argument, explaining that IPR is a matter that arises between the government and others and, as such, falls within the public rights doctrine. The Court's precedent has "given Congress significant latitude to assign adjudication of public rights to entities other than Article III courts." The Court explained that IPR is simply a reconsideration of the decision to grant a public franchise, "and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration." The IPR framework, the Court held, does not violate either Article III or the Seventh Amendment. Key to the Court's decision is the fact that IPR procedures remain limited to the public right aspect of the patent—patentability of the claims—and does not make any binding determination of liability between the parties. The Court does stress the narrowness of its holding, and likely prescribes future challenges to the IPR framework. A concurring opinion by Justice Breyer, with Justice Ginsburg and Justice Sotomayor joining, emphasizes that the Court's opinion "should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies." Chief Justice Roberts joined a dissenting opinion authored by Justice Gorsuch, which frames the IPR statute as an unconstitutional encroachment on the province of the independent judiciary. The dissenting opinion ends with a quotation from The Federalist Papers: "And the loss of the right to an independent judge is never a small thing. It’s for that reason Hamilton warned the judiciary to take 'all possible care…to defend itself against' intrusions by the other branches."
Inter Partes Review of patents does not violate Article III of or the Seventh Amendment to the U.S. Constitution
The Court determined that the Inter Partes Review (IPR) statute falls within the public rights doctrine and, as such, Congress has "significant latitude to assign adjudication…to entities other than Article III courts."
Future challenges to Inter Partes Review, as prescibed by the Supreme Court
Importantly, the Court stressed the narrowness of its holding and even seemed to prescribe future challenges to the IPR statute and procedure:
"Moreover, we address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause."
There seems to be a window for a challenge based on the retroactive nature of the IPR statute—the number of patents that issued prior to establishment of the IPR process will never grow, and the number of those that justify infringement litigation and appellate review will only shrink over time. It is not unreasonable, though, to believe that a high value patent will emerge after IPR invalidation that justifies a trip to the Supreme Court. A pharmaceutical patent seems an obvious candidate. And a due process challenge may come for any patent subjected to IPR.
So, after Oil States, the nascent IPR system lives on…but we may already know the nature of its next challenges.