SCOTUS Grants Cert to Consider Constitutionality of <em>Inter Partes</em> Review

SCOTUS Grants Cert to Consider Constitutionality of Inter Partes Review

This week, the United States Supreme Court granted certiorari in Oil States—a decision which could topple the framework of contemporary patent litigation established by the America Invents Act (AIA). Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 (cert. granted June 12, 2017).

The sole issue upon which certiorari was granted is “[w]hether 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.” Petition for Certiorari, Oil States Energy Services v. Greene’s Energy Group, et al., 16-712; 582 U.S. __, Monday, June 12, 2017, (Oil States Energy Services v. Greene’s Energy Group, et al., 16-712) (“The petition for writ of certiorari is granted limited to Question 1 presented by the petition”).

In 2012, the AIA implemented Inter Partes Review (IPRs) proceedings, together with several variations of adversarial administrative trials, held in the USPTO. IPRs are adversarial administrative trials held before the Patent Trials and Appeals Board (PTAB) which consists of panels of patent administrative law judges.

Procedurally, IPRs are typically initiated after a patent owner has filed a complaint for infringement in district court. Prior to the AIA, patent validity could only be challenged in Article III district courts. Post-AIA, an accused infringer can now file a Petition for IPR with the PTAB asking the patent office to invalidate one or more claims of the asserted patent. If the petition is granted, the district court action on infringement is typically stayed and a trial is conducted before the PTAB solely on the grounds of validity. By statute, this validity trial must be concluded within one year. 35 U.S.C. § 316. For this reason, together with more favorable procedural and evidentiary treatment for the petitioner/accused infringer, IPRs have become the norm in contemporary patent litigation where validity is determined at the patent office first. If patent claims survive the IPR, the parties return to the district court to litigate infringement.

This case originated from a suit for patent infringement initiated by Oil States against Greene’s Energy Group, LLC in the Eastern District of Texas. Oil States alleged infringement of its ’053 patent related to equipment used for hydraulic fracking. Almost one year later, Greene’s Energy Group filed a petition for IPR. The PTAB granted review and after trial issued a final written decision holding the challenged claims invalid. The PTAB also denied Oil State’s motion to amend the challenged claims. Oil States appealed to the Court of Appeals for the Federal Circuit (CAFC). Without offering an opinion, the CAFC issued a per curiam affirmance of the PTAB’s decision and denied a petition for rehearing and rehearing en banc. Oil States then filed its petition for certiorari.

At the heart of Oil States’ appeal is a constitutional challenge to the entire administrative trial framework created by the AIA. Oil States contends that, “[p]atents create property rights, protected by the Constitution. Once a patent is granted, it ‘is not subject to be revoked or canceled by the president, or any other officer of the Government’ because ‘[i]t has become the property of the patentee, and as such is entitled to the same legal protection as other property.’” Petition for Certiorari at 2, Oil States Energy Services v. Greene’s Energy Group, et al., 16-712 (citing McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606, 608-09 (1898)).  Oil States argues that the Seventh Amendment to the Constitution guarantees patent owners the right to a jury trial before an Article III court—a right violated by administrative AIA trials (including IPRs).  In contrast, Greene’s Energy and the PTO Director contend that patent rights are “public rights” for which Congress may designate for adjudication in non-Article III tribunals. Brief of Federal Respondent at 8, Oil States Energy Services v. Greene’s Energy Group, et al., 16-712.

Typically, a grant of certiorari to a case from the CAFC has foreshadowed reversal and the Supreme Court has been willing to be disruptive in patent law with its decisions in TC Heartland, Alice, Cuozzo, and others. A reversal in Oil States would be similarly disruptive and patent owners and other stakeholders should consider their current strategies for the potential that the Congress’ administrative trial invention could be held invalid.

No information in this article is intended to constitute legal advice. For specific legal advice, please contact an attorney.

If you have any questions or would like more information about Inter Partes Reviews or IPRs by the Patent and Trademark Office, please contact Aaron Homer at 713.220.9147 or ahomer@hirschwest.com.