Supreme Court says IPR is constitutional


On the morning of Tuesday, April 24th, the U.S. Supreme Court issued a decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC  that upheld the constitutionality of inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB). The Supreme Court applied the public rights doctrine to the government’s grant of a patent, finding that patent validity trials need not take place in an Article III court nor did they violate the Seventh Amendment, which ensures a person’s right to a jury trial. The majority opinion was authored by Justice Clarence Thomas. Justice Neil Gorsuch authored a dissent to which Chief Justice John Roberts concurred.

Justice Thomas’ majority opinion starts off by noting that Congress has authorized administrative processes at the U.S. Patent and Trademark Office to reconsider and cancel patent claims decades prior to the enactment of the Leahy-Smith America Invents Act (AIA) of 2011, the law which created IPRs and other post grant proceedings at the PTAB. Notably, Congress created ex parte reexamination proceedings in 1980 and the Court noted that those proceedings continue today. Congress also created inter partes reexamination in 1999, though those proceedings were phased out with the enactment of the AIA.

The majority opinion goes on to cite various statutory elements of the AIA regarding various aspects of IPR proceedings, including preliminary responses by the patent owner, the USPTO Director’s determination of the reasonable likelihood that a petitioner will prevail before instituting an IPR, and post-institution activity such as oral hearings before the PTAB and the claim amendment process. The decision also gives a brief history of the case between Oil States and Greene’s Energy Group including Oil States original patent suit against Greene’s in 2012, Greene’s petition for IPR proceedings on the patent near the end of discovery in the district court case, and the Supreme Court’s grant of writ to take up Oil States’ appeal from the PTAB after the Federal Circuit summarily affirmed the PTAB’s decision in light of that court’s decision in MCM Portfolio LLC v. Hewlett-Packard Company.

“Inter partes review falls squarely within the public rights doctrine,” Justice Thomas wrote. The Supreme Court found that it has long recognized the grant of a patent as a matter involving public rights, citing to the Court’s 1899 decision in United States v. Duell. “Ab initio, the grant of a patent involves a matter ‘arising between the government and others,’” the Oil States decision reads. Citing to SCOTUS’ 1871 decision in Seymour v. Osborne, the Court found that patents are “public franchises” granted by the government. Further, the granting of patents occurs through the executive branch under statute laid out by the legislative branch without requiring judicial interpretation, and thus the determination to issue a patent grant “need not be adjudicated by an Article III court.”

Because IPR proceedings involve the same basic matter as the grant of a patent, “it, too, falls on the public-rights side of the line,” the Supreme Court found. In IPRs, the PTAB considers the same statutory requirements that the USPTO originally considered in granting the patent, preventing the “issuance of patents whose effects are to remove existent knowledge from the public domain,” citing to language found in 1966’s Graham v. John Deere Co.  Although IPRs occur after the issue of a patent, the court found that didn’t create a distinction from the USPTO’s determination of a patent’s validity prior to granting a patent.

Despite Oil States’ arguments that the Court has previously recognized patents as “private rights” in various cases, SCOTUS found that “those cases do not contradict our conclusion.” The Supreme Court found that one of the cases cited by Oil States, specifically the 1856 decision in Brown v. Duchesne, acknowledges that a patentee’s rights are “derived altogether” from statutes and must be regulated by those laws. IPRs are one such regulation, the Court found. Although Oil States cited case law setting precedent on the judicial court system as the only competent authority for annulling patent rights, the Court found that those cases, McCormick Harvesting Machine Co. v. Aultman (1898) and United States v. American Bell Telephone Co. (1888) were decided under the Patent Act of 1870, which “did not include any provision for post-issuance administrative review.” Those precedents are thus best understood as a description of the statutory regime existing at that time, the Court found.

The Supreme Court majority next moves on to Oil States’ argument that IPRs violate the general principle that Congress may not withdraw suits from “judicial cognizance” if the nature of the matter was the subject of a suit at common law. Oil States cited to language from the 2011 Supreme Court decision in Stern v. Marshall and the fact that patent validity could be decided in 18th century English courts to support its claim. The Court found, however, that there was a historical precursor to IPR proceedings in 18th century English law: petitions to the English Privy Council to challenge a patent’s validity. The Privy Council could decide patent validity concurrent with 18th century English courts and revoked patents up until 1779. The Constitution’s Patent Clause was drafted against the backdrop of the English legal system and “the parties have cited nothing in the text or history of the Patent Clause or Article III to suggest that the Framers were not aware of this common practice,” the Court found.

Oil States’ argument that IPRs violate Article III was also dismissed by the Supreme Court. Oil States had argued that IPRs share “every salient characteristic associated with the exercise of judicial power,” including discovery, depositions, references to hearings as “trials,” references to PTAB members as “judges,” and references to decisions as “judgments.” “[T]his Court has never adopted a “looks like” test to determine if an adjudication has improperly occurred outside of an Article III court,” the Supreme Court found. Just because an agency was using court-like procedures did not necessarily mean it was exercising judicial power. Citing to 1933’s Williams v. United States, SCOTUS held that “This Court has rejected the notion that a tribunal exercises Article III judicial power simply because it is ‘called a court and its decisions called judgments.’” The Court’s finding that IPRs do not violate Article III also led to the Court’s adverse decision on Oil States’ Seventh Amendment argument. To “emphasize the narrowness of [this] holding,” the majority opinion notes that the Oil Statesdecision only extends to the constitutionality of IPR proceedings and noted that Oil States did not argue the retroactive nature of IPRs on patents issued prior to the existence of those trials, nor did they argue due process violations.

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