Constitutionality of Inter Partes Reviews: A Look at Supreme Court Oral Arguments in Oil StatesDecember 6, 2017

The enactment of the AIA in 2011, inter partes review (IPR), has been available as a method to challenge the validity of a patent in the US Patent and Trademark Office. A total of 6139 IPR petitions (92% of all petitions) have been filed with the Patent Trial and Appeals Board (PTAB) since that time. One of those challenges occurred when Green’s Energy Group, in response to litigation, went to the PTAB to invalidate Oil States Energy Service’s patent, and succeeded. This action prompted Oil States to file a lawsuit in federal court to challenge the constitutionality of the IPR process as the taking of a property right without compensation and without the input of a jury. This case will soon be decided by the U.S. Supreme Court.

Oral arguments took place on November 28, 2017 and the Justices of the Court are clearly split on the constitutionality of IPRs. Oil State’s argument begins by highlighting that ex parte and inter partes reexamination in the Patent Office, “are fundamentally examinational and not adjudicational in nature, [and] are perfectly consistent with Article III.” As such, because these proceedings take place between the government and the patent owner, they are distinct from IPR which is between two individual parties, and not the government. Oil States highlights on rebuttal IPRs are in essence a trial—“[i]t hears and determines a cause between two private parties that results in a final enforceable judgment . . . . Our challenge is to an adjudication in the Article III sense between two private parties, where the government isn’t engaging in the classic executive action of bringing the action or prosecuting action but . . . is the decider of the action.”

Green Energy dealt with questions which seemed to indicate the Court had issue with the vested rights theory of property law, as there is no element of patent law which would allow, after a passage of time, the rights of the patent to no longer be challenged. Further, the Justices focused on the issues of due process related to “panel stacking” to serve as, in the words of Chief Justice Roberts, “a tool of the executive activity . . .rather than . . .anything resembling a determination of rights.” Green Energy’s asserted that this a “quarrel  . . .with the process” and when looking under the factors in Cuozzo, the IPR is constitutional.

Counsel for the Government focused on the involvement of the PTAB in adjudicating infringement claims. However, Counsel appeared to have difficulty addressing issues raised by Justices Sotomayor and Gorsuch directed toward the “traditional” involvement of the USPTO only in the granting and assessing compliance with statutory grounds, not in the adjudication of validity and/or infringement. Justice Ginsberg seemed to take issue with the fact that the validity challenge could be moved from a court to the PTAB and then court would “defer to the agency under a substantial evidence standard on questions of fact and will review legal issues de novo. And that’s a less favorable standard of review for the patentee than would be applied in district court infringement litigation . . . .”

The outcome of the case may once again increase litigation from non-practicing entities (less affectionately known as patent trolls); however, based on the number of amicus briefs filed by pro-patent owner groups, there is certainly the sentiment that IPRs have made the path to asserting rights difficult. A decision is expected in early 2018 and will be watched closely by the patent community.

A full oral argument transcript and audio are available for review. Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, Dkt. No. 16-712, Argued Nov. 27, 2017.

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