Will the US Supreme Court kill the inter partes review?

23-08-2017

Russell Dunlap

Will the US Supreme Court kill the inter partes review?

A decision finding IPR unconstitutional might also eliminate several other programmes at the USPTO that allow third parties to attack the validity of issued patents. Russell Dunlap of Taylor English reports.

On June 12, 2017, the US Supreme Court granted certiorari in the case of Oil State Energy Services v Greenes Energy Group.

The Supreme Court will be seeking to answer the question of “whether inter partes review (IPR)—an adversarial process used by the US Patent and Trademark Office (USPTO) to analyse the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-article III forum without a jury”.

A decision answering this question in the affirmative has the potential to create significant disruption in the US patent system, as hundreds of patents have been invalidated since the institution of IPR in 2012 and IPR has proved to be a valuable tool to defendants in patent infringement lawsuits.

The America Invents Act was signed into law in 2011 and established IPR as an alternative to litigation for third parties to invalidate patents issued by the USPTO.

IPR allows third parties to petition the Patent Trial and Appeal Board (PTAB), a panel of administrative law judges associated with the USPTO, with prior art to demonstrate that a patent is either anticipated or rendered obvious.

The panel of judges can then initiate the IPR to allow the third party and the patent owner to present their cases on whether the patent should be invalidated.

The PTAB renders a final decision on whether any claims of the patent are invalid, and the final decision can be appealed to the US Court of Appeals for the Federal Circuit.

IPR is one of several proceedings available at the USPTO to invalidate patents. Ex parte reexamination and post-grant review are also available to third parties under certain conditions.

Oil State Energy Services, the petitioner, rests its argument on several issues.

"Oil State submits that issues of patent invalidity are appropriate only before federal courts, not administrative judge panels such as the PTAB."

First, Oil State asserts that, under the Seventh Amendment to the US Constitution, patents, once granted, can be invalidated only by a jury trial. Oil State argues that “IPR takes a patent infringement claim out of the jury’s hands and entrusts it to bureaucrats.”

Second, Oil State claims that patent owners have a right to an article III forum if a third party is seeking to invalidate their patents.

Article III, according to Supreme Court precedent, provides that Congress cannot “withdraw from judicial cognisance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty”.

Oil State submits that issues of patent invalidity are appropriate only before federal courts, not administrative judge panels such as the PTAB.

Greene’s Energy Group, the respondent, counters in its response to Oil State’s writ that Oil State’s invocation of the Seventh Amendment and then article III “gets the inquiry backwards”.

Greene’s cites Supreme Court precedent that, if an administrative judicial panel complies with article III, it also complies with the Seventh Amendment.

Further, Greene’s submits that actions for cancellation of a patent “were traditionally brought before courts of equity” that did not require juries, and therefore IPR, which is simply an action for cancellation of a patent, could similarly proceed without a jury under the Seventh Amendment.

The respondent also argues that article III does not prohibit IPR because patents are “public rights”, which the Supreme Court has established can be adjudicated in non-article III tribunals.

According to Greene’s, because the Constitution instructs Congress to set up a patent system in article I section 8, and because Congress did so by federal statute, patent rights exist only because of the existence of federal law, necessarily defining patent rights as public rights.

Possible disruption

If Oil State prevails at the Supreme Court, the US patent system could receive a significant shock.

A decision finding IPR unconstitutional might also eliminate several other programmes at the USPTO that allow third parties to attack the validity of issued patents.

Ex parte reexaminations allow third parties to ask the USPTO to assign a patent examiner to reexamine issued patents, providing a low-cost alternative to IPR because the third party does not participate after filing the request.

Two additional programmes, post-grant review and the transitional programme for covered business method patents, provide alternative means for third parties to seek review of issued patents before the PTAB under limited circumstances.

Each of these programmes is at risk if the Supreme Court broadly rules that the USPTO and the PTAB are not authorised to invalidate patents after issuance.

Such a decision would significantly favour patent owners by reducing the options available to parties accused of patent infringement, and could additionally incentivise more patent application filings, even as filings have increased yearly for the last several decades.

Hundreds, and perhaps thousands, of US patents have been invalidated partially or completely by IPR, and hundreds or thousands more still have been invalidated by the USPTO’s other post-issuance programmes, including IPR’s predecessor, inter partes reexamination.

A ruling that these programmes are and always have been unconstitutional raises the possibility of resurrecting long-dead patents, which would warrant a separate analysis of whether such a ruling could apply retroactively to invalidated patents.

Defendants that had considered themselves safe after invalidating a competitor’s patent could once again find themselves in a patent infringement lawsuit.

Federal courts could similarly find themselves inundated with “new” patent infringement complaints from resurrected patents that had been dead for years.

Oil State Energy Services v Greenes Energy Group requires close observation as the case moves from the briefing phase (the first brief is due on August 24, 2017) to oral argument and a final decision.

The Supreme Court has, in the past few years, issued many groundbreaking rulings in the world of patents, but Oil State Energy Services has the potential to be a significant paradigm shift.

Russell Dunlap is a patent attorney at Taylor English. He can be contacted at: rdunlap@taylorenglish.com

Russell Dunlap,Taylor English, , USPTO, patents, Supreme Court, unconstitutional, Amendment, PTAB, infringement, invalidated, federal

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