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27 November 2017Patents

The future of IPR: which way will SCOTUS rule?

With the US Supreme Court today hearing a constitutional argument that could reshape the patent system by eliminating inter partes review (IPR), WIPR explains how we got here and which way the court might rule.

Petitioner Oil States Energy Services, a provider of services to oil and gas companies, will argue before the court that the IPR process at the US Patent and Trademark Office (USPTO) is unconstitutional.

The argument

Oil States’ argument has three strands.

First, that the IPR process violates the right to a jury in an Article III court (a federal court established under Article III of the US Constitution).

The company said that historically, suits to invalidate patents were tried before a jury in a court of law, so the Constitution provides patent owners with a right to a jury and an Article III forum. “IPR violates these rights,” it said.

Second, although in certain situations non-Article III tribunals may exercise jurisdiction over disputes involving “public rights”, this doesn’t apply to IPRs.

Why? Because Oil States has claimed that patents are private property rights.

In April, the USPTO filed a reply brief, arguing that patents are “quintessential public rights” and that Congress is authorised to designate public rights for adjudication in non-Article III tribunals.

Andrew Williams, chair of the PTAB trials practice group at McDonnell Boehnen Hulbert & Berghoff, said there is some Supreme Court precedent from before 1900 that would suggest that patents are private rights and that the executive branch cannot cancel them once they have been issued.

Third, Oil States claimed that the IPR “impermissibly deprives patentees” of the Seventh Amendment guarantee to a jury trial in common law suits, explained Christopher Loh, partner at Fitzpatrick, Cella, Harper & Scinto.

Why did the court take up the case?

There are two reasons the Supreme Court granted the petition for certiorari, said Thomas King, a partner at Haynes and Boone.

“Congress’s authority to reassign decision-making authority to non-Article III courts is an open question, and IPRs are perhaps the most aggressive step that Congress has ever taken in that direction,” said King.

In addition, the separation of powers and the administrative state are hot topics at the US’s highest court.

“Second, during the Cuozzo Speed Technologies v Lee case, some members of the Supreme Court expressed discomfort with the notion that non-Article III judges could effectively overrule the decisions of Article III courts on the same issues; Oil States gives the Supreme Court the ability to face that issue head-on.”

Numerous parties have filed amicus briefs, including the Pharmaceutical Research and Manufacturers of America, university professors and the American Intellectual Property Law Association.

“While there are a great many amicus briefs, there is no consensus opinion. A roughly equal number of amici appear to have turned out in support of both sides,” claimed Loh.

Which way will the court go?

Although it’s difficult to predict how the court may rule, the solicitor general’s opinion could be an indication.

In October, acting solicitor general Noel Francisco concluded that the IPR process was constitutional and “serves to protect the public from the unwarranted burdens that erroneously issued patents impose”.

Justice Neil Gorsuch’s views may play an important role too, according to Loh, given that the Supreme Court decided to review the issue this term, despite declining to do so in 2015.

Loh said: “Justice Gorsuch’s past decisions have ruled against instances of administrative overreach, and much of the briefing on Oil States’ side of the debate has characterised the IPR process as an example of an administrative agency overstepping its bounds.”

However, the views of the other Supreme Court justices are still unknown, he added, so it will be interesting to see what they have to say during oral argument.

Williams thinks it’s unlikely that the Supreme Court will do away with the IPR system.

“Perhaps cynically, most of the decisions from the court in recent years have been anti-patent, due in large part to the perceived existence of a large number of patents that should not have been issued in the first place and the perceived patent troll problem,” he said.

Deeming the IPR system unconstitutional would frustrate these efforts to curb perceived patent abuses, Williams concluded.

Potential consequences

“If the Supreme Court rules in Oil States’ favour, it is difficult to envision a modification to the existing IPR procedure that will satisfy that ruling,” Loh noted.

Patent owners would benefit greatly from a decision striking down IPRs, said King, adding that district courts are better for patent owners “on nearly every question”.

If the court follows the reasoning that patents are private rights, and finds the IPR process unconstitutional, it will need to be determined what happens to all of the patents that have had claims cancelled since the introduction of the IPR system, cautioned Williams.

He added: “It will be important to see what the court says about what the patent office can or cannot do, and what it says about the administrative state as a whole. This could end up being the larger, long-standing outcome of this case.”

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More on this story

Patents
12 June 2017   The US Supreme Court has agreed to consider whether inter partes reviews violate the US Constitution.
Patents
25 October 2017   The US acting solicitor general has weighed in on a case being mulled over by the US Supreme Court over whether inter partes reviews (IPRs) are constitutional.