After the biggest challenge yet to the Patent and Trademark Office's popular inter partes review proceedings, the name of the game is largely "same old" for today's Supreme Court decision in Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712. The Court rejected the argument that the PTO's post-grant review of patents violates the Constitution. In the separate SAS Institute Inc. v. Iancu decision (the subject of a forthcoming alert) the Court reversed the PTO's practice of adjudicating some, but not all, claims challenged by an inter partes review petitioner.
Background
For over thirty-five years, Congress has allowed the Patent and Trademark Office (PTO) to reconsider its decision to grant a patent. What originally began as a second go-around of the examination process evolved with the Leahy-Smith America Invents Act, passed in 2011, to a much more trial-like adjudication. That new process, called inter partes review, allows any party to petition the PTO to review an issued patent. If the PTO agrees to review the patent, the patent owner and the challenger litigate the patent's validity before a panel of administrative law judges, the Patent Trial and Appeal Board (the "Board"). The parties present evidence by declaration and exhibits, participate in limited discovery, including deposing expert witnesses, and present attorney argument at a live hearing before the Board. The Board resolves the dispute under a lower burden of proof than would apply in court proceedings and without applying any presumption of patent validity. The parties to the proceeding can seek limited judicial review of the Board's decision in the Federal Circuit, which applies a deferential standard of review to the Board's decision.
Oil States
Inter partes review has proved popular with patent challengers, especially those facing infringement claims in district court. That was the scenario that played out in Oil States: after the patent owner, Oil States Energy Services, LLC, sued Greene's Energy Group in court for allegedly infringing Oil States' patent claims to a fracking tool, Greene's Energy Group asked the PTO to review the claims' validity. The PTO agreed to review the claims and ultimately ordered the claims canceled as unpatentable.
Oil States appealed, arguing in part that the inter partes review scheme violates the constitutional separation of powers and the Seventh Amendment guarantee to a jury trial. Those challenges invoked a line of Supreme Court cases defining the limits on Congress's authority to transfer power to decide issues from courts to administrative agencies. On one side of the line, Congress is free to let executive agencies adjudicate so-called public rights, "matters 'which arise between the Government and persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.'" Oil States, No. 16-712, slip op. at 6. On the other side, only Article III courts can decide private rights, such as traditional common law suits deciding liability between private parties. Id.
The Court in Oil States concluded that "[i]nter partes review falls squarely within the public rights doctrine." Id. Granting a patent is like giving a "public franchise"—patents are creatures of statutory law, they take rights from the public and give them to the patentee for a limited time, and the Constitution allows the legislative and executive branches to decide who gets one and subject to what conditions. Id. at 7-8. Even though occurring after the patent grant, inter partes review is no different. It "involves the same interests as the determination to grant the patent in the first instance." Id. at 9. Nothing prohibits Congress from authorizing the grant of a patent subject to the possibility of later review and cancellation.
The Court left open other issues, including any due-process-based challenge. It also did not decide whether it was problematic for Congress to allow inter partes review retroactively for patents that issued before the America Invents Act. Given that all patents have been subject to second-look review at the patent office since 1980, any such challenge seems likely to face an uphill battle.
Conclusion
After all the excitement and the long wait, the Oil States decision changes very little. Inter partes reviews are here to stay. For those in industries that rely on inter partes reviews (and other PTO proceedings such as covered business method reviews), this key tool in patent litigation remains intact. But as a forthcoming client alert will show, the nature of that tool may be changed by the other patent decision today in SAS Institute.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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