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SCOTUS Upholds Inter Partes Patent Reviews in Oil States Energy Services LLC v Greene’s Energy Group LLC


June 4, 2018
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In Oil States Energy Services LLC v Greene’s Energy Group LLC, SCOTUS Confirms Inter Partes Review under America Invents Act is Constitutional

In Oil States Energy Services LLC v Greene’s Energy Group LLC, the U.S. Supreme Court confirmed that inter partes review under the America Invents Act (AIA) is constitutional. For businesses that rely on inter partes review, the Court’s decision confirms that the process will remain available for the foreseeable future.

SCOTUS Upholds Inter Partes Review in Oil States Energy Services LLC v Greene’s Energy Group LLC

Photo courtesy of Samuel Zeller (Unsplash.com)

Inter Partes Review Under the AIA

Inter partes review is an adversarial administrative proceeding under which parties can request that the Patent Trial and Appeal Board (Board) take a second look at the patentability of the claims in an issued patent. Since 2012, more than 6,000 inter partes review (IPR) petitions have been filed.

Inter partes review may be used to challenge patents based only on lack of novelty or obviousness. In general, any person may petition for inter partes review; however, the Patent Trial and Appeal Board may only institute an inter partes review if “there is a reasonable likelihood that the petitioner would prevail” with respect to at least one of its challenges to the validity of a patent.

Inter partes patent review proceedings are designed to be faster and less costly than traditional patent litigation. They generally involve limited discovery, affidavits and declarations, hearings, and written memoranda. At the close of the IPR proceedings, the Board issues a final written decision addressing the patentability of the claims at issue. A final decision by the Board is subject review by the Federal Circuit Court of Appeals.

After any appeals are exhausted and the Board’s decision becomes final, the U.S. Patent and Trademark Office (USPTO) issues a “certificate” cancelling any claims of the patent that were deemed unpatentable, confirming any claims of the patent that were deemed patentable, and “incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable.”

Constitutional Challenge to IPR Proceedings

Oil States Energy Services, LLC, obtained a patent relating to technology for protecting wellhead equipment used in hydraulic fracturing. It sued respondent Greene’s Energy Group, LLC, in Federal District Court for infringement. Greene’s Energy subsequently challenged the patent’s validity in the District Court and also petitioned the USPTO for inter partes review. The District Court issued a claim-construction order favoring Oil States. Meanwhile, the Board issued a decision concluding that Oil States’ claims were unpatentable.

Oil States appealed to the Federal Circuit. In addition to its patentability arguments, it challenged the constitutionality of inter partes review, arguing that actions to revoke a patent must be tried in an Article III court before a jury. While Greene’s Energy’s appeal was pending, the Federal Circuit rejected the same constitutional arguments in MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284, 1288–93 (2015). The Federal Circuit subsequently summarily affirmed the Board’s decision with respect to Oil States.

Supreme Court Upholds Inter Partes Review

By a vote of 7-2, the Court confirmed that that inter partes review proceedings do not violate Article III or the Seventh Amendment. Justice Clarence Thomas wrote on behalf of the majority.

In deciding the Article III challenge, the Court relied on the public rights doctrine, under which Congress has significant latitude to assign adjudication of public rights to entities other than Article III courts. Quoting Ex parte Bakelite Corp., 279 U. S. 438, 451 (1929), Justice Thomas explained that the public-rights doctrine applies to matters “arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.”

The Court went on to conclude that “[i]nter partes review falls squarely within the public rights doctrine.” As Justice Thomas explained:

This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

The Court further held that inter partes review does not violate the Seventh Amendment. Citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), Justice Thomas noted that when Congress properly assigns a matter to adjudication in a non-Article III tribunal, “the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.” Accordingly, the Court ruled that its rejection of Oil States’ Article III challenge also resolved its Seventh Amendment challenge.

In its opinion, the Court emphasized that its decision was narrow and limited to the constitutionality of IPR proceedings.  The Court’s decision also noted that it did not address other potential challenges to IPR proceedings. “The decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause,” Justice Thomas wrote. In short, the Supreme Court’s decision in Oil States Energy Services LLC v. Greene’s Energy Group, LLC upholds the inter partes review process under the constitutional challenges presented. However, it does not insulate it from future constitutional challenges on other grounds.

Additional SCOTUS Patent Decision

Separately, the Supreme Court ruled in SAS Institute Inc. v. Iancu that the USPTO’s existing practice of adjudicating some, but not all, claims challenged by an IPR petitioner is improper. We have discussed the decision in a separate article.

If you have any questions about the case, please contact us

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, David Einhorn, or the Scarinci Hollenbeck attorney with whom you work at 201-806-3364.

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