Monday November 27, 2017, the Supreme Court of the United States heard oral arguments in Oil States Energy Services LLC v. Greene’s Energy Group, LLC.  The question before the Court was “whether inter partes review [IPR], an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”

The IPR procedure was established as part of the Leahy-Smith America Invents Act designed to “establish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.” IPR provides a mechanism allowing a third party to challenge a patent issued for over nine months based on a lack of novelty or non-obviousness. If the Patent Trial and Appeals Board (PTAB) grants a third party’s petition for an IPR they will oversee the proceeding, and provide a final written decision. The claims of the challenged patent could potentially be invalidated.

Oil States Energy Services LLC owns U.S. Patent No. 6,179,053 directed to protecting wellheads during hydraulic fracturing (fracking). Oil States sued Greene’s Energy Group, LLC for infringement of this patent. Greene’s Energy filed a petition for an IPR to challenge the patent in what has become a common defensive strategy. After the PTAB held the ‘053 patent invalid, Oil States appealed to the Federal Circuit.

In the petition for writ of certiorariOil States challenged the constitutionality of hearing an IPR hearing in front of the PTAB, an administrative court, claiming that “suits to invalidate patents must be tried before a jury in an Article III forum, not in an agency proceeding.”

Not surprisingly, critics feel that IPR proceedings in front of the PTAB should be eliminated as the process serves a redundant function to that already offered by the federal courts, which many believe should be the sole venue for invalidity cases.

Proponents of IPR proceedings believe they are a valuable tool for reviewing the validity of issued patents and reducing the amount of costly litigation in federal courts and thereby improve the efficiency and reduce the cost of the patent system as a whole.

After hearing oral arguments, the Justices appear to be split, largely along political ideology.  Based on the line of questioning, the more liberal Justices, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor seemed accepting of IPR proceedings, noting that the USPTO has long had the power to invalidate patents as well as the ability to grant patents after the fact.  Justice Ginsburg stated “there must be some means by which the USPTO can correct the errors it’s made.” Justice Sotomayor added that this system is saved by the fact that “a patent invalidity finding can be appealed to a court” for  judicial review.

Conservative Justices, John Roberts and Neil Gorsuch, seemed concerned over the government’s ability to easily revoke patents. Justice Gorsuch agreed that there is judicial review, but “only if someone appeals” the IPR decision. Justice Gorsuch also believes that a patent, once granted, is “a private right belonging to the inventor.” Chief Justice Roberts and Justice Gorsuch also detailed their concerns over the fact that the statutory design of IPRs allows the PTO to “stack the deck with judges” who will vote in a manner favorable to the USPTO.  

When questioning Greene’s Energy’s attorney on the issue of patent validity review in the PTAB, Chief Justice Roberts asked “your position…is simply that you’ve got to take the bitter with the sweet. If you want the sweet of having a patent, you’ve got to take the bitter that the government might reevaluate it at some subsequent point.” To which Greene’s Energy’s counsel replied, “Yes.”

Justice Breyer approached the issue from a financial practicality perspective. While Beyer did not specifically let his views on the constitutionality of IPRs known, he did take issue with the fact that a patent, that was allegedly mistakenly issued, could be reexamined years after it had been granted even after a patent owner or licensee invested large sums of money to develop the technology in reliance on the patent’s enforceability.

It is unclear at this stage how The Supreme Court will rule. The options to the Court are straightforward. The Court can i) hold that IPR proceedings are constitutional and solidify the current IPR procedures within the USPTO; ii) find the procedure wholly unconstitutional; or iii) come to a piecemeal resolution by finding the procedure unconstitutional in part. No matter the outcome, Oil States v. Greene’s Energy will be considered a landmark decision for years to come.

Suiter Swantz IP is a full-service intellectual property law firm, based in Omaha, NE, serving all of Nebraska, Iowa, and South Dakota. If you have any intellectual property questions or need assistance with any patenttrademark, or copyright matters and would like to speak with one of our patent attorneys please contact us.