On April 24, 2018, the Supreme Court issued its opinion in Oil States Energy Services, LLC v. Greene's Energy Group, LLC, No. 16-712, affirming the constitutionality of the U.S. Patent and Trademark Office's (PTO) inter partes review proceedings (IPR). The Court had granted certiorari on the following two issues: (1) whether IPRs violate Article III by having the PTO adjudicate the validity of issued patents; and (2) whether IPRs violate the Seventh Amendment right to a jury trial.
Majority Opinion
In a 7-2 decision, with Judge Thomas writing for the majority, the Court held that IPR "violates neither" part of the Constitution. Slip Op. at 1. The Court began by explaining that "administrative processes that authorize the PTO to reconsider and cancel patent claims that were wrongly issued," such as ex parte and inter partes reexamination, existed before the America Invents Act (AIA). Id. at 2. The Court further explained that the AIA merely "replaced inter partes reexamination with inter partes review." Id.
With respect to the issue of whether IPRs violate Article III of the Constitution, the Court began by comparing IPRs to the granting of patent rights. The Court stated that "the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise." Id. at 7. Upon this basis, the Court found that IPRs "fall[] squarely within the public-rights doctrine" and the PTO can permissibly reconsider the grant of a patent without violating Article III. Id. at 7. The Court explained that "the grant of a patent is a matter between the public, who are the grantors, and the patentee" and that patent rights are a "creature of statute law." Id. (citations omitted). Thus, according to the Court, "the determination to grant a patent is a matter involving public rights" and "[i]t need not be adjudicated in Article III court." Id. at 8.
The Court then explained that because "[i]nter partes review involves the same basic matter as the grant of a patent, . . . it, too, falls on the public-rights side of the line." Id. In doing so, the Court found that an IPR is merely "a second look at an earlier administrative grant of a patent" and the fact that IPRs involve issued patents "does not make a difference here" as "[p]atent claims are granted subject to the qualification that the PTO has the authority to reexamine—and perhaps cancel—a patent claim" in an IPR. Id. at 9 (citations omitted). The Court stressed that IPR "protects the public's paramount interest in seeing that patent monopolies are kept within their legitimate scope." Id. The Court further stressed that patents "convey only a specific form of property right—a public franchise." Id. at 10.
Meanwhile, with respect to the issue of whether IPRs violate the Seventh Amendment, the Court held that because IPRs are properly assigned to a non-Article III tribunal, the Seventh Amendment does not pose an independent constitutionality question. Id. at 17.
The Court did emphasize that its holding is narrow. The Court made clear that it was "address[ing] the constitutionality of inter partes review only." Id. at 16. For example, the Court stated that its decision should not be misconstrued as suggesting that patents are not property for the purposes of the Due Process Clause or Takings Clause. Id. at 17.
Concurrence and Dissent
Justice Breyer wrote a short concurring opinion, which Justices Ginsburg and Sotomayor joined. The concurring opinion agreed with the majority but explained that "the Court's opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies." Concurring Op. at 1.
Justice Gorsuch wrote the dissenting opinion, which Chief Justice Roberts joined. The dissent argued that the IPR process puts too much power in the hands of the executive branch and historically patent rights have been adjudicated by courts and not executive agencies.
Conclusion
The opinion removes any doubt that the PTO has constitutional authority to conduct IPRs. The holding presumably applies to other types of post-grant proceedings as well, such as Post Grant Reviews and Covered Business Method patent reviews.
Foley & Lardner LLP represented respondent Greene's Energy Group, LLC.
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