'; Supreme Court issues narrow ruling upholding constitutionality of IPRs

Supreme Court issues narrow ruling upholding constitutionality of IPRs

July 16, 2018

The Supreme Court has rejected an attack on the constitutionality of inter partes review (IPR) proceedings. In its 7-2 decision in Oil States Energy Services v. Greene’s Energy, the Court reaffirmed that patent rights are “public rights” and, as such, it is not a violation of the Seventh Amendment to adjudicate those rights in a forum other than an Article III court.

The closely watched case, which attracted many amicus briefs, had the potential to upend the entire system of post-grant patent adjudication established under the America Invents Act (AIA). While litigants continue to challenge various aspects of IPRs, the Court’s decision means that patent holders and challengers will be participating in these proceedings in some form for the foreseeable future, says Erik R. Swanson, a member in Leydig’s Frankfurt am Main, Germany office.

Oil States was an unsuccessful effort to swing for the fences by attacking the legitimacy of the IPR process,” Swanson says. “While the Court left open the possibility of other constitutional challenges, for now, efforts to address the perceived flaws of IPRs will have to continue on a more granular level.”

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In its petition for certiorari, Oil States asserted that a patent constitutes a private property right, and therefore, the Constitution requires that patentees be allowed to have a jury trial in an Article III court when their claims are challenged. The U.S. Court of Appeals for the Federal Circuit had consistently held that post-grant proceedings before the U.S. Patent and Trademark Office (PTO) are constitutional and do not violate the Seventh Amendment because patent rights are “public rights” that do not need to be adjudicated before a jury. They did so again in rejecting Oil States’ argument.

In the majority decision written by Justice Clarence Thomas, the Court held that “[i]nter partes review falls squarely within the public-rights doctrine,” and as public rights, Congress has “significant latitude to assign adjudication … to entities other than Article III courts.” That’s exactly what Congress did with the AIA, the Court said. As such, IPRs presided over by non-Article III administrative law judges are a proper and constitutional forum for adjudicating patent rights.

The Court did not close the door on other potential constitutional challenges, however. Thomas emphasized that the decision was a narrow one, specifically noting that it should not be interpreted as holding that patents are not property subject to the constitutional protections of the Due Process Clause or the Takings Clause.

While Oil States doesn’t necessarily alter the IPR status quo, the carefully tailored scope of the decision, a strong dissent by Justice Neil Gorsuch, and leadership changes at the PTO may represent the leading edge of changes to how IPRs are conducted in the months and years ahead, says John B. Conklin, a member in Leydig’s Chicago office.

“I’m seeing indications that the courts and the Patent Trial and Appeal Board (PTAB) are recognizing that the AIA and the IPR system were born with an anti-patent bias that has manifested itself accordingly,” Conklin says. “I think PTAB will be increasingly focused on ensuring that IPRs are more equitable and that they can survive the additional constitutional challenges the Oil States majority virtually invited with the explicit narrowness of their decision.”