Supreme Court Patent Update

Inter partes review survives constitutional challenge

Patent trolls are a significant nuisance to a range of industries. But the U.S. Supreme Court recently upheld a procedure that makes it easier for patent trolls’ potential victims to avoid prolonged litigation or costly settlements.

Inter partes review

The America Invents Act of 2012 (AIA) created inter partes review (IPR) proceedings where the U.S. Patent and Trademark Office (PTO) can reconsider and cancel an already-issued patent based on certain types of “prior art.” This includes existing patents or printed publications showing that the invention wasn’t novel or nonobvious, in whole or in part, before the effective filing date of the patent application. Under the law, any person other than the patent holder can petition for review.

Oil rig sunset image

If review is “instituted,” the petitioner and the patent owner can conduct limited discovery and file affidavits, declarations and written memoranda. The process also allows for an oral hearing before the Patent Trial and Appeal Board (PTAB). The board’s final decision is subject to review by the Federal Circuit Court of Appeals.

IPR is seen as a potential weapon against patent trolls who obtain patents solely for the purpose of suing alleged infringers for royalties and damages. Accused infringers who seek relief from the PTAB through IPR may be able to avoid court battles or settlements for infringement of questionable patents.

Challenging the law

Oil States Energy Services, LLC, had a patent for technology that protects wellhead equipment used in hydraulic fracturing (fracking). It sued Greene’s Energy Group, LLC, for infringement of that patent.

Greene’s responded by challenging the patent’s validity based on prior art on two tracks — in the trial court and by petitioning the PTO for IPR. Shortly after the court found the patent valid, the PTAB nonetheless ruled that Oil States’ invention was unpatentable.

Oil States appealed the PTAB’s decision to the Federal Circuit. Among other things, it challenged the constitutionality of IPR. It argued that actions to revoke a patent must be tried in a court before a jury. The appellate court affirmed the PTAB’s decision, and Oil States appealed to the Supreme Court.

IPR ruled constitutional

The Supreme Court began its review by noting that Congress has significant latitude to assign the adjudication of “public rights” to entities other than the courts. This public rights doctrine, the Court said, applies to matters between the government and others that don’t require judicial determination despite being susceptible to it.

The Court found that the grant of patents falls squarely within the doctrine because patents are “public franchises” that the government grants to inventors on behalf of the public. The franchise gives the patent owner the right to exclude others from making, using, offering for sale or selling the invention in the United States. Moreover, granting patents is a constitutional function that can be carried out by the executive or legislative branches of government without judicial determination. When the PTO adjudicates the patentability of inventions, the Court said, it exercises the executive power.

The high court reasoned that IPR — essentially “a second look at an earlier administrative grant of a patent” — involves the same basic matter as the grant of a patent and the same interests as the original grant. It found irrelevant the fact that IPR occurs after a patent has issued, as patents are granted subject to the qualification that the PTO has the authority to cancel them later. And it has previously recognized that franchises can be qualified in this manner.

Finally, the Court dismissed the argument that IPR was unconstitutional because it shares “every salient characteristic associated with the exercise of judicial power,” such as discovery, depositions and cross-examination of witnesses. It pointed out that it has never adopted a “looks like” test to determine if an adjudication improperly occurred outside a court.

A caveat

The Court’s ruling is welcome news for those targeted by patent trolls or other holders of patents of dubious validity. However, the Court made clear that this case didn’t require it to consider whether the retroactive application of IPR to patents granted before the AIA was allowable. That question remains for another day. •

Oil States Energy Services, LLC v. Greene’s Energy Group, No. 16-712, April 24, 2018, U.S.

SAS Institute, Inc. v. Iancu, No. 16-969, April 24, 2018, U.S.

SCOTUS makes IPR all or nothing

On the same day the U.S. Supreme Court issued its ruling in Oil States Energy Services, LLC v. Greene’s Energy Group (see main article), it released another opinion addressing inter partes review (IPR). The 5-4 decision in SAS Institute, Inc. v. Iancu reversed the U.S. Patent and Trademark Office’s (PTO’s) longstanding practice of determining whether to institute — or grant — IPR of challenged patents on a claim-by-claim basis.

SAS Institute, Inc., challenged 16 claims in a software patent owned by complementSoft, but the PTO instituted review on only some of those claims. On appeal, the Federal Circuit Court of Appeals rejected SAS’s argument that the Patent Trial and Appeal Board (PTAB) was legally required to decide the patentability of every claim challenged.

The Supreme Court disagreed, holding that the PTAB must review all of the claims a petitioner has challenged or none. It found that the relevant statutory language indicates that the petitioner’s challenges, not the PTAB’s discretion, should define the contours of the proceeding.

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