United States: Oil States/IPR Constitutionality Supreme Court Oral Argument Highlights

On November 27, 2017, the Supreme Court heard oral argument in Oil States Energy Services v. Greene’s Energy Group, No. 16-712. At issue is whether inter partes reviews (“IPRs”) are unconstitutional because the procedure permits the extinguishment of patent rights: (i) by the United States Patent and Trademark Office (“PTO”), a non-Article III tribunal, (ii) without the right to a trial by jury.

Oil States argued that IPRs are unconstitutional. Because patents are private property, Oil States explained, patent owners are entitled to an Article III forum to adjudicate questions of the patent’s validity. Justice Ginsburg questioned this proposition extensively, pressing Oil States on why the PTO should be impeded from correcting the errors that it makes if it wrongly issues a patent. Oil States conceded that ex parte reexaminations are constitutional, as were inter partes reexaminations (which were the predecessors to IPRs). This concession led to multiple questions from Justices Sotomayor and Kagan, who were trying to ascertain the constitutional distinction between these procedures.

Additionally, Justice Sotomayor questioned whether earlier Supreme Court precedent suggesting that only a court can cancel a patent (McCormick Harvesting) was based upon constitutional concerns, or whether it was instead based on the patent statute as it existed at the time (i.e., prior to the enactment of a statute that permitted post-grant proceedings in the PTO). Although Justice Gorsuch seemed to suggest that this earlier precedent had a constitutional basis, Justice Sotomayor did not appear to agree.

There was also a discussion between Oil States and Justice Kagan about whether a private party’s participation enhances the overall accuracy of the procedure as compared to a strictly “examinational” proceeding that does not allow third parties to lodge a challenge to patentability.

Finally, Oil States fielded questions from Justices Kennedy, Alito, and Ginsburg about the history of post-grant revocation of patents in the United States and England dating back several hundred years, and whether it is true that patents historically could not be revoked absent a judicial proceeding.

Defending the constitutionality of IPRs were Greene’s Energy and Malcolm Stewart from the U.S. Solicitor General’s Office on behalf of the PTO. Chief Justice Roberts and Justice Gorsuch seemed doubtful of the constitutional validity of IPRs, expressing concerns that the availability of judicial review with respect to final IPR decisions was not sufficient to permit a non-Article III tribunal to adjudicate the validity of an issued patent.

Additionally, Chief Justice Roberts and Justice Gorsuch expressed concerns that the statutory design of IPRs permits the PTO to “stack” its panels with judges who the Director believes will vote a certain way.

While his questioning in general did not suggest that he would find IPRs to be unconstitutional, Justice Breyer repeatedly expressed his concern with the idea that a patent can be invalidated by the PTO for being granted by mistake years afterwards, and specifically after a company has invested substantial money in reliance on the investment being protected by the patent.

Justice Kagan also probed whether the availability of judicial review by the Federal Circuit sufficed to make IPRs constitutional. Justice Sotomayor was more direct, saying that the availability of judicial review is “what saves” IPRs from being unconstitutional.

Justices Gorsuch and Sotomayor also queried whether upholding IPRs would lead to the conclusion that the PTO could constitutionally decide whether a patent has been infringed. They did not receive a definitive answer, but Mr. Stewart said that would be “much more constitutionally problematic” and “would get the PTO much more out of its usual bailiwick and much more into the business that is usually performed by the courts.”

From the argument, it appears that the Court is divided over the constitutionality of IPRs. Justices Ginsburg and Sotomayor seemed inclined to uphold the constitutionality of IPRs, whereas Chief Justice Roberts and Justice Gorsuch seemed inclined to hold IPRs unconstitutional. Justices Kagan and Breyer appeared likely to uphold the facial constitutionality of IPRs, although they may well leave the door open to as-applied due-process challenges based upon some of the problems (e.g., panel-stacking) discussed during oral argument. From the argument, it was hard to predict how Justices Kennedy, Alito, and Thomas will vote, although the lack of vigorous questioning from Justices Alito and Kennedy suggests somewhat that they are disinclined to strike down IPRs. In the end, although not certain, it appears likely that the Court will uphold the constitutionality of IPRs. However, there will likely be a strong dissent, at least from Chief Justice Roberts and Justice Gorsuch.

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