United States: Supreme Court Upholds Constitutionality Of IPRs

Rumors of the PTAB's demise were greatly exaggerated, it turns out. In a 7-2 decision, the Supreme Court held on Tuesday that Inter Partes Reviews (IPRs) violate neither Article III nor the Seventh Amendment of the Constitution. Finding that the "grant of a patent is a matter involving public rights" and that "[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 inter partes review," the decision clears the road for the Patent Trial and Appeal Board (PTAB) to continue to review challenged claims of already-issued patents.

The Oil States case reached the Supreme Court as part of a dispute between Patent Owner Oil States Energy Services and PTAB Petitioner Greene's Energy Group. Greene's Energy petitioned for Inter Partes Review of two patent claims asserted by Oil States in a district court patent-infringement lawsuit. The proceedings before the district court and the PTAB progressed in parallel. In the district court, the claims were construed in a manner that foreclosed Greene Energy's arguments about invalidity over the prior art. But shortly after the district court made that ruling, the PTAB issued a Final Written Decision finding the very same patent claims unpatentable. Oil States appealed, and, in addition to arguments about patentability, Oil States challenged the constitutionality of IPRs. After the Federal Circuit's decision in MCM Portfolio LLC v. Hewlett-Packard Co., 812 F. 3d 1284 (Fed. Cir. 2015), rejecting the same constitutional arguments, the Federal Circuit used its Rule 36 powers to summarily affirm the PTAB's decision against Oil States, without an opinion. Oil States petitioned the Supreme Court for review, and certiorari was granted.

The core dispute involved what kind of rights a patent represents, for if patent rights are "public" rights, then they may be adjudicated by administrative agencies. By contrast, if patent rights are purely private rights, then they may only be taken away by an Article III court. In the Oil States decision, the Supreme Court noted that Article III of the Constitution "vests the judicial power of the United States in one supreme Court, and in such inferior Courts as the Congress... may establish." "When determining whether a proceeding involves an exercise of Article III judicial power, [the Supreme] Court's precedents have distinguished between 'public rights' and 'private rights.'" "Those precedents have given Congress significant latitude to assign adjudication of public rights to entities other than Article III courts."

The Court ultimately concluded that patent rights are classic "public rights." As the Court noted, "the public-rights doctrine covers the matter resolved in inter partes review, [such that the] Constitution does not prohibit the Board from resolving it outside of an Article III court." In doing so, the Court first noted "the grant of a patent involves a matter arising between the government and others." Thus "the determination to grant a patent is a matter involving public rights." The Court further held that IPRs "involve[] the same basic matter as the grant of a patent. So it, too, falls on the public-rights side of the line."

One of the primary arguments against the lawfulness of IPRs was that the classification of a patent as a public or private right changes at the time of patent grant. But whether the patent right turns from a public to private right at grant was, in the majority's eyes, of no consequence to the constitutionality of IPRs. The majority stated, "that distinction does not make a difference here. Patent claims are granted subject to the qualification that the PTO has the authority to reexamine—and perhaps cancel—a patent claim in an inter partes review. Patents thus remain subject to the Board's authority to cancel outside of an Article III court."The majority and the two-Justice dissenting opinion—authored by Justice Gorsuch and joined by the Chief Justice—dueled over the history of patent law in the U.S. and England, and whether a granted patent's status as a private right had already been decided by the Supreme Court. The majority found that statements in the American Bell Telephone (1888), McCormick Harvesting Machine (1898), and Brown (1857) cases, which appeared to classify granted patents as private rights (e.g., "[T]he rights of a party under a patent are his private property," in Brown) were really just "a description of the statutory scheme that existed at the time. They do not resolve Congress' authority under the Constitution to establish a different scheme."

Justice Gorsuch's dissent cautioned against the allure of "dispensing with constitutionally prescribed procedures" in favor of an expedient administrative solution to erroneously granted patents. The dissent disagreed with the majority's dismissal of American Bell Telephone, McCormick Harvesting Machine, and Brown, and further found the majority's analogy of 18th-century England's Privy Council to the modern-day PTAB to be unconvincing. Arguing that today's decision is "a retreat from Article III's guarantees," the dissent cautioned: "Ceding to the political branches ground they wish to take in the name of efficient government may seem like an act of judicial restraint. But enforcing Article III isn't about protecting judicial authority for its own sake. It's about ensuring the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before."

In summary, the Oil States decision confirms the constitutionality of IPRs based on the grounds presented. The majority noted that challenges based on retroactive applicability of IPRs and due process violations are not foreclosed. But for the immediate future, the PTAB lives another day, and will continue to review the patentability of claims of granted patents.

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