Supreme Court Affirms Constitutionality of Inter Partes Review

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In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, the Supreme Court rejected constitutional challenges to the America Invents Act’s inter partes review process. The court held that inter partes review (IPR) does not violate Article III or the Seventh Amendment.

IPR is an adversarial process in which the PTO reconsiders whether a patent should have been granted in the first place. In IPR, a petitioner can challenge the patentability of one or more claims of an issued patent on the grounds that the claims are not novel or nonobvious. If the PTO determines there is a reasonable likelihood a petitioner will prevail with respect to at least one challenged claim, the PTO can institute IPR. The Patent Trial and Appeal Board (PTAB), the adjudicatory board that conducts IPRs, will then determine the patentability of the challenged claims, and any claims determined to be unpatentable will be cancelled. The PTAB’s decision can be appealed to the Federal Circuit.

When the challenged claims of its patent were found unpatentable by the PTAB, Oil States appealed that decision to the Federal Circuit. In addition to challenging the decision on patentability, Oil States also argued that IPR was unconstitutional because an action to revoke a patent must be tried to a jury in an Article III court. Relying on its decision in MCM Portfolio LLC v. Hewlett-Packard Co. that rejected similar constitutional arguments, the Federal Circuit affirmed the constitutionality of IPR.

The Supreme Court then granted certiorari to consider whether IPR violates Article III or the Seventh Amendment. The Supreme Court rejected both challenges. Because reconsideration of a patent grant does not invoke judicial power, it can be conducted outside of an Article III court and, by extension, need not be determined by a jury.

Resolution of the Article III question turned on the difference between “public rights” and “private rights.” Congress has discretion to assign adjudication of public rights outside of Article III courts. The court concluded that reconsideration of a patent grant clearly fell on the public rights side of the spectrum. The court began with the proposition that the original grant of a patent was undisputedly a matter involving public rights. Because IPR involves the same basic issue—the same statutory requirements are applied to determine whether a patent should be granted—it also is a matter involving public rights. That IPR occurs after a patent was granted makes no difference because the claims were granted subject to the condition that they might be reexamined and cancelled in IPR.

The court rejected Oil States’ reliance on several of its prior cases describing patent rights as private property. First, it explained that the property right conveyed in a patent goes only so far as the statute granting the right allows. Thus, the property rights in a patent are subject to IPR. Second, the court distinguished those prior cases as describing the statutory scheme in place at the time (the Patent Act of 1870), not Congress’ authority to enact a different scheme.

The court also rejected Oil States’ argument based on historical practice. The court acknowledged that patent validity was often decided by English courts of law in the 18th century. It noted, however, that another means to vacate a patent existed—a petition to the Privy Council—and that it closely resembled IPR. The court found nothing in the text or history of Article III or the Patent Clause of the Constitution suggesting that the Constitution was intended to exclude that practice.

Turning to the Seventh Amendment, that challenge failed as a natural consequence of the court’s Article III holding. The court has previously held that if Congress can assign adjudication of an issue to a non-Article III tribunal, then the Seventh Amendment does not prevent a nonjury factfinder from deciding the issue. Because Article III does not prohibit Congress from assigning IPR to the PTO, neither does the Seventh Amendment.

Finally, the court emphasized several narrow features of its holding. First, the court was not considering whether infringement actions or other patent matters could be heard outside of an Article III court. Second, the court was not considering whether IPR would be constitutional in the absence of judicial review by the Federal Circuit. Third, the court was not considering retroactive application of IPR to patents issued before IPR was enacted or related due process challenges. Fourth, the court emphasized that the decision should not be construed as suggesting that patents are not property for purposes of the Due Process or Takings Clauses.

The court’s observations point to questions that remain open. While IPR is constitutional as presently constructed—limited to specific challenges to patentability and with judicial review—that conclusion may change if the scope of IPR is expanded or if the process is insulated from judicial review. And while IPR may be safe from constitutional challenges from patentees who obtained their patent after it was enacted, the process may still be vulnerable to a claim that retroactively imposing IPR on patents obtained before IPR came into existence may violate due process.

On the same day it ruled in Oil States, the Supreme Court also held in SAS Institute Inc. v. Iancu that the PTAB must issue a decision on all claims challenged in the petition.