Supreme Court Upholds Constitutionality of Inter Partes Review In Oil States

5 min

On April 24, 2018, the Supreme Court in Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712, held 7-2 that the inter partes review procedure created by the America Invents Act of 2011 (AIA) does not violate Article III or the Seventh Amendment of the U.S. Constitution, because patents are public rights, and public rights need not be adjudicated before an Article III court or in a jury trial. Justice Gorsuch wrote a dissenting opinion that was joined by Chief Justice Roberts.

Background and Procedural History

The AIA allows an individual or entity to challenge the validity of an issued patent on the grounds of anticipation or obviousness through a procedure called inter partes review (IPR). An IPR is brought before the Patent Trial and Appeal Board (PTAB), an administrative tribunal within the United States Patent and Trademark Office (PTO). No Article III standing is required to file an IPR. If the PTAB finds a patent invalid in an IPR, the patent owner may appeal the finding to the United States Court of Appeals for the Federal Circuit. A petitioner may also appeal an adverse decision of the PTAB to the Federal Circuit, so long as the petitioner has Article III standing to do so.

Oil States Energy Services and Greene’s Energy Group are oilfield services companies. In 2001, Oil States obtained a patent on an apparatus and method of protecting wellhead equipment used in hydraulic fracturing. Oil States sued Greene’s for infringement of that patent in 2012 in the District Court for the Eastern District of Texas. In 2013, Greene’s filed an IPR on the same patent. In the IPR, the PTAB held the patent invalid for anticipation.

Oil States appealed the PTAB’s IPR ruling to the Federal Circuit, which affirmed the ruling in May 2016. On November 23, 2016, Oil States petitioned the Supreme Court for certiorari. On June 17, 2017, the Court granted certiorari on the question of whether the IPR procedure violates Article III or the Seventh Amendment right to a trial by jury in giving a non-Article III body—the PTAB—the authority to invalidate an issued patent.

The Court’s Opinion

Justice Thomas, writing for the Court, held that “inter partes review falls squarely within the public rights doctrine.” In other words, according to the Court, IPRs do not run afoul of Article III or the Seventh Amendment, because patents constitute public rights, the adjudication of which need not occur in an Article III court or in a trial by jury. Justice Thomas noted that Article I of the Constitution empowered Congress to grant patents, and that Congress in turn authorized the Executive Branch of the United States Government (of which the PTO and PTAB are part) to exercise that power. Justice Thomas also rejected the notion that a patent, once issued by the PTO, could not subsequently be invalidated by the PTO. In that regard, Justice Thomas, citing the Court’s 2016 Cuozzo Speed Technologies, LLC v. Lee decision, noted that patent claims are issued subject to the qualification that the PTO has the authority to reexamine and cancel those claims. Justice Thomas further analogized the grant of patents to the grant of other “public franchises,” such as rights to build a toll bridge, a railroad or a telegraph line—rights that the Supreme Court previously determined that the Government could revoke or qualify through legislation or administrative proceedings.

Justice Thomas distinguished McCormick Harvesting Machine Co. v. Aultman, 169 U.S. 606, 609 (1898), which held that “the only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” According to Justice Thomas, McCormick was limited to addressing the Patent Act of 1870, which did not include any “provisions for post-issuance administrative review.”

Justice Thomas also observed that an historical analogue to IPRs could be found in the practice of the Privy Council, an 18th century arm of the English Crown that until 1753 had the exclusive power to revoke patents, and thereafter shared concurrent jurisdiction with courts to do so. Justice Thomas asserted that, “[b]ased on the practice of the Privy Council, it was well understood at the founding [of the United States] that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council.”

Justice Thomas rejected the argument that IPRs violate Article III because they resemble trials held before Article III courts in their procedural aspects (e.g., in terms of motion practice, discovery, depositions, referring to hearings as “trials”). Justice Thomas explained that “this Court has never adopted a ‘looks like’ test to determine if an adjudication has improperly occurred outside of an Article III court. The fact that an agency uses court-like procedures does not necessarily mean it is exercising the judicial power.”

The Court’s opinion concludes by emphasizing that its holding is narrow and “address[es] the constitutionality of inter partes review only”—and even then, “our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”

Justice Breyer wrote a short concurrence, joined by Justices Ginsburg and Sotomayor, to clarify that “the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies.”

Justice Gorsuch’s Dissent

Justice Gorsuch disagreed with the Court’s opinion that patents are public rights. Instead, Justice Gorsuch argued that “[u]ntil recently, most everyone considered an issued patent a personal right—no less than a home or farm—that the federal government could revoke only with the concurrence of independent judges.” According to Justice Gorsuch, invention patents differ from other revocable “public franchises” in that they provide “a procompetitive means to secure to individuals the fruits of their labor and ingenuity,” and were regarded for most of United States history as subject to divestment “only through proceedings before independent judges.” Justice Gorsuch further argued that permitting the Executive Branch to withdraw a patent would “deprive the applicant of his property without due process of law,” and concluded that “[t]oday’s decision may not represent a rout but it at least signals a retreat from Article III’s guarantees.”