On April 24, 2018, the Supreme Court issued its opinion in Oil States v. Greene's Energy, No. 16-712, holding that inter partes review (“IPR”) before the Patent Trial and Appeal Board (the “PTAB”) does not violate Article III of the U.S. Constitution. The decision solidifies the status of the PTAB as an alternative to district courts for addressing the validity of patent claims.
Article III of the U.S. Constitution provides that “[t]he judicial power of the United States, shall be vested in one Supreme Court, and in such inferior courts as the Congress may from time to time ordain and establish.” Under this provision, Congress may not delegate authority to a non-Article III tribunal to resolve any matter that was “the subject of a suit at the common law, or in equity, or admiralty.” Stern v. Marshall, 564 U.S. 462 (2011). As such, if a suit is made of “the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,” then “the responsibility for deciding that suit rests with Article III judges in Article III courts.” Stern, 564 U.S. at 484.
Despite the requirements of Article III, the Supreme Court has recognized that Congress may delegate authority to administrative agencies to resolve disputes over “public rights.” Such “public rights” can include “a seemingly ‘private’ right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution.” Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 593-94 (1985).
In 2012, Greene’s Energy filed an IPR petition challenging the validity of several claims of a patent owned by Oil States. The PTAB instituted IPR and ultimately found the challenged claims invalid. The Federal Circuit later affirmed the PTAB’s decision. Before the Supreme Court, Oil States argued that IPR violates Article III because Congress delegated authority to a non-Article III tribunal to adjudicate issues of patent validity that were traditionally the subject of suits at common law or in equity. Oil States also argued that patent rights are private property rights, not public rights that can be taken away by an administrative agency.
Greene’s Energy and the Solicitor General defended the constitutionality of IPR before the Supreme Court. Respondents asserted that IPR is permissible under Article III because administrative bodies in England prior to 1789, such as the King and the Privy Counsel, had the authority to invalidate patents. Respondents also argued that a patent is a quintessential “public right”: the right to a limited monopoly created and defined by Congress and awarded by an administrative agency.
In its 7-2 opinion today authored by Justice Thomas (with Chief Justice Roberts and Justice Gorsuch dissenting), the Supreme Court found that “[i]nter partes review falls squarely within the public rights doctrine.” Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U. S. ____, slip op. at 6 (2018). Specifically, the Court found that it “has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.” Id. at 6-7.
In support of its conclusion, the Court explained that patents are “public franchises” that arise between the “government and others.” Id. at 7. The Court also noted that, at the time the country was founded, patent rights were not addressed exclusively in courts because the King and Privy Council retained the ability to revoke patent rights. Finally, the Court also observed that the procedural similarity between inter partes review and district court proceedings is not relevant because the Court “has never adopted a ‘looks like’ test to determine if an adjudication has improperly occurred outside of an Article III court.” Id. at 15.
Simultaneously with Oil States, the Court also issued another decision dealing with inter partes review in SAS Institute Inc. v. Iancu, 584 U. S. ____ (2018), in which it held that the PTAB must address the patentability of every claim a Petitioner has challenged. A separate client alert will be sent discussing SAS Institute.