On November 27, 2017, the United States Supreme Court heard oral arguments in the much-anticipated case Oil States Energy Services, LLC v. Green’s Energy Group, LLC, U.S., 16-712. In this case, the Petitioner Oil States challenges the constitutionality of inter partes review, arguing that “IPR violates Article III by permitting the Executive to exercise the Judicial power over matters which, from their nature, were the subject of a suit at the common law.” The issue at the Court is:
Whether inter partes review, an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.
Appearing for Petitioner Oil States, Allyson Ho of Morgan Lewis conceded, at the start, that reexaminations, which are fundamentally examinational and not adjudicational, are consistent with the Constitution. When asked by Chief Justice Robert what she meant by examinational, Ho replied that it meant that the proceeding is between the government and a private party. Justice Sotomayor pointed out that there are involvements of third parties in both reexaminations and IPR, and asked Ho to specify what procedures in IPR make IPR essentially adjudicatory and not examinational. Ho replied that the existence of procedures, such as discovery and hearing, showed that IPR is trial-like. Justice Kagan asked how many of those procedures the government had to take away before having a constitutional system. Instead of answering the question directly, Ho simply repeated that IPR is fundamentally adjudicational and thus unconstitutional, because a category of cases is taken out of the Article III courts and put into a non-Article III court. Justice Breyer pointed out that it is in fact very common for agencies to decide matters through adjudicatory-type procedure involving private parties.
Justice Kennedy pointed out that the patent owner had limited expectations as to the scope and validity of the property right that he holds, because Congress could shorten the terms of all patents under the limited time clause provided by Article I, Section 8 of the Constitution. Ho argued that the limited time clause did not allow Congress to take out the disputes that have been adjudicated in courts for centuries and put them in a non-Article III tribunal.
Justice Ginsburg pointed out, a few times during the oral argument, that IPR is geared to be an error correction mechanism, and not a substitute for litigation. However, Justice Gorsuch opined that precedents, including McCormick and American Bell, indicated that any correction to a patent had to go to a court, and anytime a private right, such as a patent, is taken by anyone, it must be through an Article III court.
Appearing for Respondent Greene’s Energy, Christopher Kise of Foley & Lardner pointed out that IPR does not extinguish private property rights because a canceled patent simply should not have been issued. Justice Breyer pointed out that a patent owner might have vested interest or right in the issued patent after enough time went by and the patent owner has relied on it.
Chief Justice Roberts pointed out that the Respondent’s position was that if you want the “sweet” of a patent, you have to take the “bitter” that the government might reevaluate it at some subsequent point.
Justice Kennedy and Justice Sotomayor pointed out that without judicial review, the PTO has unfettered discretion to take away a patent, which is worrisome. Justice Gorsuch observed that unless somebody appeals, there is no judicial review in IPR, and thus IPR is really an Article III adjudication. Justice Gorsuch further made an analogy to a land patent and pointed out that once a patent is granted, it is private right and could not be taken away in a non-Article III court. Kise contended that there was fundamental difference between a land patent and an invention patent, because the invention patent right derives solely from a federal statute, and it is granted to advance the progress of science, not for the benefit of the inventor.
Justice Ginsburg pointed out that the issue was not whether a patent is a private right because the Petitioner had conceded that reexaminations are constitutional. The real problem here was IPR looked too much like a court proceeding.
Deputy Solicitor General Malcolm Stewart contended that it had always been part of the scheme that a patent could be reexamined at least by a court at any time when the patent remained in force, so the patentee never had any expectation that the patent would be immune from invalidation. Chief Justice Roberts pointed out that the patent-at-issue was granted before there was IPR, and asked how the expectation would work in this case. Stewart contended that there were still other proceedings that could reexamine and invalidate the patent. Stewart pointed out that the “bitter” part of the deal still required the procedures to be fair and must comply with the Due Process Clause. Justice Breyer pointed out that when there had been huge investment in a patent, invalidating the patent through IPR would raise issues under either a taking clause or a due process clause. Justice Sotomayor asked whether Congress could permit the PTO to adjudicate infringement actions. Stewart answered that that would be more problematic under the constitution, because it was not part of the PTO’s traditional work.
Opinion of this case will be handed down by the end of the Supreme Court’s 2017-2018 term, which is late June or early July of 2018. Although it is often difficult to predict the outcome of Supreme Court cases based on oral arguments, it appears that most of the justices do not have a strong position in abolishing the inter partes review process.