In a much anticipated ruling, the U.S. Supreme Court has delivered a blow to innovators in the pharmaceutical and technology industries that held out hope that an increasingly used administrative procedure to invalidate valuable patents would be declared unconstitutional.

The America Invents Act of 2012 created a new administrative procedure for challenging before the Patent Trademark Office (PTO) the validity of patents it issues. These Inter Partes Review (IPR) proceedings differed from prior schemes for administrative cancellation, dating back to 1980, in the level of adversarial participation allowed. Patents put into IPR were, at least in the procedure’s early years, invalidated far more frequently than patents tested in infringement actions brought in federal district court.

While the Federal Circuit repeatedly upheld the original re-examination statutes against Seventh Amendment challenges, the Supreme Court repeatedly denied certiorari on the issue. In a recent opinion filed on April 24, 2018, Oil States Energy Services v. Greene Energy Group, the Court addressed a very different challenge to the IPR regime – one based on a distinction between “public rights” that can be extinguished in an administrative proceeding and “private rights” revocable only by an Article III court.

At various times, the Court has described patents as both private property rights and as a “public franchise” that grants exclusive rights to inventions that the public would otherwise be free to use. In this opinion, the Court found these were “public rights” in large part because Congress defined how those rights could be revoked. If, for example, Congress can grant a franchise to erect a toll bridge and reserve the authority to revoke or amend, then it can authorize (and has authorized) the PTO to do the same thing with patents.

“The Court’s decision is written narrowly to address only the PTO’s authority to revoke patent rights. It will not effect, e.g. the FCC’s authority to revoke broadcast licenses or the BLM’s authority to terminate mineral leases.”