Canadian hydraulic fracturing technology (“fracking”) is at the center of a controversial US case about inter partes review (“IPR”) of patents.[1] The IPR procedure can be a useful defense against patent infringement actions brought by non-practicing entities or “patent trolls.” However, on June 12, the United States Supreme Court agreed to hear the case challenging the constitutionality of the IPR procedure. A SCOTUS decision abolishing or curtailing the IPR procedure, and the ensuing patent troll activity, could have ramifications for Canadian business, including in the fracking industry.

Oil States Energy Services (“Oil States”) commenced a patent infringement suit against Greene’s Energy Group (“Greene’s”) for allegedly infringing US Patent No, 6,179,053 (the “US Patent”). The US Patent “relates to an apparatus and method for securing a mandrel of a well tool in an operative position in which the mandrel is packed off against a fixed-point in a well.”[2] Greene’s successfully challenged the patent’s validity in IPR proceedings. The IPR panel held that claims 1 and 22 of the US Patent were anticipated by an earlier Canadian patent application filed by the same inventor.

On appeal, Oil States argued that the IPR process is unconstitutional because it deprives patentees of property rights without having those rights adjudicated before a jury. The Court of Appeals for the Federal Circuit affirmed the Patent Trial and Appeal Board’s initial decision.

On June 12, 2017 the Supreme Court of the United States granted certiorari to decide the constitutionality of the IPR procedure.

Canadian oil & gas companies should be mindful of the IPR process and the potential significance of the US Supreme Court’s decision. The IPR process can be a quick and relatively inexpensive method to invalidate patents in the US. The IPR process provides leverage against patent trolls and removes the inherent uncertainty of a jury trial, upon which patent trolls can rely. If the US Supreme Court agrees that IPR is unconstitutional it will remove a new barrier preventing patent trolls from quickly proceeding to trial in friendly jurisdictions and rolling the dice.

There is no direct Canadian analogy to the US IPR process. In Canada patent impeachment actions are used to invalidate patents; however such actions can lead to counterclaims of infringement and the costs that are associated therein. However, any change in the US procedure that is favorable to patent trolls will only support their business model with ramifications to Canadian oil & gas companies doing business in the US and to companies that may find themselves a part of coordinated cross-border litigation.