Is Inter Partes Review Constitutional?

The Monday after Thanksgiving a presumably well-fed and rested Supreme Court will hear oral arguments in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, a Constitutional challenge to the Patent Trial and Appeal Board inter partes review (IPR) system. 

In 2012, Oil States asserted patent infringement claims against Greene Energy in a U.S. District Court, and nearly a year after litigation had commenced, Greene petitioned the PTAB to institute an inter partes review of the asserted patent.  During the IPR, the Board refused to adopt the same claim construction as the District Court, and instead, under a new claim construction, held that the patent claims were anticipated and invalid.  The merit of the Board’s final judgment was appealed to the Federal Circuit along with constitutional challenges to the IPR under Article III and the Seventh Amendment (“…the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any Court…”)

The questions confronting the Court in Oil States are the nature of the property granted by a government-issued patent, and whether that property
can be extinguished by a non-Article III tribunal, such as the judges making up the PTAB panels.

A quick review of the powers granted under the Constitution finds that Article I outlines the Legislative powers including the power

“[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries  (See Art. I, Section 8, Clause 8),

that Article II describes the powers of the Executive branch, and that Article III of the Constitution sets forth the basic parameters of the judicial branch.

With passage of the America Invents Act in 2011, Congress replaced inter partes reexamination with inter partes review, a procedure which allows for more third party intervention and more litigation like actions. The review process leads to a “trial” in front of a panel of at least three administrative law judges as selected by the Director of the PTO from a pool of over 200 judges, which includes the Director himself. 

So, should the IPR regime be viewed as a full-on adversarial judicial proceeding without the protections afforded by the Article III district courts, or as a permissible administrative law proceeding focused on improving patent quality by cancelling patents that slipped through the PTO system?

With respect to the definition of the property right involved in a patent, the issue revolves around whether patents are “public” or “private” property rights.  In view of the Court’s recent statements in Stern v. Marshall (564 U.S. 462 (2011)) (the Anna Nicole Smith estate case), it seems likely that the Court will view patents as granting private property rights. However, even the Court recognizes that “our discussion of the public rights exception…has not been entirely consistent, and the exception has been the subject of some debate…” Stern 564 U.S. at 488.

Consider that in Stern, claims arising under the public rights exception included only claims (i) by or against the government, (ii) which “historically could have been determined exclusively” outside the Judicial Branch, or (iii) the “resolution of the claim by an expert government agency is deemed essential to a limited regulatory objective…integrally related to particular federal government action.” Stern, 564 U.S. at 490 (emphasis added.)

On the other hand, the patent code sets forth that patents “shall have the attributes of personal property,” 35 U.S.C. § 261, so perhaps disputes over the validity of patent claims, personal property, should be adjudicated by Article III courts.

Should the Court find that IPR is unconstitutional, the proverbial wrench would be thrown into the cogs of the U.S. patent system; stay tuned.

Sam Burkholder is a member and intellectual property attorney at Capitol City TechLaw.  His practice covers a range of issues, including patent prosecution and counseling.  He can be reached at sburkholder@capcitytechlaw.com.