INTER PARTES REVIEW FOUND CONSTITUTIONAL

The Supreme Court issued its ruling in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, on Tuesday April 24.  The Court found by a 7-2 majority that the Patent Trial and Appeal Board inter partes review (IPR) system is constitutional, and can be used to attack and invalidate patents.

The question confronting the Court in Oil States was whether a granted patent is a property right that can be extinguished by a non-Article III tribunal?

The Court found that

Inter partes review falls squarely within the public-rights doctrine. This Court 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 (pp. 6-7.)

Looking back to decisions from the 1800’s, the Court characterized “the grant of a patent [as] a matter involving public rights,” and that an issued patent “takes from the public rights of immense value, and bestows them upon the patentee.”  (p. 7)

The Court emphasized that their holding in this case is narrow, and they did not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum. (pp. 16-17.)

Justice Gorsuch authored a dissenting opinion joined by Chief Justice Roberts, and called for stability in the patent granting system, “Just because you give a gift doesn’t mean you forever enjoy the right to reclaim it.” (Dissent at p. 10.)

So, now, in the eyes of the Court, the previously revered gold-stamped, red-ribbon wrapped patent is equivalent to government permits to construct a toll bridge, build a railroad or erect telegraph lines.  And, these “government franchises” can be canceled now by an administrative procedure in the executive branch.

IPR boards have overwhelming invalidated the patents brought before them and as a consequence may have significantly undermined the importance and value of patent rights.  The effects of these decisions have impacted the enthusiasm for patented technologies.  Oil States will, in turn, impact patent owners’ efforts to monetize their assets and bring additional uncertainty to the market of cutting edge inventions.

Also decided on the same day was SAS Institute, Inc. v. Iancu in which the Court found that the PTO Director’s prior practice of “partial institution” of an IPR proceeding on a subset of the claims challenged by a petitioner was not allowed under the statute, and that IPR proceedings must address the validity of all challenged patent claims.

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.

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