Supreme Court to Hear Constitutional Challenge to IPRs and Other Post-Grant Patent Reviews

The Supreme Court has agreed to decide whether inter partes review, the procedure that allows a Patent and Trademark Office tribunal to invalidate patents, is unconstitutional. The Court will hear argument in the fall and render a decision in early 2018. The case is Oil States Energy Services LLC v. Greene’s Energy Group, LLC, No. 16-712.

Inter partes review, created by the Leahy-Smith America Invents Act of 2011 (AIA), allows the Patent Trial and Appeal Board to reconsider the validity of issued patents, on certain grounds. Other, similar post-grant proceedings at the PTO include post-grant review (which applies only to post-AIA patents) and covered business method review (which applies only to patents that claim a method used in a financial product or service). These other proceedings appear to be implicated by the Supreme Court’s forthcoming decision as well.

The Federal Circuit has repeatedly turned away constitutional challenges to inter partes review and other post-grant proceedings in the PTO. Most recently, in MCM Portfolio v. Hewlett-Packard Co. (in which Goodwin represented Hewlett-Packard), the Federal Circuit rejected the same arguments that the Supreme Court has now agreed to consider.

First, the patent owner in MCM argued that once a patent has been issued, only a federal judge appointed pursuant to Article III of the Constitution (with life tenure and salary protection) can invalidate it. This argument is based on the constitutional separation of powers, which prevents Congress from taking the “judicial power of the United States” away from the judicial branch and assigning it to executive branch officials. But the Supreme Court has held that “public rights” can be adjudicated by administrative tribunals. The Federal Circuit held that the validity of an issued patent falls within the “public rights” exception.

Second, the patent owner in MCM argued that under the Seventh Amendment, only a jury can decide the factual questions that go into a question of patent validity. The Federal Circuit rejected that argument as well, largely for the same reasons. The federal government briefed and argued the case in defense of the constitutionality of the AIA proceedings.

The Supreme Court denied certiorari in MCM in October 2016. The patent owner in Oil States presented the same question as MCM (along with some other questions that the Supreme Court declined to hear). The different outcome here suggests that new Justice Neil Gorsuch may have influenced the decision to grant certiorari.

While the briefing schedule will likely be extended, under the Court’s default schedule, amicus briefs supporting the unconstitutionality of IPR would be due August 3, and briefs supporting the constitutionality of IPR would be due September 5.

If the Court does invalidate the IPR statute, that decision might not reinstate patents that have already been finally cancelled in IPRs or similar proceedings. For cases in pending litigation, litigants may want to consider whether to preserve a similar challenge.