The Supreme Court Finds IPR Proceedings Constitutional

April 24, 2018
Marshall Gerstein Alert

Inter partes review (IPR) is a procedure that allows a party to challenge the validity of an issued patent based on prior art patents or printed publications. IPRs first became available in 2013 following passage of the Leahy-Smith America Invents Act. Some have questioned whether this post-grant review of patent validity is constitutional. Today, the United States Supreme Court declared that neither Article III of the Constitution nor the Seventh Amendment right to trial by jury precluded such reviews by the Patent Trial and Appeal Board (PTAB). 

Petitioner Oil States Energy Services sought to overturn a decision of the Federal Circuit Court of Appeals that had affirmed an earlier PTAB decision that the claims of Oil State’s patent were invalid. The PTAB’s decision was issued in connection with an IPR brought by Greene Energy Group, an accused infringer against whom Oil States had filed suit in Federal District Court. Oil States argued to the Supreme Court that by authorizing the patent office to invalidate issued patents via inter partes review, Congress improperly invaded the judiciary’s powers established in Article III of the U.S. Constitution and violated the Seventh Amendment’s guarantee of a trial by jury. 

In an opinion written by Justice Thomas and joined by six others, the Supreme Court observed that in determining whether a proceeding involves the exercise of Article III judicial power, the Court has looked to whether the adjudication involves a public or private right. Congress has significant latitude to assign adjudication of public rights to entities other than Article III courts. 

The Court rejected Oil States’ arguments that its patent rights were private rights, as opposed to public rights. The Supreme Court noted that Article I empowers Congress to grant patents or authorize others to do so. Granting patents is one of the legislature’s “constitutional functions” requiring no “judicial determination.” The Supreme Court concluded that inter partes review is merely a reconsideration of the grant of a public right that Congress may permissibly reserve to the Patent Office. The fact that this statutory review occurs after the original issuance of the patent was not deemed relevant. The Supreme Court pointed to earlier decisions which had held that patents remain “subject to [the Board’s] authority.”

The Court did caution against construing its holding as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause. The Court also further noted that Oil States had not raised a due process challenge nor challenged the retroactive application of IPR proceedings to patents issued before their adoption.

While the Court acknowledged the “general” principle that Congress may not withdraw from the judiciary matters which were subject to suit at common law, in equity, or in admiralty, it noted that the Framers of the U.S. Constitution would have been aware of a recognized English alternative to private litigation challenging a patent’s invalidity: namely, a petition to the Privy Council. The majority opinion observed that this procedure “closely resemble[d]” inter partes review, and pointed to record evidence that this procedure was invoked as late as 1810. The historic adjudication in this country of patent validity by the courts was not deemed inconsistent with application of the “public rights doctrine” because matters governed by that doctrine may be resolved in multiple ways, including in the courts. The Court concluded that, under the public rights doctrine, Congress may reserve to itself, delegate to the executive, or commit to the judiciary, questions concerning public rights, such as patent rights. 

The Supreme Court also rejected arguments that IPR proceedings bear similarities to court adjudications and, therefore, represent an exercise of Article III power reserved to the courts. The Supreme Court majority asserted that it had never adopted a “looks like” test for application of Article III. 

Having determined that Article III did not vest patent validity solely with the judiciary, the Court summarily dismissed challenges based upon the Seventh Amendment. “[W]hen Congress properly assigns a matter to adjudication in a non-Article III tribunal, ‘the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder,’” wrote Justice Thomas.

The two dissenters took issue with the majority’s recitation of history. Justice Gorsuch asserted that after 1753, the Privy Council “divest[ed] itself of its functions” in ordinary patent disputes. At the time of the adoption of U.S. Constitution and the Bill of Rights, according to the dissenters, the sole means to challenge patents was by a writ of scire facias in a Court of Chancery. The dissent emphasized the 200 years of history—at least until the creation of patent reexamination proceedings—during which it was believed that Congress did not have the power to remove determinations on patent validity from the courts. During those two centuries, according to the dissent, an issued patent was believed to be a personal right that could only be revoked by an independent Article III judge. The majority distinguished these older decisions as having been decided under an earlier, different statutory regime.

While the decision sidesteps certain questions of due process and the legality of the procedure’s retroactive application, the Supreme Court has eliminated the most serious challenge to date to the availability of IPRs. Parties accused of infringement no doubt will breathe a sigh of relief. Moreover, the Supreme Court comments on the “public rights doctrine” may give fuel to those who seek to eliminate jury trials with respect to patent validity altogether. Time will tell.

For more information, please contact the authors of this alert or another attorney at Marshall Gerstein.

Disclaimer:  The information contained in this alert is for informational purposes only. Under applicable rules of professional conduct, this communication may constitute Attorney Advertising. © 2018 Marshall, Gerstein & Borun LLP. All rights reserved.