Dismantling Inter Partes Review

by Dennis Crouch

The America Invents Act of 2011 brought about sweeping changes to the US Patent System — most dramatic of these was the creation of the administrative trials: especially Inter Parties Review (IPR) and Covered Business Method Review (CBM).

But if initiation of the AIA Trial system has been dramatic, the potential outcome of Oil States Energy Servs., LLC v. Greene’s Energy Group, LLC (Supreme Court 2017) is even more so.  Oil States is asking the Supreme Court to find the IPR system unconstitutional and thus order the system dismantled.

Earlier in 2017, the Supreme Court agreed to hear the Oil States case on the following question:

Whether inter partes review—an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.

Oil States has now filed its very well written opening merits brief.  Briefing will continue over the next few months, and I expect substantial amicus filing on both sides of the case, as well as input from President Trump’s Department of Justice.

The patent at issue in the case is U.S. Patent No. 6,179,053 that covers a lockdown mechanism for well tools. After being sued for infringement, Green filed the IPR petition with the USPTO and the agency eventually found the challenged claims unpatentable on a broad claim construction (after first rejecting the district court’s claim construction).   The Federal Circuit then affirmed the case without opinion (R.36).  The implication here: Oil States believes its patent is valid when properly construed.

The argument in this case begins with a focuses on history — for centuries, patent infringement and validity disputes have been decided in courts. “Article III promises a court to these litigants, and the Seventh Amendment promises a jury.”  The America Invents Act (AIA) shifts the approach – to having an administrative agency handle the “trial proceedings.”

With this background, Oil States argument is straightforward:

As this Court has long held, “Congress may not ‘withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.’ ” Stern v. Marshall, 564 U.S. 462 (2011) (quoting Murray’s Lessee v. Hoboken Land & Improvement Co., 18 How. 272 (1855)). That is just what Congress has done with inter partes review, which wrests patent-validity cases from federal courts and entrusts them to administrative-agency employees, who decide questions of law that Article III reserves to judges and questions of fact that the Seventh Amendment reserves to juries. Neither Article III nor the Seventh Amendment tolerates this circumvention. . . . “When a suit is made of ‘the stuff of the traditional actions at common law tried by the courts at Westminster in 1789,’ * * * the responsibility for deciding that suit rests with Article III judges in Article III courts.”  Stern (quoting N. Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 90 (1982)).

The brief does an excellent job of demarcating a justiciable line for the Court.  According to the briefs, the problem with IPR isn’t really that the PTO is invalidating patents, but instead that the IPR regime is set-up as a full-on adversarial judicial proceeding to invalidate patents that is designed to promote a different outcome and without the Article III protections of district courts.  That wholesale replacement of the Article III court and Jury rights is simply not allowed.

One way that the court could rule against Oil States is by ruling that the IPR cancellation process involves “public rights” rather than private property rights.  To do so, however, would come in fairly directly conflict with the court’s recent statements in Stern.

More to come on this interseting ! Top-side amici briefs are due in 7-days.

Read the Brief: Oil States Energy Services 082417 AS FILED

The Federal Circuit rejected many of these arguments in MCM. Read the court’s decision here.