SCOTUS watch: can tribunals replace juries in nixing patents?

By Lisa V. Mueller, Partner, Industry Group Chair, Life Sciences, Michael, Best & Friedrich

Special to The Digest

On November 27, 2017, the Supreme Court of the United States will hear arguments in Oil States Energy Services LLC. v. Greene’s Energy Group. It’s no “ho-hum” case.

If you or your company has any issued patents or is worried that you may be infringing one or more patents owned by another company (e.g., a competitor), then you should care about this case. In fact, the Oil States case is so important that it is posed to become a landmark decision for the patent community.

What is this case about? The case involves the constitutionality of a U.S. Patent and Trademark Office (U.S. PTO) procedure known as inter partes review (IPR) which came into effect on September 16, 2012. IPRs are conducted by a entity within the U.S. PTO known as the Patent Trial and Appeal Board (PTAB). During an IPR, the validity of a previously granted U.S. Patent is assessed based on patents or printed publications (namely, the prior art). IPR decisions are made by technical specialists at the PTAB and not by juries. This is very different than in a court of law where decisions regarding the validity of patents are made mostly by juries. Since IPRs came into effect in 2012, hundreds of patents have been invalidated. While many infringers have challenged patents through the use of IPR, there have been reports of third parties gaming the system for unintended and potentially extortionary practices.

Regarding the actual case itself, in 2012, Oil States sued Green Energy for infringing U.S. Patent No. 6,179,053, directed to hydraulic fracturing technology. Green Energy responded by filing an IPR petition at the PTAB asserting that the patent was invalid based on certain prior art. The PTAB found the patent invalid. Oil States appealed to the Federal Circuit arguing that IPR proceedings violated Article III and the Seventh Amendment of the U.S. Constitution. The Federal Circuit rejected Oil States’ appeal and on November 23, 2016, Oil States further appealed to the Supreme Court. The only question to be considered by the Supreme Court is: “[W]hether 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.”

For those of you who may not recall what Article III of the U.S. Constitution, let alone the Seventh Amendment states, a quick refresher. Article III is the section of the Constitution that describes that the Supreme Court and the lower federal courts have the judicial power to decide all cases that arise under U.S. laws and the Constitution. The Seventh Amendment states that any controversy that exceeds a value of twenty dollars has the right to a jury trial.

According to Oil States, IPR proceedings are an administrative procedure within the U.S. PTO during which decisions are rendered by technical specialists at the PTAB. As a result, IPRs are unconstitutional because neither a jury nor an Article III forum renders the decision and historically, suits to invalidate patents have been tried before a jury in a court of law.

Given the importance of this case, it’s not surprising that the amount of interest in its outcome has been very high. So high in fact that fifty-eight amicus briefs have been filed in support for both parties, as well as briefs filed in support of neither party.

So, what will be the outcome? Good question. On one hand, using history as a guide, it has not been often that the Supreme Court has affirmed the Federal Circuit in a patent case. Given this rather bleak track record, this suggests that the Supreme Court will find IPRs unconstitutional. But, on the other hand, it seems hard to imagine that the Supreme Court will take a pro-patent position and dismantle the IPR procedure which to date, has resulted in the invalidation of such a large number of patents. Hopefully, the oral argument will provide some clarity.