In 2012, Congress created a new procedure that allows the U.S. Patent and Trademark Office to conduct a litigation-like procedure to review and potentially cancel patents.  This procedure - inter partes review (“IPR”) - has been highly unpopular with patent holders who challenged the constitutionality of the system.  One of those challenges made its way to the U.S. Supreme Court, which recently addressed the issue in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC. 

The Decision

Oil States threatened to permanently end IPRs.  The challenge by Oil States, which owned the particular patent invalidated through an IPR proceeding, asserted that its patent rights had been extinguished in violation of Article III and the Seventh Amendment to the U.S. Constitution.  The Court rejected the constitutional challenge, but expressly left open other constitutional arguments ensuring that this is not the final word on the issue.

The Court noted that the separation of powers question under Article III is commonly resolved based on a distinction between “private” rights, which are adjudicated by an Article III court (i.e., a federal district court), and “public” rights, which can be adjudicated by a government agency.  The Court recognized that its precedent addressing “public” vs. “private” rights has not drawn a clear distinction, but concluded that IPR “falls squarely within the public rights doctrine.”  Having resolved that patents are a “public” right, the Court had little trouble concluding that IPRs do not violate Article III or the Seventh Amendment. 

Impact

The Oil States decision effectively upholds the status quo permitting the IPR process to continue as it currently exists.  The decision may nevertheless provide impetus for changes to the IPR system.  Many of the amicus briefs submitted to the Supreme Court emphasized perceived problems with the existing procedure.  Already, , the Patent Office has announced its intent to change the IPR claim construction standard that patent holders have argued is currently unfair, and we may see additional changes in the coming months based on public criticism aired in the Oil States briefing.

In addition, patent holders moved quickly to take advantage of language in the Oil States decision suggesting that other constitutional arguments are not foreclosed.  The Court went out of its way to state that the Oil States decision addresses only the precise issues raised in the case and that it does not address potential challenges under the Due Process or Takings Clauses.  Patent holders have already filed a new class-action lawsuit seeking more than a hundred million dollars in damages for patents that have been cancelled through IPR. 

The Oil States decision upheld the constitutionality of IPRs, but it did not end the disputes over this new procedure.