Patent Day at the Supreme Court

by Dorsey & Whitney LLP

Today the Supreme Court re-affirmed the validity of the Inter Partes Review (IPR) process in Oil States Energy LLC v. Greene’s Energy Group, LLC, but also made IPRs a somewhat more stringent process in its decision today in SAS Institute Inc. v. Iancu, which held that all claims challenged by a party bringing an IPR must decide the patentability of all challenged claims (no more partial institutions), making an IPR a more high-risk strategy for a party challenging a patent.  Oil States Decision

In Oil States, the Supreme Court held that a patent is a public right, i.e., a “public franchise.”  A patent is granted by the government, via the PTO, and can be taken away in a proper proceeding by the government, in this instance through an IPR.  Justice Thomas’ opinion was particularly straightforward on this issue, writing that, by issuing patents, the PTO takes away from the public rights of immense value (and something Congress could do on its own), and thus the legislative branch can decide whether to take away such public rights, as it has done by creating IPRs.  While the Supreme Court admitted that there were some times in American history where patents were considered “private rights” and that patent validity has traditionally been adjudicated in the courts within the confines of the 7th Amendment, that does not mean that the government cannot take legislative steps, as here, to also allow a panel of Administrative Law Judges (Article II) to narrowly determine a patent’s validity.  The citations to guarantees of a trial by jury were typically for disputes between private parties, the IPR is really between the government and the patent owner.  Just because an IPR “looks” like a trial does not mean it is a “trial”, rather it is an agency procedure like many others under Article II.  Justice Thomas used the analogy of a toll bridge, whose authority can be revoked by Congress.  (I guess Peter Detkin was on to something when he coined the term “patent troll”).

Justice Thomas delivered the opinion, in which 5 Justices joined.  Justice Breyer filed a short concurrence (joined by Justice Ginsburg and Justice Sotomayor), and Justice Gorsuch and Justice Roberts dissented, calling into question the entire IPR scheme because the patent grant is a fundamental American right so serious that the founders cited it in the Declaration of Independence and 19th century American courts rejected any effort to have anyone besides judges decide patent disputes.  Many commentators were expecting a 9-0 opinion, so this is a little bit of a surprise, especially given the oral argument where none of the Justices appeared particularly excited about dismantling the IPR system that had existed for the past 7 years and was a creative of the legislative branch.

In a companion case, SAS, the Supreme Court curtailed the viability of IPRs, which patent owners are hailing as a win despite IPRs expectedly being re-affirmed in Oil States.  The Court found that no support for the partial institutions that that PTO had created in 37 CFR Section 42.108(a), and abolished that practice.  The Court found the 35 U.S.C. Section 318(a) required that Patent Trial and Appeal Board (PTAB) “shall” conclusively determine the patentability of all challenged claims.  The Court denied that there was a discrepancy between the PTO’s decision whether to institute review based on claims found “in the petition” rather than requiring a resolution of the claims challenged “by the petitioner.”  The Court found that the different language was allowed merely to allow a patentee to cancel any challenged patent claim, not to allow the PTAB to decide something less than all challenged claims.  Justice Gorsuch found that there is a “clear answer” in Section 318(a), because the final written decision with respect to the patentability of “any” patent claim means, in this context, “every” claim.  Justice Gorsuch found support in distinguished IPRs from ex parte reexaminations, where the PTO has a different charter, whereas in an IPR, the petitioner has identified exactly which claims it challenges, so all such claims must be resolved in such a proceeding.  Justice Gorsuch rejected the PTO Director’s argument that there was discretion as to which claims to evaluate, finding that the legislative intent was to give the petitioner that power through their petition, not the Director.  If the PTO Director seeks that power, it should be decided by Congress.  SAS Decision

Interestingly, the Oil States opinion by Justice Thomas seems somewhat at odds with the SAS opinion by Justice Gorsuch in that Justice Thomas treats patent as public rights that can be administratively granted and revoked, where Justice Gorsuch (who dissented in Oil States), refers to IPRs as litigation, and appears to have ruled that the petition is governed by “litigation” rules.  Nowhere does the Supreme Court accord these distinctions, and possibly it was intentional.  The result is a balancing through today’s decisions, while the IPR regime stands, it is now an all or nothing proposition for a petitioner.  The estoppel rules for an IPR, finding that a party challenging an IPR is now estopped from challenging validity in a later court proceeding, take on much more importance because losing an IPR challenge is likely to vitiate most validity challenges in any later litigation.

Justice Gorsuch delivered the opinion, in which 4 Justices joined.  Justice Ginsburg delivered a short dissent asking why a partial institution is not feasible, and Justice Breyer delivered a dissent as to which Justice Ginsburg, Justice Sotomayor, and Justice Kagan all joined (except as to one part).  The dissent questioned whether the PTAB needed to decide all claims “in the petitioner’s original petition”, because that’s not what the statute says expressly.  They agreed with the PTO Director that the lack of that language allows the PTO discretion whether to finally resolve all claims or only some.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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