Supreme Court Rules Inter Partes Review is Constitutional, for Now

by McDermott Will & Emery
Contact

McDermott Will & Emery

In Depth

In a 7-2 decision authored by Justice Thomas, the US Supreme Court held that inter partes review (IPR) proceedings—a congressionally created administrative processes in which the Patent and Trademark Office may reconsider and cancel patent claims that were wrongly issued—are constitutional. In doing so, the Supreme Court affirmed several Federal Circuit decisions. Oil States Energy Srvs., LLC v. Greene’s Energy Group, LLC, Case No. 16-712 (Supr. Ct., April 24, 2018) (Thomas, Justice) (Breyer, Justice, concurring) (Gorsuch, Justice, dissenting).

Background

The America Invents Act (AIA) created inter partes review (IPR) as a procedure by which “any person other than the patent owner” may challenge the validity of a patent on the basis of prior art. IPR proceedings are discretionally instituted by the Patent Trial and Appeal Board (PTAB or Board) and include many similar features to those found in Article III courts, including motion practice, discovery, depositions, cross-examination, evidence and an adversarial hearing before the Board. At issue for the Supreme Court was whether the revocation of a patent must be tried in an Article III court before a jury—thus rendering IPR proceedings unconstitutional.  Prior to appeal and certiorari, the challenged claims of the patent at issue were found valid in the district court, but invalid by the Board in a parallel IPR.

In the Federal Circuit decision from which certiorari was granted, and in two others—MCM Portfolio LLC v. Hewlett-Packard Co. (IP Update, Vol. 19, No. 1) and Cascades Projection LLC v. Epson America, Inc. (IP Update, Vol. 20, No. 6)—the appellate court held that IPR proceedings are constitutional. In MCM , the Federal Circuit concluded that patents were a “public right” in that they flow entirely from a legislative regime, and therefore Congress could grant their review. In Cascades, the Federal Circuit rejected en banc an appeal citing MCM, with the dissent arguing that a more comprehensive analysis as to whether patent rights were public rights or private rights was warranted.

The Supreme Court’s Decision

In upholding Congress’s authority to create IPR, Justice Thomas agreed with the appellate court that patents were indeed a public right, and that IPR “falls squarely within the public rights doctrine” and thus does not encroach on the judicial powers. Reasoning, in part, that the grant of a patent by the government (the PTO) “gives the patent owner the ‘right to exclude others from making, using, offering for sale, or selling the invention throughout the United States,’” the Court found that a grant of a patent akin to the grant of a “public franchise.” Moreover, the grant of a patent “is a matter between ‘the public,’ who are the grantors, and the patentee.”

Because an IPR is essentially “a second look” at this grant—made considering the same statutory requirements —it falls into this very same category. The Supreme Court further reasoned that Congress has long been able to grant a public franchise (such as a toll bridge) while reserving its authority to revoke or amend the franchise in an administrative proceeding. Likewise, Congress has authorized the PTO (as part of the Executive Branch) to grant patents, and the PTO grants patents subject to its authority (through the Board) to cancel them outside of an Article III court. The Court distinguished early cases, which declared patents could only be cancelled by courts, as describing a statutory scheme that existed prior to the current version of the Patent Act, and noted that the Patent Act specifically qualifies that any property rights an owner of a patent enjoys are “subject to the provisions of the [Patent Act].”

The Supreme Court rejected the argument that IPR violated Article III because of its extraordinary similarity to judicial proceedings, indicating that a “looks alike” test has never been adopted to determine whether an administrative procedure was improper outside of an Article III court. The Court also quickly dismissed an argument that IPR proceedings violate the Seventh Amendment’s right to a trial by jury, noting that it has long been established that the Seventh Amendment is no longer a bar to non-Article III adjudication of a matter once the matter has been properly assigned to the non-Article III adjudication.

The Dissent

The minority and majority opinions primarily wrestled with whether history and tradition established that patent validity must be decided by a court. Justice Gorsuch, writing for the minority, made an impassioned dissent that patents have always been considered personal rights that could only be revoked with the concurrence of independent judges, and that judicial independence from the acts of political appointees—no matter how well intended—was a fundamental promise provided by the framers.  Concerned with the witling away of individual rights by the political branches, Gorsuch focused on the time of the founding, wherein judges alone resolved virtually all patent challenges, and the conditioned grant of public franchises was disfavored as anticompetitive monopolies. While the majority countered that early English patents included a revocation clause, and a cited cases in which patents were revoked outside the courts by a Privy Council, the minority pointed out that these cases only applied to the revocation of patents on munitions during wartime.

The Court’s Limitations

The Court specifically noted that its decision addresses “only the precise constitutional challenges . . . raised,” and does not apply to whether infringement actions could be heard in a non-Article III forum, future due process challenges to IPR, or whether IPR would be constitutional “without any sort of intervention by a court at any stage of the proceedings”—surely setting the stage for further IPR related appeals. Perhaps alluding to a deficiency in the appellant’s position or a prediction of future direction, the Court also vociferously pointed out that the retroactive application of IPR (to patents granted before the AIA was enacted) was not formally challenged by the appellant, despite IPR not existing when the patent at issue was granted, and despite questioning as to whether IPR should be available retroactively for pre-AIA patents during oral arguments. With this statement, we are left with little doubt that there will be further constitutional challenges to IPR.

Practice Note

While this decision is surely not the curtain call on constitutional challenges to IPR, it certainly appears that IPR will be here for a while longer. It is notable that many, if not most, patents were granted before the AIA and IPR proceedings came into existence. The Court’s statements, including those regarding retroactive application, will likely be seen by many potential challengers as setting up the iconic ‘Bullet through the Apple’ for IPRs. We predict it won’t be long before we see how these challenges take shape.

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.

© McDermott Will & Emery | Attorney Advertising

Written by:

McDermott Will & Emery
Contact
more
less

McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.