Oil Battles Greene Energy to War Over Inter Partes Review in the Supreme Court
Here is a case on the Supreme Court docket that could become a landmark decision for the patent community. Oil States Energy Services LLC v. Greene’s Energy Group is the first time the Court has agreed to review the constitutionality of inter partes review (IPR). Over thirty amicus curiae briefs have been filed in this high-profile case that could greatly impact patent infringement and litigation practices. The Court granted a writ of certiorari to Oil States on June 12, 2017, and has set a date for argument next month on November 27. As we look forward to the decision, we review here the critical details of the case.
Beginnings of Oil States Energy Services LLC v. Greene’s Energy Group
In 2012, Oil States sued Green’s Energy for infringing a hydraulic fracturing technology patent (U.S. Patent No. 6,179,053, also referred as ‘053 patent). In turn, Greene’s Energy responded by filing an IPR petition to the Patent Trial and Appeal Board (PTAB), asserting that the patent was invalid because it was not in any way different from other similar technologies. The PTAB decided that the patent was indeed invalid, and the patent was nullified. Oil States appealed to the Federal Circuit arguing that IPR proceedings violate Article III and the Seventh Amendment of the U.S. Constitution, but was unsuccessful. On November 23, 2016, Oil States appealed to the U.S. Supreme Court. [Oil States Energy Services LLC v. Greene’s Energy Group, LLC., 639 Fed. App’x 639 (Fed. Cir 2016), cert. granted, 198 L. Ed. 2d 677 (U.S. Jun. 12, 2017) (No. 16-712)]
What is inter partes review?
Inter partes review is a procedure conducted by the PTAB of the US Patent and Trademark Office (PTO), in which they reexamine the validity of an already-granted U.S. patent based on prior art (patents or printed publications). It is a revised post-grant opposition procedure that went into effect as part of the America Invents Act (AIA) on September 16, 2012. IPR decisions are made at the PTAB by technical specialists, not juries. IPR proceedings are intended to provide a mechanism to reevaluate and invalidate already-granted “bad” patents that may have been issued due to insufficient searching of the prior art. The aftermath of permitting IPR proceedings, however, has been far more than just filtering out legitimate patents. Because of the IPR proceedings, many patent owners have lost their patents. Alleged infringers have challenged patents through the IPR mechanism, which in due course the original patents were invalidated. Additionally, there have been supposed instances of parties gaming the IPR procedure for unintended and potentially extortionary practices.
The Seventh Amendment, in short, states that any controversy that exceeds a value of twenty dollars has the right to jury trial. Article III of the U.S. constitution describes that the Supreme Court and the lower federal courts have the judicial power to decide all cases that arise under United States laws and the Constitution. Since IPR decisions are an administrative procedure made by the technical specialists at the PTAB, and not by a jury, patent owners with nullified patents have claimed that the IPR procedure is unconstitutional because neither a jury nor an Article III forum have rendered the decision. Oil States asserted that IPR proceedings violate constitutional rights because historically, “suits to invalidate patents have been tried before a jury in a court of law.” Other patent owners have previously appealed to challenge the constitutionality of PTO post-grant proceedings. Before Oil States, however, they were all rejected by the Federal Circuit.
Questioning IPR at the Court: MCM Portfolio LLC v. Hewlett-Packard Co.
MCM Portfolio LLC v. Hewlett-Packard Co. is a case in which the constitutionality of IPR and ex-parte reexamination were questioned at the Federal Circuit. The Federal Circuit ruled that IPRs do not violate Article III nor the Seventh Amendment of the constitution. The decision held that the right to a jury trial “is generally inapplicable in administrative proceedings,” and the Congress “is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation.” The Court upheld the PTO’s practice on invalidation of patents because the PTO is “an executive agency with specific authority and expertise” created by the Congress to serve for an important public purpose, which includes correcting “the agency’s own errors in issuing patents in the first place.” [MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015)] In fact, this decision agrees with a 1985 Federal Circuit decision in Patlex Corp. v. Mossinghoff – long before the AIA was passed – that ex-parte reexamination does not violate the Seventh Amendment nor Article III of the Constitution.
Past IPR challenges: McCormick Harvesting Mach. Co. v. Aultman & Co., Markman v. Westview Instruments, Inc., and Cuozzo Speed Technologies, LLC v. Lee
In the past, however, the Court guaranteed a jury and an Article III forum for patent invalidations. Here are few cases that Oil States cited in their petition for writ of certiorari to explain why IPR is not constitutional.
Oil States cited a very old case, McCormick Harvesting Mach. Co. v. Aultman & Co., to insist against the constitutionality of IPR proceedings. In McCormick, the Supreme Court held that once a patent is granted, it “is not subject to be revoked or canceled by the president, or any other officer of the Government” and that “the only authority competent to set a patent aside, or to annul it, or to correct it for any reason whatever, is vested in the courts of the United States, and not in the department which issued the patent.” [McCormick Harvesting Mach. Co. v. Aultman & Co., 169 U.S. 606 (1898)]
Fast forwarding nearly one hundred years, in 1996, the Supreme Court held that patent infringement cases have the rights to a jury trial and an Article III forum. In the case of Markman v. Westview Instruments, Inc., the Court ruled that patent “infringement cases today must be tried to a jury, as their predecessors were more than two centuries ago.” [Markman v. Westview Instruments, Inc., 517 U.S. 370, 377 (1996)] Referring to this decision, Oil States affirmed that “at minimum, the Constitution requires that an Article III judge adjudicate all cases in law and in equity arising under federal law.”
Recently, in 2016, the Court declared in the case of Cuozzo Speed Technologies, LLC v. Lee that for IPR proceedings the PTAB may utilize a “broadest reasonable interpretation (BRI)” standard as the basis for their review. Oil States contends that there is a constitutional conflict in this decision. They stated that according to the USPTO, BRI allows a patent holder “to engage in [a] back-and-forth process for amending the patent”; however, IPR does not allow this and thus “even if patent owners have no right to an Article III forum, they must receive a fair opportunity to be heard.” [Manual of Patent Examining Procedure (M.P.E.P.) § 2258(G)]
A Potential Game Changer? SAS Institute v. Lee
SAS Institute v. Lee is an interesting on-going IPR case in which the Supreme Court will decide whether the PTAB should be required to provide a written decision for every claim they review. Although this case does not directly point to the constitutionality of IPRs, the Court’s decision will affect the way IPR decisions are handled. In the future, if the PTAB must offer a final written decision for every claim they review, then petitioners will have a practical ability to appeal these decisions. On the other hand, if the Court sides with the PTAB, then patent owners must continue appealing to the Federal Circuit with their patents already nullified.
-Shin Hee Lee and Anthony Sabatelli, PhD, JD
Shin Hee Lee is a Ph.D. Candidate in the Chemistry Department at Yale University. She is currently associated with the Yale Energy Sciences Institute, where she specializes in organic synthesis of novel light-harvesting dye molecules for solar cells. Prior to attending Yale, Shin Hee obtained her B.S. in Chemistry with High Honors at the University of Michigan – Ann Arbor, during which she published patents and papers on developing synthetic methodologies for fluorinated small molecules.
This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. The opinions expressed in this article are those of the author only and are not necessarily shared by Dilworth IP, its other attorneys, agents, or staff, or its clients.