Summary of Oil States Decision

As reported in BPLA’s fall 2017 Newsletter, the BPLA filed an amicus brief in the Supreme Court case, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, et al., along with dozens of other amici. The question presented was “[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.” The BPLA argued in support of neither party, advocating instead for a more measured position that, contrary to the positions of the parties and other amici, patents are neither purely private nor purely public rights. While the BPLA maintained that IPR is constitutional, the BPLA urged the Court not to “alter or overturn decades of precedent or upset the federal regulatory scheme as properly established by Congress.”

On April 24, 2018, the Supreme Court issued its decision, 7-2, holding that IPR does not violate either Article III or the Seventh Amendment. Justice Thomas delivered the majority opinion of the Court, joined by Justices Kennedy, Ginsburg, Breyer, Alito, Sotomayor, and Kagan. Justice Breyer filed a one-paragraph concurring opinion, joined by Justices Ginsburg and Sotomayor. Justice Gorsuch filed a dissenting opinion, joined by Chief Justice Roberts.

The majority held unequivocally that “[i]nter partes review falls squarely within the public-rights doctrine.” The Court explained: “The Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.” Slip Op. at 6-7. Likewise, the Court found that IPR does not violate the Seventh Amendment because it is a matter that Congress can properly assign to the PTO. Id. at 17.

The Court did not find Oil States’ arguments about allegedly contravening prior decisions that recognized patent rights as “private property” to be persuasive. The Court reiterated that patents convey a form of property right—a public franchise—which meant that the patent can confer only the rights that are prescribed by statute (i.e., the Patent Act). Slip Op. at 10. The Court also distinguished its prior decisions that included broad declarations regarding the power to revoke a patent by pointing out that, at the time of those decisions, the Patent Act did not include any provisions for post-issuance administrative review.

Likewise, the Court was not convinced that IPR is unconstitutional because patent validity had been decided by the English courts of law in the 18th century. The Court pointed out that in fact, there was mechanism even in 18th-century England that resembled IPR—a petition to the Privy Council to vacate a patent. Sip. Op. at 13. The Court found that “it was well understood at the founding that a patent system could include a practice of granting patents subject to potential cancellation in the executive proceeding of the Privy Council.” Id. at 14. The Court also rejected the dissent’s view that simply because validity was traditionally adjudicated in courts that “courts must forever continue to do so.” Id.

The Court similarly rejected a “looks like” test to determine if an adjudication is proper under Article III. The Court held that the “fact that an agency uses court-like procedures does not necessarily mean it is exercising the judicial power.” Slip Op. at 15.

Finally, the Court emphasized the narrowness of its current holding as relating solely to the Article III and Seventh Amendment challenges brought by Oil States, leaving open the question of whether IPR could be challenged on due process or procedural grounds in the future. Slip Op. at 16-17.

Justice Breyer’s one-paragraph concurrence noted that the opinion should not be read to say that matters involving purely private rights could never be adjudicated in non-Article III courts, as the Court’s precedent is to the contrary.

Justice Gorsuch’s dissent delved into the problems with the IPR system and the issues arising from a political, non-article III tribunal such as the Patent Trial and Appeal Board. Justice Gorsuch disagreed strongly with the majority’s view of the English law precedent, writing that “[t]he law requires us to honor those historical rights, not diminish them.” Dissent at 11. In Justice Gorsuch’s view, the majority’s decision “signals a retreat from Article III’s guarantees” and “the loss of the right to an independent judge is never a small thing.” Id. at 12.

 

This article previously appeared in the Boston Patent Law Association's Spring 2018 Newsletter.