The Software IP Report
Oral Arguments in Oil States Energy Services v. Greene’s Energy Group: IPRs Look Safe
By Bryan Hart
11/28/2017
Categories: The Software IP Report
Yesterday, the Supreme Court heard oral arguments in Oil States Energy Services v. Greene’s Energy Group. The case centers on whether inter partes reviews are constitutional, and the Justices didn’t seem inclined to strike them down.
Oil States appealed an IPR decision by the Patent Trial and Appeal Board invalidating its patent to the Federal Circuit and then to the Court. The basis? IPRs violate the Constitution, namely, Article III and the Seventh Amendment. Article III reserves judicial power to the judicial branch, and, according to Oil States, IPRs count as a judicial power. Furthermore, the Seventh Amendment requires cases at common law, which actions to invalidate patents supposedly are, to be heard by juries. (For more on the background and the parties’ briefing, check out my webinar from earlier this month.)
The arguments focused solely on Article III, with the questioning kicking off about the possible broader effects of striking down IPRs. Justices Ginsburg and Sotomayor thought that the Patent and Trademark Office should be able to correct its mistakes and wondered whether it could still do so if IPRs were struck down. Allyson Ho, the counsel for petitioner Oil States, responded that reexaminations by the PTO were “fundamentally examinational and not adjudicational in nature,” unlike IPRs. A lengthy line of questioning ensued on the scope and propriety of that distinction, in which Justices Roberts, Kagan, and Kennedy joined.
Taking the opposite tack, Justice Gorsuch pushed for an expansive ruling: “why not just say anytime a private right is taken by anyone, it has to be through an Article III forum?” The Justice seemed untroubled—perhaps even excited—that a ruling for Oil States under this rationale would sweep away reexaminations and possibly other agency determinations along with IPRs. He appeared alone in his enthusiasm.
Along this line of argument, counsel for respondent Greene’s, Christopher Kise, noted that the arguments were about process rather than power; Oil States admitted that the PTO could have the power to revoke a patent and only disagreed with the process to do so.
The primary concern that the Justices expressed about IPRs was about upsetting settled expectations. Justice Breyer spun a hypothetical about a company investing billions in developing a patent over ten or more years; at what point do reliance interests kick in? Justice Gorsuch laid out a similar hypothetical involving a land patent held for generations. Kise responded that all in-force patents were acquired with knowledge that ex parte reexaminations or declaratory judgments could be used. Justice Roberts characterized the situation as “tak[ing] the bitter with the sweet” and noted that in other areas like public employment or welfare benefits, placing conditions was not permitted. Kise responded that those areas implicated due process, not Article III.
On the other hand, earlier in the questioning Justice Kennedy pointed out that Congress could arbitrarily shorten all patent terms to 10 years if it wanted, so patent owners couldn’t be said to rely too much on their settled expectations.
Another concern raised by the Justices was the occasional practice of the PTAB to add members to a panel to reach a different outcome than an initial panel. Numerous Justices expressed concern, and none of them spoke up in favor of the practice. Kise responded that the practice raised due process concerns, if anything. Ho noted that this is precisely why the cases should be heard in courts, which have constitutional protections against such meddling.
Takeaways
Overall, the Court looks likely to find IPRs constitutional. Only Justice Gorsuch clearly supported finding IPRs unconstitutional. Justices Ginsburg, Sotomayor, and Kagan all telegraphed their support, and other Justices shared their concern about how to distinguish reexaminations and other agency proceedings.