Oil States Energy Services LLC v. Greene”™s Energy Group, LLC (2018)

On April 24, 2018, the Supreme Court of the United States (“Supreme Court”) held in Oil States Energy Services LLC v. Greene”™s Energy Group, LLC, that an inter partes review (“IPR”) by the Patent Trial and Appeal Board (“PTAB”) does not violate Article III or the Seventh Amendment of the U.S. Constitution.  Following up on this case from our article in our firm”™s Summer Newsletter 2017, we provided that a reversal will have significant ramifications for defendants in a patent infringement lawsuit and will tip the scales in favor of the patent owner.  The Supreme Court, however, affirmed the judgment by the United States Court of Appeals for the Federal Circuit. 

With Justice Clarence Thomas classically writing the majority opinion for this patent case, the Supreme Court concluded that “[i]nter partes review falls squarely within the public rights doctrine.”  Op. at 6. The opinion terms patents as “public franchises,” adding that patents are “creatures” of statutory law and do not exist in common law. A patent is granted by the government to the corresponding inventor after an examination of patentability of the patent. The opinion then reasoned that even though an IPR occurs after the patent grant, an IPR is no different than an initial examination of patentability of a patent. It “involves the same interests as the determination to grant the patent in the first instance,” as it “protects ”˜the public”™s paramount interest in seeing at patent monopolies [is] kept within their legitimate scope.”™”  The opinion then provides that public franchise “can be qualified in this manner” ”“ that government can exercise its authority to revoke or amend the franchise through legislation or administrative proceedings.

The opinion then analyzed Oil States”™ argument that patent rights are private rights, providing that the cases cited by Oil States did not contradict the Supreme Court”™s conclusion. Even though the cited cases foreclose any post-issuance administrative review, those cases were decided under the Patent Act of 1870, a version of the Patent Act that did not have any provision of post-issuance administrative review. The opinion then argued against Oil States and the dissent, stating that even though patent validity was often decided in the English courts of law in the 18th century, those courts had a mechanism to cancel patents: a petition to the Privy Council to vacate a patent. Finally, the opinion disclaimed Oil States”™ argument that IPRs violate Article III because IPRs share characteristics associated with proceedings in Article III courts. The opinion provided that the judgments are different ”“ that IPRs do “not make any binding termination regarding” liability. The end of the Article III analysis “emphasize[d] the narrowness of [their] holding.” It explicitly provides no opinion on several issues, such as infringement actions being heard at a non-Article III court, due process challenges, and the constitutionality of IPRs being retroactively applied to patents issued before the America Invents Act.

The end of the opinion then provides that, because an IPR does not violate Article III, a jury is not needed in IPR proceedings. Thus, IPRs do not violate the Seventh Amendment.

Following the Oil States decision, a patent is a government franchise, not property. Additionally, IPRs and the PTAB are here to stay.  Patent infringers can take a breath of fresh air, knowing that there will still be a line of defense before trial at district court. However, patent infringers will probably have to be more strategic on what they raise at the PTAB after the decision in the Supreme Court SAS v. Iancu.