Supreme Court Upholds IPRs in Oil States

On Tuesday, the Supreme Court released its opinion in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, holding that the inter partes review procedure does not violate Article III of the Constitution. The Court maintained the status quo, and IPRs are still a viable route for defending against or attacking a patent.

The path to the Supreme Court began with an infringement suit. Oil States and Greene’s compete in supplying equipment for oil and gas extraction, and Oil States sued Greene’s for infringing U.S. Patent No. 6,179,053, which covers a wellhead for hydraulic fracturing. Greene’s—like many defendants—petitioned the Patent Trial and Appeal Board to institute an IPR and invalidate the ’053 patent. The PTAB did so, and the appeals climbed to the Supreme Court, winnowing to this Question Presented: “Whether IPRs violate the Constitution by extinguishing private property rights through a non-Article III forum without a jury.” In other words, is invalidating a patent the type of issue that must be heard by a court instead of an administrative agency? If so, must that court use a jury? (For additional background, check out my webinar discussing the briefing.)

The Court answered “no” by a 7-2 margin, holding that IPRs violated neither Article III nor the Seventh Amendment. Justice Thomas authored the majority opinion. As predicted on this blog, Justice Gorsuch dissented, joined by Justice Roberts.

The majority focused on the public rights doctrine, a significant exception to the statement in Article III that “[t]he judicial power of the United States shall be vested in” the courts. All the parties agreed that issuing patents fell within the public rights doctrine, and rescinding patents is not relevantly different; thus, rescinding patents also falls within the public rights doctrine. The majority referred to patents as public franchises and noted that the executive and legislative branches can apply conditions to franchises. Oil States had cited some cases from the 19th century with language referring to patents as private property, but the majority interpreted these cases as discussing the status of patents under the 1870 Patent Act, not the Constitution.

The other significant argument dealt with whether, at the time of the Constitution, rescinding a patent would have been understood as encompassed by “judicial power.” The historical arguments focused on the Privy Council, which was a body of advisers to the King of England. The majority noted that the Founders would have known that the Privy Council—an executive agency—had long had the power to rescind patents and had done so in the 18th century.

The majority dismissed as irrelevant to any test an argument about how “courtlike” IPR proceedings are, and the majority held that, since the Seventh Amendment test is strictly narrower than the Article III test, the Seventh Amendment was also not violated.

To end its decision, the majority cautioned about what the Court had not decided. All in all, the Court intentionally issued a narrow decision. For example, “this case does not require us to add to the ‘various formulations’ of the public-rights doctrine.” Moreover, the Court listed issues it had not decided: whether infringement can be heard in a non-Article III forum, whether IPRs would be constitutional without Federal Circuit review, whether retroactive application of IPRs is constitutional, how due process may constrain IPRs, and whether patents are property for the purposes of the Due Process Clause and Takings Clause.

The dissent emphasized the reliance interests of patent owners before transitioning to a historical argument. Justice Gorsuch essentially asked how you would feel if someone took away your patent that you worked really hard on. On the historical side, the dissent argued that the overwhelmingly common route for invalidating a patent in the 18th century was the court system. The Privy Council was basically defunct before the Constitution was ratified, and the last few cases that the Privy Council decided dealt with munitions during wartime, making those decisions atypical.

Lessons for Practice

The biggest takeaway, of course, is that the status quo has been upheld: IPRs still exist. An accused infringer (or anyone else who has reason to dislike a particular patent) still has the option of petitioning the PTAB for an IPR to invalidate the patent.

The other point to keep in mind is the narrowness of the Court’s decision. When practicing at and appealing from the PTAB, the issues that the Court explicitly didn’t decide may provide viable grounds for appealing an adverse PTAB decision.