Supreme Court Issues Multiple Decisions Regarding the Constitutionality and Scope of IPR Proceedings at the PTO
On April 24, the U.S. Supreme Court issued two widely anticipated decisions regarding inter partes review (“IPR”) proceedings. IPR proceedings are essentially a type of administrative trial conducted by petition to the U.S. Patent and Trademark Office (“PTO”), and may be brought by any one (except the patent owner) wishing to challenge the validity of a patent. The procedure was created by Congress in 2012 as part of the America Invents Act (“AIA”), in part as a response to the wide spread criticism that so-called “patent trolls” or non-practicing entities (“NPEs”) were using the federal courts to extract unwarranted settlements and damage awards based on flimsy patents. Since their creation, IPR proceedings have been an effective weapon for accused patent infringers, whether facing claims from NPEs or not, and the PTO’s Patent Trial and Appeal Board (“PTAB”) panels, which administer the procedure, have been referred to as “patent death squads.”
In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712, the Supreme Court held that IPR proceedings are constitutional, violating neither Article III of the Constitution nor the Seventh Amendment’s right to trial by a jury. In a 7-2 opinion written by Justice Clarence Thomas, the Court rejected Oil States’ position that an action to revoke a patent must be tried in an Article III court before a jury. The Court found that the grant of a patent is a matter involving public, versus private, rights, and that IPR is simply a reconsideration of the initial grant. Because Congress may properly assign adjudication of public rights to entities other than Article III courts, the IPR procedure does not violate Article III. The Court further held that the IPR procedure does not violate the Seventh Amendment’s guarantee of a right of trial by jury because the Seventh Amendment is not implicated where Congress properly assigns matters for adjudication outside of Article III courts. The Court emphasized the narrowness of its holding, and specifically noted that the retroactive application of inter partes review (i.e., the application of the IPR procedure to patents issued before passage of the AIA) had not been challenged. The Court further noted that whether IPR proceedings violate the takings clause or due process clause were not raised on appeal, thereby leaving open the possibility of future challenges on these grounds. Justice Gorsuch and Chief Justice Roberts dissented.
In a 5-4 decision in the second case, SAS Institute Inc. v. Iancu, No. 16-969, the Court held that once the PTO institutes an IPR, it must decide the patentability of all of the claims the petitioner has challenged. Under regulations issued by the PTO to administer the IPR procedure, the PTAB had determined whether to institute an IPR on a claim-by-claim basis, using a power of “partial institution.” Partial institution allows the PTAB to institute an IPR on less than all of the claims actually challenged by a petitioner. In an opinion written by Justice Gorsuch, the Court found that the PTO’s practice of partial institution violated the plain text of the AIA, which requires the PTAB—assuming an IPR trial proceeding is instituted and proceeds to a final decision—to issue a final written decision “with respect to the patentability of any patent claim challenged by the petitioner.” Thus, although the PTAB has discretion in instituting a trial, once it does so, any final written decision must address every remaining claim challenged in the petition. The Court dismissed the PTO’s counterarguments, including those based on questions of efficient administration of the procedure. Justices Ginsberg, Breyer, Sotomayor, and Kagan dissented.
The implications of the Court’s holding in SAS Institute for future IPR practice may be complex and will be closely watched. Because the PTAB will now be forced to review all challenged claims, presumably increasing the burden on panels, it is possible that the PTAB may begin exercising its discretion not to institute trials on certain petitions, even those with some meritorious arguments, if those petitions also contain a large number of weaker challenges. It is also possible that institution decisions will become much more simplified, with less guidance for the parties, as the PTAB begins instituting trial after determining that there is a reasonable likelihood that the petitioner will prevail with respect to only one challenged claim. One immediate impact is clear. Petitioners involved in pending trials that were instituted on less than all challenged claims should anticipate that the PTAB will seek to comply with the Supreme Court’s decision by re-incorporating the un-instituted challenges back into the proceedings. This may result in changes to the trial schedule.
In October 2017, Blank Rome's Intellectual Property practice and Partner James H. Hall were highly ranked in Patexia Inc.’s inaugural IPR Intelligence Report. To learn more about the Firm's inter partes review capabilities, please click here.