U.S. Supreme Court Reviews Inter Partes Review In Oil States And SAS Oral Arguments 
 

On November 27, 2017, the U.S. Supreme Court heard oral argument in two cases dealing with the United States Patent and Trademark Office inter partes review (IPR) proceedings that were created in the America Invents Act in 2011.  IPRs have been a frequent topic of discussion in the U.S. intellectual-property community since they began; the general impression is that they are a very useful and very effective way of invalidating issued patents, but there is also concern among patent owners that IPRs may be too effective, invalidating patents that a District Court judge or jury would have upheld.

In the first of the two cases, Oil States Energy Services v. Geene’s Energy Group, No. 16-712,  the Court had granted certiorari to consider IPRs in the context of separation of powers:  can an administrative agency (the Patent Office) invalidate a patent, or is that a determination reserved to Article III courts?  Numerous amici submitted briefs on both sides of the question, and while the Supreme Court had granted certiorari only on the separation-of-powers issue, the parties and amici raised due process and Seventh Amendment arguments as well.

The appellant argued in its papers that IPRs are essentially a judicial undertaking between the patent challenger and the patent owner, with discovery and written argument leading to what the statute calls a “trial.”  During the argument, Justices Kagan and Gorsuch challenged the appellant to explain why IPRs are unconstitutional, but reexaminations (Patent Office revocation and amendment proceedings that have been in existence since 1981) are not, with Justice Kagan perhaps taking the view that since reexaminations are permissible, so must IPRs be, while Justice Gorsuch seemed to approach the issue from the opposite direction:  if IPRs are unconstitutional, so must be reexaminations, despite their much longer history. 

The appellee and the government both took the position that IPRs are a permissible way for an executive agency simply to correct its own mistakes, an argument that in the courtroom seemed to resonate strongly with Justices Ginsburg and Sotomayor.  Justice Breyer, however, raised the hypothetical question of whether an agency could correct a mistake by revoking even a patent “that has been in existence for 10 years and, moreover, the company’s invested $40 billion in developing it.  And then someone comes in and says:  oh, oh, we -- we want it reexamined, not in court but by the Patent Office.”  The reliance interest that Justice Breyer invoked is typical of the way that arguments about fairness permeated both the briefing and the oral argument, despite the much narrower ground—separation of powers—upon which certiorari was granted. 

It certainly was not clear from the argument what the Court’s decision will be.  However, it was evident that some justices at least instinctively see nothing wrong with an executive agency undoing its own acts, while on the same facts other justices instinctively see an agency usurping the Article III courts’ role.  Lurking in the background, of course, is the proper role of the administrative state in American government.

The second of the two cases, SAS Institute v. Matal, No. 16-969, seemingly presented much less controversial questions.  The Patent Office’s practice now is often to decide the patentability of only some of the patent claims the patent challenger targeted in its IPR petition to the Office.  The appellant’s contention in SAS was that pursuant to the IPR enabling statutes, e.g., 35 U.S.C. § 318(a), the Patent Office must render a decision on all challenged claims, not just some of them, while the government contended that the current Patent Office practice is a permissible  implementation of the IPR structure Congress prescribed.  The issue is an important one for both patent owners and patent challengers.  Right now, a challenger can attack several claims, and the Office can elect to render a final written decision on only some of them, the results being (i) the challenger must go to District Court to attack the remaining claims, but (ii) the challenger is not estopped from attacking the remaining claims in District Court.  (The statute provides that if the Office issues a final written decision that a claim is patentable, the challenger in the IPR is in essence estopped from challenging the same claim again in court.)  If the Office is required to address all of the claims challenged in the request, then patent challengers can be more certain that an IPR would resolve their dispute, but at the same time patent challengers would have to be much more cautious about which claims they attack in their petition.

How a decision either way in this case would affect IPR practice is difficult to predict.  It would probably have opposite effects in different cases, depending on counsel’s choice of strategies, so in some cases, it would make parallel IPRs and District Court litigation less likely, while in others it would encourage two parallel proceedings, each directed to different claims.  Regardless, the justices seemed skeptical of the appellant’s reading of the statute, and based on the argument it seems most likely that the Office’s current practice will be allowed to continue—assuming that IPRs themselves survive Oil States.