Supreme Court Could Dismantle Popular Patent Challenge Next Term

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By Tony Dutra

The U.S. Supreme Court this term could dismantle a patent review program that has brought the biggest change to patent law in the last 65 years.

The court will determine whether inter partes review (IPR) proceedings—which allow parties to challenge whether the Patent and Trademark Office properly issued a patent—is unconstitutional.

IPR proceedings, first made available five years ago when the America Invents Act was implemented, have led to the cancellation of tens of thousands of patent claims, primarily in the software and life sciences industries, by the PTO’s Patent Trial and Appeal Board, an executive branch body.

Stakeholders have filed 31 friend-of-the-court briefs reviewing petitioner Oil States Energy Services LLC’s (OSES) argument that a patent is a private property right that can only be revoked by a federal court, not by the PTO ( Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC , U.S., No. 16-712, briefs filed 8/31/17 ). Companies and individual inventors with patents contend that patent rights include the Seventh Amendment right to a jury trial, which is not provided for in a PTAB proceeding before administrative patent judges.

On the other side are the Silicon Valley heavyweights and generic drug manufacturers that have used IPR proceedings as a way to avoid the higher hurdle for showing patent invalidity in court. A federal judge and jury must presume the patent is valid and require clear and convincing evidence to the contrary. The AIA set up the IPR proceeding without the presumption of validity, with the challenger’s burden of proving invalidity by an easier standard, the preponderance of the evidence.

Counterarguments by Greene’s Energy Group LLC, the successful challenger to OSES’s U.S. Patent No. 6,179,053, which relates to protecting wellheads during fracking, and the U.S. Office of the Solicitor General, are due by the end of October. Several more amicus briefs supporting the AIA’s constitutionality are expected then as well.

The court has not yet set a date for oral arguments, but it should be before the end of this year, with a decision before June 2018.

Conservative, Libertarian Views

Of the briefs filed to date, 22 explicitly support the position that IPRs—and by extension, a significant piece of the AIA—are unconstitutional. Conservative and libertarian organizations have joined in the conversation, with concerns about government overreach. The other nine briefs state support for neither party but, for the most part, support IPR constitutionality.

The difference may well boil down to a ruling on the fundamental nature of a patent—as a government authorized carve-out from the public domain or as private property, once the patent is granted by the PTO.

The Intellectual Property Owners Association did not weigh in on the constitutionality of the IPR proceeding, which allows challengers to bring up prior art that the original patent examiner didn’t find or adequately address. But the IPO implored the court to overturn the current view of the U.S. Court of Appeals for the Federal Circuit, stated in MCM Portfolio LLC v. Hewlett-Packard Co., that patents are “public rights” existing only through a statutory grant.

Others buttressed the unconstitutionality argument with complaints about the way the PTO implemented IPR and other proceedings authorized under the America Invents Act. “While any one of the procedural flaws in the IPR process may not be sufficient to render it unconstitutional, when taken together, the failures mean that the IPR process is not constitutionally permissible without significant reforms,” according to the Biotechnology Innovation Organization and the Association of University Technology Managers.

PTO as Midwife and Executioner

Critics often call the PTAB a “death squad” because of the high rate of patent claims that it kills, but the phrase was originally used to describe the constitutional questions about the board’s role.

Former Federal Circuit Chief Judge Randall R. Rader coined the term in 2013, before any IPR was decided. He meant it in a way that underlies the constitutional argument, that it is wrong to have the PTO with “7,000 people giving birth to property rights"—referring to the patent examiner corps—while PTAB judges are “acting as death squads, killing property rights.”

But the phrase is now almost solely used to explain the statistics on PTAB rulings on the merits—at least some patent claims are canceled in 82 percent of the board’s “final written decisions.” But if the statistics were reversed and patent owners were winning 82 percent of the time, the public right versus private property question would remain.

Staying true to the underlying concern, 39 “affected patent owners” echoed Rader’s view. “In asserting the role of both midwife and executioner, the PTO breaks from its own longstanding tradition,” according to their brief. “There can be no ‘secure’ right while the PTO controls both the grant and revocation.”

Compromise Position?

The Supreme Court has at least one compromise position to consider. The Intellectual Property Law Association of Chicago (IPLAC) contended that the AIA implementation date, Sept. 16, 2012, represents a demarcation point in the country’s patent system.

The turning point is somewhat supported in that lawmakers and stakeholders alike commented that the AIA’s passage represented the biggest change in patent law since the enactment of the Patent Act of 1952.

IPLAC lays out the question in terms of the PTO’s rights as to follow-on action after a patent issues. Prior to the AIA, the Patent Act gave the PTO no such rights, according to the association’s brief. But the AIA changed the nature of the PTO’s ongoing involvement. From the implementation date, the PTO’s grant is better characterized as only an “issue-from-examination … while-subject-to-further-processes-of securement,” IPLAC said.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

For More Information

OSES's brief is available at http://src.bna.com/r4i.

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