Oil States Energy Services, LLC v. Greene’s Energy Group, LLC

On November 27, 2017, the Supreme Court heard oral arguments in the Oil States Energy Services, LLC v. Greene’s Energy Group, LLC case.  The parties argued whether the inter partes review (IPR) process violates the Constitution by permitting a non-Article III court to invalidate patents. If the Court rules that the IPR procedure is unconstitutional, this popular form of adjudication will be eliminated and all patents previously invalidated in IPR proceedings will be restored. Many pharmaceutical products may be affected by this decision.

IPRs are trial-like adjudication proceedings introduced by the America Invents Act on September 16, 2012.  Congress was concerned with low quality patents and created IPRs to provide a rapid low-cost alternative to litigation.  They allow any party to challenge the validity of an issued patent based on published prior art.  The Patent Trials and Appeals Board (PTAB) of the U.S. Patent and Trademark Office conducts the proceedings between the patent owner and the petitioner who challenges the patent’s validity.  The PTAB is an “Article I” tribunal within the executive branch, not an “Article III” court within the judicial branch.

Oil States argued that IPRs are unconstitutional because patents are private property rights historically adjudicated by Article III courts.  Therefore, IPRs are an improper exercise of judicial power by an executive agency.  Oil States also argued that the IPR is not an adjudication of a public right because it is a proceeding between two private parties and not an action against a government agency.

Greene’s Energy argued that IPRs are constitutional because patents are public rights, rights that exist exclusively by an act of Congress to promote the progress of useful arts.  As such, these proceedings are rightfully conducted by the executive branch, merely with the assistance of a third party. IPR proceedings correct mistakes made by the USPTO in issuing “bad” patents.  Justice Sotomayor questioned whether there is really any constitutionality issue because IPR decisions are still under the purvey of the Article III court: IPR decisions can be appealed to the Article III appellate court.

The views on IPR proceedings are mixed.  Large technology firms like Alphabet’s Google and Intel Corp filed briefs in support of Greene’s Energy.  High tech industries are besieged by nuisance litigation from non-practicing entities known as “patent trolls” and so largely welcome the proceedings.  The reaction from the life science industry was far more mixed.  While the intent of IPRs was to provide an alternative to litigation, they have in practice provided alleged infringers with an additional chance to invalidate a patent, often resulting in duplicative adjudication.  The Pharmaceutical Research and Manufacturers of America (PhRMA), the Biotechnology Innovation Organization (BIO) and the Association of University Technology Managers (AUTM) have filed briefs in support of Oil States.

The U.S. Supreme Court justices appeared divided during the hearing.  The Court’s liberal justices appeared to support the constitutionality of the review process.  The conservative justices appeared concerned with non-judicial review.  The Court will likely issue a decision in the first half of 2018.