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The Potential Impact of the Supreme Court’s Decision in Oil States

On November 27, 2017, in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, the Supreme Court will hold oral argument to determine the constitutionality of the inter partes review (“IPR”) process implemented by the America Invents Act.  Clearly, this case has the potential to drastically alter the patent litigation landscape if IPR is removed as a means for competitors and accused infringers to invalidate existing patents.  This post reports on certain petitions for certiorari filed following Oil States, which address the question of what would happen to patents that have already been invalidated in IPR proceedings if the Court finds IPR unconstitutional.

The Briefing in Oil States

Petitioner, Oil States Energy Services, LLC, filed a petition for certiorari to review the Federal Circuit’s affirmance of the PTAB’s decision invalidating its patent.  The Supreme Court granted certiorari as to the issue of “whether inter partes review— an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”

Petitioner argues that IPR violates Article III’s separation of powers and the Seventh Amendment’s right to a jury because only courts may adjudicate disputes involving private property rights. In opposition, Respondents, Greene’s Energy Group, LLC and the Department of Justice, argue that patent rights are public rights that are subject to the power of Congress. As such, IPR does not violate Article III or the Seventh Amendment because Congress has the authority to allow the USPTO to reconsider its decisions regarding patent grants.

Since its inception, accused infringers have frequently chosen the IPR process to attempt to invalidate patents and combat against both patent trolls and competitors.  Much to patent owners’ dismay, IPR tends to be favorable to petitioners and less forgiving for patent owners. As a result, IPR has affected patent owners across a wide swath of industries.  For that reason, the Supreme Court’s decision in Oil States could have a major impact on a host of different industries, which is reflected by the numerous amicus briefs and related petitions for certiorari that were filed following the Court’s grant of certiorari.

Of the 55 amicus briefs filed in this case, 21 support finding IPR unconstitutional while 24 support finding IPR constitutional. Although the numbers are nearly split, there do appear to be some trends amongst the briefs that have been filed. Generally, many large technology corporations such as Apple, Facebook, and Google, and generic pharmaceutical companies such as Mylan support IPR and argue in favor of finding the procedure constitutional. By contrast, many amici that favor the patent owner and seek to have IPR found unconstitutional were small business associations and inventors’ groups such as the Biotechnology Innovation Organization, the National Small Business Association and US Inventor, as well as brand-name pharmaceutical companies such as Allergan, AbbVie, and Shire Pharmaceuticals.

Petitions following Oil States: What happens to previously invalidated patents if IPR is held unconstitutional?

Several “piggy-back” petitions for certiorari have been filed in IPR cases since the Supreme Court granted certiorari in Oil States.  These petitions present the same question as Oil States—whether IPR is unconstitutional—and request that the Court hold the petition pending the decision in Oil States. Petitioners argue that if the Court finds IPR unconstitutional, then the PTAB had no authority to invalidate the patent, and therefore the holding should be vacated.  The Court has requested a response to several such petitions after respondents waived their right to respond.  See, e.g., Paice, LLC v. Ford Motor Co. (Nos. 17-113, 17-220); Affinity Labs of Texas, LLC v. Samsung Electronics Co., Ltd. (No. 17-116).

In some cases, the USPTO is acting as the respondent because the party that filed the IPR has dropped out of the case.  The USPTO has acquiesced to petitions raising the same question as Oil States­, agreeing that the Court should hold the petitions open until Oil States is decided.  See, e.g., Celgard, LLC v. Matal (No. 16-1526); Security People Inc. v. Matal (No. 17-214).

In contested cases, however, most respondents have argued that a decision in Oil States should not apply to their case.  Several respondents have argued that, even if the Court holds IPR unconstitutional, such a holding should not be applied retroactively. See, e.g., Affinity Labs, No. 17-116; Skky, Inc. v. MindGeek, S.A.R.L. (No. 17-349).

In several cases, the petitioner never challenged the constitutionality of IPR below, or waived that argument on appeal to the Federal Circuit.  In these cases, the respondents argue that the Court should deny the petition for certiorari rather than entertain the challenge for the first time.  Paice, Nos. 17-113, 17-220; Outdry Technologies Corp. v. Geox S.p.A (No. 17-408).[1] As one respondent argued, it is “not the Court’s usual practice to adjudicate either legal or predicate factual questions in the first instance.” Brief in Opposition, Outdry Technologies Corp. v. Geox S.p.A (U.S. Nov. 17, 2017) (No. 17-408) (quoting CRST Van Expedited, Inc. v. EEOC, 136 S. Ct. 1642, 1653 (2016)). Respondents make a good argument as the Supreme Court has repeatedly emphasized that it “is a court of final review and not first view.” Adarand Constructors, Inc. v. Mineta, 534 U.S. 103, 110 (2001). The Court has stated that “appellate courts ordinarily abstain from entertaining issues that have not been raised and preserved in the court of first instance.” See Wood v. Milyard, 566 U.S. 463, 473 (2012).  To allow a petitioner to raise this issue for the first time at the Supreme Court would undermine the due respect generally given to lower courts through the application of waiver rules. See id. In addition, waiver rules prevent unfair surprise to opposing parties and preserve judicial resources. In re Under Seal, 749 F.3d 276, 286 (4th Cir. 2014)

Respondents point out that, because the argument was waived, the petition can be denied regardless of the outcome in Oil States. When a party fails to make a timely assertion of a right before a court and thereby waives such a right, the Supreme Court has held that “[c]ourts may for that reason refuse to consider a constitutional objection even though a like objection had previously been sustained in a case in which it was properly taken.” Yakus v. United States, 321 U.S. 414, 444 (1944).

Cases in which the petitioner waived any objection to the constitutionality of IPR would be situated like others which are no longer “open on direct review.” In Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 97 (1993), the Court held that “[w]hen this Court applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct review and as to all events, regardless of whether such events predate or postdate our announcement of the rule.”  In closed cases, however, the decision from the IPR should remain intact regardless of the outcome of Oil States. See id. 

As one litigant has pointed out, “the need for finality dictates that ‘a new rule cannot reopen the door already closed.’”  Flir Response to Status Report by LSI, Leak Surverys, Inc. v. Flir Sys., Inc., No. 13-cv-02897, Dkt. 140 at 3 (N.D. Tex. Filed Oct. 24, 2017) (quoting James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 541 (1991)).

If the Supreme Court follows the reasonable approach of denying petitions where challenges to the constitutionally of IPR proceedings have been waived, fewer completed IPR cases could be undone by a decision in Oil States.

 

[1] Rothwell Figg represented Geox S.p.A in its successful invalidation of Outdry Technologies’ patent in IPR proceedings, and is now representing Geox in its response to Outdry’s petition for certiorari.