On Monday, June 12, 2017, the Supreme Court granted certiorari in Oil States Energy Services LLC v. Greene’s Energy Group, LLC, No. 16-712, to answer the question whether the PTAB could properly examine the validity of a patent in an inter partes review.

Oil States first filed an infringement suit against Green’s Energy Group in the Eastern District of Texas.  After roughly a year of litigation and after a Markman hearing in the district court, the defendant filed a petition for inter partes review of Oil States’ patent.  As a result of the two parallel proceedings, the PTAB and the district court both interpreted claim terms of the patent-at-issue, and interpreted some terms inconsistently.  The PTAB ultimately found Oil States’ patent invalid, and the Federal Circuit, on May 4, 2016, affirmed that decision without an opinion under Rule 36.  The Federal Circuit rejected a petition for rehearing on July 26, 2016.

Oil States’ petition for certiorari asks the Supreme Court to rule on a constitutional argument and two procedural arguments relevant to inter partes reviews before the PTAB: (1) whether patents are a property right that may not be revoked by the Executive Branch instead of a jury in an Article III court, (2) whether the PTAB’s stringent amendment process conflicts with Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016), and (3) whether the Supreme Court’s instruction for the PTAB to use the “broadest reasonable interpretation” when interpreting claims requires the PTAB to apply claim construction principles traditionally used by district courts.  The Supreme Court granted certiorari on the first issue only.

This issue has drawn the most public attention, and can have wide implications, for the possible effect this case might have on the popular PTAB inter partes reviews if the Supreme Court finds the proceeding unconstitutional.  Oil States’ argument is grounded in the Seventh Amendment of the Constitution guaranteeing a jury trial for suits brought at common law.  Oil States argues that because patent infringement cases –including patent validity – in 18th century England were adjudicated in courts of law, and patent rights are private property rights that exist “wholly apart from the government when granted,” patent validity can only be finally decided by Article III courts.

Greene’s Energy disputes Oil States’ characterization of patent rights as a private right that can only be adjudicated by an Article III court and jury.   First, historically, 18th century England tried patent disputes before a jury only where damages were sought.  Second, while patents may have some elements of a private right, it is “so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution.”  While the Constitution refers to patent rights, it delegated the establishment of the patent system to Congress, along with the right to decide which ideas are deserving of a patent.  Therefore, Greene’s Energy concludes, the agency which has the right to decide initially if a patent should be awarded should also be allowed to decide if a patent should be revoked.

Supreme Court and Federal Circuit case law are in conflict whether a patent is a public or private right.  In a 19th century case, McCormick Harvesting Mach. Co. v. C. Aultman & Co., 169 U.S. 606 (1989), the Supreme Court thought a patent has the same legal rights as other private property, and “is not subject to be revoked or canceled by the president, or any other office of the Government.”  Greene’s Energy disputes the applicability of McCormick, which predated post-issuance procedures at the USPTO.  Rather, Greene’s Energy relies on Federal Circuit case law finding USPTO post-issuance proceedings to be constitutional as the Federal Government has a right to cure a defect in a governmental action – namely a wrongly granted patent.  See Patlex Corp. v. Massinghoff, 758 F.2d 594 (Fed. Cir.) modified on other grounds on reh’g, 771 F.2d 480 (Fed. Cir. 1985); Joy Techs., Inc. v. Manbeck, 959 F.2d 226 (Fed. Cir.), cert. denied, 506 U.S. 829 (1992).

Per Oil States’ petition for certiorari, 80% of patents reviewed in an inter partes review are invalidated, having a cumulative effect on the U.S. economy on the order of hundreds of billions of dollars.  In at least three instances, the Supreme Court has refused to grant certiorari on this precise question, and, just last week, the Federal Circuit refused to grant an initial en banc hearing for a case also raising this issue.

If the Supreme Court does reverse the Federal Circuit here, it will once again upend the current patent litigation climate.  Both the breadth of its decision, as well as its applicability to the thousands of patents already invalidated in an inter partes review, will be issues to watch for as well.