Supreme Court Rejects Constitutional Challenge to Patent Review Process in Oil States Energy Services, LLC v Greene’s Energy Group, LLC

In Oil States Energy Services, LLC v Greene’s Energy Group, LLC, 584 U. S. ____ (2018), the U.S. Supreme Court held that inter partes review does not violate Article III or the Seventh Amendment to the U.S. Constitution. In one of the most highly-anticipated intellectual property cases of the term, the Court rejected the argument that the administrative patent review process is an exercise of “judicial power” that should be reserved to the federal courts under Article III.

Article III of the Constitution

Under Article III, the judicial power of the United States is vested “in one Supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” Accordingly, Congress cannot “confer the Government’s ‘judicial Power’ on entities outside Article III.” Stern v. Marshall, 564 U. S. 462, 484 (2011).

When determining whether a proceeding involves an exercise of Article III judicial power, Supreme Court precedents have distinguished between “public rights” and “private rights.” As explained in Ex parte Bakelite Corp., 279 U. S. 438, 451 (1929), the public-rights doctrine applies to matters “arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.” Congress has significant latitude to assign adjudication of public rights to entities other than Article III courts.

Facts of Oil States Energy Services, LLC v Greene’s Energy Group, LLC

Inter partes review, an administrative review process implemented under the America Invents Act (AIA), authorizes the United States Patent and Trademark Office (USPTO) to reconsider and cancel an already-issued patent claim in limited circumstances. Any person who is not the owner of the patent may petition for review. If a review is instituted, the process entitles the petitioner and the patent owner to conduct certain discovery; to file affidavits, declarations, and written memoranda; and to receive an oral hearing before the Patent Trial and Appeal Board. A final decision by the Board is subject to Federal Circuit review.

Oil States Energy Services, LLC, obtained a patent relating to technology for protecting wellhead equipment used in hydraulic fracturing. It filed a patent infringement suit against Greene’s Energy Group, LLC, in Federal District Court. Greene’s Energy challenged the patent’s validity in the District Court and also petitioned the PTO for inter partes review. Both proceedings progressed in parallel.

The District Court issued a claim-construction order favoring Oil States, while the Board issued a decision concluding that Oil States’ claims were unpatentable. Oil States appealed to the Federal Circuit. In addition to its patentability arguments, it challenged the constitutionality of inter partes review, arguing that actions to revoke a patent must be tried in an Article III court before a jury. While the case was pending, the Federal Circuit issued a decision in a separate case, rejecting the same constitutional arguments raised by Oil States. The court then summarily affirmed the Board’s decision in this case.

Supreme Court’s Decision in Oil States Energy Services, LLC v Greene’s Energy Group, LLC

The Supreme Court affirmed the Federal Circuit’s decision by a vote of 7-2. It agreed that inter partes review does not violate Article III or the Seventh Amendment of the Constitution. Justice Clarence Thomas wrote on behalf of the majority.

According to the majority, “[i]nter partes review falls squarely within the public rights doctrine.” Justice Thomas further explained:

This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

The Court also held that inter partes review does not violate the Seventh Amendment. Citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989), Justice Thomas highlighted that when Congress properly assigns a matter to adjudication in a non-Article III tribunal, “the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.” Consequently, the Court ruled that its rejection of Oil States’ Article III challenge also resolved its Seventh Amendment challenge.

In its opinion, the Court emphasized that its ruling was confined to the constitutionality of IPR proceedings. Justice Thomas specifically noted that that “Oil States [did] not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued.” The Court’s decision also noted that it did not address other potential challenges to IPR proceedings, such as those under the Due Process Clause and the Takings Clause. “The decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause,” Justice Thomas wrote.