Silicon Valley is applauding a Supreme Court ruling announced early today which held 7-2 that inter parte reviews ("IPRs") do not violate the US Constitution and that the Patent Trial and Appeal Board has the authority to invalidate patents. A copy of the decision is linked here.
The "inter partes review" process was enacted in 2011 by the Leahy-Smith America Invents Act, 35 U.S.C. Section 100, which was widely referred to as "Patent Reform". Pursuant to the process, the United States Patent and Trademark Office ("USPTO") was authorized to reconsider and cancel issued patent claims.
As Reuters reports, inter partes review was intended to "handle the perceived high number of flimsy patents issued by the patent office in prior years." Since 2011, Reuters reports that the Patent Trial and Appeal Board has "cancelled all or part of a patent in eighty percent (80%) of its final decisions." For this reason, IPR has become a favorite tool of Silicon Valley technology companies in the fight against patent trolls, as IPR can resolve patent infringement disputes without the expense of a trial.
At issue in the present case was whether actions to revoke a patent must be tried in an Article III court before a jury.
The case arose out of a patent infringement suit over an oil industry patent. Petitioner Oil States Energy, Services, LLC, was the holder of a patent relating to technology for protecting wellhead equipment used in hydraulic fracturing and sued Greene's Energy Group, LLC for patent infringement. In response to the suit, Green's Energy challenged the validity of the patent in District Court and petitioned the USPTO for inter partes review. The District Court issued a decision favoring Oil States while the USPTO issued a decision that Oil States' claims were unpatentable. Oil States appealed and challenged the constitutionality of inter partes review on the basis that actions to revoke a patent must be tried in an Article III court before a jury. The Federal Circuit affirmed the USPTO's decision.
In the today's ruling, the Court held that the determination to grant a patent is a matter involving public rights that "need not be adjudicated in [an] Article III court" and that inter partes review "involves the same basic matter as the grant of a patent" and therefore similarly "falls on the public-rights side of the line." According to the Court, the fact that inter partes review occurs after the patent has issued "does not make a difference."
Justice Thomas delivered the opinion and was joined by Justices Kennedy, Ginsburg, Breyer, Alito, Sotomayor and Kagan. Justices Gorsuch and Roberts dissented.
For more in-depth commentary on this decision, check out the post by The Scotus Blog on the ruling.
As a Silicon Valley technology lawyer who practices in the patent licensing space, I cannot help but be pleased with this decision. Not only is it good news from a business perspective for Silicon Valley technology companies, who will be able to continue to rely on the IPR process to challenge weak patents as a defensive measure to patent enforcement efforts by patent trolls, but it is good news from an IP perspective as it retains a process in place for the USPTO to revisit the patents it has issued. While I have never been involved with patent prosecution, I do handle trademark registrations, which are also issued by the USPTO, and in the years I have been filing trademarks, I have seen numerous trademarks that, in my opinion, should never have been granted under the standards that the USPTO normally exercises today. My expectation as a practitioner is that if I am seeing these issues on the trademark side, the same issues have to be arising on the patent side, which is what I hear from practitioners. I think Congress was right to enact legislation to enable this type of review to be performed outside the courtroom, and I applaud the Supreme Court's decision today that this type of review is constitutional.