Constitutionality of IPRs and PGPs

Recently, the Supreme Court granted certiorari in Oil States Energy Services v. Green’s Energy Group, Case 16-712 that may have implications on the constitutionality of America Invents Act (AIA) patent review proceedings such as Inter Partes Review (IPRs) and Post Grant Proceedings (PGPs).

The case being reviewed involved a fracking patent granted to Oil States. Green’s Energy petitioned to have the Oil States patent reviewed in an IPR (6,179,053). The IPR resulted in the Oil States patent claims being held unpatentable. But, upon review at the Federal Circuit, Oil States challenged the decision and added that IPRs were not allowed under Article III and the Seventh Amendment of the Constitution. In particular, the Oil States argument advanced that the patents must be tried before a jury because invalidity of patent claims traditionally have been a jury issue before a court of competent jurisdiction. The Oil States argument then indicated that Congress could not delegate that right to an administrative agency. The Federal Circuit affirmed the USPTO’s IPR decision of invalidity, without the issuance of an opinion.

Following that decision, Oil States petitioned for certiorari to the Supreme Court regarding three issues. The one issue was whether IPR was in violation of the Constitution’s Article III provision since there was no jury trial adjudication of the “extinguishing” of private property rights. The second issue was an attack on the USPTO’s refusal to allow amendments to the claims during the IPR; and the third issue was related to claim construction.

The USPTO waived the option to file a brief. The Supreme Court asked for guidance from the Solicitor General’s office. In response, the office indicated that there was nothing unconstitutional about the administrative agency having such control of the invalidity decision and cited to a 2015 Federal Circuit decision, MCM Portfolio LLC v. Hewlett-Packard Co.

What are the consequences of the potential outcomes in this situation? The first possibility is that the Supreme Court could hold that the administrative agency, the USPTO, does not have the right to make these decisions – in effect that those provisions of the AIA were indeed unconstitutional. Although a long shot, this outcome could have an explosive impact on pending cases in front of the USPTO in IPRs and PGPs. Should this be the decision by the high court, patent litigation in the judicial setting would likely explode, since the AIA avenues would now be precluded.

It is possible that the Supreme Court could rule that the AIA portions relating to the IPR context are unconstitutional, but that the decision would not be retroactive because of undue hardships on proceeding already relied upon for those rulings. Further, either one of these outcomes may become a stimulus for increased settlement outcomes by defendant.

In any situation, it may be wise for patentees, who are facing challenges under the AIA provisions for administrative review of the validity of their patents, to consider the possibility of adding the unconstitutional argument to their proceedings. Since this decision will likely be made sometime between winter 2017 and June 2018, it is prudent for the patentees to maintain this argument for their potential benefit.

Estelle J. Tsevdos, Ph.D is a Director in the Gibbons Intellectual Property Department.
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