“Oil States” Oral Argument: Many Nuances Probed, Little Light Shed on Outcome

Kaminski_Jeffri_LRFeatured Expert Contributor, Intellectual Property—Patents

Jeffri A. Kaminski, Venable LLP

The November 27, 2017 oral arguments in Oil States Energy v. Greene’s Energy Group shed little light on the ultimate fate of inter partes review proceedings (“IPRs”), in which the Patent and Trademark Office (“PTO”) may invalidate an issued patent. As anticipated, much of the discussion focused on whether patents entail public or private rights, but more telling were the justices’ questions emphasizing due-process concerns.

A majority of the justices probed the process distinctions between the standards for adjudication at the Patent Trial and Appeal Board (“PTAB”) as compared to Article III courts, highlighting the PTAB’s limited discovery, potentially biased politically appointed judges, and panel stacking to ensure particular case outcomes.

Additionally, Article III courts have a higher standard of review; issued patents are presumed valid, and challengers must prove invalidity by clear and convincing evidence. At the PTAB, there is no presumption of validity, and challengers need only show invalidity beyond a preponderance of the evidence, resulting in a significantly higher invalidation rate than in Article III courts.

Chief Justice Roberts and other justices also questioned whether the invalidation of a patent through an IPR was analogous to the government’s condemnation of real property, which must comport with due process to pass muster under the Takings Clause. Justice Gorsuch’s line of questioning suggested he believes IPRs are constitutionally deficient. He shared Chief Justice Roberts’s concerns, and also questioned whether the option to appeal IPR decisions to a court constitutes meaningful judicial review because appeals are at the election of the parties.

The Court’s relatively extensive focus on the unbriefed due-process issue suggests at least some members of the Court may find fault with IPR on this ground.

The justices also questioned whether IPR is a formal adjudication or merely an administrative error-correction mechanism to ensure the validity of existing patents. When pressed by Justices Ginsburg and Kagan, counsel for Oil States surpassed the language in its brief by conceding that other post-issuance review proceedings, such as ex parte reexaminations, are constitutional. Oil States delineated ex parte reexaminations as more “fundamentally examinational” than IPRs because reexaminations include less third party involvement and are “fundamentally a proceeding … between the government and the Patent Owner.”

However, this distinction met resistance from multiple justices who cited other administrative proceedings that routinely resolve disputes among private parties, such as those heard by the National Labor Relations Board.

None of the justices asked would happen if IPRs were declared unconstitutional.  For example, no one inquired about whether not patents previously invalidated would be reinstated or how would the PTO need to modify the IPR process.  Some see this as an indication that the IPR process will be upheld.

These nuances aside, oral argument did not provide much insight into how the Court will decide the constitutionality of IPRs. Once the Court issues its opinion, check back for our analysis of how the technology industry and patent practitioners will fare.

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