U.S. Supreme Court building in Washington, D.C.
U.S. Supreme Court building in Washington, D.C. (Photo: Diego M. Radzinschi/ALM)

The U.S. Supreme Court recently agreed to decide whether a popular administrative process for determining patent validity is unconstitutional. In-house intellectual property attorneys say this will surely be a closely watched case, as the decision could have a significant impact on the patent system.

The high court agreed on June 12 to hear Oil States Energy Services v. Greene’s Energy Group and to determine if “inter partes review, an adversarial process used by the [U.S.] Patent and Trademark Office (PTO) to analyze the validity of existing patents, violates the [U.S.] Constitution” by eliminating a private property right without the option of a jury trial.

“Suits to invalidate patents must be tried before a jury in an Article III forum, not in an agency proceeding,” said Texas-based Oil States Energy Services in a November 2016 petition to the Supreme Court, adding that an 1898 Supreme Court decision established that a patent cannot be revoked or canceled by a government officer because it’s the property of the patentee and thus deserves the same legal protections as all property. Pointing to a more recent holding, Oil States added: “This Court has long held that patent ‘infringement cases today must be tried to a jury[.]‘”

In opposition, Greene’s Energy Group stated in a brief that “patents are quintessential public rights” and thus “the inter partes review procedure is the sort of mechanism that Congress may permissibly create to administer a public-right scheme.”

In an interview with Corporate Counsel, Lias J. “Jeff” Steen, executive vice president of legal and human resources at Oil States International Inc., said of the case: “Oil States is continuing to defend what was a 16-year-old patent when it went through the IPR process, to protect the intellectual property we had developed and used for a decade and a half. It’s very important to our business and this battle continues on to Washington in the fall.” Counsel for Greene’s declined to comment.

The IPR procedure, created by the America Invents Act of 2011, was designed to be more cost-effective and faster than traditional patent litigation. And a number of companies have found value in this option, such as Samsung Electronics Co. and Apple Inc., which often make the list of the most frequent filers of IPR petitions.

Gillian Thackray, vice president, associate general counsel and global chief counsel for intellectual property at The Clorox Co., said she sees IPRs as one of the “important tools in the tool box.”

IPRs have altered the considerations around patents both offensively and defensively, Thackray noted. “It has changed [the practice of patent law] in that every time there is a question of a patent dispute between us and a competitor, or between us and somebody who thinks we’re using a patent inappropriately … it’s added the step of: ‘Is it possible to do an IPR process to resolve this?’” she said. “And when we’re thinking of ostensibly asserting our patents … it’s: ‘Is this patent vulnerable to IPR?’”

Overall, IPR has been “very helpful because it provides something that costs a [fraction] of the amount of patent litigation,” according to Thackray. So if the Supreme Court strikes it down, that “would have a huge impact on the patent system … and it would be very disappointing to a lot of people in-house,” she said.

Jeffrey Birchak, associate general counsel, vice president of intellectual property and assistant secretary at technology developer and manufacturer Fallbrook Technologies Inc., agreed the consequences of a Supreme Court holding that inter partes review is unconstitutional would be huge. “If they declare [patents are] personal property and can only be taken away by Article III judges … that is going to have some severe ramifications for the PTO,” he said. “They would likely no longer be able to invalidate patents after they are issued … which means they are going to have to adjust their process.”

This will likely result in “a push for a more restrictive examination process” from the patent office, Birchak said.

For Edward Heller, chief patent counsel of intellectual property development and licensing company Alliacense Limited, a change in the current process would be welcome. IPRs have reduced the standard of proof on questions of patent validity, he said, adding that the “broadest reasonable interpretation” is used for claim construction and the same panel that decides to institute IPRs makes the final determination. “ This combination of factors results in a significantly high invalidity rate,” he said.

“I think the patent bar as a whole is greatly concerned [about this case], one way or the other,” said Heller, who unsuccessfully petitioned the Supreme Court to consider the constitutionality of inter partes review last year. “If you’re in favor of IPRs, then you’re very concerned. If you’re against IPRs, then you’re overjoyed.”

Contact Jennifer Williams-Alvarez at jwilliams@alm.com.