5 Key Take-Aways from the Supreme Court Case in Oil States

On April 24, 2018, the U.S. Supreme Court issued a much-anticipated decision in Oil State Energy Services, LLC v. Greene’s Energy Group, LLC (Oil States), where it upheld the constitutionality of the post-grant Inter Partes Review (IPR) process. The Court held, in a 7-2 decision, that IPR proceedings do not violate Article III or the Seventh Amendment of the United States Constitution.  Justice Thomas wrote for the majority while Justice Gorsuch dissented, and was joined by Chief Justice Roberts.

In reviewing the Supreme Court’s decision, below are five key take-ways from the decision:

1. Patents are public rights – As previously discussed, the main focus in this case is how the Court views the nature of the rights granted by a patent. Are the rights conferred by granting of a patent purely private property rights, in which case their taking must be adjudicated by a jury, or are they public rights that may be altered or extinguished by an administrative agency such as the U.S. Patent Trial and Appeal Board (PTAB)? According to the Court, the rights granted by a patent fall within the public-rights doctrine, and since IPRs involve the same interests, they also fall within the public-rights doctrine. In supporting its decision, the Court goes as far as to equate patents with “public franchises” such as when Congress grants a franchise that permits a company to erect a toll bridge but qualifies that grant of rights by reserving its authority to revoke or amend the franchise. 

2. Previous cases are bound to the patent laws in place during that time – One of the more interesting aspects of the case was to see how the Court reconciliated its decision with previous opinions that explicitly held that patents are private rights. In particular, in its 1898 decision in McCormick Harvesting Mach. Co. v. Aultman & Co., 169 U.S. 606 (1898), the Supreme Court held that once a patent is granted it “is not subject to be revoked or canceled by the president, or any other officer of the Government” because “[i]t has become the property of the patentee, and as such is entitled to the same legal protection as other property.” To differentiate itself from the prior decisions, the Court in Oil States held that those cases, including McCormick, are not in conflict with its current holding because those cases were decided under the Patent Act of 1870 that did not include any provision for post-issuance administrative review. Specifically, under the Patent Act of 1890, the Patent Office Commissioner “had no power to revoke, cancel, or annul” the patent at issue. In contrast, the current patent laws allow for the U.S. Patent and Trademark Office (USPTO) to review and revoke issued patents under certain circumstances. 

3. Historical use of courts does not preclude today’s use of the PTAB to adjudicate patents – The Court further dismissed the relevance of traditionally using American Article III courts to adjudicate patent validity, saying that even though these American courts were historically used to do so, this past use of such courts did not preclude use of other forums today. In particular, the Court held that since patents are governed by the public-rights doctrine (see 1 above), their oversight can be assigned to the Legislature, the Executive, or the Judiciary branch for adjudication. While Congress chose the courts to adjudicate patent matters in the past, it is free to choose the USPTO to do so now. The Court further went on to support this practice by analyzing the treatment of patents in England in the 18th century, noting that patents could be vacated on a petition to the Privy Council, which was composed of the Crown’s advisors, a Council that closely resembled IPR procedures handled by the PTAB today.  For similar reasons, the Court further held that even though the IPR procedure may look like a trial in that it has “motion practice before the PTAB; discovery, depositions, and cross-examination of witnesses; introduction of evidence and objections based on the Federal Rules of Evidence; and an adversarial hearing before the [PTAB],” this does not mean that the PTAB is improperly exercising its power. In other words, even though there are similarities between IPRs and district court proceedings, it does not necessarily lead to the conclusions that IPRs adjudicated by an administrative governing body (i.e., the PTAB) violate Article III of the US Constitution. 

4. Congress can change it – One of the most important holdings, I believe, from the Oil States decision is that Congress can control which branch of government adjudicates patents. In its decision, the Court held while “Congress chose the courts in the past does not foreclose its choice of the PTO today.” According to the Court, matters governed by the public-rights doctrine (i.e., patents) can be resolved in three ways: first, Congress can “reserve to itself the power to decide,” second, Congress can “delegate that power to executive officers,” and third, Congress can “commit it to judicial tribunals.” Thus, the power rests within Congress to determine the manner in which government adjudicates patents. If Congress wants patents to only be decided by the courts, then Congress can change the patent laws to achieve that rule. For those unhappy with the Supreme Court’s decision in Oil States, this gives a glimmer of hope that IPR proceedings may yet change in the future. 

5. Very limited holding – Finally, the Court cautioned that its decision is a narrow holding that was limited to the precise issues before it and should not be construed to suggest that patents are not property under either the Due Process Clause or the Takings Clause of the U.S. Constitution.  Thus, the Court’s holding in Oil States did not foreclose the possibility of future Constitutional challenges to the IPR process.

​While the Oil States decision suggests that IPRs are here to stay, it also raises additional questions that will have to be resolved in the near future, particularly with regards to further constitutional challenges to IPR proceedings. It will also be interesting to see whether this decision sparks an interest in Congress revisiting the America Invents Act and addressing the many issues related to IPR proceedings.