June 16, 2017
An opinion piece written by Fitch Even counsel Kenneth W. Hairston was posted today in the “Expert Analysis” section of Law360’s website and will be published in their e-newsletters on Monday, June 19. In the article, “Why High Court Should Find IPR Constitutional,” Ken provides commentary on the U.S. Supreme Court’s agreement earlier this week to consider the constitutionality of the IPR process in Oil States Energy Services v. Greene’s Energy Group. The full text of Ken’s article can be found below.
Ken, a former longtime Administrative Patent Judge, currently counsels clients on complex patent prosecution matters and patent office appeals, as well as administrative post-grant patent challenges.
Why High Court Should Find IPR Constitutional
On June 12, 2017, the U.S. Supreme Court agreed to hear a challenge to the constitutionality of the inter partes review process. The case has provoked much consternation because the resulting decision carries the possibility of disrupting a system currently widely used to challenge patents, throwing into question previous Patent Trial and Appeal Board decisions as well as the PTAB’s authority in reviewing future challenges. The underlying facts of the case follow.
Oil States Energy Services LLC sued Greene’s Energy Group LLC for infringement of a hydraulic fracturing patent. Greene’s Energy then challenged that patent in an inter partes review. In the IPR, several of Oil States’ claims were found to be unpatentable. On appeal, the Federal Circuit affirmed the Patent Trial and Appeal Board decision. As noted above, on June 12 the Supreme Court granted a petition for a writ of certiorari by Oil States to decide the first question, which addresses the constitutionality of determining the validity of a patent in a post-grant proceeding at the PTAB. Oil States argues that their patent rights are private property rights, and that only an Article III federal court can make a determination that their claims are unpatentable. Oil States disagrees with the Federal Circuit’s decision that patents are public rights that can be judged by the PTAB in a post-grant proceeding. The grant of the petition excludes the other questions raised by Oil States.
Prior to the creation of post-grant proceedings in the America Invents Act, Congress created reexamination via statute so that the U.S. Patent and Trademark Office could re-evaluate the patentability of patent claims. The public versus private property rights issue arose in Patlex Corp. v. Mossinghof.1 The court recognized that prior to reexamination proceedings, the raising of new questions of patentability and cancellation of claims from an issued patent could only occur in an action in an Article III court. In a discussion of the legislative history of the re-examination statute, the court recognized that Congress was seeking to uphold the important public purpose of strengthening the patent system by restoring confidence in the validity of patents. The court held that the reexamination procedure did not cause the patent owner to suffer a constitutional deprivation of any rights under the Seventh Amendment right to a jury trial by having the agency, as opposed to an Article III court, set aside claims in the patent. The grant of a patent is a public concern, and that publicly granted patent can be corrected by the USPTO in reexamination, even against the will of the patent owner.
According to Oil States, the reexamination proceeding usually involves the patent owner and the patent examiner working together to strengthen a patent. Even if the reexamination proceeding rarely invalidated claims and is less adversarial than a post-grant proceeding, it did involve the agency reviewing the patentability of issued claims.
Although the public versus private property rights issue has not been directly addressed by the Supreme Court in a patent case, it did arise several years ago in the trademark case of B&B Hardware Inc. v. Hargis Industries Inc.2 The Supreme Court dealt with the issue of whether Hargis was precluded from contesting the Trademark Trial and Appeal Board finding of likelihood of confusion in a later infringement suit in the federal court. The Supreme Court stated that its precedent holds that the Seventh Amendment does not strip competent tribunals of the power to issue judgments with preclusive effect. The dissent discussed public versus private property rights, and indicated that the majority failed to address the distinction between private property rights and public rights or the nature of the power exercised by an administrative agency when adjudicating facts in such disputes.
In view of the long-standing practice of bringing patents back into the USPTO for a second look at patentability issues, it appears that this is a perfect opportunity for the justices to exercise judicial restraint and indirectly address the public versus private property rights issue as was done in B&B Hardware, and continue to accommodate the administrative agency in removing invalid claims from challenged patents under a statutorily mandated post-grant proceeding. Using the same approach in both the B&B Hardware trademark case and this patent case would add uniformity3 and certainty to the overall practice of intellectual property.
A presumption that post-grant proceedings are constitutional can be drawn from the fact that the court gave its blessing to the overall procedure last year in Cuozzo Speed Technologies, LLC v. Lee.4 In keeping with Cuozzo and with more than three decades of patent post-grant review, the court should continue to find post-grant proceedings to be constitutional. A finding that the proceedings are unconstitutional would upend a well-utilized procedure that has rooted out claims that should not have issued in a patent. No benefit will accrue to a petitioner with parallel litigation in a federal court because the federal judge knows the positions of both parties in the defunct post-grant proceeding. A finding that the proceedings could be made constitutional with minor tweaks to how the proceedings are conducted would be disruptive, but changes to procedure to accommodate a petitioner’s due process rights could most likely be accomplished via changes to the rules. Of course, the one-year statutory time period for concluding a trial would be impacted by major changes in trial procedure that would require the judges to conduct the proceeding in a quasi-Article III manner. A finding that the post-grant proceedings are unconstitutional would only benefit applicants with pending ex parte cases, seeing that all of the judges would then be assigned ex parte dockets. Thus, any perceived benefit to Oil States for a win in this case would pale in comparison to the serious issues that would arise for the remainder of the intellectual property community.
—Written by Kenneth W. Hairston
1758 F.2d 594 (Fed. Cir. 1985)
2135 S. Ct. 1293 (2015)
3In Petrella v. Metro-Goldwyn Mayer, 134 S. Ct. 1962 (2014), the Court held that the equitable doctrine of laches does not impact the statutorily set three-year time period for bringing a copyright action, and in SCA Hygiene Products AB v. First Quality Baby Products LLC, 15-927 (March 21, 2017), the Court held that the equitable doctrine of laches is not a defense to patent infringement damages even if patentee waits the full six-year statutorily set time period to bring suit.
4136 S. Ct. 2131 (2016)
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