Type: Law Bulletins
Date: 06/15/2017

Supreme Court to Decide Constitutionality of AIA Patent Reviews

Summary: On Monday, June 12, the U.S. Supreme Court agreed to decide whether the AIA patent review system will be eliminated on constitutional grounds. If found unconstitutional, the abolition of the AIA inter partes review stands to completely change the way targets of patent infringement respond to those claims.

Inter partes review is an administrative procedure for challenging patents that was established in 2012 by the Leahy-Smith American Invents Act ("AIA"). The AIA was, ostensibly, designed to bring the U.S. patent scheme in line with that found in the rest of the world, shifting patent rights from a "first to invent" standard to a "first to file" standard. With this shift came the introduction of the Patent Trial and Appeal Board ("PTAB"), a group of three administrative patent judges tasked with handling, among other things, inter partes review of the patentability of one or more claims in a given patent. Prior to the AIA’s creation of the PTAB and inter partes review, patents could only be challenged via traditional litigation in federal court. This new administrative procedure allowed inventors to efficiently sidestep patent litigation, which was widely perceived as being an enormously expensive and time-consuming process. However, at what real cost?

In response to claims that this was unfair and violated constitutional principles, SCOTUS granted certiorari as to a single question raised in Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC: "whether inter partes review—an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury." While some have identified the PTAB that makes these decisions as a "death squad," killing patent owners’ property rights, there is no doubting the popularity of these administrative proceedings, which offer a relatively inexpensive and quick route for canceling patent claims.

There are two constitutional arguments raised in this process, both aimed at invalidating the AIA inter partes review: that any action to cancel or revoke a patent must be (1) heard by an Article III federal court, (2) with access to a jury guaranteed by the Seventh Amendment to the Constitution. In support of its Article III claim, Oil States maintains that patents create private property rights, as opposed to public rights, which are revocable only by a federal court. Regarding its Seventh Amendment claim, Oil States recognizes the efficiencies enjoyed by the PTAB review process but urges that "the Seventh Amendment enshrines the right to jury in the Constitution precisely because of the possibility that a future legislature would find juries to be inefficient or inconvenient." Thus, Oil States concludes that inter partes review wrongfully takes patent claims out of the judiciary’s hands and "entrusts [them] to bureaucrats," thereby violating the Constitution.

In opposition to Oil States’ petition for certiorari, the U.S. government maintained that patents are quintessential public rights — not private rights — and are derived from a federal regulatory system that retains the power to revoke those rights without court intervention. Likely, the argument over whether patents are public rights vs. private rights is what motivated the Supreme Court to grant the instant petition for certiorari and finally address the constitutionality of the PTAB’s inter partes review process. Before Oil States’ petition, SCOTUS rejected three petitions challenging the constitutionality of inter partes review under the AIA, The instant petition was granted only one month after the Federal Circuit voted 10-2 to not consider the same issue, en banc, in a different case. Cascades Projection LLC v. Epson Am., Inc., No. 2017-1517, 2017 WL 1946963, at *14 (Fed. Cir. May 11, 2017). In that decision, Judge Jimmie Reyna published a dissent, arguing that the standard for deciding what is a public right vs. private right "remains hazy, in particular with patent rights" and warrants judicial clarification. Judge Reyna concluded, "[t]he [PTAB’s] cancellation of patents through inter partes review may be the type of agency activity that saps the judicial power as it exists under the federal Constitution and establishes a government of bureaucratic character alien to our system. Or, it may not. It is a question we should address." (Internal quotation and citation omitted.) Indeed, the Supreme Court has agreed.

Taft Take-Aways:

  1. The Supreme Court may eliminate the AIA patent review system, returning the patent review process to traditional litigation in federal court. 
  2. Business owners would be well-advised to discuss their patent rights with an IP attorney, as this decision may make it tougher for business owners to challenge or defend patent claims and could drastically change the strategy employed for the same.
  3. SCOTUS would fundamentally alter the current patent landscape if it eradicated the option of challenging patents at the PTAB. That would be a welcome change for patent owners, who view the board’s frequent invalidity decisions as a threat to patent rights. However, accused infringers who see it as a quicker and less expensive way to challenge patents than court won’t like the change.

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