April 24, 2018

Supreme Court Decides Oil States Energy Services, LLC v. Greene's Energy Group, LLC

On April 24, 2018, the Supreme Court decided Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712, holding that the “ inter partes” review process established by the Leahy-Smith America Invents Act of 2012 (the Act), 35 U.S.C. § 100 et seq., does not infringe on the judicial power of the federal courts under Article III of the Constitution or violate the right to trial of civil matters by jury under the Seventh Amendment.

The Act authorizes any person other than a patent holder to petition the Patent and Trademark Office (PTO) for “ inter partes review” and seek cancellation of one or more claims of the patent on prior art grounds. After the Patent Trial and Appeal Board (Board) makes a non-reviewable determination whether there is a “reasonable likelihood” that the petitioner will prevail as to at least one claim, a three-member panel of the Board then conducts an inter partes review process in which the petitioner and patent-holder are entitled to limited discovery and an oral hearing. The Board’s final written decision is subject to review by the Federal Circuit.

Oil States Energy Services, LLC (Oil States) sued Greene’s Energy Group, LLC (Greene’s) for infringement of its patent on well-head protection equipment. Greene’s responded by challenging the patent’s validity on the basis of prior art, and also petitioned for inter partes review under the Act. The two actions proceeded in parallel: the district court issued a claims construction order that foreclosed Greene’s contentions regarding prior art, but shortly thereafter, the Board issued a final decision concluding that two of the claims were unpatentable. Oil States sought review in the Federal Circuit, contending that the inter partes review process is a usurpation of the judicial power exclusively vested by Article III in the federal courts, and that the Act violates the Seventh Amendment right to trial by jury of civil controversies. The Federal Circuit summarily affirmed the Board on that question, citing its recent rejection of the same constitutional claim in MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284, 1288–93 (Fed. Cir. 2015).

The Supreme Court affirmed, holding that inter partes review falls “squarely within the public rights doctrine” and can accordingly be conducted outside the Article III courts. Noting the long-established precedent that the grant of a patent is a matter involving public rights, the Court reasoned that inter partes review—a “second look at an earlier administrative grant”—involves “the same interests as the determination to grant a patent in the first instance.” Acknowledging several older decisions cited by Greene’s referring to a patent as “private property,” the Court observed that the property right at stake is a “public franchise,” a form of property created by statute and subject to regulation and limitation. Prior decisions describing the federal courts as the exclusive forum for setting aside patents, the Court noted, had been decided under an older version of the Patent Act that did not yet provide for post-issuance administrative review.

The Court rejected two further arguments offered by Greene’s. First, it turned aside the contention that Congress may not properly “withdraw from judicial cognizance” any matter which, “from its nature,” was the subject of a suit at common law. Although at common law the courts did consider challenges to the validity of patents, the Court noted that even in 18th Century England, petitions for patent cancellation could also be heard by the Privy Council, an executive body. The Court therefore concluded that because the Patent Clause was “written against the backdrop” of English precedent, post-issuance PTO adjudication is consistent with the constitutional framework. The Court likewise rejected a second, related argument that inter partes review violates Article III because it shares so many of the “salient characteristic[s]” associated with the judicial power. Rejecting the concept of a “looks like” test, the Court affirmed that the presence of numerous “judicial” features, by itself, does not render a process constitutionally suspect. The Court closed its discussion of Article III by emphasizing the narrowness of its holding and stating that the Act’s provision for Federal Circuit review obviated the need to consider whether a similar administrative process without any avenue of judicial review would be constitutional.

The Court concluded that its Article III holding controlled the question of the Act’s constitutionality under the Seventh Amendment. Citing its decision in Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53–54 (1989), the Court held that, if Congress has properly assigned a matter to adjudication in a non-Article III tribunal, the Seventh Amendment poses no “independent bar to the adjudication of that action by a nonjury factfinder.”

Justice Thomas delivered the opinion of the Court, in which Justices Kennedy, Ginsburg, Breyer, Alito, Sotomayor, and Kagan joined. Justice Breyer filed a concurring opinion, in which Justices Ginsburg and Sotomayor joined. Justice Gorsuch filed a dissenting opinion, in which Chief Justice Roberts joined.

Download Opinion of the Court.

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