Tuesday, April 24, 2018

U.S. Supreme Court Upholds Inter Partes Review

In what must be one of its most important patent opinions in recent years, the U.S. Supreme Court this morning upheld the constitutionality of inter partes reviews (IPRs)--the opposition-like procedures that Congress established in 2011 as part of the America Invents Act--in Oil States Energy Services, LLC v. Greene's Energy Group, LLC.  Opinion here.  I'm not surprised by the ruling, but I am relieved; some of the questions posed during oral argument last November left me just a tad worried about the ultimate outcome (see post here).  The breakdown of opinions does not fall along the typical ideological lines:  Justice Thomas writes the majority opinion, joined by Justices Kennedy, Ginsburg, Breyer, Alito, Sotomayor, and Kagan.  The bottom line is that patents are "public rights," a "public franchise," and thus the federal government may entrust the adjudication of these rights to a non-article III tribunal:
Inter partes review falls squarely within the public-rights doctrine. This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III (pp. 6-7).
The Patent Act provides that, “[s]ubject to the provisions of this title, patents shall have the attributes of personal property.” 35 U. S. C. §261. This provision qualifies any property rights that a patent owner has in an issued patent, subjecting them to the express provisions of the Patent Act. See eBay Inc. v. MercExchange, L.L.C., 547 U. S. 388, 392 (2006). Those provisions include inter partes review. See §§ 311–319 (p.11).
The Court also rejects arguments that historical practice shows that (1) "patent validity is a matter that, 'from its nature,' must be decided by a court" (p.12), and (2) "because courts have traditionally adjudicated patent validity in this country, courts must forever continue to do so" (p.14).  Finally, the Court concludes that the Seventh Amendment right to trial by jury does not post an obstacle either, stating that "This Court’s precedents establish that, when Congress properly assigns 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.' Granfinanciera, S. A. v. Nordberg, 492 U. S. 33, 53–54 (1989)" (p.17).

The majority nonetheless cautions that its holding is "narrow" (pp.16-17):
We emphasize the narrowness of our holding. We address the constitutionality of inter partes review only. We do not address whether other patent matters, such as infringement actions, can be heard in a non-Article III forum. And because the Patent Act provides for judicial review by the Federal Circuit, see 35 U.S.C. § 319, we need not consider whether inter partes review would be constitutional “without any sort of intervention by a court at any stage of the proceedings,” Atlas Roofing Co. v. Occupational Safety and Health Review Comm’n, 430 U. S. 442, 455, n.13 (1977). Moreover, we address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued. Nor has Oil States raised a due process challenge. Finally, our decision should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause. See, e.g., Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U. S. 627, 642 (1999); James v. Campbell, 104 U. S. 356, 358 (1882).
Presumably the next stop for Oil States will be to challenge the applicability of IPRs to patents that were issued prior to the establishment of IPRs.  

Justice Breyer's one-paragraph concurring opinion, joined by Justices Ginsburg and Sotomayor, states that 
the Court’s opinion should not be read to say that matters involving private rights may never be adjudicated other than by Article III courts, say, sometimes by agencies. Our precedent is to the contrary. Stern v. Marshall, 564 U. S. 462, 494 (2011); Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833, 853–856 (1986); see also Stern, supra, at 513 (BREYER, J., dissenting) (“The presence of ‘private rights’ does not automatically determine the outcome of the question but requires a more ‘searching’ examination of the relevant factors”).
In dissent, Justice Gorsuch, joined by Chief Justice Roberts, argues that, consistent with "[t]he Constitution's original public meaning," patents are personal rights "that the federal government could revoke only with the concurrence of independent judges" (dissent pp. 2-3).  In a footnote, he also takes issue with Justice Breyer's concurrence, perhaps foreshadowing a bigger showdown sometime down the road on the role of the administrative state (see also below).  And while I don't agree with Justice Gorsuch's analysis, I have to concur with those observers who laud his writing style, which here includes the observation that "Just because you give a gift doesn't mean you forever enjoy the right to reclaim it" (dissent p.10).  Not exactly on point, in my view, but it is a good meme!
In another, less heralded, IPR-related case, SAS Institute, Inc. v. Iancu, the Court this morning holds that the plain meaning of the relevant statutory provisions governing IPRs require that, when a party petitions for an IPR challenging two or more claims of an issued patent, the PTAB can either institute as to all the challenged claims or none of them, but cannot institute review of just some of the challenged claims (thus reversing the Federal Circuit on this issue).  The author of this opinion is . . . Justice Gorsuch, joined by the Chief and by Justices Kennedy, Thomas, and Alito.  Justice Ginsburg dissents, joined by Justices Breyer, Sotomayor, and Kagan, and Justice Breyer files a separate dissent joined by the other three (except for one part, as noted below).  So this one is more ideologically aligned, and again the subtext appears to be administrative law, specifically the Chevron doctrine under which courts generally defer to agency rulemaking when they believe that a statute is ambiguous.  According to the majority:
whether Chevron should remain is a question we may leave for another day. Even under Chevron, we owe an agency’s interpretation of the law no deference unless,after “employing traditional tools of statutory construction,” we find ourselves unable to discern Congress’s meaning (pp.11-12).
Justice Breyer, for his part, believes that the statute "leaves a gap that Congress implicitly delegated authority to the agency to fill" (dissent p.1).  Justice Breyer's further musings on Chevron (part III.A of his dissent) are the one portion of his opinion that Justice Kagan does not join (though Justices Ginsburg and Sotomayor do):
In referring to Chevron, I do not mean that courts are to treat that case like a rigid, black-letter rule of law, instructing them always to allow agencies leeway to fill every gap in every statutory provision. See Mead Corp., supra, at 229–231. Rather, I understand Chevron as a rule of thumb, guiding courts in an effort to respect that leeway which Congress intended the agencies to have. I recognize that Congress does not always consider such matters, but if not, courts can often implement a more general, virtually omnipresent congressional purpose—namely, the creation of a well-functioning statutory scheme—by using a canon-like, judicially created construct, the hypothetical reasonable legislator, and asking what such legislators would likely have intended had Congress considered the question of delegating gap-filling authority to the agency (dissent p.9).
I'm not an administrative law scholar, but even I can see the makings here of some future struggle between the Court's liberal and conservative wings over the future of the administrative state.

Justice Ginsburg, for her part, proposes a work-around for the PTAB:
Given the Court’s wooden reading of 35 U. S. C. §318(a),and with “no mandate to institute [inter partes] review” at all, Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ___, ___ (2016) (slip op., at 9), the Patent Trial and Appeal Board could simply deny a petition containing challenges having no “reasonable likelihood” of success, §314(a). Simultaneously, the Board might note that one or more specified claims warrant reexamination, while others challenged in the petition do not. Petitioners would then be free to file new or amended petitions shorn of challenges the Board finds unworthy of inter partes review.
The majority states that it has "no occasion today to consider whether this stratagem is consistent with the statute's demands" (majority opinion p.11 n.*). 


  1. I have read III.A of Justice Breyer's dissent three times now, and I cannot figure what it means that Justice Kagan refused to join it. Does she think that Mead was wrongly decided, and that even low-level decisions by agency employees are entitled to Chevron deference? Or does she join Justice Thomas in just wanting to chuck Chevron out the window?

    Mysterious, but intriguing.

  2. Like I said, I'm no admin law scholar, so I could be way off base. But my guess is that she's not sure she wants to sign off on such a legal-realist view of Chevron.