IPRs Held to be Constitutional

Introduction

            The USPTO began operation of the Patent Trail and Appeal Board (“PTAB”) under the power made available to it by the American Invents Act in 2012. Since then, the PTAB has been the forum of choice to challenge the validity of existing patents through a process called Inter Partes Review (“IPR”). However, patents are private property rights and the long-standing norm has been that these kinds of rights should only be taken away in an Article III forum (judge or jury).  The case of Oil States v. Greene’s Energy Group, et al. sought to settle once and for all the constitutionality of having an Article I (executive branch) tribunal extinguish patent rights.

Background

The case began in 2012 when an Oil States subsidiary sued Greene’s Energy Group for an alleged infringement of its patent on hydraulic fracturing, otherwise known as fracking. In response, Greene’s Energy initiated an IPR proceeding against the asserted patent. In its decision, the PTAB would go on to cancel key parts of the patent. On appeal, the United States Court of Appeals for the Federal Circuit (“CAFC”) upheld the PTAB’s decision in 2016. In June of 2017, the U.S. Supreme Court granted Oil State’s writ of certiorari to decide the issue of whether the IPR system violates the constitution by extinguishing a private property right through a non-Article III court. 

Ruling/ Implications

On April 24, 2018, the Supreme Court ruled 7-2 that the IPR process is constitutional and does not violate a property right under the Constitution to have a case adjudicated by a federal court. In its reasoning, Justice Thomas writing for the majority stated “[IPR] is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration.”[1] Oil States v. Greene’s Energy Group et al., 584 U.S.___ (2018).

This decision was met with praise and disappointment from two distinct industries. On the one hand the technology industry celebrated the decision as being an effective and inexpensive[2] way to combat patent trolls.[3] Technological giants such as Apple Inc. and Samsung Electronics Co. Ltd are frequently sued for patent infringement, and as a result view the IPR process as an efficient and economical way to deal with patent troll litigation.

On the other hand, the pharmaceutical industry was collectively disappointed by the Supreme Court’s decision, and called for the scrapping of the IPR process in its entirety . In the pharmaceutical industry, drug makers obtain patents for the drugs they have developed. However, because of the IPR process, many generic drug companies challenge drug patents to shorten the duration that the drug may remain exclusive. This opens up the door for generic drug makers to develop generic alternatives to name brand drugs.

Conclusion

Now that the IPR system has received the stamp of approval from the Supreme Court, some companies might have to reconsider how they approach their patent seeking process. Since the PTAB has, according to some statistics, cancelled or partly cancelled 80% of patents brought to its attention. Drug companies might have to seek better drafted patents to make sure they are not struck down by generic drug makers. 

 At Rao DeBoer Osterrieder, our goal is to help you understand complex aspects of Intellectual Property ("IP") as they apply to your business, like that of the Oil States case. As IP strategies vary greatly between industries or even businesses, it is our aim to learn your business goals and function as an in-house IP attorney would for you. There are a number of strategies even after a patent is allowed that can help increase your bottom line.

Contact us so we can tailor a plan to your individual business goals and needs.  Make your IP effectively work for you.

We look forward to speaking with you!

 

© 2018 Jorge Zamora

The views expressed in this article are those of the author and do not reflect the views of Rao DeBoer Osterrieder, PLLC, or any of its clients. All rights reserved.

 

[1] Oil States v. Greene’s Energy Group et al., 584 U.S.___ (2018). NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports.

[2] An IPR generally tends to cost less than $400,000.00. In comparison, a patent infringement lawsuit, from start to end, can reach as much as $5,000,000.00.

[3] Patent Trolls are entities that have a business model based on suing other patent holder companies over patent infringement, rather than actually making products.