Centuries of Precedent are Little Help as IPR Constitutionality Divides Justices

This morning the Supreme Court heard arguments in the heavily anticipated case of Oil States Energy Services, LLC v. Greene’s Energy Group, LLC on the question of whether AIA trials at the patent office, such as inter partes reviews (IPRs), are constitutional. Oil States led by arguing that patent validity has been decided in court for 400 years, but now the PTO exercises judicial power in deciding disputes between private parties over a private right, without any of the protections found in Article III courts.

Justices Ginsburg, Kagan and Sotomayor all pounced early on the difference between ex parte reexam, inter partes reexam, and the current IPRs. Interestingly, Oil States quickly conceded that reexams are constitutional because they are continued examination, as opposed to the exercise of  judicial power through adjudication that occurs in IPRs.  Justice Gorsuch would later lob Oil States a softball that they should simply be arguing that patents are private rights that cannot be taken away once issued, except by a court, period.  But the attorney for Oil States still wouldn’t agree, apparently believing that such a strong position would not win over enough of the Justices.

While most of the active Justices questioned both parties somewhat evenly, Justice Gorsuch gave the clear impression that he believes IPRs are unconstitutional.  As mentioned, he argued that patents are private rights. He further gave Oil States the opportunity to address the argument that favorable Supreme Court case law is just interpreting the statutes of the day, as opposed to answering the constitutional question.  He repeatedly brought up the analogy to “land patents” which cannot just be taken away hundreds of years later. He argued that the PTAB is not an adjunct to district court like a magistrate, where decisions must be approved.  And he was clearly displeased, as was Justice Roberts, with the PTAB practice of stacking panels in a certain few cases so the Director could get the result she sought.  There was little question he was looking for a path to at least curtail IPRs in some way, if not throw them out entirely.

Other notable lines of questioning included whether IPRs are fair to patent owners who did not know about this procedure at the time they filed for their patents. And several justices inquired about what Justice Breyer called a “vested rights” theory.  Essentially, what if a company receives a patent and then invests $40B in development?  Is it really fair to take the patent away in an Article I tribunal 15 years later?  Finally, many questions focused on the broader implications for adjudications by other government agencies.

Interestingly, neither Greene Energy nor the Government seemed to argue strongly that patents are public rights – which was the basis for the Federal Circuit decisions upholding reexaminations, and now IPRs. Based on the oral argument, it seemed like the Supreme Court will decide this case on a different basis such as how patents were handled before 1790, or more likely what Congress is allowed to do in creating the patent laws including much shorter terms or other requirements such as agreeing to IPRs as a quid pro quo for securing a patent. All I can say at this point is that while most Supreme Court patent decisions are unanimous, I suspect this one will not be.