Oil States Energy Services v. Greene’s Energy Group: Constitutionality of inter partes review upheld

May 4, 2018

The Supreme Court’s 7-2 decision Oil States Energy Services v. Greene’s Energy Group[1] upheld the constitutionality of inter partes review, and found that this administrative process does not violate either Article III or the Seventh Amendment of the U.S. Constitution.

After receiving conflicting decisions affecting the validity of its patent in litigation and at the Patent and Trial Appeal Board in an inter partes review, Oil States appealed the Board’s decision to the Federal Circuit. Oil States argued that the Board did not have the power to revoke a patent, and that such issues must be tried to an Article III court before a jury. The Federal Circuit affirmed the Board’s decision.

The Supreme Court found that the inter partes review process does not violate Article III of the U.S. Constitution because it involves a public, rather than private, right. The Court acknowledged that its precedents “have given Congress significant latitude to assign adjudication of public rights to entities other than Article III courts.” The Court further explained that since the grant of a patent involves the right to exclude others, it is “a matter between the public, who are the grantors, and . . . the patentee.” It therefore involves a public right, “specifically, the grant of a public franchise.” According to Justice Thomas, the author of the opinion, “granting patents is one of the constitutional functions that can be carried out by the executive or legislative departments without judicial determination.”

Justice Thomas went on to explain that since an inter partes review “involves the same basic matter as the grant of a patent,” and is merely “a second look at an earlier administrative grant of a patent,” “it, too, falls on the public-rights side of the line.” As a result, the Court held that the “Constitution does not prohibit the Board from resolving it outside of an Article III court.”

The Supreme Court rejected Oil States’ argument that patent rights are the “private property of the patentee” and therefore must be adjudicated in an Article III court. The Court explained that patents “convey only a specific form of property right – a public franchise,” and that public franchises “can confer only the rights that the statute prescribes.” The Patent Act however “qualifies any property rights that a patent owner has in an issued patent, subjecting them to the express provisions of the Patent Act.” Since the Patent Act includes provisions for inter partes review, any right granted in a patent is subject to such limitations.

Nor did the Court agree with Oil States that the historical treatment of patents in English courts of law in the 18th century restricts its decision in this matter. History “does not establish that patent validity is a matter that, from its nature, must be decided by a court.”

Finally, Justice Thomas explained that although inter partes review “uses court-like procedures,” that does not necessarily mean that it is improperly exercising the judicial power. The Court “has never adopted a ‘looks like’ test to determine if an adjudication has improperly occurred outside of an Article III court.”

The Supreme Court also addressed whether inter partes review violates the Seventh Amendment’s right of trial by jury. The Court explained that the Seventh Amendment is not an independent bar to the adjudication of an action by a nonjury factfinder when that action is properly assigned to a non-Article III tribunal. Since “inter partes review is a matter that Congress can properly assign to the PTO,” the Supreme Court found that “a jury is not necessary in [those] proceedings.”

Justice Thomas ended the opinion by emphasizing the narrowness of the holding. The opinion addressed the constitutionality of inter partes review only, not “whether other patent matters, such as infringement actions, can be heard in a non-Article III forum.” Nor should the opinion be read to “suggest[] that patents are not property for purposes of the Due Process Clause or the Takings Clause.” While this decision preserves the status quo for inter partes review, it does not preclude other constitutional challenges in the future.

Justice Gorsuch wrote the dissent, and emphasized the need for patent rights to be decided by independent judges, rather than political appointees and administrative agents. The dissent argued that the efficiencies offered by shifting some of the work from Article III judges to the Board does not justify the loss of a right to an independent judge. “[E]nforcing Article III isn’t about protecting judicial authority for its own sake. It’s about ensuring the people today and tomorrow enjoy no fewer rights against governmental intrusion than those who came before.”

[1] Oil States Energy Services v. Greene’s Energy Group, 584 U.S. ___ (2018)