Inter Partes Review (IPR), created by the Leahy-Smith America Invents Act (AIA), 125 Stat. 284 (2011), has become a prominent part of patent litigation. Accused infringers can challenge asserted patents based on printed prior art by petitioning the Patent Trial and Appeal Board (PTAB) to “institute” an IPR “trial.” An IPR before the PTAB is an administrative proceeding with no right to a jury trial on patent validity. If instituted, non-Article III judges receive evidence and arguments and determine whether the patent is valid. Many IPRs arise out of pending District court patent infringement litigation and parties to an IPR proceeding can be estopped from re-litigating issues that were raised or could have been raised in the PTAB. At the discretion of the federal judge, district court litigation may be stayed pending the outcome of the IPR. Ultimately, IPRs can be less expensive than district court validity determinations and often contribute to efficient resolution of patent disputes.
The constitutionality of the IPR process itself is before the Supreme Court this month. In Oil States Energy Services, LLC v. Grene’s Energy Group, LLC, No. 16-712, Petitioner Oil States will argue on November 27 that IPRs are unconstitutional because they can cancel private property rights without a jury trial presided over by an Article III judge. At play is whether a patent is a public or private right. Generally, determination (or invalidation) of a private right requires an Article III court whereas a Government-issued public right can be determined by administrative action. Stern v. Marshall, 564 U.S. 462, 490-91 (2011). Whether patent validity is a “suit at common law” and subject to a jury trial is the subject of much commentary and dispute, especially where damages may not be at issue (such as some declaratory judgment actions or various ANDA litigation). See, e.g., Atlas Roofing, 430 U.S. 442, 449 (1977). The Federal Circuit takes the view that patents are public rights and has rejected challenges to the IPR procedure.
According to Oil States, the 2011 procedure is unconstitutional because 18th Century patent validity cases were tried in English courts by judges and questions of fact regarding patent validity were decided by juries. Oil States does not argue that interference proceedings, ex parte reexaminations and inter partes reexaminations, are unconstitutional. Instead, it attempts to distinguish these procedures from IPRs.
In response, the U.S. Patent Office and Respondent argue IPRs are consistent with Article III because Congress has long-authorized the Patent Office to reconsider its own patent grant decisions (which Oil States concedes). They further argue the Seventh Amendment is not offended because Congress has permissibly assigned IPR adjudications to non-Article III tribunals.
While difficult to predict which way this case will go, what should parties do in the meantime? First, patentees being taken to an IPR amidst district court litigation should preserve the issue. Likewise, error should be preserved as to any district court decision impacted by an adverse PTAB IPR decision. Accused infringers need to know the law may change quickly and that needs to be factored into strategy decisions. If the IPR process is invalidated, it is unclear what will become of past case resolutions. Parties already involved in an IPR should exploit the process to secure useful discovery and strategic admissions from experts. If the constitutionality of IPRs is upheld in Oil States, pay attention to a companion case, SAS Institute, which addresses the scope of IPR estoppel on district court litigation. For more information on this issue, please contact Erin Knese or Steve Holtshouser.