Panel Debates Potential Impact Of Reversal Of US Administration Patent Review

The United States Supreme Court recently agreed to hear arguments in Oil States Energy Services v. Greene’s Energy Group, a case involving a patent on a device used for hydraulic fracturing (fracking). After the patent was granted, Greene’s petitioned for, and was granted, an “inter partes review (IPR)” by the US Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB). After losing at the board, Oil States asked the high court to determine that IPR, which is used to analyse the validity of existing patents, is unconstitutional because it takes away private property rights by denying Art. III jury trials.

Such a finding will shake up patent practice, lawyers and legal scholars said at a 22 September Duke Law Center for Innovation Policy conference in Washington. And even if the Supreme Court leaves IPRs intact, Congress must step in and fix serious problems with the PTAB, they said.

The petition for certiorari is here: https://patentlyo.com/patent/2017/02/states-services-greenes.html

PTAB: Repo Man or Thief?

The IPR procedure was created by Congress in the 2011 America Invents Act (AIA) “to combat what it perceived as inefficiencies in patent litigation,” the petition for cert says. The measure allows the PTAB to review existing patents and extinguish those rights in an adversarial process (IPR), while suits to invalidate patents historically have been tried before juries in courts of law, it said.

The board would not have been needed if more federal dollars had been given to the federal judiciary, James Smith, former chief judge of PTAB and now with Ecolab, said at the conference, which was webcast. PTAB was established to deal with the backlog of patent cases in the courts, he said. Now, the question is whether PTAB is the “repo man or the auto thief” as far as patents are concerned. said Smith. The Supreme Court will decide, but “either way, Congress has work to do” to improve PTAB’s proceedings.

Congress must be careful, however, not to allow form to override substance, said Finnegan, Henderson PTAB lead patent trial attorney Erika Arner, president-elect of the PTAB Bar Association. The substance of why the PTAB and the patent system were created was to ensure balance, she said, adding, “It is not all about the inventor” but also about the public.

The question is whether the PTAB process is faster, cheaper and better and if so, for whom, said Rob Sterne, a founding director at Sterne, Kessler, Goldstein & Fox. Many patent owners criticise IPRs for being slower (adding three years in two different tribunals); more expensive (because no one settles anymore); and of less benefit (because the ability to defend their rights is more limited than in federal court), he said. Whether IPRs and the board are constitutional or not, “this is far from over,” he said.

Patent litigator Paul Berghoff, of McDonnell Boehning Hulbert & Berghoff, who filed an amicus brief on behalf of the Intellectual Property Owners’ Association, said he has clients on both sides of the IPR issue. A finding that IPR is unconstitutional will greatly disrupt the patent system, but could be “really cool” for patent owners, said Berghoff, who stressed he was speaking personally.

Biotechnology companies see themselves as singularly patent-dependent, said BIO Deputy General Counsel Hans Sauer. BIO members, who include pharmaceutical, biotech and agricultural associations, find the argument that patents are not special but are merely public rights “provocative,” he said. They believe that patents have the attributes of personal property and, as such, should not be decided by administrative agencies. The PTAB is positioning itself as the pre-eminent decider of which patents are patentable, but it has lower standards of proof and different claims construction standards than federal courts, and it almost always finds against patentees, he said. The board’s impact on patent law has been “profound,” shifting power from the courts to the USPTO, he said.

Greg Reilly, of Chicago-Kent College of Law, said he’s more interested in what the case means for Congress’ power over the patent system. Most of the substantive system has been around since the 1800s, but the AIA contained two substantial divergences – first-to-file and post-patent issuance proceedings, both of which raised constitutional issues, he said. If the Supreme Court strikes down IPR it will be second-guessing Congress’ jurisdiction over the patent regime, he said.

A reversal of IPR will focus attention on whether the USPTO is issuing quality patents, said Michael Messinger of Messinger PLLC, who represents innovators. There is a need for a second check on patent quality via litigation and IPR, he said. If IPRs are unconstitutional, those checks will have to take place in the context of pre-grant opposition with all its concomitant delays, said Adam Rossoff, a law professor at Antonin Scalia Law School, George Mason University.

Peering into the Abyss?

Another closely watched issue is whether a decision invalidating IPR will affect other agencies and the administrative state in general.

“It depends,” said University of Texas Law School Professor Jonathan Golden. The law isn’t a model of clarity, and the Supreme Court could provide some clarification of public versus private rights in Art. III of the Constitution (which authorises the court system), or on how relevant historical contingency is to the Art. III analysis. If the court strikes down IPR, it will be “a quite extreme step” in the history of jurisprudence in this area and could signal a more aggressive stance to the Art. III separation of powers approach, he said. Alternatively, the decision could be narrowly tailored to affect only patent law, he noted.

The entire area of Art. III jurisprudence is underdeveloped in the Supreme Court, said Jonathan Massey of Massey & Gail, who submitted an amicus brief supporting the petitioner for certiorari on behalf of the biotechnology industry. He noted that conservative justices on the high court are already questioning how much power agencies should have, and that Oil States will give them the opportunity to confront that issue in the context of the intersection of Art III and intellectual property law.

There is heightened interest by the Supreme Court in the proper relationship between the executive and judicial branches of government, between courts and administrative agencies, said Don Verrilli of Munger, Tolles & Olson. Some justices want to do away with the Chevron doctrine, which entitles agency decisions to deference, to ensure that Congress specifies what executive actions are to be done and the courts then decide if what’s done is correct, he said. This case falls right in the middle of the debate, he said.

The implications of the case depend on whether the Supreme Court takes a practical or formalistic approach, said University of Texas Law School Professor Melissa Wasserman. Under the latter, the case is just about patents, she said; but if the court takes a more pragmatic stance, there is a question of whether the decision might affect other agency adjudications, such as those of the Trademark Trial and Appeal Board or the Copyright Royalty Board.

With issues such as whether Art. III judicial authority is being invaded, this case might lead the Supreme Court to the precipice, said Verrilli. It might then see the abyss and back away, but if it takes the leap there will be many more such cases, in the patent sphere and elsewhere, coming its way, he said.

 

Image Credits: USPTO