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Supreme Court Upholds Patent Office Power to Invalidate Bad Patents

DEEPLINKS BLOG
April 24, 2018

Supreme Court Upholds Patent Office Power to Invalidate Bad Patents

In one of the most important patent decisions in years, the Supreme Court has upheld the power of the Patent Office to review and cancel issued patents. This power to take a “second look” is important because, compared to courts, administrative avenues provide a much faster and more efficient means for challenging bad patents. If the court had ruled the other way, the ruling would have struck down various patent office procedures and might even have resurrected many bad patents. Today’s decision [PDF] in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC is a big win for those that want a more sensible patent system.

Oil States challenged the inter partes review (IPR) procedure before the Patent Trial and Appeal Board (PTAB). The PTAB is a part of the Patent Office and is staffed by administrative patent judges. Oil States argued that the IPR procedure is unconstitutional because it allows an administrative agency to decide a patent’s validity, rather than a federal judge and jury.

Together with Public Knowledge, Engine Advocacy, and the R Street Institute, EFF filed an amicus brief [PDF] in the Oil States case in support of IPRs. Our brief discussed the history of patents being used as a public policy tool, and how Congress has long controlled how and when patents can be canceled. We explained how the Constitution sets limits on granting patents, and how IPR is a legitimate exercise of Congress’s power to enforce those limits.

Our amicus brief also explained why IPRs were created in the first place. The Patent Office often does a cursory job reviewing patent applications, with examiners spending an average of about 18 hours per application before granting 20-year monopolies. IPRs allow the Patent Office to make sure it didn’t make a mistake in issuing a patent. The process also allows public interest groups to challenge patents that harm the public, like EFF’s successful challenge to Personal Audio’s podcasting patent. (Personal Audio has filed a petition for certiorari asking the Supreme Court to reverse, raising some of the same grounds argued by Oil States. That petition will be likely be decided in May.)

The Supreme Court upheld the IPR process a 7-2 decision. Writing for the majority, Justice Thomas explained:

Inter partes review falls squarely within the public rights doctrine. This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

Justice Thomas noted that IPRs essentially serve the same interest as initial examination: ensuring that patents stay within their proper bounds.

Justice Gorsuch, joined by Chief Justice Roberts, dissented. He argued that only Article III courts should have the authority to cancel patents. If that view had prevailed, it likely would have struck down IPRs, as well as other proceedings before the Patent Office, such as covered business method review and post-grant review. It would also have left the courts with difficult questions regarding the status of patents already found invalid in IPRs. 

In a separate decision [PDF], in SAS Institute v. Iancu, the Supreme Court ruled that, if the PTAB institutes an IPR, it must decide the validity of all challenged claims. EFF did not file a brief in that case. While the petitioner had tenable arguments under the statute (indeed, it won), the result seems to make the PTAB’s job harder and creates a variety of problems (what is supposed to happen with partially-instituted IPRs currently in progress?). Since it is a statutory decision, Congress could amend the law. But don’t hold your breath for a quick fix.

Now that IPRs have been upheld, we may see a renewed push from Senator Coons and others to gut the PTAB’s review power. That would be a huge step backwards. As Justice Thomas explained, IPRs protect the public’s “paramount interest in seeing that patent monopolies are kept within their legitimate scope.” We will defend the PTAB’s role serving the public interest.

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