Today, the Supreme Court issued two opinions in cases focused on the inter partes review (IPR) procedure.  First, in Oil States v. Greene’s Energy Group, the Court upheld the constitutionality of IPR by a 7-2 vote.  Second, in a more narrowly divided 5-4 decision in SAS v. Matal, the Court decided that the PTAB’s practice of not conducting an IPR on claims where it had made a threshold determination of patentability was contrary to the statute.

Upon Further Review, Oil States’s Claim Wasn’t Valid

The first case, Oil States, was a direct challenge to the constitutionality of IPR.  And it was just as directly dismissed. Patents “convey only a specific form of property right—a public franchise.”¹  And even that limited property right is “subject to the conditions” of the law creating patents.  In other words, patents are granted subject to the limitations Congress chooses to place on them.

And Congress chose to allow the Patent Office to reconsider its decisions.  Since 1980, Congress has authorized the Patent Office to reconsider the validity of patents.  In 1999, that authorization was expanded to allow additional participation by third parties. I’m not aware of a single patent in force today that was granted without these conditions in place—every patent out there was granted subject to Congress’s authorization for the Patent Office to reconsider its validity.  

In the end, Justice Thomas’s opinion summarizes the entirety in a single sentence: “[i]nter partes review is simply a reconsideration of [the patent] grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration.”  IPR is constitutional and can continue.

The Unspoken Holding

There’s another impact of the Oil States case that isn’t addressed in the opinion, but which remains important—this case confirms that there is no constitutional bar to determining patent validity without the use of a jury.  In Granfinanciera, the Court noted that “if Congress may assign the adjudication of a statutory cause of action to a non-Article III tribunal, then the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder.”  And today, the Court held that Congress may assign the adjudication of patent invalidity to the PTAB, a non-Article III tribunal.

In other words, Mark Lemley was (as usual) right.  There is no jury trial right on the issue of patent validity.

Even If The PTAB Thinks A Claim Is Valid, It Has To Conduct An IPR Anyway

The second case, SAS v. Matal, focused on the statutory language authorizing IPR.  The challenger argued that this required the PTAB to conduct an inter partes review and issue a final decision on every challenged claim if at least one claim appeared to be invalid; in contrast, the PTAB only conducted a review and issued a decision on the claims that they had determined met the invalidity threshold in the institution decision.  Patent Progress covered this case when it was filed, and—unfortunately—correctly predicted the outcome.

How Do You Create A Record Sufficient For The Federal Circuit?

As I noted then, requiring the PTAB to issue a final written decision on all challenged claims creates bad procedure.  Either we’ll see a lot of claims—despite initially being determined to be valid—being re-argued during the IPR proceeding or else we’ll see decisions being issued based on a limited factual record.  Particularly given recent Federal Circuit decisions criticizing PTAB for providing an inadequate record, the second seems far less likely.

Do You Always Argue Every Claim?

That means that the benefit of the threshold institution decision will be eliminated.  Regardless of the institution decision, all claims will have to be fully argued even if only one claim out of a hundred is believe to be unpatentable.  This inefficiency will raise costs for patent owners and challengers alike and increase PTAB’s workload, all for what will almost certainly be the same end result.

Or Just Leave It ‘Til The Last Minute?

The alternative, where the PTAB effectively eliminates substantive analysis in the institution decision (other than stating that a single claim had been shown likely invalid), is even worse.  In this case there isn’t even the guidance as to which claims the PTAB believed invalid. Instead, every claim has to be argued over. The parties won’t know the scope of the dispute, meaning that they’re less likely to settle with one another.  And district courts, unable to determine if the PTAB feels all claims are invalid or only one, will become less likely to stay cases.

Given the importance of this procedural change, the PTO must provide petitioners and patent owners with information as to what they should expect regarding the conduct of proceedings at the first opportunity.  Subsidiary concerns like the standard of review can wait.