In light of this week’s opening of the U.S. Supreme Court’s October 2017 term, we want to highlight two patent-related cases that the Court will review this term: (1) Oil States Energy Services, LLC v. Greene’s Energy Group, LLC[1] and (2) SAS Institute Inc. v. Matal (No. 16-969).[2] Dates for oral arguments in both cases remain unassigned.
Oil States Energy Services, LLC v. Greene’s Energy Group, LLC
In Oil States, the Court will be reviewing whether inter partes review—an adversarial process used by the USPTO to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury. In simpler terms, the Court will be considering whether ownership in a patent is a private right or a public right. If the Court determines that ownership in a patent is a private right, then the Court would likely need to consider whether such property rights can be taken away by the executive branch (by way of the USPTO’s Patent Trial and Appeal Board, or “PTAB”), or whether such property rights can only be extinguished by the judicial branch (by way of an Article III tribunal).
Procedural History
Patentee Oil States Energy Services sued Greene’s Energy Group in 2012 for patent infringement, alleging that Greene’s Energy infringed U.S. Patent No. 6,179,053, which claims an apparatus used in hydraulic fracturing (“fracking”) procedures. After the district court construed the claims in a Markman hearing, Greene’s Energy filed papers with the USPTO petitioning the PTAB to grant inter partes review of the ‘053 patent.[3] After instituting review, the PTAB determined in 2015 that the challenged claims of the ‘053 patent were unpatentable.[4] Oil Services then appealed the PTAB’s decision to the Federal Circuit, which did not issue a written opinion but instead summarily affirmed the PTAB’s decision.[5] Oil States then petitioned the Supreme Court in 2016 for a writ of certiorari pertaining to three issues.[6] The Supreme Court limited review to the first of the three issues[7]: whether inter partes review violates the Constitution by extinguishing property rights through a non-Article III forum without a jury.
Arguments
In support of its position that patent rights are private rights, Oil States relies[8] upon a nineteenth-century Supreme Court case, McCormick Harvesting Machine Co. v. C. Aultman & Co.,[9] which held that a patent “is not subjected to be revoked or cancelled by the President, or any other officer of the Government” and “is entitled to the same legal protection as other property.”[10]
Greene’s Energy, on the other hand, asserts that patent rights are public rights and cites to Stern v. Marshall,[11] for support.[12] In Stern, the Supreme Court held that, although the bankruptcy court was authorized by statute to enter judgment on a counterclaim at issue, the court lacked the authority to do so under Article III of the Constitution.[13] (The counterclaim at issue, the Court explained, was one under state common law between two private parties. It does not “‘depend[] upon the will of congress’; Congress has nothing to do with it,” wrote Chief Justice Roberts.[14])
Though not a party to the suit, the USPTO was nevertheless requested by the Court to respond to Oil Services’ petition for a writ of certiorari. Not surprisingly, the USPTO asserted in its response that ownership in a patent is a public right, which is derived from a federal regulatory scheme,[15] a position which is consistent with a Federal Circuit panel’s position in MCM Portfolio LLC v. Hewlett Packard Co.[16]
Effect of Outcome
Oil Services is the first time that the Supreme Court has agreed to consider whether inter partes reviews are constitutional. If the Court agrees with the Federal Circuit that patent rights are indeed public property rights, then the Court would likely conclude that inter partes reviews are constitutional. Thereafter, constitutionality of inter partes reviews would be a settled issue. If, instead, the Court determines that patent rights are private property rights, then the Court could deem inter partes reviews unconstitutional. Such an outcome would likely deal a devastating blow to the America Invents Act (AIA), which implemented inter partes reviews and related post-grant proceedings.
SAS Institute Inc. v. Matal[17]
In SAS, the Court will be reviewing whether 35 U.S.C. § 318(a) requires the PTAB to issue a final written decision as to every challenged claim. In other words, the Court will consider whether the PTAB may institute partial inter partes reviews, or whether, if review is granted, the PTAB must adjudicate all challenged claims.
Relevant Statute
35 U.S.C. § 318(a):
Final Written Decision.- If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d).
Procedural History
In 2013, SAS Institute, Inc., petitioned the PTAB for inter partes review of U.S. Patent No. 7,110,936, owned by ComplementSoft LLC.[18] The claims of the ‘936 patent are directed to a system and method for generating and maintaining computer code. The PTAB instituted review of some, but not all, of the claims challenged by SAS.[19] After review, the PTAB found all but one of the instituted claims unpatentable in view of the prior art.[20] SAS appealed the PTAB decision to the Federal Circuit, arguing that the PTAB misconstrued a claim term and that the PTAB erred by not addressing in its final decision all claims for which SAS sought review.[21] The Federal Circuit sided with the PTAB on the issue of partial institution and determined that the PTAB did not need to address in its final written decision claims for which it did not institute review.[22] SAS then petitioned the Supreme Court in 2017 for a writ of certiorari, which the Court granted.[23]
Arguments
SAS argues that the USPTO cannot partially institute inter partes reviews[24] because § 318(a) requires that the USPTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”[25] In SAS’s view, the statute is clear, and a contrary interpretation by an executive agency therefore thwarts Congressional intent.[26]
The USPTO responds by arguing that the AIA delegated rulemaking authority to the USPTO and that the USPTO’s practice of issuing final written decisions directed to instituted claims (i.e., not necessarily all challenged claims) is within the scope of its rulemaking authority.[27] For support of its position, the USPTO relies[28] upon a Federal Circuit panel’s decision in Synopsys, Inc. v. Mentor Graphics Corp.,[29] which held that “the final order of the [PTAB] need not address every claim raised in the petition for review.”[30] Notably, the Federal Circuit denied an en banc rehearing in Synopsys last month.[31]
Effect of Outcome
Potentially at stake in this case is the estoppel provision of 35 U.S.C. § 315(e)(1), which estops a petitioner from challenging claims in a subsequent provision before the USPTO.[32]
If the Court agrees with the Federal Circuit and the USPTO that the PTAB need not address claims not instituted in its final written decision, the PTAB’s practice of instituting partial inter partes reviews would be a settled issue. If, instead, the Court determines that the USPTO has exceeded its rulemaking authority and that its practice of instituting partial inter partes reviews is inconsistent with § 318(a), this outcome could potentially impact the estoppel effect of inter partes reviews. In HP Inc. v. MPHJ Technology Investments, LLC,[33] a Federal Circuit panel held that noninstituted grounds do not become a part of an inter partes review, and therefore the estoppel provisions of § 315(e)(1) do not apply to noninstituted claims.[34] If the Supreme Court determines that the PTAB must address every challenged claim in its written decision, the scope of estoppel could be expanded to include all challenged claims, not just instituted claims.
[1] No. 16-712 (U.S. filed Nov. 23, 2016).
[2] No. 16-969 (U.S. filed Jan. 31, 2017).
[3] Greene’s Energy Grp., LLC v. Oil States Energy Serv., LLC, IPR2014-00216, Paper 1 (PTAB Dec. 3, 2013).
[4] Id., Paper 53 at 29 (PTAB May 1, 2015).
[5] Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 639 F. App’x 639 (Fed. Cir. 2016), cert. granted, 137 S. Ct. 2239 (U.S. 2017) (No. 16-712).
[6] Petition for Writ of Certiorari, Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712 (U.S. filed Nov. 23, 2016).
[7] Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, 137 S. Ct. 2239 (U.S. 2017).
[8] Brief for Petitioner at 29, 32, Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712 (U.S. filed Aug. 24, 2017).
[9] 169 U.S. 606 (1898).
[10] Id. at 608–09.
[11] 564 U.S. 462 (2011).
[12] Brief for Respondent at 6, 7, 8, 10, Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712 (U.S. filed Jan. 30, 2017).
[13] Stern, 564 U.S. at 482.
[14] Id. at 493.
[15] Brief for Federal Respondent at 7, 10, 15, 16, Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, No. 16-712 (U.S. filed Apr. 28, 2017).
[16] 812 F.3d 1284 (Fed. Cir. 2015).
[17] Joseph Matal is listed as the first respondent in his capacity as Interim Director of the USTPO.
[18] SAS Institute Inc. v. ComplementSoft, LLC, IPR2013-00226, Paper 1 (PTAB Mar. 29, 2013).
[19] Id., Paper 9 at 22 (PTAB Aug. 12, 2013) (instituting review of claims 1 and 3–10 and declining to institute review of claims 2 and 11–16).
[20] Id., Paper 38 at 41 (PTAB Aug. 6, 2014) (determining that claims 1, 3, and 5–10 are unpatentable and that claim 4 has not been shown to be unpatentable).
[21] SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1343 (Fed. Cir. 2016), cert. granted, 137 S. Ct. 2160 (U.S. 2017) (No. 16-969).
[22] Id. at 1352.
[23] SAS Inst., Inc. v. Lee, 137 S. Ct. 2160 (U.S. 2017).
[24] Brief for Petitioner at 14–15, SAS Inst., Inc. v. Matal, No. 16-969 (U.S. filed Jul. 20, 2017).
[25] 35 U.S.C. § 318(a) (emphasis added).
[26] Brief for Petitioner, supra note 24, at 15 (“… the Patent Office cannot reduce Congress’s mandate by administrative fiat.”).
[27] Brief for Federal Respondent at 8, SAS Inst., Inc. v. Matal, No. 16-969 (U.S. filed Sep. 5, 2017).
[28] Id. at 11, 12, 24, 33, 46, 47.
[29] 814 F.3d 1309 (Fed. Cir. 2016).
[30] Id. at 1311.
[31] Mentor Graphics Corp. v. EVE-USA, Inc., 2017 U.S. App. LEXIS 16854 (Fed. Cir. Sep. 1, 2017).
[32] 35 U.S.C. § 315(e)(1) (“Proceedings Before the Office. The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that petitioner raised or reaosnably could have raised during that inter partes review.”)
[33] 817 F.3d 1339 (Fed. Cir. 2016).
[34] Id. at 1347.
