SCOTUS Watch: Oil States Oral Hearing Preview

On November 27, 2017, the U.S. Supreme Court will hear oral arguments in the appeal from the Court of Appeals for the Federal Circuit, Oil States Energy Services v. Greene’s Energy Group.[1]  Certiorari was granted earlier this year.  The sole question presented is whether the inter partes reviews – adversarial proceedings held before the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) and enacted as part of the AIA in 2012 – violates the Seventh Amendment of the U.S. Constitution by terminating a private property right through a non-Article III forum without a jury.

Inter partes proceedings – collectively, inter partes reviews, post-grant reviews, covered business method reviews – and ex parte reexaminations have become important tools utilized by patent owners to combat overly broad issued patents owned by so-called “patent trolls.”  Inter partes proceedings, while expensive, are nothing compared to the costs of a full-blown litigation in the federal courts, which is part of the reason this mechanism has been popular since its enactment almost four years ago.

There is also a large vocal chorus on the other side which finds that inter partes proceedings and the PTAB’s entire post-grant challenge process to be a thorn in the side of strong patent rights.  The high challenge rate at the PTAB, as well as the high invalidity rate, were reasons for the U.S. to drop to tenth in the world in protection of IP rights.

The Federal Circuit already has long held that ex parte reexams do not violate Article III or the Seventh Amendment.[2]  After enactment of the AIA’s post-grant procedures in 2012, the Federal Circuit held the same for inter partes proceedings.[3]  However, neither case made its way to the Supreme Court until Oil States was granted certiorari.

If the Supreme Court finds that patents are, indeed, private property rights, and in doing so, reverses the Federal Circuit and hold inter partes reviews unconstitutional.  However, if it finds patents are public rights (i.e., being issued by a public agency for the betterment of the public as a whole), the Federal Circuit’s decision would be affirmed, and inter partes reviews found constitutional.  Perhaps a possible hint of how the Supreme Court might rule came in a recent trademark case, B&B Hardware, Inc. v. Hargis Indus.[4]  In the majority opinion, Justice Samuel Alito wrote:

The likely reason that Hargis did not directly advance a constitutional argument is that, at least as to a jury trial right, Hardis did not even list the Seventh Amendment as an authority in its appellee brief . . . . To the extent, if any, that there could be a meritorious constitutional objection, it is not before us.[5]

One interesting dicta is what another commentator[6] noted:

It would . . . be desirable if all [patent] cases of this sort could be referred to a commision of intelligent experts and practical men to report their opinion thereon, with their reasons, for the final action of the court . . . . Neither courts nor ordinary juries are perfectly adapted to the investigation of mechanical and scientific questions . . . .[7]

More information will follow after oral arguments.

[1] 639 Fed. App’x 639 (Fed. Cir. 2016), cert. granted, 198 L. Ed. 2d 677 (U.S. Jun. 12, 2017) (No. 16-712).

[2] See Patlex Corp. v. Mossinghoff, 758 F.2d 594, modif’d on rehearing, 771 F.2d 480 (Fed. Cir. 1985).

[3] See MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Fed. Cir. 2015).

[4] 575 U.S___; 135 S. Ct. 1293 (2014).

[5] Id. at 1304.

[6] See Dennis Crouch, 1877 Supreme Court Thought’s on Oil States?, Patently-O Blog (Nov. 20, 2017), at https://patentlyo.com/patent/2017/11/supreme-thoughts-states.html.

[7] Quoting Cochrane v. Deener, 94 U.S. 780 (1877).

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