Case No. 16-712 | Fed. Cir. Decision
The Supreme Court will hear two different cases regarding the adjudication process of the Patent Trial and Appeal Board (“PTAB”). In 2012, as part of the America Invents Act, Congress created the PTAB within the United States Patent and Trademark Office. The PTAB offers parties the opportunity to challenge patents under inter partes review (“IPR”). IPR is an adjudicative process where the PTAB first decides whether the full patent will be reviewed, and if so, considers whether the claims are patentable or whether the patent should be invalidated on the ground that it is already in use in another patent. The PTAB then issues a final decision on which claims are unpatentable and which claims are patentable. That decision may be appealed to the Federal Circuit. Oil States Energy Services argues that this new process allows a non-Article III forum without a jury to extinguish private property rights in violation of the Constitution.
Oil States Energy Services manufactures a solution that protects wellhead equipment. The corrosive nature of hydraulic fracturing fluid combined with the high pressures at which it is pumped into a well can cause damage to the equipment used at the wellhead if the wellhead is continuously exposed to the fluid without some kind of protection. The patents at issue both provide a solution by using a protective tube that locks after it is inserted into the wellhead. By locking in the protective tube, there is an adequate seal even where the fluid pressure fluctuates. Thus, the wellhead and the pipe casing are protected from the abrasive fluid.
Oil States filed a patent infringement suit against Greene’s Energy Services in a Texas district court. The court found that Oil States’ patent was distinct from Greene’s patent. Greene’s sought IPR and the PTAB ended up invalidating Oil States’s patent on the grounds that it was “anticipated” by Greene’s patent application. Oil States moved to amend its patent to clarify the technical descriptions, but the PTAB denied the motion. Oil States appealed to the Federal Circuit, arguing that IPR violates Article III and the Seventh Amendment because the process extinguishes private property rights in a non-Article III forum and the forum proceeds without a jury.
Should the Court rule in favor of Oil States the result would invalidate the entire IPR process. This would bring back exactly what Congress was trying to avoid: the lengthy and costly patent infringement litigation that could disincentivize businesses from applying for new patents because of the fear of the adversarial process. Further, the government argues that IPR is not as abrupt a shift as Oil States makes it out to be and that patents have always been part of administrative procedure due to the fact that they are granted by an administrative agency. On the other hand, is Congress allowed to legislate around judicial authority just because it doesn’t like the process?