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Supreme Court and Patent Death Squad


By
Smith & Hopen PA

Inter Partes Review (IPR) is an administrative proceeding before the United States Patent & Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB). IPRs are generally an 18-month process in which a petitioner seeks invalidation of a patent based on prior publication (e.g., “prior art”). Most IPRs petitions are filed by patent infringement defendants. Typically, a company is sued for patent infringement and within one year, the defendant files an IPR petition. While attorney fees for an IPR proceeding run $250,000 or higher, this was initially considered much less than district court litigation. However, the government filing fee alone is $23,000 and virtually all contested cases are appealed to the Federal Circuit which may incur an additional $100,000 to $200,000 per side. Usually the district court judge will put the litigation on hold (“stay”) while the PTAB hears the IPR. If the PTAB finds the patent invalid (which is quite often) the district court has saved itself a lot of time and effort.
 
IPR proceedings were born from a certain type of patent litigation. Companies would buy up unused patents and assert them against companies making products or services that might infringe up the patents. These patent assertion companies were either called “non-practicing entities” or “patent trolls.” The IPR process was intended to stifle litigation that was perceived as opportunistic and abusive. Many believe the IPR process has exceeded its initial purpose and diminished the strength of the patent system itself. Patent owners, particularly those in the pharmaceutical industry, warn that the PTAB “patent death squad” is stifling innovation by lowering the value and certainty of granted patents.
 

While granted patents are presumed valid by a clear and convincing standard, instituted IPR proceedings lowered that standard to a “preponderance.” The PTAB was also comprised of administrative judges hand-picked by the USPTO Director. Much like the vetting process of Supreme Court Judges on gun rights and abortion, PTAB judge candidates may be vetted on their philosophies regarding patent validity theories. Furthermore, the USPTO Director can select additional judges to preside over a rehearing when the initial 3-judge decision is perceived inconsistent with the policies sought by the Director.

On November 27, 2017, the U.S. Supreme Court heard oral arguments (transcript) on the constitutionality of IPR proceedings (Oil States v. Greene’s Energy, 16-712). Key arguments center around whether a patent is a private right that can be revoked by an administrative body of the executive branch versus a court with the judicial branch as required by Article III of the Constitution. Defenders of the IPR process claim it is used simply to correct a mistakenly issued patent by the USPTO. Critics of the IPR process assert the PTAB is a trial court appointed by the executive branch in violation of Article III which takes away constitutional rights without a jury as required by Article VII of the Constitution. A ruling on the case is expected sometime in 2018.




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