IPRs: SCOTUS to Patent Owners' Rescue?
The 2011 America Invents Act (“AIA”) allows third parties to challenge the validity of issued patents through procedures operated by the United States Patent and Trademark Office (“PTO”) rather than the U.S. district courts. One such AIA procedure, handled by the PTO’s Patent Trials and Appeals Board (“PTAB”), is called Inter Partes Review (“IPR”).
Several key Constitutional questions regarding IPRs have been raised in recent cases and provide a tremendous opportunity for the Supreme Court to either correct or bless the IPR system as it has been developing. Their decision on this front could have legal and economic ramifications in the United States and the world—positive or negative—for many years to come.
This spring, the Supreme Court will review a Federal Circuit ruling that allows PTAB to invalidate patent claims according to their “broadest reasonable interpretation.” See In re Cuozzo Speed Technologies, LLC. That standard is by definition broader than the well-established Markman claim interpretation standard district courts have used for many years when determining patent validity. Critics of the ruling argue that if it is upheld, a patent undergoing IPR will be invalidated more easily than if the patent were reviewed by a district court, resulting in a fundamentally unfair and unconstitutional process improperly stripping property rights from patent owners.
In another case, the Federal Circuit ruled that PTAB can invalidate patents under IPR with the same effect of an Article III district court even though PTAB is an Article II executive tribunal. See Cooper v. Lee. In that case, the petitioner argues—citing nineteenth century Supreme Court precedent—that once the PTO grants a patent that patent becomes the private property of the grantee and only an Article III court can take such private rights away from the owner. The case is not currently before the Supreme Court but a petition for writ of certiorari has been filed requesting, inter alia, that the case be decided in conjunction with In Re Cuozzo.
In yet another case, the Federal Circuit ruled that the same PTAB panel can both (1) decide to institute an IPR and (2) render a final determination in that same IPR. See Ethicon Endo-Surgery, Inv. v. Covidien LP This raises—at a minimum—fairness questions in that if an IPR is instituted, the patent holder proceeds before the same panel that found there was a “reasonable likelihood” the patent holder would lose. As of the date of this posting, this decision has not been petitioned for either en banc review or writ of certiorari to the Supreme Court but it is possible one of those avenues will be pursued.
Critics warn that these cases raise serious concerns from both legal and economic perspectives. They argue that if the PTO can grant private rights that can later be revoked under a proceeding that does not carry the same Constitutional protections afforded in district court, then a fundamental legal principle underpinning the entire patent system—that patents are private property rights—is in jeopardy.
The argument follows that if that pin is pulled, and the patent system is concomitantly weakened, innovators may be less apt to invest in research and development because there is no protection or reward for that research and development, and may decide resources would be better spent holding key technology as trade secrets and perhaps copying others, which steers dangerously toward an IP culture that resembles the IP culture of China.
Hopefully, the Supreme Court will step in at this critical juncture and set the proper path forward.