The Supreme Court has agreed to hear a petition for Certiorari in Oil States Energy Services v. Greene’s Energy Group, which will result in the Court addressing the constitutionality of post grant proceedings that were instituted following the passage of the America Invents Act of 2011 (AIA). The Inter Partes Review (IPR) proceeding that was created within the AIA, to be administered by the USPTO’s Patent Trials and Appeals Board (PTAB), has become the tool of choice of major patentees to challenge the validity of patents. This has led to the USPTO being placed in the position of both granting patents and then later cancelling them without the judicial review of an Article III court, and without the deliberation of a jury as called out in the US Constitution.
The impact of the resulting decision in this case may affect patent dispute outcomes not just moving forward, but possibly spanning 5 years into the past. At a (very) high level, there are three possible outcomes arising from the Supreme Court decision that is expected in 2018 that will impact the IPR process: no change, some change, major change.
What might each of these outcomes look like, what could they mean to the patent holder, and how can portfolio owners best prepare for whatever change may come? TechInsights examines the different scenarios that may apply, and outlines the effects of each on portfolio management strategy.
No change, some change or major change – what do we expect?
If the Supreme Court Justices felt that the case had no merit and the provisions of the America Invents Act of 2011 (AIA) were on solid ground constitutionally, they would not have agreed to grant a hearing following the receipt of Plaintiff’s petition. In other words, if the Justices expected that nothing would change as a result of hearing this petition, they would not have granted cert. in June. It is therefore reasonable to conclude that maintenance of the status quo for IPRs is not a likely outcome of this case.
Ultimately, the outcome in this case could see the Supreme Court:
- Provide guidance to the USPTO on the conduct of the IPR post grant proceedings that are at issue – meaning the IPR could be found to be constitutional but over-zealous, and adjustments will be made
- Declare the relevant portions of the AIA to be ultra vires and exceeding the Constitutional authority of Congress – meaning the IPR could be found to be unconstitutional, and the process will change profoundly
The most likely outcome is that the Supreme Court will provide guidance and IPRs will continue, but with parameters defined to help make adjustments to the process.
The latter would lead to a somewhat chaotic situation in which roughly 1,300 PTAB decisions in which claims were invalidated would be vacated and the status of the patents involved in those cases would come into question.
What we would expect to see…
Portfolio management strategy best practices are heavily influenced by the current IPR process, and they will be heavily influenced by the outcome of this case.
…If the process doesn’t change
The IPR process has effectively eliminated most of the more prolific PAEs and significantly reduced spurious attempts at assertion, but it has also limited the ability – or rather the willingness – of patent holders to actively protect their assets. There is a lot of unrealized value in portfolios simply because inventors may have to defend them at the PTAB.
If the IPR process is held to be constitutional, we may see more organizations finally adopting more thorough prosecution processes, looking deeper into the validity of their patents, and undergoing strengthening exercises on a more regular basis. We would expect to see more thorough prior art searches, narrower claims in patent drafts, and more in-depth examinations ahead of acquisitions.
Under the current process, we are seeing more portfolios licensed than we are individual patents. If the process doesn’t change, we expect to see this trend continue.
…If the process is adjusted
This is the most likely outcome of Oil States v. Greene’s Energy. It is also the broadest category to try to address. Let’s consider the potential changes that we feel are the most likely:
- Modified evidentiary standard – how compelling does evidence have to be in order to be admissible? We may see the standard changed from the current preponderance of the evidence to the more stringent clear and convincing level.
- Broader guidelines for gathering evidence – currently only evidence that is publicly available at the time of filing is admissible. We could see this restriction loosened to allow for the submission of evidence that is geared specifically toward the matter at hand.
- Modified amendments process in AIA reviews – currently the burden of proving an amended claim is patentable is on the patentee; we could see this process adjusted so the burden is on the petitioner to prove the claim unpatentable.
Nearly any adjustment to the IPR process would make it friendlier to patent holders, and we would also expect to see a re-emergence of PAE activity as a result.
We anticipate that increased inspection of patent validity would still occur, simply because facing a challenge with certainty on your side is favorable to facing a challenge with a maybe.
Patent holders would still look to license subsets of portfolios, but those subsets may be in smaller lots.
In prosecution, we would expect to see broader claims, with greater risk that prior art could invalidate the patent. Inventors would file the broadest claims possible if the IPR process is adjusted to the point where it no longer looms as an obvious threat to any attempt at assertion.
…if the IPR is deemed unconstitutional
If the last five years of patent decisions are essentially thrown out, well… the words “Wild West” come to mind.
Rather than speculate on what might happen to the patents involved in any IPR over the past five years, we’ll focus on the key outcomes:
- The burden of weakening a patent would return to private negotiations
- All PAEs that were making money before the IPR process was introduced would reactivate
- Portfolio owners would look increasingly to monetize their portfolios aggressively
What you should do as a portfolio owner
The pendulum has swung far away from portfolio owners over the last five years; Oil States v. Greene’s Energy is pushing it back. We will see improvements in patent rights and an increase in licensing activity. It’s time to get your portfolio in order.
Join the Discussion
15 comments so far.
Art MonkOctober 5, 2017 03:43 pm
UPDATE: We had been expecting to see a shift in the burden of proof as one of the outcomes of the Oil States v. Greene’s Energy SCOTUS ruling early in 2018, but it has come earlier than anticipated. The Federal Circuit decided on October 4th, in the Aqua Prod., Inc. V. Matal case, that the burden of persuasion regarding the patentability of proposed amended claims lies with the petitioner, rather than with the patent owner (respondent). With this decision it is now the responsibility of the petitioner to prove that a claim or any amendment proposed by the respondent is unpatentable, and no longer the responsibility of the respondent to prove such claims and amendments are patentable.
Anon – Of Comment 3October 3, 2017 10:48 am
The proposed severability amendment to the AIA was listed as amendment No. 11 in part B of House Report 112–111. As reported in the Congressional Record for June 23, 2011, Rep. Watt offered the amendment on behalf of Rep. Waters (who was not present) and then subsequently withdrew it upon learning that Rep. Waters did not intend to offer the amendment.
Art MonkOctober 1, 2017 12:12 pm
To “The Time … “
Post AIA, investors began to reject investments focused solely on patent licensing. If IPRs are turned off, or significantly modified, those same investors can reevaluate such business plans and decide if the risk/reward ratio is now acceptable. This is purely an outcome following changes that might be made to the IPR proceeding – which the investment community will observe and react to – and not a “subtle salvage the PTAB message.” I have no bias regarding patent rights accruing to those who practice or do not practice and agree with the “patent owner is a patent owner” position … which leads to your level playing field comment. On purpose, I stay away from the “T-word” in such writings as I believe it to be less than useful as a descriptor for the reasons you allude to.
AnonSeptember 29, 2017 07:40 pm
Your statement though of “The ‘nose of wax’ is too appealing; the legal bullies are having too much fun;” may indicate that the Court WILL find the IPRs to be unconstitutional.
Here is why: If they decide the other way, then the Article I forum could be made to bethe only forum. If deemed merely a public right, subject to the Article I “court,” there is nothing to stop Congress from passing a next-gen “IPR” and making it necessary that ALL questions of validity (and infringement) must FIRST (and then only) go through the PTAB. Part of the aspect of a granted patent being a property right is ALL of the other Constitutional protections that inure to property.
The “nose of wax” addiction actually make it more probable than not patents will be upheld as being property with all those inured rights.
Eric BerendSeptember 29, 2017 12:40 pm
Forget it. Is the issue and its assured outcome, not already obvious enough?
What was that classic quote regarding the SCOTUS and U.S. patents?
‘The only patent that is not invalid, is one that has not yet appeared before us”.
The ‘nose of wax’ is too appealing; the legal bullies are having too much fun; the ‘Big tech’ bribes are flowing; academic prestige attaches; the approval of the ignorant mob follows – to EVER put a stop to this feast on inventors’ lives and patent holders’ interests.
I predict that this will be used as an opportunity by the Supreme Court, to ‘double down’ on the supposed legitimization of this anti-Constitutional law, to make sure that patent protection advocates, practitioners and inventors “get the message” that now and for the future, we’re politically ostracized and permanently regarded as poison in Washington, D.C. (“Beltway”) society.
Pro seSeptember 28, 2017 10:40 pm
If the SCOTUS deem IPRs unconstitutional, I’m already prepared with Undue Influence and Duress arguments to get all my patent value and claims I lost to restore as if the last 5 years never happened.
I will also be suing the USPTO to get the 5 years in reparations back as a patent term adjustment having been unfairly had years robbed from my patents from yearly countless IPR challenges stifling my right in district court to enforce due to serial stays.
The Time Is Now To ActSeptember 28, 2017 09:52 pm
The comments on PAE activity seem inappropriately parsed separately from patent owner activity. It is as if the author wishes to whisp a subtle Salvage the PTAB message in the wind. Troll… Troll..Booo Troll..
A patent owner is a patent owner, whether practicing or not. When the playing field evens, it evens for all.
Truly, an even playing field is the possible outcome most feared here.
Edward HellerSeptember 28, 2017 02:56 pm
The author does not consider the impact of Octane Fitness and Halo on PAE activity.
AnonSeptember 28, 2017 02:39 pm
You state: “District courts will weigh the findings of the PTAB as evidence of invalidity”
This weighing would be meaningless given that different standards (yes, more than one aspect) are at play between the Article I and Article III forums. Quite possibly, the rules of evidence may in fact prevent such a thing (it would engender more confusion than help in trying to ascertain whether or not ANY Article I finding from different standards could hold to the Article III requirements). The “ability” of the patentees to show difference is an incorrect burden switch, and any evidence would have to meet the proper standards in the first instance.
Your comments sounds in the advice of some Amici: just make the PTAB “advisory” to the actual Article III courts.
The problem of course (beyond the point already provided) is that is just not how the law is written, and that is just not how a change in the law can be undertaken.
What you seek would need to be proposed in – and passed by – another session of Congress to be put into place.
(By the way, the Anon above at post 3 is a different Anon than this Anon. I have pulled back on my “severeability” position pending my ability to find the actual amendment for severeability that I had previously thought to have been proposed and defeated. HOWEVER, the statement above is a different statement – one in which different versions of the law are involved. I am not quite convinced that this would have the same effect as the view that originally promoted my (then) ardent belief of the AIA as having a Chaebol effect (too big to fail).
Matthew A. Fox, Esq. (IN, NY, USPTO)September 28, 2017 02:19 pm
I do not see a significant chance of a retroactive effect from a U.S. legal perspective, add in the political factor, and it’s virtually non-existent. There might be some opportunity to petition for relief, but a wholly retroactive, very unlikely. The machine of the PTAB is too economically important domestically.
I take cues from my criminal defense practice, and the “criminal acts” under federal laws that deprived many of their liberty for decades because of a sentencing guideline or an alleged “violent” act. The Court would later abolish or amend many of the laws and guidelines that incarcerated people for decades. Under new laws and guidelines, some had served 10x the amount of time called or, other acts were no longer criminal. None were suddenly released. Instead, it was a petition process that required more time, more filings, more attorney skill, before being released or having a sentence reduced. By then, many had already miss their window of opportunity.
Those that have lost claims in the PTAB IPR process have mostly likely had the window closed on them. I truly hope I am wrong.
Invention RightsSeptember 28, 2017 11:54 am
Here is what happens when IPR is ruled unconstitutional. A patent owner cannot waive jurisdiction by participating in the IPR. He had no choice. It is not a voluntary or court ordered arbitration. Any decision or cancellation of claims by the PTAB would be ultra vires.
Patentees that settled their infringement suits will be precluded from asserting the patents at least against the same parties.
Otherwise, district courts will weigh the findings of the PTAB as evidence of invalidity, but patentees will have the opportunity to show that the PTAB decision was error or depended on a different burden of proof or claim construction.
Invention RightsSeptember 28, 2017 11:47 am
Here is what happens if IPR is ruled unconstitutional. A patent owner cannot waive jurisdiction by participating in the IPR. He had no choice. It is not a voluntary or court ordered arbitration. Any decision or cancellation of claims by the PTAB would be ultra vires.
Patentees that settled their infringement suits will be precluded from asserting the patents at least against the same parties.
District courts will weigh the findings of the PTAB as evidence of invalidity, but patentees will have the opportunity to show that the PTAB decision was error or depended on a different burden of proof or claim construction.
AnonSeptember 28, 2017 11:17 am
I agree with the author that a “no change” outcome is unlikely. But in finding IPRs to be unconstitutional, I don’t see how SCOTUS avoids throwing much of patent law into chaos. As stated by Eric Guttag in an IP Watchdog blog post from July 13, 2015:
As many have observed, there is no “severability clause” in the AIA. And as those many have also observed, the lack of such a ““severability clause” in the AIA was not an oversight by Congress, but a deliberate omission to ensure passage of it. (A “severability clause” was present in earlier drafts of the AIA, but was then removed from the final version.) In other words, it could be very validly argued that if the IPR provision is ruled to be unconstitutional (invalid) by the courts, the entire AIA could completely fall because the invalid IPR provision cannot be “severed” from the remaining (and so far) valid provisions of the AIA.
curoiusSeptember 28, 2017 11:04 am
As has been brought up here in the comments before – would a determination that IPR is unconstitutional necessarily vacate the past 5 years of IPR decisions? If the defense of unconstitutionality wasn’t raised during the IPR, was it effectively waived? Or will patent owners (of patents cancelled during IPR) have redress via some sort of petition (an active step required by patent owners, rather than passively having all the patents reinstated)?
Invention RightsSeptember 28, 2017 09:48 am
I don’t see that the question presented allows for SCOTUS to fine tune IPRs. If the problems can be “fixed” then they will simply affirm. And if so, there will be another case down the road that raises due process issues. Hopefully the Court will recognize in Oil States that the infirmities are the inevitable byproduct of overreach by the Executive branch, and will toss the whole thing out as irredeemable.