Houston-based oilfield services company Oil States International, Inc. challenged the legality of inter partes review (IPR), a patent review process that allows the Patent Trial and Appeal Board (PTAB) to hold hearings with patent challengers and patent holders to determine the validity of a patent.
The company argued that IPR violated the right of defendants under the U.S. Constitution to litigation in federal court with a jury. However, justices ruled 7-2 that IPR made no such violation, and the review process will remain upheld as of April 24, 2018.
The Ex Parte System
Before the enactment of the America Invents Act on September 16, 2012, patent review worked on a system based on the ex parte system. Ex parte allowed any person at any time to challenge the validity of a patent that he or she believed was unoriginal or obvious according to prior art.
Ex parte reexaminations were, most often, initiated by public men and women who, after requests were submitted, no longer participated in the process. Instead, an examiner investigated the case as the patent owner defended it.
IPR in Action
Following the America Invents Act, the new inter parts review allowed third parties to participate in proceedings, file comments in response to submissions made by patent owners, and appeal decisions by the United States Patent Office (USPTO).
Oil States International raised its suit following an IPR case that did not end in the company’s favor. Competitor Greene’s Energy Group used IPR to successfully challenge Oil States, which invalidated the patent they tried to leverage against Greene’s.
Concerned that the outcome may have been the result of a truncated litigation process carried out by PTAB, Oil States sought to prove the illegality of IPR for a better chance to litigate in federal court.
The decision to uphold the process, however, is at least partially based on the success of IPR according to its directives.
Since 2012, it has fielded more than 7,000 petitions and canceled over 1,300 patents on the grounds that the inventions were unpatentable.
How IPR Affects Litigation
Inter partes review aims to lower the frequency of litigation related to patent law held in court. By establishing a government-backed review board that can separately handle specific patent challenges, courts can focus on more complex patent litigation.
Attorneys and firms who seek patent infringement cases likely have already seen a decrease in the value of taking cases that are destined to go no further than PTAB. While at its base, IPR seeks to improve the quality of patents overall, its impact will send patent-specialist firms looking for more, or different, types of work.
Those patent-specialist firms will probably suffer a blow to the number of court-level cases for which they can provide counsel. The $20,000 filing fee alongside the 60+ page petition and 100+ page expert report sounds intimidating, but at its initial level, at least, IPR is still less costly than in-court hearings.
Work for patent-specialist firms could turn heavily in favor of supporting new patents, especially in the growing sector of pharmaceuticals and biopharmaceuticals. Interestingly, tech companies like Apple Inc. and Samsung Electronics Co. Ltd. continue to support IPR while pharmaceutical companies such as AbbVie Inc. and Celgene Corp. seek to take it down.
That’s because IPR makes it easier for organizations in favor of generic drug manufacturing to challenge pharmaceutical patents and accelerate the production of generic drugs. Pharmaceutical companies who are paying for the research and development of those drugs worry that IPR may obstruct the process of innovation by limiting R&D budgets.
On the other hand, tech companies are concerned with ex-employees taking sensitive patent information from emerging technologies to other companies to which they defect, then using that sensitive technology alongside publicly-available information to develop competitive products. With stronger patent-review processes at a lower cost, technology firms can combat technology transfer issues outside of court.
If litigants are able to assess how likely success will be in an IPR case with some predictability, willingness to use the tool will likely increase. As it is, however, the relatively small amount of information and precedent about the IPR process is hindering its adoption.
IPR is still evolving with a goal to become a better process for settling patent infringement cases outside of court, but we’ll have to wait longer to see if non-IPR cases balance out the in-court case load for attorneys.