Earlier this year, Ford Motor Company successfully defeated a patent owned by non-practicing entity Paice, LLC. The patent, directed to hybrid vehicles, was canceled following an “inter partes review” at the patent office. Later this year or early next year, however, the Supreme Court will hear arguments that broadly challenge the authority of the patent office to cancel issued patents. For anyone involved in innovation, the impact of the Supreme Court’s decision is potentially massive.
What are Inter Partes Reviews?
Inter partes reviews were created by Congress in 2011 as an administrative procedure for challenging a patent at the patent office—effectively requesting that the patent office reconsider whether the patent should have granted in the first instance. Inter partes reviews have a narrower scope than district court litigation, focusing only on the validity of a patent. Discovery is not as far reaching, and inter partes reviews are typically concluded within 18 months.
In view of these differences, many businesses now turn to inter partes reviews as a lower cost alternative to defending against a patent in district court. Across all industries, inter partes reviews have favored patent challengers, with the success rate remaining near 70%. Within the auto industry, Ford, Toyota and Mercedes-Benz are among the more prolific users of inter partes reviews, each having initiated over 30 separate inter partes reviews since 2013.
The Supreme Court Appeal
Not surprisingly, inter partes reviews have been challenged under various grounds since first implemented in 2013. Sometime during the upcoming October Term, the Supreme Court will hear the latest challenge in Oil States v. Greene’s Energy Group. Among other issues, the Supreme Court will consider whether patent owners are entitled to have a jury decide whether a patent should be canceled as being invalid. At its core, the issue centers on whether a patent is a private right or a public right. Generally, deprivation of a private right requires a trial by jury under the seventh amendment, while deprivation of a public right does not. If patents are determined to be a private right, inter partes review proceedings may be deemed unconstitutional.
The impact of the Supreme Court’s decision in Oil States could have far reaching effects. If inter partes reviews are unconstitutional, many commentators expect patent infringement filings to return to pre-2013 levels. If inter partes reviews are left intact, however, the number of petitions filed each year could increase. For example, over 1,500 petitions for inter partes review have been filed within the last 12 months. This number could rise over the next 12 months, particularly if the Supreme Court’s decision is viewed as an endorsement of Congress’s authority to delegate to the patent office the ability to cancel invalid patents.
Takeaway
The Oil States appeal is not the Supreme Court’s first exposure to inter partes reviews. Last June, the Supreme Court upheld the patent office’s practice of interpreting patents broadly in inter partes reviews. The upcoming oral arguments should offer an initial insight into the thinking of the several justices regarding this most recent challenge. If inter partes reviews are an important aspect of your business, or if you would like more information regarding the Oil States appeal, please contact Vito Ciaravino or any of the intellectual property attorneys in our Automotive Industry Group.
