US Supreme Court building. Credit: Diego M. Radzinschi / NLJ

The U.S. Supreme Court maintained the status quo at the U.S. Patent and Trademark Office Tuesday while also shaking things up at the Patent Trial and Appeal Board in a separate companion decision that will force changes to operating procedures.

The court ruled 7-2 in Oil States v. Greene's Energy Services that the inter partes review procedure created by the 2011 America Invents Act does not encroach on Article III or the Seventh Amendment, though the court left open the possibility of a due process or takings-based challenge.

Orrick, Herrington & Sutcliffe partner Mark Davies summarized it this way: “Patents must claim real inventions. Unfortunately, many patents do not. Today, the Supreme Court rejected a challenge to a critical method that the Patent Office is using with increasing frequency to eliminate patents that should never have [been] issued in the first place.”

By a 5-4 vote the court also ruled in SAS Institute v. Iancu that if the Patent Trial and Appeal Board institutes review proceedings on any patent claim challenged in an IPR petition, it must review all of the remaining challenged claims as well.

Here's a roundup of observations in the wake of the big news.

• First and foremost, more than 100 PTAB judges and many more litigators who've built a practice around IPRs still have a job. Patent owners will likely remain convinced that the IPR process is unfair and perhaps even launch new constitutional challenges. And PTAB practitioners who are midway through IPRs where the board has instituted on some but not all claims will have to figure out how to conform with SAS. “'What's going to happen to the pending cases?' is what everyone's asking,” said Knobbe Martens partner Brent Babcock.
• U.S. Supreme Court Justice Neil Gorsuch has already found his voice on patent issues. Gorsuch penned the dissent arguing that IPRs are not constitutional, then turned around and wrote the 5-4 majority opinion in SAS explaining how they must be adjudicated going forward. Justice Clarence Thomas, author of Oil States, strengthened his already established voice on patent issues. Thomas' recent credits also include the patent venue decision TC Heartland v. Kraft and the court's most recent patent eligibility decision, Alice v. CLS Bank.
• Thomas' opinion in Oil States comes with a big caveat. At the end of his opinion, he noted, “We address only the precise constitutional challenges that Oil States raised here. Oil States does not challenge the retroactive application of inter partes review, even though that procedure was not in place when its patent issued.” His opinion “should not be misconstrued as suggesting that patents are not property for purposes of the due process clause or the takings clause.”

Villanova University Charles Widger School of Law law professor Michael Risch asked via tweet if this means patents issued before the America Invents Act are now vulnerable to a takings-based challenge. “That's my view of how this case should have been argued all along,” he commented.

“The Supreme Court did not shut the door entirely on constitutional challenges to the AIA,” said Knobbe Marten's Babcock. “It would take a pretty bold patent owner to take another challenge all the way up, and it would certainly be an uphill battle. But, you know, never say never.”

Ropes & Gray counsel Matt Rizzolo seemed to see it the same way. Owners of pre-AIA patents could reasonably argue that if they'd known about IPRs, they might have elected to protect their inventions via trade secrets, for example. But, he said, petitioners could counter that before the AIA, patent owners faced the same risks via re-examination.

'SAS' Takes Center Stage

In SAS, the high court ruled that Section 318(a) of the America Invents Act said that when the PTAB institutes IPR proceedings, the board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” The PTO had interpreted that as allowing the board to pick and choose a handful of the weakest claims from a petition that might challenge 20, 30 or more. It will no longer have that option.

Latham & Watkins partner Bob Steinberg said this will raise “all kinds of strategic questions” for petitioners. Petitioners will have to be more careful about which claims they challenge. In the past, if the PTAB didn't institute proceedings on a claim, it was no-harm-no-foul.

Now petitioners will face a higher risk of final written decisions finding challenged claims valid, leaving petitioners estopped from fighting them in district court. “The PTAB is going to be the place where patentability challenges get decided,” Steinberg said.

SAS counsel Greg Castanias said some accused infringers might opt for district court. But “the claims are likely to be litigated in a single stop, rather than in a piecemeal fashion” across the two jurisdictions, said the Jones Day partner.

In the meantime, there's the issue of pending cases. Babcock estimates there are hundreds of partial institution cases wending their way through the PTAB. He thinks one option might be starting over while extending the proceedings by six months, which the board can do for good cause. He also suggested the board could find claims that weren't worthy of institution are patentable.

Former PTO director Michelle Lee suggested one other possibility: Petitioners could perhaps file new petitions on the un-instituted claims and try to get them joined with the ongoing proceedings, depending on what stage the PTAB litigation is in.

A PTO spokesman said the agency is “carefully considering” both Supreme Court decisions and determining their impact.

Weil, Gotshal & Manges partner Ed Reines pointed out that the PTAB also tends to pick and choose among petitioners' prior art references. The Supreme Court didn't expressly rule on this, but Gorsuch's opinion seemed to imply some skepticism. Gorsuch observed that the ex parte re-examination statute lets the PTAB review patents both claim-by-claim and ground-by-ground, while adding that “Congress didn't choose to pursue that known and readily available approach here.”

Ropes & Gray's Rizzolo noted that Gorsuch drew frequent parallels between IPRs and district court proceedings, saying IPR “mimics civil litigation” and “looks a good deal more like civil litigation.”

That sounded to Rizzolo like the Supreme Court's rationale for applying Native American tribal immunity to proceedings before the Federal Maritime Commission in a 2002 opinion. He expects Allergan Inc. and the Saint Regis Mohawk Tribe to make the same argument about the PTAB.

Finally, winning attorney Castanias relayed a moment of grace and civility. Shortly after the Supreme Court issued the SAS decision, Castanias said, he received a brief email from his opponent, Assistant Solicitor General Jonathan Bond, congratulating him on the win. That, said Castanias, made a good day even better.