Supreme Court divided over legality of
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[November 28, 2017]
By Andrew Chung
WASHINGTON (Reuters) - U.S. Supreme Court
justices on Monday appeared divided over whether a federal agency's
in-house process for challenging patents violates the constitutional
rights of patent owners, leaving the fate of a system that has led to a
high rate of patent cancellations uncertain.
In one of the most important Supreme Court patent cases in years, the
nine justices heard an hour of arguments in a dispute over the U.S.
Patent and Trademark Office's patent review proceeding, known as inter
partes review (IPR). A decision to strike down the reviews could
fundamentally change the way patents disputes are litigated in the
Three of the court's liberal justices appeared sympathetic toward the
review process, but other justices including conservatives John Roberts
and Neil Gorsuch raised concerns that the government might be able to
revoke patents too easily.
The reviews have become a quick and cheap way for companies to try to
invalidate patents owned by competitors and others, and have been
especially popular with high technology firms such as such as Apple Inc
<AAPL.O> and Samsung Electronics Co Ltd <005930.KS> that are common
targets of patent infringement suits.
On the other hand, name-brand pharmaceutical companies like AbbVie Inc
<ABBV.N>, Allergan plc <AGN.N> and Celgene Corp <CELG.O> call the review
process a threat to innovation.
The U.S. Congress created the reviews as part of a 2011 law to deal with
the perceived high number of poor-quality patents that had been issued
by the patent office in prior years, which helped fuel the business
model of so-called patent trolls that make money off patents rather than
The case arose from a dispute between two rival Houston-based oilfield
services companies, Oil States International Inc <OIS.N> and Greene's
Energy Group, over a patent on protecting wellhead equipment used in the
hydraulic fracturing, or fracking, of oil wells.
In challenging the review process, Oil States argued that patents are
private property that may be the revoked only by a federal court, and
that the administrative procedures violate the U.S. Constitution's right
to be heard by a federal court and jury. The standard for canceling a
patent is higher in federal courts than in the review proceedings.
Liberal Justices Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor
noted that the patent office has long had the power to grant patents and
invalidate wrongly issued ones after the fact.
"There must be some means by which the patent office can correct the
errors it's made," Ginsburg said.
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Protesters gather outside the Supreme Court, as the justices will
hear arguments over whether a federal administrative process
frequently used by high technology companies to invalidate patents
they are accused of infringing violates the U.S. Constitution, in
Washington, U.S., November 27, 2017. REUTERS/Yuri Gripas
Sotomayor added that what "saves" the system is the fact that any
invalidation can be appealed to the Washington-based U.S. Court of
Appeals for the Federal Circuit for full judicial review, as
happened in this case.
CONSERVATIVES RAISE DOUBTS
Gorsuch noted that judicial review is available only if someone
appeals a patent review proceeding's decision, which does not always
happen. He agreed with Oil States that a patent is a private right
belonging to the inventor.
Chief Justice Roberts said Supreme Court precedents have frowned
upon the government offering benefits on a conditional basis.
Roberts told Greene's Energy attorney Christopher Kise, "Your
position ... is simply you've got to take the bitter with the sweet.
If you want the sweet of having a patent, you've got to take the
bitter that the government might re-evaluate it at some subsequent
Conservative Justice Anthony Kennedy and liberal Justice Stephen
Breyer had tough questions for both sides.
The court is due to rule on the case by the end of June.
An Oil States subsidiary sued in 2012 claiming Greene's Energy
infringed its patent. Greene's responded by filing an inter partes
review at the Patent Trial and Appeal Board, the administrative
tribunal run by the patent office that conducts the reviews. The
board later canceled key parts of the patent. The Federal Circuit
upheld that ruling last year.
Backed by the President Donald Trump's administration, Greene's
Energy had the support of large technology firms like Alphabet's
Google <GOOGL.O> and Intel Corp<INTC.O>.
In about 1,800 final decisions up to October, the agency's patent
board canceled all or part of a patent around 80 percent of the
(Reporting by Andrew Chung; Editing by Will Dunham)
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