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.