Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC

• Decision Date: 24 April 2018
• Docket Number: No. 16–712.,16–712.
• Citation: 200 L.Ed.2d 671,138 S.Ct. 1365
• Parties: OIL STATES ENERGY SERVICES, LLC, Petitioner v. GREENE'S ENERGY GROUP, LLC, et al.
• Court: U.S. Supreme Court

138 S.Ct. 1365

200 L.Ed.2d 671

OIL STATES ENERGY SERVICES, LLC, Petitioner

v.GREENE'S ENERGY GROUP, LLC, et al.

No. 16–712.

Supreme Court of the United States

Argued Nov. 27, 2017.

Decided April 24, 2018.

Allyson N. Ho, Dallas, TX, for Petitioner.

Christopher M. Kise, Tallahassee, FL, for Respondent.

Malcolm L. Stewart, Washington, DC, for Federal Respondent.

C. Erik Hawes, Archis V. "Neil" Ozarkar, Morgan, Lewis & Bockius LLP, Houston, TX, Allyson N. Ho, Judd E. Stone, James D. Nelson, Morgan, Lewis & Bockius LLP, Dallas, TX, for Petitioner.

Pavan K. Agarwal, David B. Goroff, George E. Quillin, Lawrence J. Dougherty, Bradley D. Roush, Foley & Lardner LLP, Washington, DC, Christopher M. Kise, Joshua M. Hawkes, Foley & Lardner LLP, Tallahassee, FL, for Respondent Greene's Energy Group, LLC.

Sarah T. Harris, General Counsel, Nathan K. Kelley, Solicitor, Thomas W. Krause, Deputy Solicitor, Farheena Y. Rasheed, Mary Beth Walker, Associate Solicitors, United States Patent and Trademark Office, Alexandria, VA, Noel J. Francisco, Solicitor General, Chad A. Readler, Acting Assistant Attorney General, Malcolm L. Stewart, Deputy Solicitor General, Rachel P. Kovner, Assistant to the Solicitor General, Douglas N. Letter, Mark R. Freeman, William E. Havemann, Attorneys, Department of Justice, Washington, DC, for Federal Respondent.

Justice THOMAS delivered the opinion of the Court.

The Leahy–Smith America Invents Act, 35 U.S.C. § 100 et seq., establishes a process called "inter partes review." Under that process, the United States Patent and Trademark Office (PTO) is authorized to reconsider and to cancel an issued patent claim in limited circumstances. In this case, we address whether inter partes review violates Article III or the Seventh Amendment of the Constitution. We hold that it violates neither.

I

A

Under the Patent Act, the PTO is "responsible for the granting and issuing of patents." 35 U.S.C. § 2(a)(1). When an inventor applies for a patent, an examiner reviews the proposed claims and the prior art to determine if the claims meet the statutory requirements. See §§ 112, 131. Those requirements include utility, novelty, and nonobviousness based on the prior art. §§ 101, 102, 103. The Director of the PTO then approves or rejects the application. See §§ 131, 132(a). An applicant can seek judicial review of a final rejection. §§ 141(a), 145.

B

Over the last several decades, Congress has created administrative processes that authorize the PTO to reconsider and cancel patent claims that were wrongly issued. In 1980, Congress established "ex parte reexamination," which still exists today. See Act To Amend the Patent and Trademark Laws, 35 U.S.C. § 301 et seq. Ex parte reexamination permits "[a]ny person at any time" to "file a request for reexamination." § 302. If the Director determines that there is "a substantial new question of patentability" for "any claim of the patent," the PTO can reexamine the patent. §§ 303(a), 304. The reexamination process follows the same procedures as the initial examination. § 305.

In 1999, Congress added a procedure called "inter partes reexamination." See American Inventors Protection Act, §§ 4601–4608, 113 Stat. 1501A–567 to 1501A–572. Under this procedure, any person could file a request for reexamination. 35 U.S.C. § 311(a) (2006 ed.). The Director would determine if the request raised "a substantial new question of patentability affecting any claim of the patent" and, if so, commence a reexamination. §§ 312(a), 313 (2006 ed.). The reexamination would follow the general procedures for initial examination, but would allow the third-party requester and the patent owner to participate in a limited manner by filing responses and replies. §§ 314(a), (b) (2006 ed.). Inter partes reexamination was phased out when the America Invents Act went into effect in 2012. See § 6, 125 Stat. 299–305.

C

The America Invents Act replaced inter partes reexamination with inter partes review, the procedure at issue here. See id., at 299. Any person other than the patent owner can file a petition for inter partes review. 35 U.S.C. § 311(a) (2012 ed.). The petition can request cancellation of "1 or more claims of a patent" on the grounds that the claim fails the novelty or nonobviousness standards for patentability. § 311(b). The challenges must be made "only on the basis of prior art consisting of patents or printed publications." Ibid. If a petition is filed, the patent owner has the right to file a preliminary response explaining why inter partes review should not be instituted. § 313.

Before he can institute inter partes review, the Director must determine "that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged." § 314(a). The decision whether to institute inter partes review is committed to the Director's discretion. See Cuozzo Speed Technologies, LLC v. Lee, 579 U.S. ––––, ––––, 136 S.Ct. 2131, 2140, 195 L.Ed.2d 423 (2016). The Director's decision is "final and nonappealable." § 314(d).¹

Once inter partes review is instituted, the Patent Trial and Appeal Board—an adjudicatory body within the PTO created to conduct inter partes review—examines the patent's validity. See 35 U.S.C. §§ 6, 316(c). The Board sits in three-member panels of administrative patent judges. See § 6(c). During the inter partes review, the petitioner and the patent owner are entitled to certain discovery, § 316(a)(5) ; to file affidavits, declarations, and written memoranda, § 316(a)(8) ; and to receive an oral hearing before the Board, § 316(a)(10). The petitioner has the burden of proving unpatentability by a preponderance of the evidence. § 316(e). The owner can file a motion to amend the patent by voluntarily canceling a claim or by "propos[ing] a reasonable number of substitute claims." § 316(d)(1)(B). The owner can also settle with the petitioner by filing a written agreement prior to the Board's final decision, which terminates the proceedings with respect to that petitioner. § 317. If the settlement results in no petitioner remaining in the inter partes review, the Board can terminate the proceeding or issue a final written decision. § 317(a).

If the proceeding does not terminate, the Board must issue a final written decision no later than a year after it notices the institution of inter partes review, but that deadline can be extended up to six months for good cause. §§ 316(a)(11), 318(a). If the Board's decision becomes final, the Director must "issue and publish a certificate." § 318(b). The certificate cancels patent claims "finally determined to be unpatentable," confirms patent claims "determined to be patentable," and incorporates into the patent "any new or amended claim determined to be patentable." Ibid.

A party dissatisfied with the Board's decision can seek judicial review in the Court of Appeals for the Federal Circuit. § 319. Any party to the inter partes review can be a party in the Federal Circuit. Ibid. The Director can intervene to defend the Board's decision, even if no party does. See § 143; Cuozzo, supra, at ––––, 136 S.Ct., at 2143–2144. When reviewing the Board's decision, the Federal Circuit assesses "the Board's compliance with governing legal standards de novo and its underlying factual determinations for substantial evidence." Randall Mfg. v. Rea, 733 F.3d 1355, 1362 (C.A.Fed.2013).

II

Petitioner Oil States Energy Services, LLC, and respondent Greene's Energy Group, LLC, are both oilfield services companies. In 2001, Oil States obtained a patent relating to an apparatus and method for protecting wellhead equipment used in hydraulic fracturing. In 2012, Oil States sued Greene's Energy in Federal District Court for infringing that patent. Greene's Energy responded by challenging the patent's validity. Near the close of discovery, Greene's Energy also petitioned the Board to institute inter partes review. It argued that two of the patent's claims were unpatentable because they were anticipated by prior art not mentioned by Oil States in its original patent application. Oil States filed a response opposing review. The Board found that Greene's Energy had established a reasonable likelihood that the two claims were unpatentable and, thus, instituted inter partes review.

The proceedings before the District Court and the Board progressed in parallel. In June 2014, the District Court issued a claim-construction order. The order construed the challenged claims in a way that foreclosed Greene's Energy's arguments about the prior art. But a few months later, the Board issued a final written decision concluding that the claims were unpatentable. The Board acknowledged the District Court's contrary decision, but nonetheless concluded that the claims were anticipated by the prior art.

Oil States sought review in the Federal Circuit. In addition to its arguments about patentability, Oil States challenged the constitutionality of inter partes review. Specifically, it argued that actions to revoke a patent must be tried in an Article III court before a jury. While Oil States' case was pending, the Federal Circuit issued an opinion in a different case, rejecting the same constitutional arguments. MCM Portfolio LLC v. Hewlett–Packard Co., 812 F.3d 1284, 1288–1293 (2015). The Federal Circuit summarily affirmed the Board's decision in this case. 639 Fed.Appx. 639 (2016).

We granted certiorari to determine whether inter partes review violates Article III or the Seventh Amendment. 582 U.S. ––––, 137 S.Ct. 2239, 198 L.Ed.2d 677 (2017). We address each issue in turn.

III

Article III vests the judicial power of the United States "in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish." § 1. Consequently, Congress cannot "confer the Government's ‘judicial Power’ on entities outside Article III." Stern v. Marshall, 564 U.S. 462, 484, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). When determining whether a proceeding involves an...