Oil States/CAFC to Unravel “Litigation” Premise

Sovereign immunity from proceedings of the Patent Trial & Appeal Board (PTAB) has become inextricably linked with the Oil States debate now before the Supreme Court. That is, the 7th amendment argument in Oil States and the 11th amendment argument for sovereign immunity at the PTAB are both tied to the same basic, threshold premise — IPR is a trial proceeding akin to an Article III lawsuit.

In Oil States, the “trial argument” is made to distinguish IPR proceedings from patent reexamination. It is argued that because an IPR is more trial-like compared to the earlier, examination based system, a jury trial is now required, consistent with the 7th Amendment.

In the sovereign immunity context, immunity applies if an administrative proceeding is similar to civil litigation. Fed. Mar. Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002). But, some judges of the CAFC have already signaled a willingness to unravel this “IPR is a trial” premise, and it is my expectation that Oil States will follow suit.

In Ultratec, Inc. v. Captioncall, LLC, 2017, (Fed. Cir. Aug. 28, 2017), the panel addressed the use of the term “trial” to describe an IPR proceeding in a footnote, explaining:

The PTO at times refers to the IPR proceedings as a “trial.” Very seldom do IPR proceedings have the hallmarks of what is typically thought of as a trial. See Joanna Shepherd, Disrupting the Balance: The Conflict Between Hatch-Waxman and Inter Partes Review, 6 NYU J. INTELL. PROP. & ENT. L. 14, 37 (2016) (“In contrast to the expansive discovery and witness testimony that is common in district court litigation, discovery is significantly restricted and live testimony is rarely allowed in IPR proceedings.”); Eric Cohen, A Primer on Inter Partes Review, Covered Business Method Review, and Post-Grant Review Before the Patent Trial and Appeal Board, 24 FED. CIR. B.J. 1, 5 n . 40 (2014) (noting that in the first two years of IPRs, the Board allowed live testimony once). In this case, the IPR proceeding itself was limited to a brief argument by the lawyers for each side, and there was no live testimony by any witness.

(emphasis added)

While this observation may have been volunteered by the Federal Circuit to address an argument now being briefed in Oil States it is equally problematic for proponents of sovereign immunity. Contrast the more recent statement above (and its emphasis on the absence of live testimony) with the Court’s 2007 statement in Vas-Cath, Inc. v. Curators of the Univ. of Missouri, 473 f .3d 1376, 1384 (Fed. Cir. 2007) (determining that patent interference was sufficiently litigation-like for purposes of sovereign immunity)

[C]ontested interference proceedings in the PTO bear “strong similarities” to civil litigation, and the administrative proceeding can indeed be characterized as a lawsuit. PTO interferences involve adverse parties, examination and cross-examination by deposition of witnesses, production of documentary evidence, findings by an impartial federal adjudicator, and power to implement the decision.

(internal citations omitted)

Turning now to the Supreme Court view of the “trial argument,” the CAFC’s shifting view may be more readily understood. In Cuozzo Speed Technologies, LLC v. Lee, there the Court pushed back on this theory:

[I]nter partes review is less like a judicial proceeding and more like a specialized agency proceeding. Parties that initiate the proceeding need not have a concrete stake in the outcome; indeed, they may lack constitutional standing. . .challengers need not remain in the proceeding; rather, the Patent Office may continue to conduct an inter partes review even after the adverse party has settled. §317(a). Moreover, as is the case here, the Patent Office may intervene in a later judicial proceeding to defend its decision—even if the private challengers drop out. . . .

Most importantly, these features, as well as inter partes review’s predecessors, indicate that the purpose of the proceeding is not quite the same as the purpose of district court litigation. The proceeding involves what used to be called a reexamination (and, as noted above, a cousin of inter partes review, ex parte reexamination, 35 U. S. C. §302 et seq., still bears that name). The name and accompanying procedures suggest that the proceeding offers a second look at an earlier administrative grant of a patent. Although Congress changed the name from “reexamination” to “review,” nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision. Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protect the public’s paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope.

(emphasis added, internal quotes and citations omitted)

I expect the High Court to once again distinguish IPR as a specialized agency proceeding that protects the public interest. As such, the Oil States decision will almost certainly provide additional fodder for the “trial argument” issue common to the sovereign immunity debate. Such a development, on top of the Federal Circuit’s recently expressed view on this debate indicates to me that sovereign immunity will be a short-lived, PTAB phenomena.

Scott A. McKeown is an author of the Patents Post Grant.