Supreme Court Upholds Patent Review Process Favored by High-Tech

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The U.S. Supreme Court on Tuesday gave its stamp of approval to a government review process prized by high technology companies as an easy and cheap way to combat “patent trolls” and others that bring patent infringement lawsuits.

The justices ruled 7-2 that a type of in-house patent review at the U.S. Patent and Trademark Office does not violate a defendant’s right under the U.S. Constitution to have a case adjudicated by a federal court and jury. The court ruled against Oil States International Inc, a Houston-based oilfield services company that had challenged the legality of the process, called inter partes review (IPR).

Justices John Roberts and Neil Gorsuch dissented from the decision authored by fellow conservative Justice Clarence Thomas to uphold the reviews.

While the ruling gave Silicon Valley reason to celebrate, it was sure to displease name-brand drugmakers, which had called the IPR 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 flimsy patents that had been issued by the patent office in prior years. Since then, the patent office’s Patent Trial and Appeal Board has canceled all or part of a patent in about 80 percent of its final decisions. In 2015, it canceled an Oil States patent on protecting wellhead equipment after an IPR proceeding.

These reviews have been especially popular with companies like Apple Inc. and Samsung Electronics Co. Ltd that are frequent targets of patent infringement suits. On the other hand pharmaceutical companies like AbbVie Inc., Allergan plc and Celgene Corp. called for the IPR system to be scrapped.

In challenging the review process, Oil States argued that patents are private property that may be the revoked only by a federal court. The standard for canceling a patent is higher in federal courts than in the review proceedings.

Thomas, writing for the court, said the IPR process is an extension of the Patent and Trademark Office’s decision to grant a patent.

“Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration,” Thomas wrote.

A ruling striking down the reviews could have diverted the bulk of patent disputes back to federal courts, where litigation is more drawn out and expensive. A patent office review costs about $350,000 to litigate fully, whereas in district court it could be $3 million, Apple said in legal papers.

The case began when an Oil States subsidiary sued in 2012 claiming Houston-based rival Greene’s Energy Group infringed its patent for use in the hydraulic fracturing, or fracking, of oil wells. 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 U.S. Court of Appeals for the Federal Circuit, a specialized Washington-based patent court, upheld that decision in 2016. Oil States appealed to the Supreme Court, telling the justices that the reviews are not wiping out weak patents as advertised but instead “the best United States patents.”

Backed by the President Donald Trump’s administration, Greene’s Energy also had the support of large technology firms including Alphabet’s Google and Intel Corp.

Firms dubbed patent trolls have business model based on suing other companies over patents rather than actually making products.

(Reporting by Andrew Chung; Editing by Will Dunham)