A United States Supreme Court ruling this week means retailers will not return to choosing between crippling legal fees and paying royalties to holders of sketchy technology patents. But the process for resolving patent disputes without going to court is not safe from future challenges.
In a 7-2 decision on Tuesday, the Supreme Court upheld the constitutionality of the U.S. Patent and Trademark Office’s “inter partes review” (IPR) process, which is an administrative process for resolving patent disputes. But that’s all the court decided. The details about how IPRs should work and which patents they should apply to are still up in the air. Despite that, the Supreme Court’s decision in Oil States Energy Services LLC v. Greene’s Energy Group LLC is seen by patent attorneys as a victory that e-retailers can benefit from.
“The biggest takeaway for the e-retailer community is a big sigh of relief,” says Thomas Duston, a partner with the law firm Marshall, Gerstein & Borun LLP in Chicago.
Had the Supreme Court ruled the IPRs are unconstitutional, Duston says, that would have put past rulings by the Patent Trial and Appeal Board (PTAB) in question and would have put retailers “back to the old days” when dealing with patent trolls. For those reasons, he says, the ruling on Tuesday was positive. However, “IPRs are not out of the woods yet,” Duston says, because the Supreme Court left important issues unresolved, as the majority opinion itself acknowledges.
Two questions of vital importance, Duston says, are whether the specific rules created for the IPRs deprive patent holders of due process and whether PTAB decisions can rightfully be applied to patents issued before the PTAB was created. Those issues were not addressed by the decision issued this week.
Jeffrey Drake, an attorney and principal at Chicago-based Miller, Canfield, Paddock and Stone P.L.C., says IPRs are fair, straightforward and intended to weed out bad patents that never should have been issued in the first place. Therefore, he does not think they are a threat to legitimate property rights. But, because the decision does not deal with due process and retroactive application issues related to IPRs, it’s almost certain that the Supreme Court will have to revisit the issue.
Some patent owners are referred to by critics as “trolls” because they don’t use their patents to make products, but instead seek royalties from companies deemed to have violated patent-holders’ intellectual property rights. Such parties have been notorious for demanding royalties from e-retailers and threatening costly litigation if the merchants refuse.
As a defense against the trolls, the patent office’s Patent Trial and Appeal Board was formed in 2012 as part of the America Invents Act. The board hears patent disputes using IPRs, which are far quicker and less expensive than full-blown patent litigation.
The National Retail Federation (NRF), a trade association representing retailers, hailed the Supreme Court decision as a victory for retailers, which have been targeted by patent trolls.
“This ruling is a major step toward stopping patent trolls and their attempts to commit extortion against retailers and other businesses that have done nothing wrong,” Stephanie Martz, senior vice president and general counsel for NRF, said in a statement.
Martz said the ruling helps retailers by up upholding a system that allows patent disputes to be “resolved by fixing patents at the patent office,” rather than in litigation. “The justices have removed any doubt that the administrative review of questionable patents is within the authority of the patent office,” Martz says.
The NRF and other retail groups argued in a friend-of-the-court brief filed in October that IPR is “an efficient and constitutional mechanism” that can “expunge invalid patent claims without the burdensome cost and winner-takes-all posture of litigation and settlement.”
The NRF’s brief says overturning the IPR process would have undermined merchants’ ability to defend themselves against frivolous patent claims.
PTAB Bar Association, an organization of about 900 lawyers and stakeholders who appear before the PTAB, also issued a statement in support of the Supreme Court’s ruling. The group had filed an amicus brief in the case and said its views on the issue were adopted by the court.
In May 2017, the Supreme Court made it more difficult to channel patent suits to the Eastern District of Texas, a patent-friendly jurisdiction where more than one-third of all infringement suits had been filed, including many against online retailers.