Background
Oil States Energy Services held a patent on a technology for protecting wellhead equipment used in hydraulic fracturing (fracking) operations. Greene’s Energy Group petitioned for inter partes review of Oil States’ patent. While the IPR was pending, Oil States challenged the constitutionality of IPR itself — arguing that IPR violated Article III by having an executive agency (the PTAB) adjudicate patent validity in a proceeding that, under the Seventh Amendment, required a jury trial in an Article III court.
Oil States’ argument tracked the reasoning of Justice Gorsuch’s subsequent dissent: once a patent is granted, it becomes private property with the full protections of Article III court adjudication, meaning the government cannot cancel it through an administrative agency process without the protections of federal court proceedings. The Federal Circuit rejected Oil States’ constitutional challenge, and the Supreme Court granted certiorari.
The Court’s Holding
The Supreme Court affirmed, 7-2. The majority held that IPR does not violate Article III or the Seventh Amendment because patents are public franchises — rights granted by the government through legislative action — rather than private property created independently of government grant. As a public franchise, patents exist within the government’s power to grant, modify, or reclaim. Congress granted patent rights through the patent statute and expressly reserved the authority to review and cancel those grants through post-issuance review proceedings; there is nothing constitutionally suspect about Congress providing an executive agency mechanism to review whether grants were properly issued.
The majority distinguished patents from purely private property rights that could only be adjudicated in Article III courts. Because patent validity involves a question — whether the government’s original grant was proper — that is historically within the public rights domain, Congress could assign it to an administrative tribunal without violating Article III or requiring a Seventh Amendment jury trial.
Key Takeaways
- Inter partes review is constitutionally valid — it does not violate Article III or the Seventh Amendment because patents are public franchises subject to legislative reclamation through executive agency proceedings.
- The public rights doctrine permits Congress to assign patent validity adjudication to an administrative tribunal, because it involves whether the government’s own grant was proper — a public right rather than a purely private property dispute.
- The Court’s holding was expressly limited: it does not address whether other executive adjudications involving private rights would satisfy Article III, leaving open broader questions about administrative adjudication of private property disputes.
- Justice Gorsuch’s dissent argued forcefully that patents are private property and that the majority’s public franchise reasoning erodes important constitutional protections against congressional reassignment of private property disputes to administrative agencies.
Why It Matters
Oil States resolved the most fundamental constitutional challenge to the America Invents Act — the question of whether Congress could constitutionally create an administrative process to cancel issued patents without the full protections of an Article III court. A ruling against IPR would have invalidated the entire inter partes review system, which by 2018 had been used to cancel thousands of patent claims. The 7-2 decision gave IPR strong constitutional footing.
For the patent community, Oil States confirmed that patent holders must contend with IPR as a permanent feature of the patent landscape. The decision shifted debate to legislative and policy channels for reforming or constraining IPR proceedings — including discussions about whether the PTAB should be able to institute review of the same patent multiple times, whether estoppel provisions adequately protect patent holders, and whether institution rates at the PTAB are appropriately calibrated. These policy debates continue to shape how Congress, the courts, and the PTO approach the balance between patent quality review and patent holder security.