Versata v. Rea - An APA Challenge to the AIA - Part 4

In this series, we follow Versata’s challenge under the Administrative Procedure Act (“APA”) to the USPTO’s implementation of the Transitional Program for Covered Business Method Patents, Section 18 of the AIA. Part 1 of this series examined Versata’s original complaint filed in the United States District Court for the Eastern District of Virginia, and Part 2 reviewed the agency’s motion to dismiss. Part 3 discusses Versata’s response, and Part 4 summarizes intervenor SAP’s arguments in support of dismissal.

SAP’s interest in Versata’s APA challenge stems from an adverse judgment entered against SAP in 2011 by the United States District Court for the Eastern District of Texas. In that patent litigation, a jury awarded Versata $400 million for alleged infringement of U.S. Patent 6,553,350 (“the ’350 patent”). SAP, however, petitioned for USPTO review of the ’350 patent under the AIA Transitional Program for Covered Business Method Patents. In June of 2013, the USPTO issued a Final Written Decision invalidating all challenged claims of Versata’s patent. Although recent Federal Circuit rulings make it unclear what effect the PTAB decision in favor of SAP will have on the judgment, Versata here challenges the USPTO’s initial decision to institute post-grant review proceedings.

In its memorandum in support of dismissal, SAP raises two distinct points. First, SAP argues that Versata’s challenge is statutorily precluded in light of the “final and nonappealable” language of 35 U.S.C. § 324(e) (governing transitional post-grant review proceedings) and analogous pre-AIA provisions. SAP further considers the factors underlying implied statutory preclusion enunciated by the Fourth Circuit in Southern Pines Assocs. v. United States, 912 F.2d 713 (4th Cir. 1990). In that case, the Fourth Circuit stated that “[i]n determining whether a statute precludes judicial review, we look not only to its language, but also to ‘the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved.’” Citing to the legislative history of the AIA, SAP describes how the Fourth Circuit’s factors are satisfied.

SAP’s second argument proceeds from the requirement that judicial review under the APA is reserved for “final agency action,” 5 U.S.C. § 704, which under Supreme Court precedent is marked by “the consummation of the agency’s decision making process . . . by which rights or obligations [are] determined, or from which legal consequences will flow.” Bennett v. Spear, 520 U.S. 154, 177-78 (1997) (internal quotations marks omitted). Here, SAP argues that finality is precluded because the PTAB’s initial decision is merely a threshold determination to begin proceedings that assigns no legal rights or consequences. To the contrary, SAP further argues, “the only legal right at issue here is the patentability of Versata’s challenged patent claims,” and only the PTAB’s Final Written Decision under 35 U.S.C. § 328 can affect the patentability of those claims.