August 2, 2017
Westlaw Journal Intellectual Property
One tongue-in-cheek criticism of the Patent Trial and Appeal Board has been that it conducts itself as a certiorari court, determining what claims and issues it will decide in post-grant proceedings under the Leahy-Smith America Invents Act, otherwise known as the AIA. The U.S. Supreme Court is set to examine the accuracy of that characterization in the case of SAS Institute Inc. v. Lee, No. 16-969, cert. granted, 2017 WL 468440 (U.S. May 22, 2017).
Specifically, the high court will analyze whether the PTAB may persist in its practice of partial institutions, whereby inter partes review proceedings are instituted on fewer than all of a patent’s claims and issues that are identified in a petition. Petitioner SAS has contested the PTAB’s ability under the governing statute to pick and choose which patent claims and issues it will review. According to SAS, this practice violates Congress’ carefully crafted language in Section 318(a) of the Patent Act, 35 U.S.C.A. § 318(a). That statutory provision reads as follows:
If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d).
SAS argues that if a petitioner shows a reasonable likelihood that at least one claim is unpatentable, then the statute mandates a final written decision on all claims raised in the petition.
The U.S. Court of Appeals for the Federal Circuit held on appeal that the PTAB could issue its final written decision on just some of the claims challenged in an inter partes review petition. SAS Inst. Inc. v. ComplementSoft LLC, 825 F.3d 1341 (Fed. Cir. 2016). The appeals court interpreted Section 318(a) to mean that once the PTAB finds a patent claim reasonably likely to be found unpatentable on review—the statutory threshold—the PTAB can review "any patent claim" it chooses. SAS argued that the statute’s plain language, in conjunction with the wider architecture and purpose of the AIA, requires a full review by the PTAB of all claims raised in a petition if even one claim meets the threshold standard. While the PTAB had instituted and provided a final written decision on nine claims of U.S. Patent No. 7,110,936, it omitted other, noninstituted claims from its final written decision, consistent with its standard practice. According to the appeals court, the PTAB did not err "by not addressing in the final written decision every ’936 patent claim SAS challenged in its IPR petition."
The appeals court deemed the issue settled by Synopsys Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), which was decided after briefing but before oral argument in the SAS case. In Synopsys the Federal Circuit found that there is "no statutory requirement that the board’s final decision address every claim raised in a petition for inter partes review," and that "Section 318(a) only requires the board to address claims as to which review was granted." The majority reasoned in SAS:
We found it significant that Section 318(a) describes "claims challenged by the petitioner," whereas the institution decision statutory subsection, 35 U.S.C.A. § 314, describes "claims challenged in the petition." We reasoned that the differing language implies a distinction between the two subsections such that Section 318(a) does not foreclose the claim-by-claim approach the board adopted there and in this case. Further, we upheld the validity of a PTO-promulgated regulation authorizing the claim-by-claim approach.
Judge Pauline Newman dissented from both the Synopsis and the SAS decisions, and further dissented from a decision to deny en banc consideration in the latter case. SAS Inst. Inc. v. ComplementSoft LLC, 842 F.3d 1223 (Fed. Cir. 2016). "The PTO may, in its sole discretion, choose to decide some, but not all, of the patent claims that are challenged under the statute. … The practice, called 'partial' or 'selective' institution, leaves the unselected claims dangling, lacking both finality and estoppel, preventing the expediency and economy and efficiency that motivated the America Invents Act," Judge Newman said. The Supreme Court granted certiorari May 22.1
If the statute is read to create an all-or-nothing institution decision, it would expand what must be considered by the PTAB and no doubt impact the twin AIA goals of finality and estoppel. The practical considerations facing would-be petitioners and patent owners would shift in the case of a Supreme Court reversal.
With respect to finality, petitioners could be more assured that by opting for patentability review, they will not be litigating only a small subset of the claims they present for adjudication there. If the Supreme Court agrees with SAS, its decision would ensure that all claims selected by the petitioner for inclusion in the proceedings are decided—rather than only those that the PTAB has picked. Further, such a decision would prevent the scenario seemingly described in the legislative history, whereby petitioners are still forced to litigate the overlooked claims in an alternate venue.2
Regarding estoppel, it is a well-known feature of Section 315(e) of the Patent Act, 35 U.S.C.A. § 315(e), that upon issuance of a final written decision, the petitioner "may not assert in a civil action that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review." Some have questioned how this apparently robust statutory estoppel provision can fairly apply under regulations allowing "partial institution." SAS argues that as written, Section 315(e) prevents petitioners and real parties in interest from later pursuing in litigation even uninstituted grounds. This interpretation is debated. The petitioners, however, have generally taken solace in Federal Circuit opinions suggesting that no estoppel attaches to claims and grounds not instituted.3Arguably dicta until a trial court first considers the issue, such an understanding has perhaps mitigated some potential effects of the current PTAB institution practice. But if the Supreme Court reads Section 318(a) otherwise and reverses in SAS, then petitioners may be more directly exposed to the full reach of estoppel. From there, everything included in a petition instituted on any claim—and everything not included—could become unavailable in future patent cases.
As Judge Jimmie V. Reyna has observed, "The potential for estoppel is one of the important considerations for defendants in deciding whether or not to file an IPR petition." Shaw Indus. Grp. Inc. v. Automated Creel Sys. Inc., 817 F.3d 1293 (Fed. Cir. 2016). Indeed it is. If the current PTAB procedure is maintained, a more narrow view of estoppel allows petitioners to bear less risk in bringing AIA challenges—although the PTAB decision may not ultimately have the full scope desired. What is more, petitioners need not devote as much argument to every claim because less is at stake if the PTAB does not institute some claims. Recognizing that the PTAB can select from among any invalidity grounds raised, petitioners are sometimes loath to include too many alternative grounds, as the administrative patent judges might adopt weaker arguments to institute an inter partes review proceeding. Petitioners may even choose to raise only those claims that are necessary to achieve their business or litigation purposes. They must weigh in the balance, however, if it is even worth the candle—here, an expensive and resource-consuming PTAB trial—to gain disposition of just some claims.
If the PTAB is required to evaluate and issue a final written decision on all claims raised in a petition, as SAS advocates, the petitioner might be more likely to include detailed arguments and additional grounds for each, hoping this will help the PTAB in the final analysis. That might even require breaking up into multiple petitions the claims presented to the PTAB, to maximize the attention and pages offered to each disputed claim. This runs counter to the following supposition, which is expressed in the government’s brief. "Challengers would have an incentive to provide as little information as possible in order to prejudice the patent owner’s ability to defend the patentability of all the challenged claims during the instituted proceedings," the brief says. SAS Inst. Inc. v. Lee, No. 16-969, opposition brief filed, 2017 WL 1291696 (U.S. Apr. 5, 2017). Petitioners will bear more risk from estoppel in an all-or-nothing system, and they bear the burden of demonstrating unpatentability. For those reasons, they have an interest in adequately addressing everything. If petitioners fail to include enough invalidating material, they lose for good all arguments that were or could reasonably have been made. This greater risk could yield a greater reward, however, because the PTAB decision could result in cancellation of the entire challenged patent.
Seeing its work greatly multiplied if the patentability of every claim in a petition must be adjudicated, the government argues that such an interpretation of the statute is unworkable in the limited timeframes established by Congress. The petitioner argues that under the statute, nothing requires the PTAB to perform such a fulsome analysis of patentability at the time of institution, albeit on a preliminary, non-final basis.4Instead, SAS reasons in its petition that by passing on "those extensive, unreviewable and non-stopping preliminary opinions," the PTAB can easily "issu[e] comprehensive final written decision on all challenged claims—complete decisions that can then be given complete estoppel effect and reviewed by the Federal Circuit."
Allowing claims to escape PTAB review by no fault of the petitioner raises other issues in parallel proceedings. For an inter partes review proceeding, the AIA does not mandate a particular test for a district court to apply in granting a stay. Most have simply adopted the analysis applied to such requests in the former re-examination context, the process the PTO used to evaluation patents before Congress created the PTAB in 2011. Some district courts5,for example, condition a stay of an infringement case on a finding that the claims instituted for review at the PTAB are coextensive with those raised in the related case, considering in its analysis whether a stay "will simplify issues at trial."6The PTO’s refusal to address core claims may tilt against a stay in the co-pending infringement case because it fails to streamline trial and simplify issues. Trial courts could be more confident staying a case under an all-or-nothing regime, knowing that an institution decision on any claim will likely mean an eventual determination of all claims in the petition.
Only weeks after the Supreme Court granted the SAS petition, the high court granted another certiorari petition in Oil States Energy Services LLC v. Greene’s Energy Group LLC, No. 16-712, cert. granted, 2017 WL 2507340 (U.S. June 12, 2017). The Supreme Court in that case will consider broader constitutional questions that could potentially moot the SAS matter altogether, depending on the court’s answer to the following: "Whether inter partes review—an adversarial process used by the Patent and Trademark Office to analyze the validity of existing patents—violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury." The high court will no doubt be aware of this connection and schedule the hearings accordingly.
Endnotes
1The question presented is: "Does 35 U.S.C.A § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review 'shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,' require that board to issue a final written decision as to every claim challenged by the petitioner, or does it allow that board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?"
2154 Cong. Rec. S9989 (daily ed. Sept. 27, 2008) (statement of U.S. Sen. Jon Kyl) (a primary purpose of the AIA is "to force a party to bring all of [its] claims in one forum … and therefore to eliminate the need to press any claims in other fora").
3See Shaw Indus. Grp. Inc. v. Automated Creel Sys. Inc., 817 F.3d 1293 (Fed. Cir. 2016) ("Shaw raised its Payne-based ground in its petition for IPR. But the PTO denied the petition as to that ground, thus no IPR was instituted on that ground. … Thus, Shaw did not raise—nor could it have reasonably raised — the Payne-based ground during the IPR."); HP Inc. v. MPHJ Tech. Inv. LLC, 817 F.3d 1339 (Fed. Cir. 2016) ("The noninstituted grounds were not raised and, as review was denied, could not be raised in the IPR. Therefore, the estoppel provisions of Section 315(e)(1) do not apply.").
4"There is no requirement in the AIA that the institution decision be any more reasoned than a simple up-or-down 'notice' that an inter partes review has been instituted and will commence on a certain date," SAS' certiorari petition says, citing Section 314(c) of the Patent Act, 35 U.S.C.A. § 314(c).
5Staying a district court litigation during PTO proceedings is squarely within the court’s discretion. See Landis v. N. Am. Co., 299 U.S. 248 (1936); Ethicon Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988).
6Courts have usually asked whether a stay will simplify issues at trial, discovery is complete or trial is set, and a stay unduly prejudices the nonmoving party.
Originally printed in Westlaw Journal Intellectual Property on August 2, 2017. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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