SAS Institute Inc. v. Iancu

As we recently noted in our companion piece Part 1 of 2: Supreme Court and Inter Partes Review, the Supreme Court issued decisions in two intellectual property appeals relating to inter partes review (“IPR”) before the U.S. Patent and Trademark Office. In Oil States Energy Services LLC v. Greene’s Energy Group LLC, No. 16-712, the Court decided 7–2 that the inter partes review process does not violate Article III of the Constitution or the Seventh Amendment. In SAS Institute Inc. v. IANCU, No. 16-969, the Court decided that the Patent Trial and Appeal Board (“PTAB”) must decide the patentability of all of the claims the petitioner has challenged rather than selectively picking and choosing which claims to review. In response to the Court’s decision in SAS, the PTAB has already issued new guidance regarding the institution of IPRs.

This blog addresses the SAS decision.

The Supreme Court Decision

Having finally put to rest the question of whether IPRs are constitutional (for now at least), the Court moved on to decide the extent of the PTAB’s authority in determining whether to institute such a proceeding. The question the court addressed is whether the PTAB “must resolve all of the claims in the case, or may it choose to limit its review to only some of them?” Slip Op. at 1 (italics in original). The Court, relying on a plain language interpretation of the statute, held that the statute has a “mandatory and comprehensive” requirement that if the PTAB decides to institute an IPR, the PTAB must decide the patentability of all the claims in the original petition. In other words, the PTAB has a “binary choice—either institute review [on all claims in the original petition] or don’t.” Id. at 8.

In reaching this conclusion, the Court made a series of arguments. First, the Court decided that the language of the statute was clear, “[t]he text says only that the Director can decide ‘whether’ to institute the requested review-not ‘whether and to what extent’ review should proceed.” Slip Op. at 8 (citing 35 U.S.C. § 314(b)). Second, the Court explained that the policy argument of allowing the PTAB to focus on the most promising challenges to avoid wasting time on others was a question for Congress and not one that the judiciary could decide. Third the Court explained that Chevron is not relevant because, according to the Majority, the “statutory provisions . . . deliver unmistakable commands” and there is “no room in this scheme for a wholly unmentioned ‘partial institution.’” Id. at 12. Finally, the Court disposed of the argument that the judiciary lacks power to review a PTAB’s institution decision under § 314(d), including whether that institution decision can restrict the claims under review.[1] The Court explained that § 314(d) pertains to the substantive analysis by the PTAB of whether there is a “reasonable likelihood” that claims are unpatentable while the question at issue pertains to whether the PTAB is acting outside of its statutory limits, a question which the Court may in fact review.

The Court highlighted that the Director (through his delegate, the PTAB) still has discretion in deciding whether to institute an IPR—the PTAB can decide not to institute even if there is at least one claim upon which the petitioner has a reasonable likelihood of prevailing.

The Court’s SAS decision upends years of common practice at the PTAB. While the Court has settled the question of partial institutions, it has opened up many questions that will likely lead to future litigation.

Looking Forward

More questions than answers remain after the SAS decision, and almost certainly more litigation. The PTAB has been quick to take action, issuing new guidance in response to SAS on April 26, 2018, two days after the decision. However, more than just the PTAB will be affected. The effects of SAS will be felt by the courts and will likely alter petitioner and patent owner practice.

PTAB Guidance

On April 26, 2018, the USPTO published Guidance on the impact of SAS on trial proceedings (the “Guidance”), in response the Supreme Court’s SAS decision. The guidance, like the SAS decision itself leaves many questions that will need to be answered.

The PTAB will review all challenges in a petition

The Guidance clearly states that the “PTAB will institute as to all claims or none,” thereby complying with the SAS decision. The Guidance goes further, however, and also states that it will institute on “all challenges raised in the petition” (italics added). This additional step as to “challenges” goes beyond the requirements in SAS, which only explicitly required the PTAB to institute as to all claims. This step by the PTAB to review all challenges, which was not always the practice at the PTAB, is likely anticipatory and a move to avoid future litigation on a similar matter. Patent holders will likely benefit as they will no longer have to worry about challenges that the PTAB decided not to review popping back up in district court.

The PTAB has discretion for already instituted IPRs

The Guidance provides that for pending trials with a partial institution, the PTAB may issue an order supplementing the petition. The Guidance does not require that all pending partially instituted IPRs be supplemented, instead leaving discretion to the panel for each IPR. It is likely that this issue will be litigated, however, due to the time requirements for IPRs proceedings, this will only remain an issue for a short period of time.

The PTAB has discretion to extend deadlines

The Guidance provides that the PTAB may extend deadlines and allow for additional briefing and other time extensions where it deems necessary. Under 35 U.S.C. § 316, once an IPR is instituted, the IPR proceeding should be completed and a final written decision issued within one (1) year, with a six (6) month extension possible for good cause. The change in practice required by the SAS decision will undoubtedly qualify as “good cause,” but there is a potential for litigation where a proceeding is extended beyond the six month extension period.

An additional issue raised is how discovery will be affected by the PTAB supplementing institution decisions. It is possible that depositions will need to be retaken, more production requested, and other similar issues that will delay the proceedings.

IPR parties will have to meet and confer

The Guidance provides that parties to an IPR shall meet and confer as to scheduling requirements. Although not mandatory, it is recommended that the parties take advantage of a meet and confer as the PTAB may not extend deadlines without a request.

Other effects at the PTAB

It is unclear at this time how the SAS decision will affect petitioner practice before the PTAB, but it clear that for the near future, the PTAB has a lot more work in front of it.

The PTAB has an increased workload

The PTAB has an increased workload in at least its final written decisions, which will surely be longer as the PTAB can no longer weed out claims it deems unmeritorious at the preliminary stage. For any instituted IPR, the PTAB must now include a written decision to all claims even where it initially believed some claims were without merit.

Conclusory Institution Decisions?

To balance the increased workload, it is entirely possible that the PTAB may drastically shorten its institution decisions, perhaps to a single word—instituted or denied. Another option for the PTAB is to explain the reasonable likelihood that the petitioner would prevail to the one (1) claim required by statute for institution. The panel for each PTAB proceeding will continue to have the prerogative to include as much or as little information in the institution decision, as permitted by the statute.

First, the statute merely requires that the Director (i.e., PTAB) notify the parties, in writing, of the institution determination. 35 U.S.C.  314(c). The statute does not require an explanation of its decision. Instead, the statute requires only a notification of the decision and the date on which the review shall commence.

Second, the PTAB’s determination on whether to institute an IPR is final and nonappealable—if, of course, the issue is substantive, i.e, the PTAB’s determination of a reasonable likelihood that the petitioner would prevail as to at least one claim. Again, the PTAB appears to have discretion to drastically shorten its institution decisions.

If the PTAB does take this route, petitioners and patent owners will lose early insight into the PTAB’s position early on in the proceeding.

Denial of more petitions; Telegraph which claims warrant reexamination (Ginsburg’s Dissent)

The Director/PTAB still has complete discretion in whether to institute an IPR. Thus, as Justice Ginsburg notes in her dissent, it is entirely possible that the PTAB can deny any petitions containing challenges that have no “reasonable likelihood” of success and explain or note in its decision what claims the PTAB feels warrant review. The petitioner would simply need to amend its petition (and likely pay a new filing fee) to include only those claims that the PTAB has telegraphed as warranting review.

The Majority noted Justice Ginsburg’s dissent in a footnote and acknowledged the PTAB’s ability to act in such a way. Slip Op. at 11. However, the Majority provides some indication that such a practice by the PTAB may constitute “shenanigans” which the Court might not deem allowable if it gets the chance to review such a question. It seems that if the PTAB does take this path, litigation will follow shortly thereafter.

One issue that would complicate this approach is the one year time bar that runs from the date that a civil complaint is served. 35 U.S.C. § 315(b). Where IPR petitions are filed in response to civil litigation, it is unlikely that the PTAB would be able to deny a petition quickly enough to telegraph what claims are worth pursuing without foreclosing the opportunity for a petitioner to refile.

Changes at the courts

This decision will not only affect the PTAB, but also the district courts and the Federal Circuit.

More stays at the district court

The removal of partial institutions at the PTAB may result in more district courts deciding to stay their case pending the outcome of an IPR. The statute does not require a district court to stay a proceeding once an IPR is instituted, however courts have been amenable to such an idea. Issues arise, however, where the claims included in a partial institution at the PTAB do not encompass all claims at issue at the district court. With the removal of partial institutions, it is possible that more IPRs will encompass all the claims at the district court, which may lead the district court to order stays more often.

The Federal Circuit has an increased workload

The Federal Circuit will have an increased workload in reviewing longer decisions by the PTAB that includes more claims than it has in the past. It is possible that the Federal Circuit will continue its current practice of summarily affirming close to half of the appeals that it receives. However, with the increased number of claims making their way through the PTAB, it is possible that the Federal Circuit will take a closer look at more cases and on more issues. In addition to reviewing more claims at the Federal Circuit, it is also likely that the Federal Circuit will have to deal with more procedural issues.

Petitioner Practice and estoppel

Petitioners, real party in interest, or those privy of petitioner are estopped from asserting in a civil action or an action before the ITC that a claim is invalid on any ground that the petitioner raised or could have raised during an IPR and that resulted in a final written decision. Estoppel will be more prevalent with the PTAB having to review all claims in a petition.

Therefore, Petitioners should spend more time analyzing their arguments and ensuring that they are choosing only those claims that they feel have a good chance of being invalidated at the PTAB, else they lose their chance to argue the same in another proceeding.

An alternative option for petitioners is to file more petitions. Where possible, a petitioner may want to split up what would normally be included in a single petition and file as entirely separate petitions.  In this way, the petitioner would have a greater chance of preserving arguments where the PTAB denies certain petitions and not others. This would, however, require additional filing fees.

Conclusion

The Supreme Court has shaken up the patent world once again with little guidance on how to move forward. This slight change in IPR practice will have large effects at the PTAB and the courts. Issues in response to this decision will undoubtedly show up in the courts in the future.

We will continue to monitor these development and will keep you informed of changes.

 


 

[1] 35 U.S.C. § 314(d) states that the “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”