United States: SAS Urges High Court To Restore Balance To AIA Post-Grant Framework

Who makes the country's patent laws—Congress, or the Patent Office? A recent petition for certiorari filed by SAS Institute, Inc.—represented by a team of Jones Day lawyers—asks the Supreme Court to decide that question in the context of inter partes reviews under the America Invents Act.

In SAS Institute, Inc. v. ComplementSoft, LLC., 825 F.3d 1341 (Fed. Cir. 2016), the Federal Circuit held that the America Invents Act's provisions governing the institution and decision of inter partes reviews—known colloquially as "IPRs"—allow the Patent Trial and Appeal Board to decide only some, but not all, of the patent claims challenged by the petitioner. This would seem to be at odds with the relevant statute, 35 U.S.C. § 318(a), which says:

In SAS's case, ComplementSoft, LLC sued SAS for patent infringement, alleging that SAS infringed "one or more" of the sixteen claims of U.S. Patent No. 7,110,936. SAS responded by petitioning for inter partes review of the '936 patent, challenging the patentability of all 16 claims. However, believing it had the authority to institute IPR on fewer than all of the claims challenged by SAS, the Board instituted IPR only as to claims 1 and 3-10 of the '936 patent—but not claims 2 and 11-16.

On August 6, 2014, the Board issued its "final written decision" under 35 U.S.C. § 318(a). Despite the statutory mandate that the Board "shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner," the Board only addressed some of the patent claims challenged by SAS—claims 1 and 3-10, but not claims 2 and 11-16. After SAS's petition for rehearing was denied, each party appealed to the Federal Circuit, where SAS challenged—among other things—the Board's refusal to issue "a final written decision with respect to the patentability of any patent claim challenged by the petitioner," as SAS had challenged the patentability of all 16 claims but only received a final written decision as to nine of them. Without a final written decision on all patent claims challenged, the validity (or invalidity) of the un-instituted claims will have to be relitigated in district court, thereby depriving inter partes reviews of their intended efficiency—an IPR challenge litigated to a final written decision before the Board receives the estoppel effects set forth in 35 U.S.C. § 315, but with a final decision only reaching some of the claims, the remaining claims, regardless of their similarity to those litigated in the IPR, will have to be relitigated in district court.

On June 10, 2016, over a dissent from Judge Newman, a divided panel of the Federal Circuit upheld the Board's partial-decision practice, holding that SAS's position was foreclosed by Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), a 2-1 decision that was also issued over Judge Newman's dissent. SAS's petition for rehearing en banc was denied on November 7, 2016, with Judge Newman again dissenting—this time from the denial of en banc rehearing. 842 F.3d 1223 (Fed. Cir. 2016).

The reasoning of the Synopsys majority, embraced by the SAS panel majority, was based upon the premise that the Board is empowered to institute an inter partes review as to fewer than all of the claims challenged by the petitioner (the relevant statute, § 314(a), says only that the Board shall institute an IPR where there is a reasonable likelihood that the petitioner would prevail with respect to "at least 1 of the claims challenged by the petition"). The majority thus concluded that "any patent claim challenged by the petitioner" really meant "any patent claim challenged by the petitioner and allowed to proceed past the institution stage by the Patent Office." The Synopsys majority also opined that under the Chevron decision, the Board was authorized to adopt the partial-institution, partial-decision regime under its rulemaking authority.

SAS's petition for certiorari challenges both the Federal Circuit's statutory interpretation of 35 U.S.C. § 318(a)—"any patent claim challenged by the petitioner" does not mean "some of the patent claims challenged by the petitioner"—and its reliance on Chevron deference. The Solicitor General's brief in opposition did not challenge SAS's showing that this issue is hugely important to the administration of the America Invents Act, but instead largely defends the Patent Office's practices as a reasonable application of the statute—reasoning that if the Patent Office is permitted to institute inter partes review on fewer than all claims, then it should not have to issue a final written decision on "any patent claim challenged by the petitioner."

SAS's reply in support of the petition, filed on April 17, 2017, thus frames the issue starkly: "The question presented is nothing less than this: Who makes the laws in this country—the National Legislature or an executive agency?" As Judge Newman recognized in her SAS panel dissent, this "[i]ncorrect implementation by the agency distorts the framework [of IPR and its effects on parallel proceedings], providing the now-observed result of protracted litigation grinding against administrative obstinacy. The victim is the Nation's innovation economy." 825 F.3d at 1354. Should SAS's petition be granted, the Supreme Court will have an opportunity to restore the proper balance embodied in Congress' IPR statutes.

SAS's petition, which was featured on Friday, April 14, 2017 as SCOTUSBlog's "Petition of the Day," will be taken up by the Justices in a forthcoming conference, most likely in May 2017.

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