United States: Potential Impact Of The Supreme Court's Decision To Review The PTAB's Practice Of Issuing Partial Final Written Decisions In Post-Grant Proceedings

In a case with potential wide-ranging ramifications for patent validity challenges, on May 22, 2017, the Supreme Court granted a writ of certiorari in an appeal from an inter partes review ("IPR") decision, SAS Institute v. Lee, No. 16-969. The appeal asks the Court to determine whether the America Invents Act ("AIA"), and specifically 35 U.S.C. § 318(a), requires the Patent Trial and Appeal Board ("PTAB") to issue a final written decision as to the patentability of every claim challenged in a granted IPR petition, or whether it allows the PTAB to issue a final written decision on only those claims as to which the IPR was instituted, as is the current practice. The cert petition was filed by SAS after the Federal Circuit declined en banc review of a majority decision holding that the PTAB did not violate the AIA by failing to address in its final written decision all of the claims challenged in SAS's IPR petition, where the IPR was instituted on a subset of the challenged claims. Although the cert petition is framed as a narrow question of statutory interpretation, at stake is the extent to which PTO post-grant proceedings foreclose district court patent validity challenges.

In about a quarter of all IPR petitions — as in the case of the SAS petition — the PTAB institutes an IPR on only a subset of the patent claims challenged in the petition.1 The PTAB's practice in such cases, as well as in the case of Post-Grant Reviews ("PGRs"), limits the PTAB's final written decision to the claims on which the review was instituted. See Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1317 (Fed. Cir. 2016); 37 C.F.R. §§ 42.108(a), 42.208(a). Under the AIA, the decision not to institute an IPR or PGR as to one or more claims is generally not appealable. See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2141 (2016); 35 U.S.C. §§ 314(d), 324(e). Moreover, estoppel applies only to those claims that are subject to a final written decision under 35 U.S.C. § 318(a). See 35 U.S.C. §§ 315(e), 325(e). Thus, claims that are challenged but not instituted in an IPR or PGR may be subject to further validity challenges in the district courts and PTAB, and the associated appeals.

SAS argued in its cert petition that the PTAB's partial-decision practice violates the AIA's "overall language, structure, and manifest purpose," including the alleged "plain" language of 35 U.S.C. § 318(a), which states that "[i]f an inter partes review is instituted . . . [the PTAB] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner" (emphasis added). In opposing the cert petition, the government argued that the AIA's prohibition on appeals from institution decisions bars the Court from considering this issue. The government further argued that should the Court take up this issue, the PTO's rules and practice are in accordance with the AIA and, at a minimum, are based upon a reasonable interpretation of the statute, and thus entitled to deference.

Patentees have repeatedly argued that the PTAB's practice of partial institution subjects patents to piecemeal litigation that the AIA's estoppel provisions were designed to prevent. This practice has also drawn the criticism of Judge Newman who, following her dissent in Synopsys, again dissented in the SAS appeal on the ground that partial institution "foils the legislative purpose" of the AIA's administrative patent challenges. See SAS Inst., Inc. v. ComplementSoft, LLC, 842 F.3d 1223, 1224 (Fed. Cir. 2016) (Newman, J., dissenting from decision denying rehearing en banc); SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1358 (Fed. Cir. 2016) (Newman, J., dissenting).

From a patentee's perspective, reversal by the Supreme Court of the PTAB's current partial-decision practice would allow a successful patentee to enjoy broader estoppel in the district courts and in subsequent proceedings before the PTAB. Estoppel would still not be complete as to all validity challenges because, for example, the AIA's IPR provisions are restricted to prior art challenges based on printed publications or patents. Such a reversal, however, would likely reduce serial validity challenges. And, assuming such a holding was also applied to PGRs, the estoppel would be broader still, because the AIA's PGR provisions permit additional types of validity challenges.

From the petitioner's point of view, a reversal by the Supreme Court would allow the petitioner to appeal the PTAB's determination of no invalidity as to any challenged claim in a granted petition, not just those claims on which the PTAB decided to institute the IPR. While it seems unlikely that this would significantly raise the chances of invalidating before the PTAB an otherwise uninstituted claim, it may make IPRs and PGRs more attractive to parties seeking to challenge the validity of patents in one proceeding with one appeal.

A reversal by the Supreme Court could cause the PTO to change its approach to institution decisions. The AIA requires only that the PTO find that a petitioner has a reasonable likelihood of prevailing on one claim in order to institute the IPR, and to provide written "notice" of this determination. See 35 U.S.C. § 314(a) and (c). Thus, the PTAB may decide to discontinue its practice of issuing an institution decision explaining its reasoning as to all challenged claims, and instead institute with a notice stating that the threshold has been met for at least one claim. Such a change in practice would likely increase the number of claims contested in the IPR trial phase, potentially complicating IPR proceedings for the parties and the PTAB. While this may drive up the costs of an IPR for the parties in the short term, in view of the increased estoppel effects, it may reduce the long-term costs associated with additional litigation of such claims under the PTO's current practices.


1 According to statistics obtained from Docket Navigator on May 25, 2017. See http://www.docketnavigator.com.

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