United States: SAS Institute & The PTAB: Be Afraid Patent Owners

The Supreme Court will get a heavy dose of the PTAB on November 27th. That is the day the High Court will hear oral arguments in both the Oil States and SAS Institute appeals.  While almost all of the focus to date has been on Oil States, the case that is likely to have the biggest impact on the PTAB is SAS.

As a reminder, SAS argues that partial PTAB trial institutions are inconsistent with the controlling statutes of the America Invents Act (AIA).  That is, if the PTAB finds that at least one claim is demonstrated as reasonably likely to be proven (RLP) unpatentable, the PTAB should institute an IPR trial for all petitioned claims. As of today, if a petitioner challenges, say claims 1-10 of a patent, the PTAB assesses each claim as to the RLP standard.  So, if the PTAB is not satisfied as to claims 5-6 of claims 1-10, trial would only go forward on claims 1-4 and 7-10.

If SAS is successful on appeal, PTAB trials would go forward on all claims as long as a single claim of the petition was deemed to meet the RLP standard. This would be a significant change to PTAB trial practice with unfortunate consequences for Patent Owners.

First, partial institutions are of significant value to patentees.  Frequently, stays of concurrent litigation are avoided since "simplification of issues for trial," a factor in such determinations, is effectively mooted when it is clear the trial will need to go forward as to at least non-instituted claims.  As between the two options, Patentees, even if later winning on some claims at FWD, will not want their litigation efforts needlessly stalled for an 18 month PTAB proceeding (trial + preliminary proceeding).  Likewise, it would seem unlikely that courts would be interested in lifting a stay during the pendency of an appeal covering all challenged (and presumably litigated) claims.  Sweeping all challenged claims into trial would greatly undermine settlement opportunities and unnecessarily expand legal spend, not to mention needlessly expand prosecution history for claims that would have otherwise avoided trial under the current trial framework.

Second, patentees have only recently secured the right to  submit new testimonial evidence to avoid institution. Should the all or nothing institution model become reality, there would be even less of an appetite to submit this testimony.  As it stands now, there is value in such submissions since avoiding trial on even a subset of claims is, as noted above, is of significant value. If Patentees now have to defeat every claim to avoid trial, they are better off keeping their evidence and arguments for trial. In my experience the submission of early evidence fosters settlement and is quite helpful in focusing the trial record at an early date.

Third, if the PTAB need only find a single claim of a challenged set susceptible to unpatentability the quality of institution decisions will significantly degrade.  For example, as institution would likely analyze the broadest claim, meaningful discussions of narrower claim terms wouldn't even need to be included in the decision.  Likewise, it is human nature that institution will become far more attractive from the agency perspective (or so it will be argued).  This is because it is far easier to author an opinion to institute on a single claim as opposed to authoring a denial that would need to address every claim.   As it stands, institution decisions offer a great deal of guidance to the parties.

Finally, by failing to address all potential issues and claim terms at institution, Patent Owners will have far less guidance before submitting their opening brief.  Absent some procedural mechanism to remedy this "notice" shortfall, the PTAB might face challenges under the Administrative Procedure Act (APA).  As such, it seems very likely that the PTAB would be forced to move to a Markman style brief exchange prior to the merits briefs.  It is rumored that the agency has considered such in the recent past, and may need to dust off those plans pending SAS.  Of course, offloading such work from the agency to the litigants will drive up the costs and complexities of PTAB trials.

To the extent there is any benefit to an "all or nothing" system for Patent Owners it would be the simplification of estoppel determinations. With no partial institutions or (presumably) redundancy issues to deal with, district courts may have an easier time grappling with the scope of statutory estoppel. That said, the negatives far outweigh the positives for Patent Owners.

In any event, keep your eye on SAS, it is shaping up to be the biggest change to PTAB practice to date.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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