All or Nothing: Supreme Court Prohibits PTAB From Partially Instituting AIA Petitions Challenging Patents
All or Nothing: Supreme Court Prohibits PTAB From Partially Instituting AIA Petitions Challenging Patents
On the same day that patent challengers breathed a sigh of relief once the Supreme Court upheld the constitutionality of inter partes review (IPR) in Oil States, the Court also threw a monkey wrench into the way IPRs will be litigated. In a 5-4 decision, the Court held that when the Patent Trial and Appeal Board (PTAB) institutes an IPR, the PTAB must decide the patentability of all of the claims that a Petitioner has challenged in its petition. SAS Institute Inc., v. Iancu. The Court held that the United States Patent and Trademark Office (USPTO) Director does not have the statutory authority to partially institute a challenge by picking and choosing the claims that will proceed to a full review. Instead, if the PTAB decides to institute an IPR because at least one claim in the challenge has a reasonable likelihood of being invalidated, the PTAB is required to institute as to all of the claims challenged in the original petition, and ultimately issue a final written decision on all of the challenged claims. While the Court’s decision on the surface appears to make only a procedural adjustment, the decision could have far-reaching impact on cases before the PTAB, as well as before district courts.
In response to the passage of the Leahy-Smith America Invents Act in September 2011, which created IPRs, the USPTO promulgated a series of rules governing how the PTAB was to conduct the newly created IPR proceedings. One of those rules provided that “the Board may authorize the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim.” 37 CFR § 42.108(a) (emphasis added). Using this rule, the PTAB routinely has instituted IPR proceedings only on patent claims that it felt had a “reasonable likelihood of success” of being found unpatentable. As a result, even if an IPR petition challenged all the claims of a patent, the PTAB often used its discretion to institute a proceeding only on some of those claims, while declining to institute review on the remaining claims. Upon conclusion of the proceeding, the PTAB would render a final written decision addressing only the claims for which it had instituted review.
SAS Institute’s Challenge
SAS Institute Inc. (SAS) sought an IPR of U.S. Patent 7,110,936 assigned to ComplementSoft LLC. In its petition, SAS challenged all 16 of the patent’s claims on various grounds of invalidity. However, the PTAB instituted an IPR only on claims 1 and 3 through 10, while declining to review the rest of the claims. Ultimately, in a final written decision, the Board found claims 1, 3, and 5 through 10 unpatentable, while upholding claim 4. The Board’s final written decision did not address the claims for which review was denied.
SAS appealed, arguing that 35 U.S.C. § 318(a) required the PTAB to decide the patentability of every challenged claim in its final written decision. The Court agreed with SAS. Section 318(a) states that “[i]f an inter partes review is instituted and not dismissed . . . 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. . . .” In analyzing the text of § 318(a), the Court concluded that by stating that the Board’s final written decision “shall” resolve the patentability of “any patent claim challenged by the petitioner,” Congress meant that the Board must address every claim Petitioner challenged in its petition. Thus, the Court held that the PTAB did not have the statutory authority to only institute proceedings on some of the challenged claims. Instead, if the Board found that any claim had a reasonable likelihood of being successfully invalidated based on the petition, the Board was required to institute review for all of the claims challenged in the petition.
Short Term and Long Term Effects on the PTAB
The Court’s holding will likely have an immediate impact on pending cases before the PTAB in which the Board only partially instituted on the claims raised in the petition. The Board may be forced to revisit its original institution decisions and add non-instituted claims back into pending proceedings in order to comply with the SAS decision. Furthermore, the Federal Circuit may also remand cases back to the PTAB in which the Board only partially instituted a petition so that the non-instituted claims can be considered. Petitioners who currently have IPRs pending before the PTAB, or appeals pending before the Federal Circuit from the PTAB, should immediately consider whether to request that the PTAB add non-instituted claims to their IPR proceedings and issue a final written decision as to the non‑instituted claims. However, Petitioners should be wary of what they wish for. Asking for claims to be reviewed by the PTAB, which had previously declined to review them, may mean that these claims could be found patentable at the final written decision, thereby triggering estoppel for Petitioners as discussed below. Furthermore, the addition of claims in any proceeding will increase costs for all involved.
The longer-term impacts of the Court’s decision are less clear. While the SAS decision holds that if the PTAB decides to institute a proceeding, it must institute with respect to all claims challenged by Petitioner, the Court’s decision left open the question of whether the PTAB will be required to institute on all grounds of invalidation set out in a petition. For instance, if a petition challenges a single claim of a patent on multiple grounds of invalidation (i.e., using different combinations of prior references), it is not clear whether the PTAB is required to institute on all grounds contained within the petition. The statutory basis for the Court’s holding, 35 U.S.C. § 318, only addresses claims, and the question presented to the Court was directed only to whether the PTAB must decide all claims. However, the Court’s decision is based in part on its view that the “petitioner is master of its complaint and normally entitled to judgment on all of the claims it raises, not just those the decision maker wish to address” and that “the statute envisions that a petitioner will seek an inter partes review of a particular kind – one guided by a petition describing ‘each claim challenged’ and ‘the grounds on which the challenge to each claim is based.’” Thus, the Court’s decision might also be read to require that, if the Board institutes a challenge, it must institute as to all grounds raised by Petitioner. If that happens, IPRs will become more expensive for all parties involved and the scope of estoppel will be larger for Petitioners as discussed below.
It is unclear how the PTAB will respond to the Court’s decision. The PTAB retains considerable discretion as to whether to institute an IPR proceeding, and institution decisions are largely unreviewable. As a result, the PTAB could elect to control its docket by instituting fewer cases. For example, if a Petitioner files two petitions on the same patent, the Board may opt to institute review only one of the two petitions to reduce its workload while still being true to SAS. The PTAB might also opt to issue less thoughtful and complete institution decisions, perhaps stopping once it found that a single claim was likely invalid. Justice Ginsburg, in a dissent to the Court’s majority opinion, contemplated that the PTAB could circumvent the Court’s ruling and narrow proceedings by denying petitions that contain multiple challenges, and noting in its institution decision which grounds the Board felt were unworthy of institution. In Justice Ginsburg’s hypothetical, Petitioners would then be free to file a new petition that removed the challenges that the Board previously had noted were not worthy of institution. Responding to Justice Ginsburg’s hypothetical, the majority suggested a court could invalidate “shenanigans” by the PTAB, but would only consider the issue later.
District Court Impact
Even though the Court’s decision applies to IPR proceedings before the PTAB, the case will likely have a significant impact on patent cases before district courts. As a preliminary matter, the Court’s decision could mean that a district court would be more likely to grant a stay in a pending patent litigation prior to the PTAB’s institution decision, since now only one claim needs to be found likely unpatentable to trigger a final written decision from the Board as to all challenged claims.
The Court’s decision will also likely have a significant impact on the estoppel effects triggered by final written decision from the PTAB. Section 315(e)(2) estops a petitioner in an IPR from asserting in district court “that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” District courts have considered estoppel as to three types of invalidity arguments: (1) grounds that were actually instituted in the IPR (“instituted grounds”); (2) grounds that were included in a petition but not instituted (“non-instituted grounds”); and (3) grounds that not were included in a petition (“non-petitioned grounds”). Many courts had found that estoppel did not apply to category (2) grounds, thus permitting those grounds to be litigated in district court even after a petitioner’s unsuccessful IPR.
The Supreme Court’s holding in SAS may eliminate category (2) entirely if the PTAB no longer is able to institute review only on some of the grounds raised in the petition. Thus, by including a ground in an IPR petition, it may become more likely Petitioner will be estopped from raising the ground in the district court. Therefore, going forward, the estoppel risks associated with filing an IPR petition may increase.
Because of the far-reaching implications that the SAS decision may have for IPR proceedings and district court litigation, both Petitioners and Patent Owners will need to reevaluate their strategies in conducting IPRs before the PTAB going forward. Petitioners will need to doubly ensure that the unpatentability analysis, including expert testimony, in their petitions are equally strong for independent and dependent claims. Furthermore, this decision may only allow Petitioners to litigate the invalidity of a patent in one forum (either the PTAB or the district court) due to the new “all or nothing” nature of IPR proceedings and its estoppel impacts. Thus, Petitioners will have to make a strategic decision as to which forum to assert their invalidity challenges. Patent Owners will need to reassess their responses to an IPR petition, taking into account the fact that should the Board decide that even one claim has a reasonable likelihood of being invalidated, the Patent Owner may be required to respond to every claim (and perhaps every ground) that was included in the Petition.
 See MoFo Client Alert at https://www.mofo.com/resources/publications/180424-inter-partes-review.html