PTAB Need Not Address Denied Trial Grounds in Final Decision

The Supreme Court will soon consider the propriety of the "appeal bar" of 35 U.S.C. § 314(d) in Cuozzo. This appeal bar of the America Invents Act (AIA) prevents appeal of institution decisions of the Patent Trial & Appeal Board (PTAB). To date, attempts to circumvent this bar have failed via writ of mandamus to the Court of Appeal for the Federal Circuit (CAFC), and lawsuits against the USPTO under the Administrative Procedure Act (APA).

This week, another attempt to side-step the appeal bar was denied by the CAFC inSynopsys Inc., v. Mentor Graphics Corp.  

In Synopsys, the petitioner challenged claims 1-15 and 20-33 of Mentor Graphics patent 6,240,376 in Inter Partes Review (IPR).  Trial was instituted for claims 1–9, 11, and 28–29.  Claims 10, 12– 15, 20–27, and 30–33 were denied institution.  After the PTAB trial concluded, Synopsys brought a suit in district court under the APA seeking to invalidate the PTAB's regulation that allows institution of an inter partes review on “all or some of the challenged claims” 37 C.F.R. § 42.108. The suit also challenged the PTO’s practice of issuing final decisions on fewer than all of the claims raised in a petition. The district court denied the suit on jurisdictional grounds.  Synopsys raised the same procedural issues on appeal from the PTAB, among others.

In deciding the issue of whether or not the PTAB must institute trial as to all challenged claims if one is found to be proper, the Court explained (here):

[T]he text makes clear that the claims that the Board must address in the final decision are different than the claims raised in the petition. Congress explicitly chose to use a different phrase when describing claims raised in the petition for inter partes review in § 314(a) and claims on which inter partes review has been instituted in § 318(a). Section 314(a) specifies that Board may not institute inter partes review unless “the information presented in the petition . . . and any response filed . . . shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314(a) (emphasis added). However, in describing the final written decision, Congress stated that the Board must issue a final written decision with respect to any “claim challenged by the petitioner.” 35 U.S.C. § 318(a) (emphasis added). When Congress chooses to use two different words or phrases, this typically suggests that the two were deemed to have two different meanings.      

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In addition, the conditional phrase “[i]f an inter partes review is instituted” in § 318(a) also strongly suggests that the “challenged” claims referenced are the claims for which inter partes review was instituted, not every claim challenged in the petition. Thus, the text of § 318(a) demonstrates that the Board need only issue a final written decision with respect to claims on which inter partes review has been initiated and which are challenged by the petitioner after the institution stage.

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Although we find that the language is clear, if there were any doubt about the Board’s authority and the statute were deemed ambiguous, the PTO has promulgated a regulation allowing the Board to institute as to some or all of the claims. The regulation “authorize[s] 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 C.F.R. § 42.108. Contrary to Synopsys’s argument that this regulation is invalid, the PTO has explicit authority to promulgate regulations “setting forth the standards for the showing of sufficient grounds to institute” inter partes review. 35 U.S.C. § 316(a)(2). This regulation is plainly an exercise of that authority. Under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), this regulation is a reasonable interpretation of the statutory provision governing the institution of inter partes review. See Cuozzo, 793 F.3d at 1278. As the PTO noted in adopting the regulation, the claim-by-claim approach streamline[s] and converge[s] the issues for consideration” and “aids in the efficient operation of the Office and the ability of the Office to complete the [review] within the one-year timeframe.”

Of note to practitioners is footnote 4, which explains: 

We note that an issue relating to institution does not become appealable simply because the Board mentions that issue in its final decision. See Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015) (appealability bar applies to institution decisions “even if such assessment is reconsidered during the merits phase of proceedings and restated as part of the Board’s final written decision”).

Judge Newman penned a lengthy dissent that explained her belief that the PTO regulation was inconsistent with the statute and its legslative history, and, therefore, the regulation could not be given Chevron deference.  She also re-visited some of her earlier dissents in Cuozzo and Ethicon, and found the footnote on Achates publishing to be an unnecessary extension of that holding.