After four years under the new post-grant proceedings enacted by the America Invents Act (AIA), the Federal Circuit and the Supreme Court have begun issuing decisions that further shape the rules for inter partes review (IPR), covered business method review (CBM), and post-grant review. One area of the AIA that has been challenged several times is the statutory provision that institution decisions in post-grant proceedings are non-appealable. The Supreme Court recently affirmed that a decision to institute a post-grant proceeding is unappealable unless the challenge falls within a narrow category of exceptions. An analysis of the relevant cases reveals that no matter how a party tries to characterize their challenge to fit one of the exceptions, the Federal Circuit is likely to decline review of a decision to institute a post-grant proceeding.
The statutory language foreclosing appeal of institution decisions in post-grant proceedings may seem clear on its face. For example, 35 U.S.C. § 314(d) provides:
(d) NO APPEAL — The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.
Similar language is found in 35 U.S.C. § 324(e) regarding post-grant review, which also applies to CBM review.1
In one of its early cases on this subject, the Federal Circuit held in St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp. that the Federal Circuit lacks subject matter jurisdiction to review a PTAB decision denying institution of an IPR because the non-institution decision is not an appealable final written decision of the Patent Trial and Appeal Board (PTAB) and that § 314(d) expressly bars such an appeal.2 Thus, an appeal of a non-institution decision is prohibited.
Subsequently, the patent holder in Cuozzo Speed Technologies, LLC v. Lee argued that, while interlocutory appeal of a non-institution decision is prohibited, § 314(d) is meant to postpone review until after the PTAB issues a final written decision, at which time the final written decision as well as the institution decision are appealable.3 The Supreme Court rejected the argument and interpreted § 314(d) as precluding review of both the PTAB’s non-institution and institution decisions even after a final written decision.4
The Supreme Court in Cuozzo clarified, however, that challenges to institution decisions are prohibited when the grounds for attacking the decision to institute consist of questions closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate review, relying on the “under this section” language of § 314(d).5 The Supreme Court left open the possibility that § 314(d) may allow for appeals that implicate constitutional questions, that depend on other less closely related statutes or present questions of interpretation that reach well beyond § 314(d), or where the Patent Office acts outside of its statutory authority.6
Prior to Cuozzo, the Federal Circuit held in Versata Dev. Grp., Inc. v. SAP Am., Inc. that it has authority to review whether a patent covers a business method even when the Patent Office makes that determination as part of a CBM institution decision.7 If the patent is not a covered business method patent, then the PTAB would exceed its statutory authority by instituting a CBM review of the patent.8 The Federal Circuit thus concluded it had jurisdiction to review the institution decision and determined that the patent was indeed a business method patent.9 However, since the Supreme Court’s Cuozzo decision, no party has successfully challenged an institution decision under the exceptions set forth in Cuozzo.
For example, in Achates Reference Publ’g, Inc. v. Apple Inc. the Federal Circuit held that procedural limits regarding timing of when a party may file for review (e.g., the one year time bar after being served with an infringement complaint) do not relate to the PTAB’s authority to invalidate a patent.10 The procedural limits only prevent a particular petitioner from challenging a patent but do not affect the PTAB’s authority to invalidate the patent. Thus, unlike Versata, the Federal Circuit lacked jurisdiction to review the institution decision.11
Based on Cuozzo, the Federal Circuit delineated a two-part inquiry for determining whether it may review an institution decision in Husky Injection Molding Sys. Ltd. v. Athena Automation Ltd.12 First, if the challenge is closely tied to the application and interpretation of statutes related to the decision to institute, then the court lacks jurisdiction to review; if instead, the challenge implicates constitutional questions, depends on other less closely related statues, or presents other questions of interpretation that reach well beyond § 314(d), then the court has jurisdiction.13 Second, even if the challenge is grounded in a statute closely related to the decision to institute, the court has jurisdiction if the challenge is directed to the PTAB’s ultimate invalidation authority.14
Using the two-part test, the Federal Circuit determined in Husky that it may not review the PTAB’s decision that assignor estoppel cannot bar an assignor or its privies from petitioning for IPR. Similar to Achates, assignor estoppel only applies to a particular petitioner and not the PTAB’s ultimate invalidation authority (e.g., someone other than the assignor may still challenge the validity of the patent).15 The Federal Circuit also noted that the patent statutes are silent regarding the equitable doctrine of assignor estoppel (i.e., 35 U.S.C. § 311(a) permits anyone who is not the owner of a patent to file an IPR on the patent).16
In Medtronic, Inc. v. Robert Bosch Healthcare Sys., Inc., the petitioner failed to name all real parties in interest, and the PTAB vacated its institution decision upon discovering the failure because the petitioner failed to comply with the statutory requirement that all real parties in interest be disclosed.17 The Federal Circuit determined that the PTAB’s vacatur of an institution decision and subsequent termination of the proceedings also constitutes a decision whether to institute a proceeding and is therefore nonappealable under § 314(d).18 Thus, in addition to an initial institution or a non-institution decision, a reconsideration of an institution decision is also non-appealable.
Other attempts to characterize an institution decision as something else have also failed. For example, in Harmonic Inc. v. Avid Tech., Inc. the PTAB instituted an IPR proceeding on a subset of the grounds in the petition and ultimately determined that the instituted ground rendered some, but not all, claims invalid.19 The petitioner argued that the PTAB erred by not considering the other grounds in the petition that were not instituted.20 In doing so, the petitioner characterized the decision to institute on some grounds but not on others as a case management decision instead of an institution decision.21 The Federal Circuit disagreed and concluded that a decision to institute on a subset of grounds is simply a combination of an institution decision and a non-institution decision, neither of which the Federal Circuit has jurisdiction to review.22
A review of these cases reveals that the Federal Circuit will rarely hear an appeal of a PTAB institution decision, whether the PTAB decision is referred to as a non-institution decision, an institution decision, a reconsideration of an institution decision, or a case management decision. These decisions may have a greater effect on patent challengers than patent holders. While a patent holder may still have the opportunity to appeal a final written decision on the grounds of patentability, a patent challenger may be foreclosed from ever challenging a patent under post-grant proceedings if the petitioner’s request is not instituted.
For example, a petitioner must take care to anticipate any possible statutory bar challenges to its request and should include all available arguments and evidence that may be relevant to such a challenge in their request. Further, a petitioner must take care that the other statutory requirements are met as well, because the petitioner may not always be able to file a second request to correct an oversight (e.g., may be time-barred by the time the oversight is detected) and the PTAB, as in Medtronic, may refuse to allow amendment of the petition.23
As shown in Husky where the Federal Circuit declined to review whether the PTAB may institute a post-grant proceeding without regard for assignor estoppel, certain defenses available in civil court may not be available at the Patent Office. The post-grant proceeding statutes broadly permit anyone who is not the owner of a patent to file a request for review. The unavailability of particular defenses in post-grant proceedings may impact a patent challenger’s decision whether to fight in civil court or at the PTAB.24
Because a PTAB decision on whether to institute a post-grant proceeding is unreviewable except for the rare case when the PTAB exceeds its statutory authority, a petitioner must present its best case up front. If the PTAB does not institute the post-grant proceeding, the petitioner’s only remaining option may be to challenge the patent in civil court.