In a 5–4 decision, the Supreme Court of the United States reversed a decision by the US Court of Appeals for the Federal Circuit, holding that once the Patent Trial and Appeal Board (PTAB) institutes an inter partes review (IPR) proceeding, it must review every claim challenged in the petition. SAS Institute Inc. v. Iancu, Director of the USPTO, Case No. 16-969 (Supr. Ct., Apr. 27, 2018) (Gorsuch, Justice, joined by Roberts, Chief Justice, and Kennedy, Thomas and Alito, Justices) (Ginsburg, Justice, dissenting, joined by Breyer, Sotomayor and Kagan, Justices) (Breyer, Justice, dissenting, joined by Ginsburg, Sotomayor and Kagan, Justices). Going forward, the PTAB will no longer be permitted to engage in the practice of “partial institution,” i.e., institution of only some of the claims challenged in the petition.
This dispute arose when SAS filed a petition for IPR challenging all 16 claims of a patent owned by ComplementSoft. The PTAB determined that SAS demonstrated a reasonable likelihood of success on only nine of the challenged claims, and therefore declined to institute an IPR on the remaining seven claims. In doing so, the PTAB relied on a regulation that states that the US Patent and Trademark Office (PTO) director “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). In its final written decision, the PTAB found all but one of the instituted claims unpatentable and was predictably silent with regard to the seven claims on which it did not institute. SAS appealed to the Federal Circuit, which (over a “vigorous” dissent by Judge Newman) upheld the regulation (IP Update, Vol. 19, No. 12).
In reversing the Federal Circuit, the Supreme Court found that the America Invents Act (AIA) supplied a clear answer to the question at hand: § 318(a) states that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” The Court found this directive both mandatory and comprehensive, analogizing it to civil litigation where a plaintiff would expect to have a decision on all the claims in the complaint and not just “those the decision maker might wish to address.” The Supreme Court also dismissed the director’s argument for partial institution because such power simply does not appear in the AIA, and the text that Congress chose to utilize strongly counsels against permitting partial institution.
The Supreme Court next addressed the comprehensive AIA framework for IPR proceedings to show that Congress was clear when requiring institution of all claims. Justice Gorsuch cited § 312(a)(3), explaining that the petition, not the institution decision, defines the contours of the proceeding. Next, citing § 314(b), Gorsuch stated that the director’s decision to institute “pursuant to [the] petition” is simply a yes or no choice—not a piecemeal determination.
Additionally, citing § 314(a), the Supreme Court explained that the statute requires institution when a reasonable likelihood of success is shown for “at least one of the claims challenged in the petition.” As the majority explained, this requirement combined with the need to use the petition itself as the procedural contour of the proceeding suggests, if anything, a regime where reasonable likelihood of success on one claim is both necessary and sufficient to justify review of all the challenged claims.
AIA § 316(a)(8) was also informative for the Court, since it discusses the patent owner’s response “to the petition” and not its response to the instituted claims. Lastly, the Supreme Court noted that § 318(a) mandates that the PTAB issue a final decision for “any patent claim challenged by the petitioner.”
In contradistinction to AIA proceedings, the Supreme Court looked to the provision covering a related proceeding, ex parte re-examination, where the director is explicitly granted discretion to determine, on a claim-by-claim basis, whether to review for patentability. 35 USC § 303(a).
In attempting to reconcile the statutory sections of the AIA, the director argued justification for the PTAB to exercise discretion in the language of §§ 314 and 318. According to the director, since § 314 is directed to claims in the petition, while § 318 is directed to claims challenged by the petitioner, there is enough linguistic discrepancy to find the number of claims in the petition to be fewer than those eventually challenged by the petitioner in the actual IPR proceeding. Justice Gorsuch stated, however, that “[w]e just don’t see it,” and noted that whatever differences there may be are insufficient to authorize the PTO’s regulation. If anything, this discrepancy could be a result of the patent owner’s ability to cancel, settle or amend various claims (powers specifically within the statute’s text), thereby making the claims in the petition fewer than those eventually challenged.
The Supreme Court also dismissed the director’s final two arguments. The Court rejected a policy argument that investing the PTAB with discretion for partial institution promotes efficiency at the PTAB, thus expediting the streamlined nature of the IPR system. The Court simply noted that such policymaking was a job for Congress. The Court also rejected the director’s argument that reviewing a decision not to institute on some challenged claims was violative of the Supreme Court’s Cuozzo decision (IP Update, Vol. 19, No. 7). The Court noted that the case at hand did not involve a challenge to the determination of a likelihood of success, but rather was an appeal over whether the director exceeded its statutory authority in declining to institute all claims despite finding the requisite likelihood of success for at least one challenged claim.
One dissent, authored by Justice Ginsburg, was short but strongly worded. Ginsburg noted that viewing the combination of the majority’s interpretation of § 318(a) and the absence of a mandate to institute IPRs at all under Cuozzo, the PTAB could simply decline to institute on petitions having some challenged claims where no reasonable likelihood of success is demonstrated while simultaneously noting that other claim challenges warrant ex parte re-examination. Such a procedure would permit petitioners to file multiple petitions in order to determine which claims are most likely to be instituted and then file amended petitions that would receive institution. Justice Ginsburg found it difficult to believe that Congress would implicitly authorize this practice while clearly precluding the more rational way of weeding out insubstantial challenges through the PTAB’s process of partial institution.
Another dissent by Justice Breyer noted many linguistic gaps in the statutory framework that the majority found so clear. For example, Breyer explained that the phrase “any patent claim challenged by the petitioner” is not clear as to whether such claim is from the “original petition.” Under the majority view, if 16 claims are challenged and 15 of the challenges are found to be frivolous, the PTAB is nevertheless required to issue appealable decisions on each claim, as opposed to the PTAB’s regulatory framework, where only a decision on the one non-frivolous claim would be appealable and the decision not to institute IPR on the remaining 15 claims would not be appealable.
Breyer’s dissent also focused on the need to effectuate the statute’s purpose and avoid a “rigid” reading of the statute (such as the majority’s reading). The dissent pointed to the director’s ability to institute as an authorization of discretion because some challenges are allowed and others are not. The dissent wondered why a hard line to stop at all claims or no claims would be preferred over the more efficient claim-by-claim alternative.
The dissent also found the majority’s reading of the statute at odds with Cuozzo, noting that it was difficult to understand why Congress would make decisions not to institute non-appealable and wholly within the director’s discretion, while simultaneously requiring institution of all challenged claims even if a likelihood of unpatentability was demonstrated for only one. In Breyer’s view, that paradigm creates appellate review of final decisions upholding the patentability of claims in cases where a petitioner, in its petition, failed to raise a reasonable likelihood that a claim was invalid. The dissent argued that this additional work for the PTAB and the Federal Circuit could not have been Congress’ intent when creating a more streamlined and inexpensive procedure for patentability review.
Practice Note: Going forward, institution decisions will be based on whether the petitioner has established a reasonable likelihood that at least one challenged claim is unpatentable. In two cases currently on appeal where the PTAB instituted on fewer than all of the challenged claims (PGS Geophysical AS v. Iancu and BASF Corporation v. Iancu), the Federal Circuit ordered supplemental briefing on whether the cases can be heard or must sent back to the PTAB. There is likely to be considerable litigation around the SAS decision on issues such as whether all claims may be waived by petitioner (to limit the scope of estoppel).
On April 26, 2018, the PTO issued a memo explaining how SAS will affect pending and future IPRs. For future IPRs, the PTAB will either institute as to all the petition’s challenges or decline to institute an IPR altogether. For pending trials where the petition was only partially instituted, the panel may issue an order supplementing the institution decision to include all challenges from the petition. After this order issues, the parties “shall” meet and confer to discuss the need for additional briefing and/or other adjustments to the schedule. While the PTAB has discretion to sua sponte grant adjustments to the briefing and/or procedural schedule, parties are encouraged to contact the PTAB following any meet and confer to explain their decision whether to seek adjustments, since doing so guarantees that the parties’ intentions are reflected in the IPR moving forward. Lastly, the memo explains that going forward, the PTAB “shall” address all pending and unresolved claims in its final written decision, including all remaining challenges from the petition and any new claims added during the IPR via amendment.