The Supreme Court, in Oil States Energy Services, LLC v. Greene’s Energy Group, LLCi , upheld the constitutionality of inter partes reviews (IPRs) under the America Invents Act (AIA). On the same day, in SAS Institute Inc. v. Iancuii, a case that will have far-reaching effects, the Court held that the AIA requires the Patent Trial and Appeal Board to institute on all challenged claims or none—striking down the practice of “partial institution,” in which the Board reviews some claims and not others.
The Oil States opinion was a 7–2 victory for the Patent Office, albeit short of the 9–0 win boldly predicted by Joseph Matal, interim director of the USPTO.iii The decision was not surprising, but interestingly found patents to be public rights because they are a “creature of statute.”iv The Court distinguished prior cases characterizing patents as “personal property” on the basis that those cases interpreted the superseded Patent Act of 1870.v Notably, the Court stated that its decision was narrow and left open issues that could strengthen patents, e.g., whether the Patent Office can assess infringement, whether the Patent Office can review patents having priority before the AIA, whether IPRs give sufficient due process, whether patents are property under the due process and takings clauses, and whether decisions must be appealable to Article III courts. Finally, the Court found no distinction between the constitutionality of IPR and the right to a jury trial, and therefore found juries to be unnecessary in determining unpatentability.
Justice Neil Gorsuch met expectations by siding against the executive branch in both cases, authoring the majority opinion in SAS and the lone dissenting opinion in Oil States, where he passionately argued that the Constitution promises “independent judges,” and prevents “intrusions by the other branches” on the authority of the judiciary.vi He argued that while side-stepping constitutional procedures may be expedient, the costs outweigh the benefits.vii
Forced to accept the constitutionality of IPRs, Justice Gorsuch partially won by cutting back on executive authority in his 5–4 decision in SAS. The majority found that the AIA made clear that, once instituted, the Board must issue final written decisions on “any patent claim challenged by the petitioner” in the petition.viii The majority held that because there was no ambiguity in the underlying statute, the agency deserved no deference. Gorsuch, a skeptic of agency deference, addressed the petitioner’s invitation to “embrace the ‘impressive body’ of pre-Chevron law,” but saved that question for “another day,” perhaps foreshadowing his desire for the right case to weaken Chevron deference further.ix
The dissent in SAS would have upheld the partial-institution practice, arguing that the statute was ambiguous. The statute could be read as requiring a final written decision on “any claim challenged by the petitioner” in the petition or during the IPR. In addition, there are reasonable policy motives supporting either interpretation. Therefore, the Court should defer to the Patent Office under the Chevron precedent.
While Oil States sticks to the status quo, SAS has significant strategy implications. Patent Office trials will be more expensive because the parties will argue all challenged claims when at least one claim is likely unpatentable. If instituted, petitioners will face estoppel as to all challenged claims rather than just the instituted claims. Petitioners must be even more careful about making sure all challenges will withstand relatively stricter Board scrutiny. Petitioners will now be able to buttress weaker challenges that the Board previously would have simply denied. Finally, courts will be more likely to issue stays when all claims are undergoing review by the Patent Office, rather than just a subset of claims.
We must now wait and see how the Board responds to the SAS decision. Will it backload cases and do a marginal job at institution (i.e., find only one claim likely unpatentable)? How will it handle pending and remanded cases? How will the Federal Circuit handle cases on appeal? Dentons’ Post-Grant group stands ready to discuss these issues and other potential impacts these important decisions may have on your organization.