On April 24, 2018, the Supreme Court issued its opinion in SAS Institute, Inc. v. Iancu, No. 16-969, holding that the Patent Trial and Appeal Board (the “PTAB”) must issue a final written decision addressing the patentability of every claim challenged by a petitioner if the PTAB institutes inter partes review (“IPR”). This significantly changes the PTAB's current practice of permitting institution of inter partes review on only a subset of the claims challenged by a petitioner. This decision also impacts district court actions involving the challenged patent, because a petitioner is estopped from re-asserting invalidity defenses that were raised, or reasonably could have been raised, in IPR. 35 U.S.C. § 315(e)(2). Because this estoppel flows from the PTAB's final written decision on all instituted claims, requiring the PTAB to address all of the challenged claims in its final written decision should result in broader estoppel flowing from IPR.

A petition for IPR must identify “each claim challenged” and “the grounds on which the challenge to each claim is based.” 35 U.S.C. § 312(a)(3). The PTAB may institute IPR if it determines that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Id. at § 314(a). Under the governing regulations, the PTAB has the authority to institute review of “some or all of the challenged claims.” 37 C.F.R. § 42.108. Section 318, however, provides that “[i]f an inter partes review is instituted and not dismissed,” the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” (emphasis added).

In 2013, SAS filed a petition seeking IPR of claims 1-16 of U.S. Patent No. 7,110,936 (the ’936 patent). While the PTAB agreed to institute review with respect to claims 1 and 3-10, it declined to institute review of claims 2 and 11-16, finding that SAS had failed to establish a reasonable likelihood that those claims were invalid. At the conclusion of the IPR, the PTAB issued a final written decision confirming the validity of claim 4 and cancelling claims 1, 3, and 5-10 as invalid. Consistent with its established practice, the PTAB did not address non-instituted claims 2 or 11-16 in the final written decision.

On appeal to the Federal Circuit, SAS argued that the PTAB was required to issue a final written decision addressing each of the claims that SAS challenged in its petition for inter partes review. In a 2-1 panel decision, the Federal Circuit rejected SAS’s argument, holding that, under § 318, the PTAB is only required to issue a final written decision with respect to claims for which inter partes review is actually instituted.

Before the Supreme Court, SAS argued that the plain language of § 318 requires a final written decision addressing every claim challenged in the IPR petition. SAS also asserted that the PTAB’s “partialinstitution, partial decision” approach undermines a principal aim of the America Invents Act (“AIA”) – to resolve patent validity challenges more efficiently. The Solicitor General defended the PTAB’s current practice, arguing that § 318 only requires a final written decision “[i]f an inter partes review is instituted.” Based on this language, the Solicitor General asserted that no final written decision is required with respect to noninstituted claims.

In a 5-4 opinion today authored by Justice Gorsuch and joined by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito, the Supreme Court held that the “plain text of § 318(a)” controls, and its directive is “both mandatory and comprehensive.” SAS Inst., Inc. v. Iancu, 584 U. S. ____, slip op. at 4 (2018). Thus, the Court finds, “when §318(a) says the Board’s final written decision ‘shall’ resolve the patentability of ‘any patent claim challenged by the petitioner,’ it means the Board must address every claim the petitioner has challenged.” Id. at 5.

In support of its conclusion, the Court explained that nothing in the statutory scheme “suggests the Director enjoys a license to depart from the petition and institute a different inter partes review of his own design.” (Id. at 7.) The Court noted that, if Congress had desired to give the Director that power, “it knew exactly how to do so.” Id. The Court was unmoved by the PTAB’s public policy arguments, stating “[p]olicy arguments are properly addressed to Congress, not this Court.” Id. at 10. And finally, the Court found Chevron deference inapplicable to the PTAB’s practice because there is no uncertainty as to Congress’s intent that “could warrant deference.” Id. at 12.

The Supreme Court’s decision in SAS raises significant procedural issues that the PTAB and the Federal Circuit will need to resolve. For example, it is currently unclear whether pending appeals before the Federal Circuit will need to be remanded so that the PTAB can issue final written decisions that comply with SAS. Moreover, the PTAB will need to determine how to address non-instituted claims in pending IPR proceedings where the parties have not developed a discovery record. And, as discussed above, the Court’s decision is likely to substantially enlarge the scope of estoppel flowing from IPR.

Simultaneously with SAS Institute, the Court also issued another decision dealing with inter partes review in Oil States Energy Services, LLC V. Greene’s Energy Group, LLC, 584 U. S. ____ (2018), in which it approved PTAB review of issued patents under Article III of the U.S. Constitution.