Recently, the Supreme Court reversed the judgment of the Federal Circuit in SAS Inst. Inc. v. Iancu and held that the United States Patent and Trademark Office (USPTO) must decide the patentability of every claim challenged by the petitioner in an Inter Partes Review (IPR). 584 U.S.____ (2018). This 5-4 decision rejected the USPTO’s practice of “partial institution,” which allowed the USPTO to institute an IPR on fewer than all of the claims challenged in an IPR petition. The Court examined the language related to “partial institution” in the IPR statutes (35 U.S.C. §§ 311-319), specifically §§ 314 and 318, and determined that once an IPR is instituted, every claim challenged by the petitioner should be reviewed by the Patent Trial and Appeal Board (“the Board”). This decision may force both parties to the IPR (the petitioner and the patentee) to change their strategies by considering the effects that this decision may have on pending patent infringement litigation.
IPR Procedures: Any third party may file a petition to institute an IPR of an issued patent. § 311(a). The petition must identify every claim challenged, the grounds on which every challenge is based, and the evidence that supports the grounds for each challenge. § 312(a)(3). Once the petition is filed, the patentee has a chance to respond to the petition by explaining why the IPR should not be instituted. § 313. Then, the Board determines if the petition shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition. § 314(a).
Prior to the SAS decision, according to the rules promulgated by the Director of the USPTO, the Board could have allowed the review to proceed on all or some of the challenged claims. 37 C.F.R. § 42.108(a). Next, the Board conducts the review and issues a final written decision with respect to the patentability of any patent claim challenged by the petitioner. § 318(a). Accordingly, the Board could — and frequently did — issue final written decisions on fewer claims than were challenged in the original IPR petition. However, in the SAS decision, the Supreme Court interpreted the language “any patent claim challenged by the petitioner” as “every claim challenged by the petitioner” and struck down the USPTO’s partial institution practice rooted in the regulation 37 C.F.R. § 42.108(a).
Implications of IPR Strategies: Justice Gorsuch’s opinion touched upon the policy arguments regarding efficiency of the IPR for both parties. The USPTO argued in favor of limiting claims only for “promising challenges” to maintain an efficient review by the Board. SAS argued that litigating all the claims in one place, instead of both the IPR and in federal court, is more efficient. In this decision, the Supreme Court declined to address those arguments and instead left the issue for Congress. The policy arguments certainly affect the administrative efficiency by the USPTO and the Board but, more importantly, the decision affects how petitioners and patentees structure IPR proceedings.
For instance, in a typical patent infringement case, the petitioner (defendant) frequently uses an IPR to challenge all the accused claims hoping to invalidate all the challenged claims. If successful, the petitioner is able to avoid the patent infringement action entirely. Thus, at first blush, it may appear that the petitioner is not affected by the SAS decision. However, the effect of this decision may bring the opposite effect.
Prior to SAS, when partial institution was common, the patentee would enjoy some benefit insofar as any uninstituted claims did not run the risk of being invalidated in the IPR. However, because those challenged claims did not proceed through the IPR proceeding, the statutory estoppel benefit did not attach to those claims and they could continue to be challenged in the patent litigation under the same grounds. § 315(e); Shaw Industries Group Inc. v. Automated Creel Systems, Inc., 817 F.ed 1293, 1300 (Fed. Cir. 2016). For that reason, the petitioner had very little risk for petitioning review of every claim asserted in a patent litigation action. If the Board declined to institute the IPR, the petitioner could just proceed with a validity challenge in litigation, even on the same grounds.
However, after SAS, it now appears the Board must issue a final written opinion on all challenged claims, even if the grounds raised in the petition do not warrant review. Accordingly, there should be far more challenged claims upheld as valid in final written opinions. Thus, patentees should benefit from the SAS decision. In theory, claims that would have been invalidated pre-SAS will continue to be invalidated just as before. However, claims that were declined by the Board will end up being affirmed as valid in a final written opinion, thereby foreclosing the petitioner from further validity challenges on what, presumably, were the petitioner’s best grounds. On the other hand, the petitioner will continue to benefit from the IPR if any challenged claims are invalidated as the petitioner can still avoid the extra costs and time of litigation. This should make petitioners consider carefully the likelihood that their challenges in the petition have a good likelihood of being instituted. The downside of this strategy is that the petitioner almost guarantees that any motion to stay an infringement action would be denied as there would seemingly be little to gain from staying a patent litigation action if fewer than all the asserted claims asserted are challenged in the IPR. Therefore, this may result in fewer motions to stay being granted.
The SAS decision has definitely shaken up existing IPR proceedings. The decision may even trigger legislative revisions to the America Invents Act post-grant proceedings. Given the fundamental changes envisioned, we expect to have some more definite direction on the actual effects of the SAS decision soon.