Takeaway: When an IPR is instituted, the PTAB must issue a final written decision on all claims challenged in the petition.
On April 24, 2018, the Supreme Court issued its decision in SAS Institute Inc. v. Iancu, No. 16-969 (2018), on the heels of the Court’s decision rejecting constitutionality challenges to inter partes review in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 2018). SAS, like Cuozzo Speed Technologies, LLC v. Lee, No. 15-446 (2015) before it, relates to the statutory language implementing inter partes review and to the PTO’s regulatory interpretations of the statute. But whereas Cuozzo approved the PTO’s broadest reasonable interpretation standard for inter partes review, applying the Chevron framework, SAS reversed the Federal Circuit and rejected the PTO’s practice of partial institution, wherein a panel of the PTAB would issue a final written decision as to only a subset of claims at issue in an inter partes review petition. SAS thus reinforces that the PTO’s practices in PTAB proceedings will be carefully scrutinized. The en banc Federal Circuit, too, has recently pushed back on the PTO’s practices in PTAB proceedings in Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018) (en banc) (PTAB’s time-bar determination under § 315(b) appealable) and Aqua Products, Inc. v. Matal, 872 F.3d 1290 (Fed. Cir. 2017) (en banc) (rejecting PTAB’s practice of placing burden of proving patentability of claim amendments on patent owner).
In SAS, the inter partes review petitioner (SAS) filed a petition seeking a declaration that all 16 of the claims in a patent owned by ComplementSoft were invalid. The PTO instituted inter partes review on only a subset of those claims and eventually issued a final written decision regarding the patentability of only that subset of claims. The PTO had authorized such so-called partial institution decisions in a regulation, codified in 37 CFR § 42.108(a).
Justice Gorsuch, for the majority of the Court, reasoned that such a practice is contrary to the plain meaning of 35 U.S.C. § 318(a), which provides that “[i]f an inter partes review is instituted and not dismissed under this chapter, the Board shall issue a final written decision with respect to the patentability of any claim challenged by the petitioner.” Under the majority’s reading, § 318(a) requires the PTAB to “address the patentability of all 16 claims” challenged by SAS in its petition. Slip op. at 5. The majority compared an inter partes review petition to a civil litigation complaint, explaining that “the petitioner is master of its complaint and normally entitled to judgment on all of the claims it raises, not just those the decisionmaker might wish to address.” Id. Further echoing that rationale, the majority explained that “the petitioner’s petition, not the Director’s discretion, is supposed to guide the life of the litigation,” id. at 8, and “the petitioner’s contentions, not the Director’s discretion, define the scope of the litigation all the way from institution through to conclusion,” id. at 9.
The majority rejected the PTO’s argument that the language of § 314(a) supported partial institution. Section 314(a) provides that inter partes review may not be authorized if a likelihood of success is not shown as to “at least 1 of the claims challenged in the petition.” In the majority’s interpretation, § 314(a), rather than authorizing claim-by-claim institution, “anticipates a regime where a reasonable prospect of success on a single claim justifies review of all.” Id. at 7.
Perhaps notably, the majority did not cite Chevron or its progeny prior to offering the above rationale. In a short discussion later in the opinion, the majority explained that, even under Chevron, “after applying the traditional tools of interpretation here, we are left with no uncertainty that could warrant deference.” Id. at 12. Hinting at possible reconsideration of Chevron down the line, the majority stated, “[b]ut whether Chevron should remain is a question we may leave for another day.” Id. at 11.
Justice Ginsburg, in a short dissent joined by Justices Breyer, Sotomayor, and Kagan, reasoned that the majority’s decision precluded the Board from using a “rational way to weed out insubstantial challenges,” and would instead promote more roundabout ways of challenging subsets of claims from a petition. Id. at 1 (Ginsburg, J., dissenting).
Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan, disagreed with the majority’s finding the phrase “any patent challenged by the petitioner” in § 318(a) equivalent to the phrase “any patent challenged by the petitioner in the petition,” which does not appear in the statute. Id. at 4 (Breyer, J., dissenting). Justice Breyer would have found that “[s]ection 318(a) contains a gap just after the words ‘challenged by the petitioner,” sufficient to render the statute ambiguous under Chevron step 1. Id. at 8-9. Justice Breyer also would have found 37 CFR § 42.108(a) to be a reasonable filling of that gap under Chevron step 2, and thus would have affirmed the Federal Circuit. Justice Kagan did not join one paragraph of Justice Breyer’s dissent, in which he characterized “Chevron as a rule of thumb, guiding courts in an effort to respect that leeway which Congress intended the agencies to have” and explained that “courts can often implement a more general, virtually omnipresent congressional purpose.” Id. at 9.
The implications from SAS are unclear at this time. For example, questions remain about potential effects on institution rates, petition strategy, and estoppel. Furthermore, it is unclear who will potentially benefit from a situation in which review is instituted—and a record is developed—on challenges to claims which, on their own, would not have cleared the institution hurdle. Moreover, SAS leaves open the future viability of the Chevron doctrine, the effects of which extend far beyond the reaches of patent law.