2019 Report: Federal Circuit Appeals from the PTAB - Summaries of Key 2018 Decisions: SAS Institute v. Iancu, 138 S.CT. 1348 (2018)

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SAS sought an inter partes review (IPR) of ComplementSoft’s patent. In its petition,  SAS alleged that all of the patent’s claims were unpatentable. The PTAB determined to institute trial on some, but not all, of the challenged claims, and to deny review on the rest based on 37 C.F.R. § 42.108(a), which allows for “partial” institution. At the end of trial, the Board issued a final written decision on the instituted claims but not the claims that it declined to review. On appeal to the Federal Circuit, SAS challenged the Patent and Trademark Office’s partial-institution regulation as contrary to the plain text of 35 U.S.C. § 318(a), which requires the PTAB to determine the patentability of every claim challenged in the petition if it decides to institute inter partes review. The Federal Circuit rejected SAS’s argument. The Supreme Court granted certiorari to resolve the statutory question.

A 5-4 majority of the Supreme Court rejected the Office’s interpretation of §318(a), striking down the Office’s partial-institution regulation: “[W]hen § 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.” Prior to SAS, the PTAB routinely partially instituted post-grant proceedings, picking and choosing claims and grounds for review in an attempt to streamline the issues. SAS forecloses this practice, requiring the PTAB to institute trial, if at all, on all challenged claims. Justices Ginsburg, Breyer, Sotomayor, and Kagan dissented on grounds that the statute should not be interpreted to preclude “the Board’s rational way to weed out insubstantial challenges.” The 5-4 split reflects a divide between justices who read the statutory text as conclusive, and justices who would give more deference to the agency in formulating regulations to advance practical needs and goals.

Prior to SAS, the PTAB routinely partially instituted IPRs to streamline the issues. SAS forecloses this practice.

SAS has been interpreted subsequently by the Office and the Federal Circuit to require institution, if at all, on all grounds  as well as all claims addressed in the petition. This    is because the SAS majority spoke expansively of inter partes review as a proceeding guided by “the petitioner’s petition, not the Director’s discretion.” Specifically, the majority explained that “the petitioner is master of its complaint and normally entitled to judgment on all of the claims it raises.” Contrasting inter partes review to the “inquisitorial” process of reexamination, the Court noted that “[t]he text only says that the Director can decide ‘whether’ to institute the requested review—not ‘whether and to what extent’ review should proceed,” concluding that “[i]n all these ways, the statute tells us that the petitioner’s contentions, not the Director’s discretion, define the scope of the litigation all the way from institution through to conclusion.”

SAS  has had an impact. In the wake of SAS, the PTAB issued over 350 orders aiming   to bring partially-instituted proceedings into compliance with the Supreme Court’s mandate—an effort that implicated roughly 45% of its active docket. The Federal Circuit also sought to resolve questions about SAS raised in pending appeals.

Eliminating partial institutions has also had downstream implications, namely, for the statutory estoppel associated with IPRs and, by extension, the willingness of some district courts to stay co-pending litigation. Following the Federal Circuit’s decision in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., several district courts had concluded that estoppel should not attach to non-instituted claims and grounds. But with all claims and grounds now instituted, if at all, Shaw’s exception for non-instituted grounds will presumably have limited application—a consequence that at least one Federal Circuit panel has recognized.

RELATED CASES

  • PGS Geophysical AS v. Iancu, 891 F.3d 1354 (Fed. Cir. 2018) (interpreting SAS as “broadly” requiring the PTAB to institute, if at all, on all grounds as well as all claims; holding that the court has jurisdiction to review final decisions that fail  to comply with SAS; explaining that relief from a SAS-related error need not be addressed by the court unless raised by one or both parties).
  • BioDelivery Scis. Int’l, Inc. v. Aquestive Therapeutics, Inc., 898 F.3d 1205 (Fed. Cir. 2018) (holding that, if a party seeks remand based on a SAS-related error, the court need not review the other issues, reserving its review for a “final judgment” and avoiding “piecemeal litigation”).
  • Nestle Purina PetCare Co. v. Oil-Dri Corp.  of  Am., No. 17-1744, ECF No. 83 (Fed.  Cir. June 11, 2018) (remanding in light of SAS and giving the PTAB discretion to consider allegation of fraud and the propriety of sanctions, but declining to “require” the PTAB to consider such issues).
  • Ulthera, Inc. v. DermaFocus LLC, No. 18-1542, ECF No. 22 (Fed. Cir. May 25, 2018) (noting that a remand based on SAS “will ensure later on that there is no dispute or concern in the parallel district court proceedings regarding the scope of estoppel under 35 U.S.C. § 315(e)(2)”).

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