July 2018: Strategic Considerations in USPTO Inter Partes Review Proceedings in Light of Supreme Court’s SAS Decision

Quinn Emanuel Urquhart & Sullivan, LLP

Quinn Emanuel Urquhart & Sullivan, LLP

On April 28, 2018, the Supreme Court issued its opinion in SAS Institute, Inc. v. Iancu, 585 U.S. __ (2018). While not as closely followed as the Supreme Court’s decision in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U.S. ___ (2018), the SAS opinion is likely to have far reaching implications on the way that Patent Office inter partes review proceedings are conducted before the Patent Trial and Appeal Board moving forward.

Before the Supreme Court’s SAS decision, parties filing inter partes review petitions often addressed all claims asserted in district court litigation, regardless

of the strength of the arguments concerning individual claims. The PTAB would evaluate all grounds presented and determine whether there was a reasonable likelihood that the petition would prevail with respect to at least one of the claims challenged in the petition, pursuant to 35 U.S.C. § 314. This evaluation was generally performed on a per claim and per ground basis, and the PTAB would often grant institution on certain presented claims and deny institution on others.

This practice of “partial institution” was the focus of the Supreme Court’s SAS opinion. In that case, SAS Institute, Inc. challenged the validity of all 16 patent claims of ComplementSoft’s software patent. The PTAB chose to institute inter partes review on 9 claims, denying institution on the remaining 7, and ultimately finding that 8 of the 9 reviewed claims were invalid. SAS appealed the ruling on the ground that the PTAB should determine the validity on all challenged claims in the event the PTAB institutes review on any of the claims.

Addressing the plain text of 35 U.S.C. § 318, which states that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner…,” the Court held that the PTAB has no discretion to institute on only some of the claims challenged in a petition for inter partes review. SAS Institute Inc., 585 U.S. at *4 (quoting § 318(a)). While acknowledging that the PTAB possesses discretion on whether to institute an inter partes review at all, the Court found that the statute afforded no discretion as to which challenged claims could be addressed upon a decision to institute a review. Id. at *8. As a result, the PTAB must now institute on all claims raised in a petition once a decision to institute regarding any one claim is made, no matter how weak the arguments are for the remaining claims. Correspondingly, a final written decision must be issued on all claims addressed in the petition (pursuant to § 318(a)), increasing the chances for a finding that certain claims addressed in a petition for review are found not invalid and triggering the estoppel provision of 35 U.S.C. § 315(e). Between September 2012 and May 2018, 65% of instituted petitions resulted in all claims upon which review was instituted being found unpatentable, while 16% of instituted petitions resulted in only some claims being found unpatentable (see https://www.uspto.gov/sites/default/files/documents/trial_statistics_20180531.pdf). These percentages are now likely to change, with the number of occurrences in which only some claims are found unpatentable increasing.

Parties wishing to challenge the validity of a patent through IPR proceedings must now be more cognizant of the claims that they choose to include in their petitions. While previously parties could rely on the PTAB acting as a gatekeeper, using partial institution to deny institution on claims that the PTAB did not find likely unpatentable (and thereby foregoing a final written decision on those claims), petitioners cannot rely on the PTAB to weed out perceived weaker challenges in their petitions prior to institution. While the potential does exist, and the Court did contemplate, that a party may withdraw claims after the initial institution decision, in practice, this may be easier said than done.

Patent validity is often addressed before the district courts and PTAB. While district court proceedings may encompass any argument against the validity of a patent, inter partes review is limited to challenges based on novelty and obviousness. See 35 U.S.C. § 311 ¶ 2 (limiting inter partes review to §§ 102 and 103 invalidity challenges). As a result, invalidity challenges pursuant to 35 U.S.C. §§ 101 or 112 must be brought in district court. While the PTAB and district courts utilize different rules, PTAB decisions can potentially impact district court proceedings. For example, claim construction decisions at the PTAB can impact claim construction before the district courts, and the issuance of a final written decision by the PTAB results in estoppel of an invalidity ground that was raised or could reasonably have been raised before the PTAB. See 35 U.S.C. § 315(e)(2).

An indefiniteness challenge pursuant to 35 U.S.C. § 112, ¶ 2 is one example of an invalidity argument that cannot be raised in IPR proceedings before the PTAB. Section 112, paragraph 2 requires that the specification of a patent “shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention.” Pursuant to the Supreme Court’s decision in Nautilus, Inc. v. Biosig Instrum., Inc., this requirement is met when “a patent’s claims, viewed in light of the specification and prosecution history, inform those skilled in the art about the scope of the invention with reasonable certainty.” 134 S. Ct. 2120, 2129 (2014). Because indefiniteness challenges are not grounded in §§ 102 or 103, the PTAB lacks statutory authority to find a patent invalid as indefinite during an IPR proceeding. In the past, the PTAB has often denied institution on claims that the PTAB could not construe (i.e., were indefinite), but such a denial would now run afoul of the Supreme Court’s holding in SAS. Thus, the question now exists as to how the PTAB will treat claims in an IPR

petition that the challenging party may believe are indefinite, especially if not all challenged claims have this prospective indefiniteness issue.

A popular target for indefiniteness arguments are patent claims written in “means-plus-function” format. Under 35 U.S.C. § 112, ¶ 6 patent claims may “be expressed as a means or step for performing a specified function.” The trade off for reciting a claim using this “means-plus-function” format is that a patent specification must expressly disclose corresponding structure and link that structure to performance of the function recited in the claim. If the specification fails to sufficiently define the corresponding structure for performing the recited function, the claim is invalid as indefinite. When challenging a means-plus-function claim in an IPR, the challenger is required to set forth the purported structure identified by the patent. 37 C.F.R. § 42.104(b)(3). Failure to identify the corresponding structure will often result in a denial to the challenge.

Post-SAS decisions rendered by the PTAB on challenges to claims that are likely invalid for indefiniteness may be detrimental to the success of indefiniteness arguments presented in parallel district court proceedings. It is unclear exactly how the PTAB will address a claim raised in a petition that is not amenable to construction, either because the language cannot reasonably inform a person of ordinary skill of the claim’s scope or it recites a means that lacks a disclosed discernible structure. As the PTAB is required by statute to issue a final written decision on any claim for which institution is granted, there is a chance that the Board will be forced to ascribe some meaning or structure to the claim in order to render an opinion on its validity under §§ 102, 103. Alternatively, the PTAB may find a claim limitation not subject to § 112, ¶ 6 in order to avoid the question of indefiniteness, particularly under the “broadest reasonable interpretation” standard. Either of these approaches may make it more difficult to argue before a district court that a claim should be construed as means-plus-function (and therefore found indefinite for a lack of disclosed structure). As a result, the inclusion in an IPR petition of claims that may be best attacked on indefiniteness grounds risks burdening an otherwise successful IPR challenge with a potential adverse holding on a claim that may potentially be better addressed in a district court.

The changes in IPR institution and the possibility of detrimental effects of IPR decisions on claims of indefiniteness have strategic implications for claim selection and jurisdictional decisions. While arguments are often presented in the alternative, and this is generally considered an acceptable litigation strategy, the PTAB’s need to issue a final written decision on every claim raised in an instituted IPR petition is likely to complicate this strategy in the future, particularly when there are potential district court challenges under 35 U.S.C. § 112 for a claim. This will especially be the case if the PTAB abandons its “broadest reasonable interpretation” claim construction analysis in favor of one consistent in scope with that applied by the district courts, as has been proposed. (see https://www.federalregister.gov/documents/2018/05/09/2018-09821/changes-to-the-claim-construction-standard-for-interpreting-claims-in-trial-proceedings-before-the).

Those preparing to file IPR petitions must now be more careful in analyzing the strength of their respective arguments at the outset, paying careful attention to the strength of 102 and 103 grounds relative to prospective indefiniteness defenses that may be raised before the district court. While a petitioner may have previously relied upon the PTAB as the gatekeeper to deny institution on claims that were more amenable to an indefiniteness defense, the Supreme Court’s mandate in SAS may ultimately result in such reliance becoming a thing of the past.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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