Banta: Supreme Court weighs patent invalidity case procedures

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By Holly Banta

Accused infringers might have a greater incentive to save their patent invalidity arguments for federal court or International Trade Commission litigation after the U.S. Supreme Court renders its decision in SAS Institute, Inc. v. Matal, U.S., No. 16-969. Although wildly overshadowed by the Oil States Energy Services, LLC v. Greene’s Energy Group, LLC case, which ruling could do away with many of the patent validity review options created by the America Invents Act (AIA), the Supreme Court heard oral argument recently on a case that, if the review options remain, will decide how an important Patent Trial and Appeal Board (PTAB) procedural rule must be interpreted.

The question to be addressed in SAS Institute concerns whether, when the PTAB receives an inter partes review (IPR) petition and decides to institute the proceeding, the PTAB must then issue a final written decision on all claims alleged to be invalid in the petition or whether it may decide to institute trial on only one or a few claims that appear to be the simplest to invalidate. The answer is important as the AIA estops a patent challenger from raising invalidity arguments in other fora that were or could have been raised in the PTAB proceeding. Current Federal Circuit precedent confirms this estoppel applies only to those claims addressed once review is instituted. The answer is also important because only the final written decision of the PTAB may be appealed; the decision to institute a proceeding may not. Obviously, if the Supreme Court requires the PTAB to issue a decision on all claims raised in the initial petition, then the scope of the estoppel will be much broader.

A change to the status quo will shake up the calculus concerning whether an accused infringer should use a PTAB proceeding and what to allege in a petition. Interestingly, however, patent owners are not yet sure which result is better.

America Invents Act of 2011

The AIA created a host of new administrative litigation options from which to choose when strategizing how to invalidate a patent. The rationale for creating these options was to provide an easier (compared to the clear and convincing standard used by federal courts) and cheaper method of determining whether claims in a patent are invalid than is offered by traditional litigation. To avoid the potential for abuse, the AIA included 35 U.S.C. § 315(e)(2), which prevents a patent challenger from asserting in a different litigation forum that the subject patent is invalid “on any ground that the petitioner raised or reasonably could have raised during that inter partes review.”

One of these PTAB options, IPR, permits a patent challenger to file a petition that alleges one or more grounds on which the challenger believes certain patent claims should be invalidated. When the PTAB receives such a petition, it engages in a two-step review process. First, the PTAB makes the institution decision by reviewing the petition to determine which of the claims alleged to be invalid present a case that makes it reasonably likely the petitioner would prevail with respect to at least one claim challenged in the petition. Once a proceeding has been instituted, the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” 35 U.S.C. § 318(a). In practice, this written decision requirement has been applied only to the claims on which the institution decision was based in order to further the AIA’s plan for efficient resolution of invalidity matters within one year.

Supreme Court Oral Argument

The only clear prediction that emerged after the Nov. 27 oral argument is that the decision is likely to be divided along liberal-conservative lines. The liberal-leaning justices appeared to side with the government’s position that the PTAB should be able to focus its resources on the challenges that it identifies as the most substantial. These justices suggested that SAS Institute was attempting through this case to overturn the Supreme Court’s decision in Cuozzo Speed Techs., LLC v. Lee, 579 U.S. __,136 S. Ct. 2131 (2016) (affirming that petitioners may not appeal an institution decision). The conservative-leaning justices agreed that the Patent Office might have some discretion when it came to the institution decision (the reasonable likelihood of invalidating at least one claim was not considered to be a claim-by-claim analysis, rather a yes or no based on finding that likelihood for at least one claim), but the Patent Office was bound by the terms of the statute to evaluate and provide a written decision addressing all the claims contained in the original petition.

Potential effect of a change

If the Supreme Court holds that the Patent Office exceeded its rulemaking authority by permitting the PTAB to select which claims it will render a written decision upon, then the PTAB might choose to review the initial petition, decide which claims present substantial challenges, and then set a conference to let counsel know that the petition will not be instituted as filed but would be instituted if the non-substantial claims were deleted. Such an option was suggested by Justice Kennedy during oral argument. This option would permit the patent challenger to preserve definitively those invalidity arguments not considered by the PTAB in its written decision.

Some patent owners fear a change, because it might lead patent challengers to allege as many invalidity grounds on as many claims as possible to take advantage of the PTAB’s lower invalidity standard. In addition, if all claims alleged to be invalid will be addressed in the PTAB’s written decision, then there is a greater likelihood a district court judge would impose a stay order pending a PTAB review (because all the invalidity arguments will be addressed by the PTAB).

Other patent owners are confident a change would lead to fewer trials in IPR proceedings. The PTAB could refuse to hear cases in which only a minority of the claims appeared to have substantial challenges. The decision to institute cannot be appealed under current Supreme Court precedent, so such a procedure would not be subject to review.•


Holly Banta is a partner in Ice Miller’s Intellectual Property Group. She is a registered patent attorney and concentrates her practice in the areas of intellectual property litigation, dispute negotiations, U.S. and foreign trademark prosecution and intellectual property licensing.

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