On April 24, 2018, the U.S. Supreme Court issued decisions in two patent cases specifically related to inter partes review (IPR) proceedings under the America Invents Act (AIA) of 2011. The Oil States case reviewed the constitutionality of IPR proceedings as a whole, while the SAS Institute case considered the narrower issue of the interpretation of the language “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” recited in the statute. If the Court ruled in Oil States that IPRs do not survive constitutional muster, the SAS Institute case would have been moot. To the contrary, in its decisions this week the Court upheld the constitutionality of IPRs and found that the statutory language of the AIA governing IPRs requires the USPTO to issue a final written decision for every claim that a petitioner challenges in an IPR proceeding.
Turning first to the Oil States decision, the majority of the Court found that patent grants issued by the USPTO under the authority given to it by Congress are public rights rather than private rights. Since a patent grant falls within the public-rights doctrine, inter partes review, in which the USPTO rather than an Article III court reconsiders that grant, is a constitutionally permissible exercise of power that is lawfully given to the USPTO by Congress. The Patent Clause of the Constitution allows Congress to grant patents, and to delegate the granting of patents to the Executive branch. The USPTO exercises the executive power when it grants patents that meet the statutory criteria enacted by Congress. Since the granting of a patent is a matter arising between the government and others, a patent grant is a public right which need not be adjudicated by an Article III court. Further, the property rights granted by a patent are subject to the conditions set forth in the Patent Act. IPR proceedings are included in the Patent Act, and the Court therefore found that inter partes review is merely another look at whether a patent grant meets the statutory criteria set for in the Patent Act. Furthermore, the Court found that patent validity is not by its nature a matter that under common law must be decided by a court. The Court also found that although in earlier times patent validity was only decided by courts, that was because previous patent acts did not provide for any post-grant review procedures. The Court maintained that Congress had the authority to change this, which they did in part by implementing IPR proceedings under the AIA. Additionally, the Court briefly held that IPRs do not violate the Seventh Amendment right to jury. Since Congress properly assigned IPRs to a non-Article III tribunal, a jury is not necessary and the Seventh Amendment is not implicated by IPR proceedings.
The dissent contrarily took the position that patent rights are private rights that are analogous to ownership of personal or real property. Thus, the dissent found that patent rights were not something that could be taken away without a decision by independent judges, i.e. an Article III court. The dissent held a different view of the common law and prior precedent, finding that previous practice relied on courts to invalidate patents and previous decisions recited that withdrawing of a patent by the Executive branch rather than the Judicial branch would be an unconstitutional deprivation of property without due process. The dissent also raised a fairness issue that after all the money and effort a patentee puts forth to obtain a patent, a third party can emerge, file an IPR, and take it all away. However, this argument seems to be more of a matter of the quality of granted patents and the quality of the IPR process rather than whether the IPR process itself is allowable under the Constitution.
In any event, the effect of the Court’s decision in Oil States is simple: inter partes review remains alive.
In SAS Institute, the majority of the Court found that the plain meaning of the statutory text “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” clearly and explicitly mandates that all claims challenged by a petitioner must receive a final decision from the Patent Trial and Appeal Board (exercising its authority on behalf of the Director of the USPTO). Therefore, the “partial institution” practice set forth in the Patent Rules (37 CFR 42.108(a)), under which the PTAB may institute an IPR of less than all of the claims challenged by a petitioner in its petition, is contrary to the statutory requirements enacted by Congress. Hence, the Court held that if the PTAB institutes an IPR, it must review each and every claim challenged by the petitioner in its petition, and must issue a final written decision as to each and every one of these claims.
The dissent took a different approach to the statutory construction of the language at issue. In its interpretation of the statute, the dissent contrarily found that the language was not clear and explicit, leaving a gap that Congress implicitly left for the USPTO to fill, and which under its discretion it did reasonably fill in drafting the regulatory procedures for IPRs (providing for “partial institution” of an IPR petition). In short, the dissent found that the language “final written decision with respect to the patentability of any patent claim challenged by the petitioner” did not clearly and unambiguously refer to any patent claim challenged by the petitioner in its original petition. Therefore, the dissent concluded that the Board’s practice of issuing a final written decision as to only those claims challenged in the instituted IPR did not run afoul of the statute.
The SAS Institute decision on its face may seem like a victory for petitioners challenging patent validity. Petitioners now will receive a final written decision for all of the claims they raise a challenge to in an IPR petition. No longer will the Board be able to pick and choose which claims will survive an IPR trial institution decision. However, the Court’s decision raises a cautionary flag. Previously, if the Board did not institute an IPR on certain claims raised in a petition and then subsequently did not issue a final written decision as to those non-instituted claims, arguably the non-instituted claims were not subject to the estoppel provisions of 35 U.S.C. 315. Thus, the petitioner would be free to subsequently raise challenges to the non-instituted claims in the USPTO and in other civil actions or proceedings. Now that the Board will issue a final written decision as to each and every claim raised by a petitioner in its petition (assuming a trial is granted), estoppel will apply to all of the challenged claims. This becomes more problematic if the Board summarily decides the validity of some of the claims in its final written decision where the Board would have previously found at the institution stage (prior to a final written decision and the triggering of estoppel) that there was not a reasonable likelihood that petitioner would prevail as to those claims. Therefore, in actuality the Court’s decision means that petitioners should be more careful which claims they challenge in an IPR and should be sure that the arguments and evidence presented for each and every claim are strong and thorough. Otherwise, the Board may uphold the validity of some of the challenged claims without much reasoning, and the petitioner would then be estopped from challenging the validity of those claims in a later proceeding.
A copy of the Oil States decision may be accessed at https://www.supremecourt.gov/opinions/17pdf/16-712_87ad.pdf and a copy of the SAS Institute decision may be accessed at https://www.supremecourt.gov/opinions/17pdf/16-969_f2qg.pdf.
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U.S. Supreme Court Issues Decisions in the Oil States and SAS Institute Cases
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