Supreme Court Review in SAS Institute May Impact the Scope of Appealability and Estoppel in AIA Proceedings

Recently, the Supreme Court agreed to hear arguments on the question of whether the PTAB is required to issue a final written decision with respect to every claim challenged in an IPR petition. SAS Institute Inc. v. Lee, No. 16-969 (May 22, 2017).  The Supreme Court’s decision on this issue has the potential to dramatically reshape the scope of appealability and estoppel in AIA proceedings.

Background

SAS filed an IPR petition challenging the patentability of several patent claims. In its decision on institution, the PTAB panel decided to institute trial on some, but not all, of the claims challenged in the IPR petition. IPR2013-00226, Paper 9 (PTAB Aug. 12, 2013). After the PTAB issued its final written decision, SAS appealed to the Federal Circuit, arguing that the PTAB’s practice of making institution decisions on a claim-by-claim basis and not addressing the non-instituted claims in the final written decision is contrary to the provisions of 35 U.S.C. § 318(a). Under § 318(a), the PTAB is required to issue “a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” The Federal Circuit rejected SAS’s argument, and SAS appealed to the Supreme Court.

PTAB Procedure Concerning Non-Instituted Claims

In AIA proceedings, the PTAB assesses whether or not to institute trial on a claim-by-claim basis. The Office Patent Trial Practice Guide sets forth guidelines for instituting trial:

In instituting a trial, the Board will streamline the issues for final decision by authorizing the trial to proceed only on the challenged claims for which the threshold standards for the proceeding have been met. Further, the Board will identify, on a claim-by claim basis, the grounds on which the trial will proceed. Any claim or issue not included in the authorization for review is not part of the trial. [Emphasis added.]

77 Fed. Reg. 48765 (Aug. 14, 2012). By winnowing those claims for which the IPR petitioner fails to demonstrate a reasonable likelihood of success, the PTAB reduces the issues litigated at trial. Thus, in such cases where some, but not all, of the challenged claims are instituted for trial, the PTAB routinely does not address non-instituted claims in its final written decision. The final written decision is limited to addressing only the claims that were instituted for trial. In its appeal, SAS seeks to overturn this standard PTAB practice.

SAS’s Arguments: Statutory Interpretation and Judicial Efficiency

At the Federal Circuit, SAS noted that § 318(a) states that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” SAS argued that § 318(a) requires the PTAB to address in a final written decision every claim that was challenged in an IPR petition, and that the PTAB erred by not doing so.

The Federal Circuit disagreed, holding that the PTAB is not required to address non-instituted claims in its final written decision. See SAS Inst., Inc. v. Complementsoft, LLC, 825 F.3d 1341, 1343 (Fed. Cir. 2016). Citing rationale from Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), the Federal Circuit noted that § 318(a) describes “claims challenged by the petitioner,” whereas the statutory section governing institution decisions, § 314(a), describes “claims challenged in the petition.” SAS Inst., 825 F.3d at 1352. The Federal Circuit determined that “the differing language implies a distinction between the two subsections such that § 318(a) does not foreclose the claim-by-claim approach the Board adopted there and in this case.” Id.

In its briefing filed with the Supreme Court, SAS reiterated its statutory interpretation argument, and further asserted that the PTAB’s practice of allowing for partial trials is contrary to promoting efficient outcomes in patent litigation:

Congress’s version of the AIA envisions an efficient, administrative substitute for district-court invalidity litigation . . . .

The Director, however, claims that the only efficiency that matters is “the efficient operation of the Office and the ability of the Office to complete the proceeding within the one-year timeframe” of 35 U.S.C. § 316(a)(11). [Citation omitted.] But, as SAS showed in the petition, administrative efficiency is no excuse for refusing to honor the clear text of legislation [citation omitted], and, more importantly, Congress plainly designed inter partes review under the AIA to be efficient for all―the courts, litigants, and the agency. The AIA provides no warrant for the Patent Office to selfishly favor its own efficiencies to the exclusion of those of the parties and the courts.

The Patent Office’s version of the AIA instead substitutes a complicated, expensive, two-front regime for challenging patent claims that is inefficient for everyone but the Patent Office. Congress’s version was not only better policy; it was the version that was actually enacted by the legislative branch.

SAS Inst., Inc. v. Lee, No. 16-969, Reply for Petitioner at 4-5.

Potential Impact on the Scope of Appealability and Estoppel

If the Supreme Court agrees with SAS and determines that § 318(a) requires every claim challenged in an IPR petition to be addressed in a final written decision, such a decision may have a dramatic impact on the scope of appealability and estoppel.

First, such a decision may extend the scope of appealability to all claims challenged in an IPR petition. Under 35 U.S.C. § 314(d), institution decisions rendered by the PTAB are final and nonappealable. Final written decisions, on the other hand, can be appealed under 35 U.S.C. § 319. If the PTAB is required to render a final written decision with respect to every claim challenged in an IPR petition, this would extend the ability to seek judicial review to all claims challenged in a petition, including non-instituted claims that would not have otherwise been appealable under § 314(d).

Second, as discussed in our previous article, in cases where the PTAB has authorized institution with respect to some, but not all, of the claims challenged in a petition, the Federal Circuit has held that estoppel does not apply with respect to the non-instituted claims. More generally, as we previously discussed, some district courts have expressed concern about the Federal Circuit’s reasoning for limiting the scope of estoppel. Requiring the PTAB to address every challenged claim in the final written decision could result in expanding the scope of estoppel to all of the claims challenged in a petition, thereby providing a bright-line rule for district courts to follow.

Thus, the Supreme Court’s decision in SAS Institute has the potential to bring about dramatic changes in AIA practice and procedure.