On May 22, 2017, the Supreme Court granted certiorari in SAS Institute, Inc. v. Lee, No. 16-969, 2017 WL 468440 (U.S. May 22, 2017). The issue in this appeal is whether the America Invents Act permits the Patent Trial and Appeal Board (“the Board”) to partially institute IPR proceedings (as it has been doing). If the Supreme Court determines that partial institution is not permitted (thought to be a likely ruling by many, given that the Supreme Court typically does not take Federal Circuit cases to affirm the decision), this could have significant effect on, inter alia, the scope of estoppel attaching to the Board’s decisions.
Partial institution is the common practice in which the Board institutes review of some but not all of the claims challenged in a petition. One of the central problems with this practice is that it multiplies litigation without adequately simplifying the issues in dispute. Because a defendant faces liability for infringement of even a single valid claim, litigants must resolve the validity of each and every asserted claim. When the Board institutes review of only some of those claims, it forces the parties to litigate the validity of the remaining claims in another forum, thereby bifurcating the proceeding. Judge Newman has forcefully addressed the inefficiencies resulting from this practice in a trio of dissenting opinions. Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016) (Newman, J. dissenting); SAS Inst., Inc. v. ComplementSoft, LLC., 825 F.3d 1341 (Fed. Cir. 2016) (Newman, J. dissenting); SAS Inst., Inc. v. ComplementSoft, LLC., 842 F.3d 1223 (Fed. Cir. 2016) (Newman, J. dissenting).
If the Supreme Court reverses in SAS Institute, it will likely rely on 35 U.S.C. § 318(a) in doing so. Section 318(a) instructs that the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” On first inspection, this language appears to foreclose the Board’s practice of partial institution. The Federal Circuit has held, however, that the language in Section 318(a)—“any patent claim challenged by the petitioner”—refers not to the claims challenged in the petition, but rather to the claims upon which the Board institutes review. See Synopsys, 814 F.3d at 1315; SAS Inst., 825 F.3d at 1352.
In support of the Federal Circuit’s interpretation of Section 318(a), it has cited to subtle differences in the statutory language found in Sections 314(a) and 318(a). Section 314(a), which defines the threshold for instituting inter partes review, refers to the petitioned claims as “claims challenged in the petition.” Section 318(a), by contrast, refers to the claims to be addressed in the final written decision as “any patent claim challenged by the petitioner.” Citing this linguistic distinction, the Federal Circuit concludes that Sections 314(a) and 318(a) do not refer to the same set of claims, and that the Board is therefore not required to address all of the petitioned claims in the final written decision. Synopsys, 814 F.3d at 1315.
The opposite conclusion—that these strikingly similar linguistic formulations refer to the same set of claims—is at least as plausible as the holding reached by the Federal Circuit. Thus, if the Supreme Court finds itself persuaded by policy considerations, it will have a statutory basis to reverse the Federal Circuit’s ruling.
From a practical perspective, reversal in SAS Institute would convert the institution decision into an all-or-none approach whereby the Board would be forced to institute all of the claims challenged in a petition or none at all. For petitioners, the advantage of such a regime is clear—by showing that one challenged claim is likely invalid, the petitioner may be able to obtain review of all challenged claims. The allure from the patent owner perspective, meanwhile, is that an all-or-none approach would strengthen the estoppel provisions under 35 U.S.C. Section 315(e). But the degree to which estoppel may be strengthened by a Supreme Court reversal in SAS Institute may be limited for reasons discussed below.
The Patent Office regulation governing institution of inter partes review, 37 C.F.R. § 42.108(a), provides for two types of partial institution. First, the Board may elect to institute review on only some challenged claims. Second, the Board may elect to institute review on only some of the grounds of unpatentability asserted for each claim. This latter class of discretionary denials is quite significant and includes, for example, many of the Board’s redundancy determinations.
As the authors have previously written, the scope of estoppel under Section 315(e) appears to be significantly narrower than originally expected. This is due not just to the partial institution (of claims) issue discussed above, but also, in part, to the Federal Circuit’s guidance in Shaw Industries Group, Inc. v. Automated Creel Systems, Inc., 817 F.3d 1293 (Fed. Cir. 2016), which has led at least one district court to conclude that estoppel is limited to the grounds actually decided in the Board’s final written decision. See Intellectual Ventures I LLC v. Toshiba Corp., No. CV 13-453-SLR, 2016 WL 7341713, at *13 (D. Del. Dec. 19, 2016). While SAS Institute presents a suitable vehicle to reverse the Board’s practice of instituting review on only some challenged claims (and thus resolve the estoppel issue related thereto), it is unclear whether SAS Institute (or any USPTO regulations that follow from a reversal in SAS Institute) will speak to the arguably larger estoppel issue related to instituting review on only some of the asserted grounds of unpatentability.
Importantly, SAS Institute does not argue that Section 318(a) compels adjudication of all of the asserted grounds of patentability. The Supreme Court may therefore decline to address this issue in its opinion. Given the likelihood that judicial economy and finality will be central to the Court’s analysis of Section 318(a), however, the Court may find it difficult to ignore the Board’s treatment of secondary grounds and the potential that such treatment may undermine Congressional intent to provide an alternative—rather than supplementary—forum to adjudicate patent validity.
Until the Supreme Court rules in SAS Institute, practitioners would be wise to closely monitor the Board’s partial institution practices and the impact that such practices may have on estoppel. As one example, in cases where the Board issues a final written decision on less than all of the claims challenged in a petition, both parties could potentially have basis to appeal since the petitioner may have been denied the opportunity to invalidate claims upon which review was not instituted, and the patent owner may have been denied the benefit of a final determination and estoppel attaching to those claims.