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PGS v. Iancu – The Post-SAS Landscape Develops

The Supreme Court held in SAS Institute Inc. v. Iancu, 138 S. Ct. 1348 (2018), that the Patent Trial and Appeal Board’s (“PTAB” or “the Board”) practice of so-called partial institutions was contrary to the statute.  The Supreme Court explained that once an inter partes review (“IPR”) is instituted, the PTAB must decide on the invalidity of all challenged claims.  But while answering one question, the Supreme Court opened a host of others, including how the U.S. Court of Appeals for the Federal Circuit should dispose of appeals involving the now-improper partial institutions.

In PGS Geophysical AS v. Iancu, No. 2016-2470, 2016-2472, 2016-2474 (Fed. Cir. June 7, 2018), the Federal Circuit (“the Court”) provided some clarity, holding that the Federal Circuit has jurisdiction to assess the merits of a final written decision of the Board despite the Board’s error in “limiting the scope of the IPRs it instituted and hence the scope of its final written decisions.” Slip Op. at 2.

In November 2014, WesternGeco filed three IPR petitions directed to PGS’s Patent No. 6,906,981.  The Board instituted review on some, but not all, of the requested grounds of invalidity, with the IPR proceeding to a final written decision.  Both parties appealed, but WesternGeco withdrew its appeal after settling, with the Director intervening under 35 U.S.C. § 143.

The Court first held that the Board’s actions had been contrary to SAS’s dictate.  The Court explained:

We read [ ] the SAS opinion as interpreting the statute to require a simple yes-or-no institution choice respecting a petition, embracing all challenges included in the petition, and we have seen no basis for a contrary understanding of the statute in light of SAS. We note that it is a distinct question (not presented here) whether, after instituting on the entire petition, the Board, in a final written decision, may decide the merits of certain challenges and then find others moot, the latter subject to revival if appellate review of the decided challenges renders the undecided ones no longer moot.

Slip Op. at 8.

The Court then turned to the threshold question of whether it possessed jurisdiction over the appeal.  The panel concluded that it did, relying on 28 U.S.C. § 1295(a)(4)(A), which provides the Federal Circuit with “exclusive jurisdiction…of an appeal from a [final] decision of …. the [Board] with respect to [an] inter partes review under title 35.” Slip Op. at 9. The panel held that the Board’s decision, while legally flawed, was nonetheless a “final agency action” under the Administrative Procedures Act, concluding that a “legal error does not mean lack of finality.” Slip Op. at 11.

Having concluded that it possessed jurisdiction, the Court concluded that it could rule on the merits.  Importantly, the Court noted that neither party sought “SAS-based relief,” remand, and the Court “uncovered no legal authority that require[ed it] sua sponte to treat the Board’s incorrect denial of institution as to some claims and grounds either as a basis for disturbing or declining to review the Board’s rulings on the instituted claims and grounds or as a basis for reopening the IPRs to embrace the non-instituted claims and grounds.”  Slip Op. at 11.  Finally turning to the merits, the Federal Circuit affirmed the Board’s final written decision.

PGS intentionally left certain questions unanswered, and hinted at the answer to others.  For example, the opinion’s language would make it seem likely that if a party (and in particular, a petitioner) were to request SAS-based relief, the Federal Circuit would be willing to grant some form of relief.  (And indeed, the Court has granted such relief in non-precedential orders.  See Nestle Purina Petcare Co. v. Oil Dri-Corp. of America, Case No. 17-1744 (Fed. Cir. June 11, 2018).  Likewise, the Federal Circuit left open the possibility that the Board could issue a final written decision that addressed some, but not all, petitioned grounds of invalidity.

Ultimately, while PGS provides some answers, the full scope of SAS’s impact on PTAB proceedings is yet to be determined.