Congress’ passage of the America Invents Act (AIA) in 2011 created a new process for challenging the validity of issued patents. This new process is filed with the very governmental agency that originally issued the patent. Called Inter Partes Review (IPR), hundreds of issued patents have been invalidated, in whole or in part, using the new proceeding. On April 24, 2018, the Supreme Court handed down two decisions directly relating to IPRs. In the first, it upheld the IPR process as constitutional. In the second, it provided additional direction to the Patent Trial and Appeals Board (“PTAB”), which oversees and decides IPRs.
First, in Oil States Energy Services, LLC v. Greene Energy Group, LLC, the Court upheld the constitutionality of the IPR process, determining that it is not in violation of Article III or the Seventh Amendment of the Constitution. The Court found that patent rights fall within the public rights doctrine, similar to a public franchise. The Court ruled that an IPR is merely a reconsideration of a patent grant, thereby also falling into the public rights doctrine. Because issuance of a patent and also IPR both fall under the public rights doctrine, Congress permissibly reserved the USPTO’s authority to reconsider patent issuance through IPR.
The dissent strongly disagreed, arguing that the majority’s ruling represented a retreat from Article III’s guarantees.
Upon finding IPRs constitutional in Oil States, the Supreme Court was immediately tasked with deciding whether the PTAB must issue a written decision on all challenged claims in SAS Instituate Inc. v. Iancu. The relevant statutory language reads as follows: “the [Board] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner…” The majority found the statutory text that created IPR proceedings to be unambiguous, ruling that such language means: “the [Board] shall issue a final written decision with respect to the patentability of every patent claim challenged by the petitioner”. Such statutory language gives the Board only the discretion whether to institute an IPR – not whether and to what extent to institute an IPR. The Court noted that the petition defines the scope and contours of the IPR, and the USPTO cannot depart from the petition, thereby suggesting that all claims and all challenges (e.g. proposed rejections) are to be reviewed anytime IPR is instituted. Furthermore, because the majority found the statute to be unambiguous, the Court did not need to give deference to the USPTO’s interpretation of the statute. As such, the PTAB must now issue a final written decision regarding every challenged claim presented in an IPR petition after instituting IPR.
The dissent disagreed with the majority and found the statutory language to be at least partially ambiguous, which should trigger Chevron deference, thereby giving the USPTO wide deference in interpreting and applying the statute.
In response, the PTAB issued guidance to petitioners and patent owners involved in currently-instituted IPRs or future IPRs. While the Supreme Court in SAS unambiguously required the PTAB to issue final written decisions on all claims challenged when the PTAB decides to institute IPR, the PTAB further clarified the scope of SAS by mandating that the PTAB will also institute IPR on all challenges raised in a petition when the PTAB decides to institute IPR. That is, not only will the PTAB institute on all challenged claims or none, the PTAB will also institute on all challenges presented in the petition or none.
The impact of the Supreme Court decisions and the PTAB guidance is yet to be felt but could impact litigation strategies as well as petition preparation.
First, because the PTAB must now issue final written decisions on all claims and all challenges, the workload on the PTAB will almost certainly increase, which leads many future petitioners to wonder whether institution rates will decline to offset that increased workload. Institution of an IPR is discretionary, and the PTAB is not required to institute IPR on any petition demonstrating a reasonable likelihood of success. Therefore, the PTAB might decline IPR of petitions demonstrating a reasonable likelihood of success simply because the PTAB is overworked and stretched thin. Alternatively, it might be more difficult to convince the PTAB of a reasonable likelihood of success, as the PTAB may grant more petitions based on a single reference and fewer based on multiple combined references.
Second, defendants considering IPR as a litigation strategy should be acutely aware of the estoppel provisions that might attach to filing an IPR. According to § 315 of the AIA, a petitioner who receives a final written decision is estopped from asserting in Federal Court the same invalidity ground raised during IPR or any other ground that reasonably could have been raised during the IPR. Now, in view of SAS, so long as the PTAB institutes IPR with regard to one claim, the petitioner will receive a final written decision on all challenges, and estoppel will attach to all the challenges. Petitioners would be wise to identify back-up invalidity positions based on products, public sales or uses, or other prior art that is ineligible for IPR review because it does not qualify as a “printed publication”.
Third, depending on how the PTAB applies its discretionary powers post-SAS, petitioners might consider asserting as many challenges as possible within the word limit constraints of a petition. Petitioners would be wise to focus most of their petition on their best argument to ensure institution, but so long as
the PTAB continues to institute IPR on all challenged grounds, petitioners might be able to include multiple, back-up challenges to the claims, which could be the grounds ultimately found persuasive by the PTAB. However, an overworked PTAB may view petitions having numerous challenges as overly-burdensome. Thus, if the PTAB begins to commonly decline institution based on too many challenges, petition strategy may instead shift toward narrowing the scope of the petition to only the best argument(s) to increase the chances of institution. Even though estoppel might be broadly applied, this strategy will depend on future PTAB tendencies.
Finally, so long as the PTAB decides to institute IPR, petitioners can appeal more final decisions made by the PTAB. Previously, if the PTAB instituted on, for example, claim 1 but not claim 2 because the PTAB did not find a reasonable likelihood of success for proving invalidity of claim 2, a petitioner could not appeal the decision by the PTAB to deny institution of claim 2. In many respects, a PTAB decision not to institute could be seen as a suggestion that the non-instituted claim is valid. Now, even if the PTAB ultimately finds claim 2 valid in a final written decision, the petitioner can appeal that decision to the Federal Circuit.
In conclusion, while IPR remains an attractive, and constitutional, litigation defense of an asserted patent, especially given the lower burden of proof in proving invalidity than in Federal Court, petitioners should carefully consider which claims to challenge and which challenges to present to the PTAB.