SAS Institute Summary for the PTAB Bar Association

Drafted by Raghav Bajaj (Haynes & Boone)

Edited by Michael Babbitt (Jenner & Block) and Jason Stach (Finnegan)

The fallout from the Supreme Court’s recent decision in SAS Institute v. Iancu will affect Patent Trial and Appeal Board practice for years to come. In a 5-4 decision, the Supreme Court found that when the Board institutes an inter partes review, its final written decision must decide the patentability of every claim challenged in the IPR petition. In reaching its holding, the Court also commented on other aspects of Board practice, including rejecting the USPTO’s view that the Board has authority to institute an IPR on a subset of claims. The SAS decision led the USPTO to issue guidance that may dramatically affect both pending and future cases, as explained below.

Summary of the SAS Opinion

SAS Institute filed an inter partes review petition challenging 16 claims of a patent assigned to ComplementSoft. The Board instituted review on a subset of those challenged claims. The Board anchored its decision to partially institute in its discretionary power under 37 C.F.R. § 42.108(a), which states that “the Board may authorize the review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim.” The Board later issued a final written decision on that subset of claims, which SAS then appealed, arguing that the Board should have instituted on all claims and rendered a final written decision on all claims. The Federal Circuit affirmed the Board’s ability to partially institute SAS’s petition, finding that 35 U.S.C. § 318(a) did not foreclose the claim-by-claim approach adopted by the Board.

The Supreme Court reversed. Writing for a five-Justice majority, Justice Gorsuch found that the directive from the statute was both “mandatory and comprehensive,” and found no room for the USPTO Director or the Board to exercise discretion to issue a final written decision that addresses a subset of the challenged claims. The Court found that § 318(a)’s statement that the Board’s final written decision “shall” resolve patentability of “any patent claim challenged by the petitioner” means that the final written decision must address every claim challenged in the petition. The Court also found no statutory basis for a discretionary “partial institution” power, whether within § 318 or elsewhere in the statute. Thus, the Court characterized the institution decision as a binary yes-or-no decision, stating: “once [the] single claim threshold is satisfied, it doesn’t matter whether the petitioner is likely to prevail on any additional claims.”

Comparing the inter partes review statutes to the ex parte reexamination statutes, the Court found that Congress knew how to authorize partial institution, but did not do so in IPR. The Court also found support for its conclusion in other IPR statutes. In § 316(a)(8), for example, the statute requires the USPTO to allow “a response to the petition” as opposed to the institution decision, which the Court said would not make sense if “the Director enjoyed the discretion to limit the claims under review.”

The Court also rejected the USPTO’s interpretations of §§ 314(a) and 314(d) as supporting discretion, rejected several policy arguments, and found that § 318(a) was clear on its face so there was no need to defer to the USPTO’s interpretation of that statute under Chevron.

The Court concluded that the petitioner, SAS, was entitled to a final written decision addressing all claims challenged in the petition.

Justice Ginsburg’s short dissent, joined by Justices Breyer, Sotomayor, and Kagan, stated that § 318 should be read to permit the Board to “weed out insubstantial challenges.” Justice Breyer’s longer dissent stated that the Board’s interpretation and rulemaking was owed Chevron deference, so he would have affirmed the Federal Circuit’s ruling.

USPTO Guidance

The USPTO issued guidance in light of the SAS decision on April 26th, and held a chat with Chief Judge Ruschke and several vice-chief judges on April 30th to explain the guidance.

Under the USPTO’s guidance, for those cases that have not yet received an institution decision, the Board will institute as to all claims or as to no claims (i.e., deny institution). The Board will also, “[a]t this time,” institute on all challenges raised in the petition, and not simply (as the SAS Institute decision more clearly requires) all claims. The Board informed the bar that they do not read SAS Institute as mandating institution on all challenges, but rather, that the Board is taking that approach as a policy position for the time being. Therefore, the Board noted that the policy is subject to change. The Board also stated that panels will continue to choose how much information to include in the institution decision.

For pending trials where a panel has already instituted on all challenges and all claims, no changes will be made.

For pending trials where a panel has instituted on a subset of challenged claims or a subset of challenges, the panel may issue a supplemental institution decision. For example, the Board may supplement the institution decision to institute on all claims and grounds in the petition. The parties then are instructed to meet and confer to discuss additional briefing, or other effects of a supplemental institution decision, such as additional discovery (e.g., depositions), and are expected to work cooperatively throughout the process. The parties may jointly agree to withdraw certain claims or grounds. However, the Board has not yet reached consensus on what will happen with a unilateral request from either the petitioner or the patent owner, as the estoppel and other implications would need to be considered. The Board may also take additional actions, such as permitting additional briefing or oral argument, or extending the statutory final-written-decision deadline for good cause under § 316(a)(11). The Board emphasized that briefing from the Petitioner will typically be limited to responsive briefing, and consistent with prior practice, that additional evidence that should have been included with the petition is subject to exclusion. The Board may act sua sponte, but the guidance notes that the proceeding may continue unchanged if the parties do not request any changes.

During the chat, Chief Judge Ruschke noted that approximately 18-20% of all institution decisions have instituted on a subset of claims challenged by the petitioner, but that the Board did not yet have data on the number of cases in which only a partial set of grounds was instituted.

Chief Judge Ruschke and others also stated that, in pending cases where the Board had instituted on a subset of claims or grounds, instead of instituting on the remaining claims or grounds, the Board might retroactively deny institution altogether. They gave the example of a petition challenging 20 claims where only one claim had been found to have a challenge meeting the merits threshold. In that instance, the Board may choose to deny institution instead of instituting on all 20 claims.

Finally, for trials in which a final written decision has already issued, if an appeal has not been filed, or if the time for rehearing has not passed, the Board may reopen a proceeding to comply with SAS.

Practice Notes

There remains uncertainty about how SAS will be interpreted and applied in the long term.  In the short term, the workload of the Board will increase because of the guidance and policy to institute on all claims as well as all grounds. Going forward, SAS would allow for institution decisions to focus only on one claim, and sweep remaining claims into a proceeding if a single claim meets the threshold. Conversely, the Board may also choose to exercise more discretion in denying institution, if the petition only meets the reasonable likelihood standard for only some of the claims challenged. Further, because the final written decision must address every claim, statutory estoppel may have a broader scope than before. Proceedings, and eventual appeals, are also likely to become more complex, as the number of “live” issues remaining throughout a trial may grow, parties might have less guidance from an institution decision, and the prospects of mixed results in the final written decision may increase.