SCOTUS to hear SAS Institute v. Lee, could impact estoppel effect of IPR proceedings

SCOTUSOn Monday, May 22nd, in addition to deciding the much-anticipated patent venue case TC Heartland v. Kraft, the U.S. Supreme Court granted a petition for writ of certiorari, which means that the nation’s highest court will once again address issues surrounding the controversial Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO). The case it will decide is SAS Institute, Inc. v. Lee, which will be argued during the October 2017 term, and which will force the Court to again look at how the USPTO, and more specifically the PTAB, is implementing the post-grant patent validity trials created when Congressional passed of the America Invents Act (AIA) of 2011.

The Order by the Supreme Court granting certiorari merely stated: “The petition for a writ of certiorari is granted.” The single question presented in the SAS Institute petition for certiorari read:

Does 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” require that Board to issue a final written decision as to every claim challenged by the petitioner, or does it allow that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?

“The question presented is nothing less than this: Who makes the laws in this country—the National Legislature or an executive agency?” Thus explains the reply for petitioner SAS Institute filed in this case. Melodramatic perhaps, but not incorrect. The law as written couldn’t be any clearer, yet the PTAB does not issue final written decisions with respect to all of the claims challenged by petitioners.

Dissecting the SAS Institute Appeal

SAS Institute is appealing a decision issued last June by the U.S. Court of Appeals for the Federal Circuit in which the Federal Circuit held that the PTAB did not err in issuing a final written decision in an inter partes review (IPR) petitioned by SAS Institute. SAS alleged that the PTAB erred in misconstruing a claim term and by not addressing all the claims challenged by SAS in the original petition.

In SAS Institute’s petition to the Supreme Court, it cites 35 U.S.C. §318(a) as the relevant statute regarding the TAB’s responsibility to address every claim challenged by a petitioner under the terms of the AIA. This statute reads:

“If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d).”

As SAS Institute’s petition notes, the track record of the PTAB is clear. The PTAB believes that final written decisions need only to address certain challenged claims, not every challenged claim. The IPR proceeding instituted by PTAB did not include every claim of U.S. Patent No. 7110936, titled System and Method for Generating and Maintaining Software Code, which SAS challenged. In its decision siding with the PTAB, the Federal Circuit noted that SAS’ argument on addressing challenged claims which haven’t been instituted was foreclosed by the court’s February 2016 decision in Synopsys, Inc. v. Mentor Graphics Corp., which also found that the PTAB was not required to issue a final written decision on every challenged claims if those unaddressed claims weren’t part of the trial ultimately instituted by PTAB.

Of course, the fact that the Federal Circuit got it wrong in Synopsys should hardly be justification for continued flagrant violation of the clear dictates of the statute by the PTAB. Given that the Supreme Court does not generally take Federal Circuit cases to affirm the decision it is easy to speculate that the Court, or at least four of the Justices, believe the Federal Circuit is wrong in both Synopsys and SAS Institute. With patent decisions routinely being unanimous at the Supreme Court it would be reasonable to assume that the entire Court has concerns with this PTAB practice ratified by the Federal Circuit.

The USPTO Position from Director Lee

The brief for the respondent, USPTO Director Michelle K. Lee, argued that the agency exercised its lawful rulemaking authority granted by passage of the AIA, giving the PTAB the power to institute challenged claims in part so as to “secure the just, speedy, and inexpensive resolution of every proceeding” petitioned at PTAB. This has led to PTAB’s practice of issuing final written decisions on challenged claims for which a trial has actually been instituted and not all challenged claims. In SAS Institute’s case, the PTAB only acknowledged that the petitioner had not established the likelihood that it would prove invalidity of some challenged claims. Lee’s brief also leaned on the Federal Circuit’s ruling in the Synopsys case and noted that the court denied an en banc rehearing of that case, which seems hardly likely to persuade a Supreme Court that has not been bashful about reversing the Federal Circuit even when there have been en banc decisions.

The brief filed on behalf of Director Lee argued that review of the case was unwarranted because the appellate court lacked the jurisdiction to address SAS Institute’s argument that the USPTO was required to institute every claim challenged in an IPR petition. Respondent Lee cites 35 U.S.C. §314(d) to support this argument: “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” “Petitioner cannot circumvent Section 314(d) by framing its argument as a challenge to the Board’s final written decision, rather than as an attack on the institution decision,” the respondent’s brief reads. The brief also pointed to other statutes governing review proceedings which establish the fact that final written decisions and all other relevant aspects of PTAB review proceedings are claim-specific.

However, petitioner SAS Institute’s reply notes that it had never pursued the claim that the USPTO must institute an IPR for every challenged claim. Instead, it has focused on the argument that Section 318(a) requires a final written decision addressing all challenged claims, not simply claims for which a trial has been instituted. “The Federal Circuit squarely addressed this pure question of law [adverse to SAS], and it is now ripe for this Court’s review,” SAS’ reply reads. SAS further contends that respondent Lee’s argument that the USPTO’s generalized rulemaking authority “somehow justifies its wholesale reconfiguration of Congress’s plan for inter partes review.” As to the claim-specific nature of IPRs and other AIA trial proceedings, SAS argues that this part of Lee’s argument doesn’t obviate the mandate of Section 318(a) to issue a final written decision on all challenged claims.

If the Federal Circuit decision is left to stand, petitioner SAS argues that the USPTO’s ability to ignore challenged claims in final written decisions “destroys the efficiencies that Congress designed into the AIA through the application of estoppel from a final decision.”

“The fact that the Department of Justice as IPR petitioner took a fundamentally different view of the statute than does the Department of Justice as lawyer for the Director of the Patent Office… only punctuates the reasons why this Court’s review is needed. It shows that the issue is indeed important—the extrastatutory regime adopted by regulation even prejudices the government as litigant—and that the Federal Circuit’s decision was not so obviously correct as the Director now claims it to be.” – From reply for petitioner SAS

Another Newman Dissent to Become Law?

Perhaps interestingly, Judge Pauline Newman dissented-in-part from the Federal Circuit’s ruling now being appealed to the Supreme Court. Judge Newman wrote in part:

I write separately because the PTAB’s practice of deciding the validity of only some of the patent claims challenged in the petition does not conform to the America Invents Act. I stated these concerns in Synopsys, Inc., v. Mentor Graphics Corp., 814 F.3d 1309, 1324, 117 U.S.P.Q.2d 1753, 1765 (Fed. Cir. 2016) (Newman, J., dissenting). The facts and rulings in the present case further illuminate the error in the PTO’s adoption of rules that depart from the legislative plan. The exclusion of some of the challenged claims from the statutory procedures and estoppels of the AIA, accomplished by accepting some of the claims for which review is sought while ignoring others, in the PTO’s absolute discretion, serves no purpose other than to negate the intended legislative purpose of the AIA.

The PTO practice replaces the benefits of the America Invents Act with new disadvantages, for, after the extensive (and expensive) proceedings of inter partes review, the parties are left with unaddressed claims to the same patented invention, claims that can be litigated as if no post-grant proceeding had occurred. This departure from the legislative purpose is illustrated in this case more strongly than in Synopsys, for here the PTAB issued a split final decision, invalidating eight petitioned claims while validating one of the petitioned claims, simultaneously ignoring seven other petitioned claims that were properly presented for review. The split decision, following a partial institution, adds to the uncertainty of the claims that the PTAB chose not to review. The legislative plan contains no hint of such intentional irregularity.

Those familiar with the Federal Circuit and Supreme Court alike will already know that in cases where Judge Newman has dissented the Supreme Court has been known to overrule the panel decision in favor of her position. Indeed, one of the audiences Judge Newman writes for in her dissents is the Supreme Court, and they have throughout her tenure on the Federal Circuit paid attention to her views with deference seldom shown by the Supreme Court to judges of subordinate courts.

What This Means?

It would be easy for patent owners to be very skeptical given that the Supreme Court has been responsible for some of the most egregious anti-patent decision points over the last 11+ years. The Supreme Court, more than any other branch of government or entity, is uniquely responsible for the erosion of patent rights and the rise of patent jurisdictions outside the U.S. in China and Europe. But it would take a monumental collapse and epic failure of the ages for the Supreme Court to get this decision wrong.

Clearly, the PTAB is supposed to be issuing final written decisions with respect to any patent claim that is challenged. The PTAB may not authorize an inter partes review to be instituted unless there is a reasonable likelihood that the petitioner would prevail. That has to mean that the PTAB did not believe there was a reasonable likelihood that the petitioner would prevail with respect to those claims not instituted. The fact that claims not instituted are not reasonably likely to be invalid coupled with the extremely low statutory threshold of invalidity in an inter partes review (i.e., preponderance), that means that claims not instituted must be unlikely to be invalid even under the challenger friendly preponderance standard. All of this coupled with the presumption of validity that attaches to patent claims once they are issued must mean that claims not instituted will receive gold platting by the PTAB and the petitioner will be estopped from every challenging them again.

The wolf in sheep’s clothing here is this: SAS Institute and other unsuccessful petitioners want to get those non-instituted claims to the Federal Circuit so they can be appealed. Right now institution decisions cannot be appealed, and while those claims remain in limbo from the patent owners perspective, challengers will want to Federal Circuit to step in and review those claims that receive gold platting by the PTAB based on the belief that the Federal Circuit has become rather hostile to patents.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Gene Quinn

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

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Discuss this

There are currently 15 Comments comments. Join the discussion.

  1. Night Writer May 23, 2017 8:27 am

    Sounds like it will be more work for the patent judges. And, sounds like it will give the patentee a break in adding some estoppel.

  2. Anon May 23, 2017 8:55 am

    I am not sure that I agree with the statement: “The law as written couldn’t be any clearer, ” ==> the PTAB [must] issue final written decisions with respect to all of the claims challenged by petitioners.

    From: “Does 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,” require that Board to issue a final written decision as to every claim challenged by the petitioner, or does it allow that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the Federal Circuit held?

    Let me take one phrase:

    “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner,”

    To me, the phrase MAY turn on how the word “any” is applied – and I can see more than one path of application (thus the general lack of clarity).

    There is no doubt that “a final written decision” SHALL be rendered.
    But what does that final written decision include?
    Is the “shall” determinate of the contents?

    If Congress instead used the phrase:

    “shall issue a final written decision with respect to the patentability of all patent claim challenged by the petitioner,”

    Then I could see the petitioner’s point.

    Congress did not do that though.

    So what does “any” mean?
    Does “any” mandate “all?”
    Or does “any” mean “at least one?”

    “Any” being a rather common word (and without apparent legal term of art constraints), lends itself to a common dictionary approach.

    The “Google” definition is (emphasis added):

    1. used to refer to one or some of a thing or number of things, no matter how much or many.

    2. whichever of a specified class might be chosen.

    The “or” and “might” indicate optionality. I do not see a limit on that optionality in the words chosen by Congress (thus the lack of clarity on any notion that “may” MUST be “all”).

    Now the “fun” ambiguous part…

    Contrast the “Google” definition with the definition from dictionary.com:

    adjective
    1. one, a, an, or some; one or more without specification or identification:

    2. whatever or whichever it may be:

    3. in whatever quantity or number, great or small; some:

    4. every; all:

    5. (following a negative) at all:

    pronoun
    6. an unspecified person or persons; anybody; anyone:

    7. a single one or ones; an unspecified thing or things; a quantity or number:

    adverb
    8. in whatever degree; to some extent; at all:

    Idioms
    9. any which way, in any manner whatever; indifferently or carelessly:

    Contrast definition 4 with definition 1, and then realize that Congress (another AIA gem) may have definition 9 applied to its work.

    Which brings me to my rant of the day: the biggest failure of the AIA is how sloppy it was drafted and how MUCH invitation is thus extended to the courts to apply “interpretations.” This at a time when (I believe) Congress should be taking back its Constitutional authority and removing as much as possible the scrivening of patent law by the courts (and the Court in particular).

  3. Curious May 23, 2017 9:19 am

    Anon — after reading Gene’s note I was thinking the same thing you were. I’m glad you did the work of exploring the issue already.

    The term “any” appears to be ambiguous. However, one could argue that if Congress intended that “any” meant “all” they would have just used “all” instead. As such, I’m inclined to think that definition 9 applies.

  4. EG May 23, 2017 9:29 am

    “Which brings me to my rant of the day: the biggest failure of the AIA is how sloppy it was drafted and how MUCH invitation is thus extended to the courts to apply ‘interpretations.'”

    Hey Anon,

    Couldn’t agree more. The Abominable Inane Act was drafted very a very poorly, and as some have alleged, was deliberately so in several instances to lay legal “land mines” for the unwary.

  5. Night Writer May 23, 2017 1:34 pm

    I think “any” means “any” of the claims of the patent.

  6. Gene Quinn May 23, 2017 1:52 pm

    Anon @2-

    Your rant of the day is absolutely correct.

    I see the point about how “any” could be interpreted to give the PTAB only the mandate to issue a final written decision on at least one claim challenged. That would, however, be a reading of the statute that seems entirely inconsistent with the other sections of the statute. It would also be entirely inconsistent with the legislative history, which explains that there will not be serial or repeated challenges and that there is an estoppel. The USPTO selected the interpretation of 318(a) that might be plausible in a vacuum, but which doesn’t seem at all plausible when one considers the statute as a whole or the legislative history. As Judge Newman points out, interpreting 318(a) as the Federal Circuit and PTAB have done evicerates the estoppel provisions to the point where they are meaningless. It is also the reason that challengers are allowed to file serial petitions challenging the same claims.

    Finally, I’ll point out that interpreting “any” as meaning one or more, or perhaps none, would render 318(a) rather asinine. For example:

    The PTAB:

    A. “shall issue a final written decision with respect to the patentability of at least one patent claim challenged…”

    B. “shall issue a final written decision with respect to the patentability of none (or more) of patent claim[(s)] challenged…”

    C. “shall issue a final written decision with respect to the patentability of all patent claim challenged…”

    C seems to be the only one that makes any sense. A can’t make sense because it would give the PTAB discretion to pick a single claim to issue a final written decision on while not selecting, at their sole discretion, other similarly situated claims. B makes no sense because you simply cannot have a mandate that then creates a nullity, which is no mandate at all.

    So I suppose it could have been clearer, but for the Supreme Court to ratify what the PTAB is doing and the CAFC is allowing would require statutory gymnastics that even this dishonest bunch shouldn’t be capable of performing.

    -Gene

  7. Anon May 23, 2017 4:34 pm

    Gene,

    I fully grant that my dictionary application in construing the term “any” does not take into effect any [sic 😉 ] other sections of the statute nor any legislative history.

    That being said, the points remain that Congress could have (but did not) use the word “all” instead of “any” in this section.

    Further, I do not see your “B.” option – down to “none” – as viable as that option does not accord with the dictionary meaning of one or more (yes, it would be no mandate at all, but I do not reach that state and would not consider that as an option).

    As I also indicate, “any” does include a sense of discretion, for which, if Congress had not intended, then the proper word to chose would have been “all.” I find it difficult to insert a constraint and elimination of discretion when such an easy and direct change of word would have made the lack of discretion so much more clear.

    I have seen arguments (not repeated here), as to why an “all” interpretation would be at least as problematic as the discretionary “one or more” interpretation.

    This may come down to a binary decision by the courts – not quite truly an ALL or nothing, but an ALL or “whatever the PTAB feels like.”**

    Do you have any pin cites as to the “legislative intent” arguments?

    Thanks

    **A quick glance at this particular case, specifically the stand alone legal event of the institution decision reveals that claims 11-16 were not instituted due to petitioner error and failure to map out (as required) specification sections to claim “means” elements. Dependent claim 2 was not instituted based on the PTAB view that the petitioner’s argument did not provide the necessary “reasonable likelihood” level to begin with.

    I have to wonder if it makes sense for the PTAB (in the “all” sense of “any”) to have to pass (further?) judgment on claims challenged but not instituted. Would not the decision to not institute be “judgment enough?” If “any” is indeed taken to be “all” then one would have to be redundant, as the “any” modifies NOT “claims instituted,” but instead “claims challenged.”

    This then would also – if this section is taken alone on its face – speak to the interpretation of the discretionary “one or more.”

  8. Michael Sander May 24, 2017 6:23 am

    I haven’t done the research, but I strongly suspect that the word “any” has been subject to statutory construction in many decisions in the past. I suspect that some diligent associate will bring them to our attention in the briefing.

  9. Jeff Lindsay May 24, 2017 10:56 pm

    The meaning of “any” depends upon its grammatical role and context. In this case, with a sentence defining a requirement, not an option, it’s hard to see how “any” could most plausibly be read as “at least one” rather than “every.” Some examples to consider:

    “Any student who gets an A shall receive $10.” (“any” = “every”)
    “Any student who gets an A could receive $10.” (here “any” + “could” = “at least one” + “might”)

    “The USPTO shall treat any patentee fairly.” (“any” = “each”/“every”)
    “The USPTO may treat any patentee fairly.” (“any” does not necessarily mean “all” here)

    Note also how “any of” can differ from “any”:
    “The Court shall review any challenged claim.”
    “The Court shall review any of the challenged claims.”
    The first sentence seems to have “any” = “each,” while in the second, “any of” could be read as “at least one of”.

  10. Anon May 24, 2017 11:25 pm

    Jeff,

    The “shall” is to the report – I covered that early in my comment.

  11. Anon May 25, 2017 12:29 am

    Jeff,

    It may help your examples if you also remember the word “challenged” versus the word “instituted.”

    Since the mandatory report is dictated to “challenged,” there is already built in a degree of discretion. So while “all” may apply (and in truth, if a court is going to decide this, then logic may very well be thrown out the window), it appears that “all” is already compromised because “all” shouldn’t be those items already “losing out” from the challenge stage to the instituted stage – and that IS discretion that Congress gave to the Executive agency. If Congress wanted no discretion (as in “all”), they could have eliminated ALL discretion, and mandated that all challanged claims would be instituted (if an institution were granted), or all challenged claims would fail (if an institution were denied).

    They – Congress – did not do that.

    How is that for context?

  12. Anon May 25, 2017 8:19 am

    Interestingly enough, that “other blog” this morning carries a new thread exactly on the item that I viewed as “leaning” towards a “any” == “discretion.”

    https://patentlyo.com/patent/2017/05/20168.html

    Chisum (no slouch when it comes to patent law) does take a “any” = “all” position and further indicates that the item that I picked up (albeit not identified as a Rule created by the Office instead of a Law written by Congress) is itself infirm.

    Of course, he travels in the opposite direction that I traveled, and he bases his view of infirmity of the rule on a first presumption that “any” must equal “all.”

    This evidences perhaps a bit of “assume the conclusion desired” and work from there; whereas my exposition here simply allows for the dictionary definition and other aspects to be viewed altogether at one time, and thus is less of a presumed conclusion.

    To me, the driver here is that words dictating no discretion and a totality circumstance are readily available and more easily understood. Why would Congress not take the better path if indeed what they wanted was the no-discretion, “any”=”all” path?

  13. Gene Quinn May 25, 2017 10:40 am

    Anon @11-

    I’m not sure I’m following your distinction between “challenged” and “instituted.” That distinction would seem to support my view that “any” would mean that the PTAB has to issue a final written decision that includes all the petitioned claims. 318 talks about any challenged claim, not any instituted claim.

    What are you seeing there in this distinction?

  14. Anon May 25, 2017 1:43 pm

    Gene,

    That last paragraph of mine was a little difficult to follow.

    In essence, what I am doing is augmenting the “plain dictionary” post that I made earlier and I am including the rest of IPR statute to gain contextual clues.

    Those clues speak more to Congress providing the USPTO with discretion.

    But the “any”=”all” path is the opposite of that, and forces a lack of discretion.

    It seems odd for Congress to be doling out so much discretion, and then turning around and using the word “any” – when the word “all” is more direct and simple as to a condition lacking discretion.

    Within the IPR sections there is a bit of “catch-22” (circularity).

    So let’s discuss this in the following manner.

    Let’s for a moment take it that “any”=”all.”

    For the reporting mechanism to then make sense, partial institution could not happen. It just does not make sense that a mandatory report would force the PTAB to include claims challenged but not instituted.

    This would reduce (eliminate discretion) the initiation decision down to a binary “all” or “nothing.”

    That seems unduly “heavy-handed” given the rest of the IPR statute.

    Now, I do see that if indeed “any”=”all” holds, this makes it so that an institution decision forces a level of work on the PTAB to address every single challenge item if even but a single challenge item achieves the necessary level for institution – I see that the PTAB would be (perhaps only subtlety) predisposed to increase the height of the bar in order to not choke on all of the work that all of the otherwise challenged-but-not-instituted-currently items would bring to the table.

    Was Congress that intelligent to include such a feedback loop / self correcting mechanism?

    Given the rest of the writing of the AIA, I have to say no.

  15. Gene Quinn May 25, 2017 5:42 pm

    Anon-

    Was Congress that intelligent? Well, when you put it like that…

    Remember, however, that much was made of the estoppel. We all said that this would lead to serial challenges, which is exactly what the infringer lobby wanted. We were told NO! You will get an opportunity to amend, no one is trying to take your patents if you deserve one (right!). And if your patents survive challenge then there will be an estoppel. I thought this was all wolf in sheeps clothing and didn’t buy it, but even I didn’t predict what the PTAB has turned out to be. But I do think this final written decision applying to challenged claims was by design. Otherwise the statements that are all over the legislative history about not enabling serial challenges and estoppel having teeth are meaningless.

    Normally I am not a fan of legislative history because I believe Justice Scalia was right, you can get it to say anything. But when there are so many different Members saying the same exact thing in speech after speech and report after report then it has to mean something.

    But I do agree with you, the drafting of the AIA was exceptionally poor. For example, the term “disclosure” which is only essential to everything in 102 is not defined. Now we can all say we probably know what they meant, and the USPTO has given a reasonable definition of the term, but how idiotic is it to pick a term like that without any meaning in the law and then not define it? There are other examples as we continue to learn. Still, I do think this is very clear, but could have been clearer as you’ve correctly pointed out.

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