The Supreme Court, the Federal Circuit, and the Patent Office Walk Out of an Appellate Review Bar: Changing Standards For Appellate Review of IPR Institution Decisions

Patent LawThis article reviews recent Federal Circuit and Supreme Court decisions addressing the scope of appellate review of institution of inter partes review (IPR) by the Patent Trial and Appeal Board.  The America Invents Act, 35 U.S.C. § 314(d), provides that: “[t]he determination… whether to institute an inter partes review under this section shall be final and nonappealable.”  Federal courts initially interpreted Section 314(d) to bar appellate review of institution decisions entirely.  However, recent decisions have narrowed Section 314(d) and expanded the scope of appellate review of matters decided by the Board at institution.  This article will review decisions interpreting Section 314(d) to date, and explain how recent precedents have created new opportunities for appellate review of the Board’s decisionmaking in IPR proceedings.

A brief introduction to inter partes review. 

Inter partes review is an administrative proceeding that allows any person, termed the petitioner, to challenge the validity of a U.S. patent before the Board.  There are two stages: pre-institution and post-institution.  In the initial pre-institution phase, the petitioner identifies the patent claims challenged and the specific theories of invalidity for each claim.  After the patent owner is given an opportunity to respond, the Board decides whether to institute IPR based on whether there is a reasonable likelihood the petitioner will prevail after a full trial.

IPR proceedings that are not instituted go no further.  But for IPRs that are instituted, a second, post-institution stage ensues where the parties litigate the validity of the patents and the Board issues a final written decision that may be appealed to the Federal Circuit and, potentially, the Supreme Court.  The Board’s institution decision is an important gateway that determines whether the proceedings will enter the second stage and thus has considerable impact on the parties.


Initial Decisions:  The Federal Circuit cannot review whether there is a reasonable likelihood that an IPR petitioner will prevail.

The Federal Circuit first addressed appellate review of institution decisions under Section 314(d) in three opinions it issued on a single day: St. Jude, Dominion Dealer, and Procter & Gamble.  Those decisions confirmed that the Board’s institution decisions were not reviewable on appeal, conferring considerable discretion on the Board in instituting IPR.

St. Jude was an interlocutory appeal from a Board decision refusing to institute IPR proceedings because it held that a counterclaim by the petitioner in another proceeding had triggered the one-year bar under 35 U.S.C. § 315(b).  St. Jude Med., Cariology Div., Inc. v. Volcano Corp., 749 F.3d 1373, 1375 (Fed. Cir. 2014).  The Federal Circuit relied on Section 314(d) and declined to hear the appeal, reasoning that the petitioner could only appeal final written decisions by the Board and that a refusal to institute IPR was not such a decision.

In Dominion Dealer, petitioner sought a writ of mandamus after the Board refused to institute IPR proceedings, finding there was no reasonable likelihood the petitioner would prevail on the merits.  ).  In re Dominion Dealer Sols., LLC, 749 F.3d 1379, 1381 (Fed. Cir. 2014).  The Federal Circuit denied mandamus, holding that the petitioner had no “clear and indisputable right” to challenge a non-institution decision under Section 314(d

The Board instituted IPR in Proctor & Gamble over the patent owner’s objection that the petition was time-barred under 35 U.S.C. § 315(b) because the petitioner had filed a declaratory judgment of invalidity in district court more than one year before.  In re Proctor & Gamble Co., 749 F.3d 1376, 1379 (Fed. Cir. 2014).  The patent owner sought a writ of mandamus to halt the IPR proceeding under Section 315(b).  The Federal Circuit denied the writ, again explaining that Section 314(d) precluded judicial review.

Although St. Jude, Dominion, and Proctor & Gamble established interlocutory review of IPR institution decisions was unavailable under Section 314(d), the Federal Circuit left open the question whether it could review the Director’s institution decisions after final judgment.  A little over a year later, the Federal Circuit answered that question in the negative.

In Cuozzo I, the Federal Circuit held that institution decisions were also unreviewable after the final written decision.  In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015) (Cuozzo I).  On appeal, the patent owner challenged the Board’s institution decision after completion of IPR proceedings, arguing that the petitioner had failed to satisfy 35 U.S.C. § 312(a)(3), which mandates IPR petitions “identif[y] . . . with particularity . . . the grounds on which the challenge to each claim is based,” and thus IPR proceedings should not have been instituted in the first place.  The Federal Circuit declined to review the Board’s decision, explaining that Section 314(d) “is written to exclude all review of the decision whether to institute review.”  Id. at 1273.

The patent owner appealed and the Supreme Court granted certiorari, addressing Section 314(d) for the first time.

The Supreme Court interprets Section 314(d).

In its Cuozzo II decision, the Supreme Court simultaneously broadened and narrowed Section 314(d).  Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (2016) (Cuozzo II).  It upheld the Federal Circuit’s refusal to review the Director’s institution decision, reasoning that whether a petitioner complied with Section 312(a)(3) was part and parcel of whether there was a reasonable likelihood the petitioner would prevail.  Thus, such determinations fell under the ambit of Section 314(d) and were unreviewable.  However, the Supreme Court noted that there was a strong presumption in favor of appellate review.  It set forth three scenarios where an institution decision could be reviewed by the appellate court: (1) where the Board committed a constitutional violation; (2) where the Board violated statutes “less closely related” to Section 314(d); and (3) where institution decisions presented “other questions of interpretation that reach, in terms of scope and impact, well beyond “this section.”  Id. at 2141.  By opening the door to appellate review, the Supreme Court overrode the Federal Circuit’s prior interpretation that Section 314(d) was “written to exclude all review of the decision whether to institute review.”  Cuozzo I, 793 F.3d at 1273.

The Supreme Court’s decision in Cuozzo II left open the question of what circumstances could open the door to appellate review of Board institution decisions.  The following two sections address the current standards for appellate review.

Changing Standards For Instituting IPR On All Claims Challenged In An IPR Petition: Synopsis and SAS.

Before the Supreme Court issued its decision in Cuozzo II, the Federal Circuit decided Synopsis and SAS I, which addressed the Board’s discretion in instituting IPR on fewer than all claims challenged in the IPR petition.

In Synopsis, the petitioner appealed a final decision after the Board instituted on some, but not all, of the challenged claims, arguing that the Board had to decide whether all claims were patentable.  Synopsis, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1313 (Fed. Cir. 2016).  The Federal Circuit held that the Board did not have to institute on all challenged claims.  In so holding, it reasoned that the court could decide the petitioner’s appeal because the petitioner did “not challenge the decision to institute, but rather the scope of the final decision itself.”  Id. at 1314.  This reasoning marked a narrowing from the Federal Circuit’s expansive interpretation of Section 314(d) in St. Jude and Cuozzo I.  If the Federal Circuit could hear a challenge to “the scope” of a final decision by the Board, and if institution decisions defined the bounds of final decisions by the Board, then the Federal Circuit could necessarily entertain some challenges to institution decisions.

The Federal Circuit reached the same ultimate conclusion in SAS I, holding that Synopsis foreclosed the petitioner’s argument that, if the Board instituted IPR, Section 318(a) required the Board to institute on every challenged claim.  SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016) (SAS I).  But the Supreme Court reversed.  In SAS II, the Supreme Court further narrowed Section 314(d)’s reach.  SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018) (SAS II).  SAS II reversed Synopsis and held that the Board must institute on all or none of the challenged claims.  SAS II effectively rendered moot the question of whether the Federal Circuit can review the Board’s decision not to institute on some claims because that option was no longer available under the statute.  Now, if the Board institutes IPR, all challenged claims must be included as part of the instituted proceeding.  And if the Board does not institute, no appeal can be taken under Section 314(d).  Thus, SAS II effectively expanded appellate review and narrowed Section 314(d) by eliminating some of the Board’s discretionary decisionmaking about which claims were included in the IPR.

Emerging precedents: reviewing statutory and other bars.

Questions about the scope of Section 314(d) extend to the issue of whether the Federal Circuit may review institution decisions turning on whether parties are barred from seeking IPR in the first instance, including whether a party is time-barred under Section 315(b), subject to assignor estoppel, or has failed to identify a real-party-in-interest as required by Section 312(a)(2).

Section 315(b) provides that “[a]n inter partes review may not be instituted if the petition requesting the proceeding is filed more than one year after the date on which the petitioner, real-party-in-interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.”  The Federal Circuit had initially declined to review institution of IPR proceedings over an objection they were time-barred in St. Jude.  However, the Federal Circuit did not squarely address whether it had jurisdiction to review violations of the time bar until its decision in Achates.

Achates narrowly construed the Federal Circuit’s authority to review institution decisions.  Achates Reference Publishing, Inc. v. Apple Inc., 803 F.3d 652 (Fed. Cir. 2015).  The patent owner argued the petitioner was in privity with a third party who had sued respondent more than a year before petitioner filed for IPR and thus the petition was time-barred under Section 315(b).  The Board disagreed, and the patent owner appealed, arguing that the PTAB had exceeded its statutory authority by instituting IPR on a time-barred petition.  The Federal Circuit dismissed the appeal, holding that it could not review the Board’s determination to institute IPR in these circumstances.Eighteen months later, the Federal Circuit sitting en banc overruled Achates in Wi-Fi One.  Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364 (Fed. Cir. 2018).  The Federal Circuit applied the Supreme Court’s Cuozzo II’s framework: to overcome the strong presumption in favor of judicial review, there must be “clear and convincing” indications drawn from “specific language, specific legislative history, [or] inferences drawn from the statutory scheme as a whole, that Congress intended to bar review.”  Id. at 1371–72.  The Federal Circuit distinguished Section 315(b) from Section 314(d) and held there was no clear and convincing evidence that Congress meant to bar review of decisions under Section 315(b).  Section 315 was not “closely related” to the Director’s institution decision and therefore did not fall within Section 314(d)’s appellate bar as interpreted by the Supreme Court in Cuozzo II.  This was true, the Federal Circuit explained, even though the Board’s determination of whether a petition violated the time-bar must take place at institution.

As the pendulum of reviewability swung from St. Jude and Achates to Wi-Fi One, the Federal Circuit expanded the ability to appeal institution decisions.  However, the extent to which the Federal Circuit can review doctrinal bars other than Section 315(b) remains an open question.  For example, the Federal Circuit in Husky Injection declined to review a Board decision holding that assignor estoppel did not apply to IPR petitions to bar parties who previously assigned a patent from later challenging that patent’s validity.  Husky Injection Molding Sys. Ltd. v. Athena Automation, Ltd., 838 F.3d 1236 (Fed. Cir. 2016).  Likewise, in Medtronic, the Board dismissed an IPR after it found that the petitioner failed to identify all real-parties-in-interest as required by 35 U.S.C. § 312(a)(2), a decision the Federal Circuit found it had no authority to review under Section 314(d).  Medtronic, Inc. v. Robert Bosch Healthcare Systems, Inc., 839 F.3d 1382 (Fed. Cir. 2016).

Whether the Supreme Court’s framework in Cuozzo II requires re-evaluation of these precedents remains to be seen.

Conclusion

When the Federal Circuit first considered Section 314(d) in 2014, it adopted a deferential posture to appellate review of Board institution decisions.  The Federal Circuit and the Supreme Court subsequently re-interpreted Section 314(d) in Cuozzo II, Wi-Fi One, and SAS and expanded the scope of appellate review.  Following these decisions, Section 314(d) bars appellate review of a Board’s initial decision-making regarding whether there is a reasonable likelihood that a petitioner will prevail, but other matters determined at institution are reviewable.  This emerging trend toward increased appellate review signals a growing willingness by federal courts to police IPR proceedings.  We shall see how broadly appellate review of IPR proceedings extends.

The Author

Michelle Armond

Michelle Armond is a Partner with Knobbe Martens. Michelle practices in property litigation and appeals, including litigation before the Patent Trial and Appeal Board (PTAB). She is co-chair of Knobbe Martens’ PTAB litigation practice group and is a frequent invited speaker, teaching courses covering advanced Federal Circuit appellate patent law for the nationally recognized Patent Resources Group.

For more information or to contact Michelle, please visit her Firm Profile Page.

Michelle Armond

Forrest McClellen is a Associate with Knobbe Martens. His practice focuses on intellectual property enforcement and patent and trademark litigation. He also has an active pro bono practice. Prior to joining Knobbe Martens, Forrest worked in an academic research lab where he designed systems for affinity reagent generation. His technical background includes SELEX, aptamers, antibodies, and small molecule drugs.

For more information or to contact Forrest, please visit his Firm Profile Page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments. Join the discussion.

  1. Mike June 29, 2018 4:20 pm

    And what about retroactive application of IPRs on patents having a priority date that predates the AIA? Can a patent owner appeal a decision for instituting an IPR on these grounds?

    In this situation, the patent owner did not agree to these examinational rules when her invention was filed and disclosed, and the patent application is even examined using preAIA rules. So why, following the grant of such an application, should it also be subject to an AIA IPR examinational proceeding, especially when thia wasn’t a part of the patent bargain to which the inventor agreed when disclosing his invention to the government/world? This changing of the rules in the middle of the game has constitutional problems all over it, and Oil States even made room for this argument, as seen in the SCOTUS opinion when the narrowness of the Oil States holding was expressed.

  2. Paul Morgan June 30, 2018 9:20 am

    Yes, IPR institutions can now be challenged on certain limited grounds, but if not clearly applicable should not one also consider the possible negative view of the Fed. Cir. to one’s having filed a writ of mandamus or other attempted interlocutory appeal [typically strongly disfavored] when the same case comes up to them again after the IPR decision?

  3. Paul Morgan June 30, 2018 9:32 am

    Mike, I would think someone has already made that very IPR institution objection by now, since the vast majority of patents being sued on and subjected to IPRs are still older pre-AIA patents. But they will take time to wind their way though the appeal process. They should anticipate being challenged, among other grounds, on why the prior existence of reexaminations, especially inter-partes reexamations [also challenging patent validity on prior patent or pubication grounds] was not already a sufficiently similar “part of the bargan?” That issue was also not decided in Oil States.

  4. Steve June 30, 2018 11:11 am

    Anyone able to refer Gene’s readers to any briefs now arguing such unconstitutionality for pre-AIAs?

  5. Software Inventor July 1, 2018 4:18 pm

    To the authors, thank you for a beautifully written and informative piece. As an inventor, it helps me better understand our IP courts, processes and preferences. And, upon reflection, helps me connect the dots to understand the motivation of the courts and the USPTO: it is not driven by constitutional interpretation yet political preference.

    To me, appears the courts have acquiesced their judicial duties to enable the administrative PTAB to drive IP rights and ownership which are not bound by the constitution as they are, thereby more effectively taking private property from rightful owners and transferring it to the politically preferred state where the state can then decide by whom the property is best utilized, in turn to benefit the state.
    As is the political preference demonstrated by the courts in Ebay and followed by the more efficient post partes review apparatus and processes implemented by the AIA, whereby high-volume transfer of property to the state was more efficiently processed.

    Indeed, the recent political enlightenment by the NY socialist candidate victory brought forth the movement for all Americans to see, yet the courts preceded her victory by a dozen years.

    I suspect Lenin and Trotsky would be pleased. If not for constitutionalists such as Justice Gorsuch, and his brilliance eloquently penned in his Oil States dissenting opinion, there may be hope the constitutional rights of the people may remain in their hands and not so easily taken and controlled by the state.

    Soon, I will appear before the PTAB administrating two IPR petitions brought forward by efficient infringers. I know now that I will not be appearing before the court of the people but an empowered panel of the state.

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