In the second of two patent decisions handed down by the United States Supreme Court on April 24, 2018, SAS Inst. Inc. v. Iancu[1] was the less visible of the two cases. However, SAS’s close split decision and more practical effect on the patent practice will make it the much more important patent case handed down by the Supreme Court this term.
SAS sought an IPR of ComplementSoft’s software patent, alleging all 16 claims were unpatentable in its petition. The PTAB, in its institution order, only opted to institute review of claims 1 and 3-10, denying review of the remaining claims.
The issue before the Court was whether the PTAB, when making its decision to institute an inter partes review (IPR), must decide patentability of all claims challenged by the petitioner or may it, through its administrative discretion, only opt to review a smaller group of claims. The Supreme Court, in a bare majority of 5-4, held that the PTAB must review all claims.
Justice Gorsuch, who filed a dissenting opinion in the Oil States case decided earlier in the day that found IPRs constitutional, wrote for the majority, joined by Chief Justice Roberts, and Justices Kennedy, Thomas, and Alito. He found the answer readily available based on a plain reading of 35 U.S.C. §318(a), or decision of the Board (PTAB):
(a) Final Written Decision – 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 316(d) (Emphasis added.)
Justice Gorsuch added:
This directive is both mandatory and comprehensive. The word “shall” generally imposes a nondiscretionary duty (citations omitted). And the word “any” naturally carries “an expansive meaning” (citations omitted). When used (as here) with a “singular noun in affirmative contexts,” the word “any” ordinarily “refers to a member of a particular group or class without distinction or limitation” and in this way “implies every member of the class or group.”[2] So, when §318(a) says the Board’s final written decision “shall” resolve the patentability of “any patent claims challenged by the petitioner,” it means the Board must address every claim the petitioner has challenged.[3]
The majority disputed the PTAB’s notion of “partial institution” power, noting that the plain text of §318(a) mentions nothing of “partial institution.” On the contrary, Justice Gorsuch noted, that the statute offers only a “binary” choice – either institute review on the challenged claims or do not.
Further, the USPTO had argued that §314(a) gave authority to institute partial review of claims because of the language of the statute. 35 U.S.C. §314(a) reads:
(a) Threshold. – The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition [] and any response [] shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition. (Emphasis added.)
Because the statute requires the Director determine a “reasonable likelihood that the petitioner will prevail” as to at least one claim allows the Director to institute review on a claim-by-claim basis. Justice Gorsuch dismissed this argument:
This language, if anything, suggests just the opposite. Section 314(a) does not require the Director to evaluate every claim individually. Instead, it simply requires him to decide whether the petitioner is likely to succeed on at least one claim. Once that single claim threshold is satisfied, it doesn’t matter whether the petitioner is likely to prevail on any additional claims; the Director need not even consider any other claim before instituting review. Rather than contemplate claim-by-claim institution, then, the language anticipates a regime where a reasonable prospect of success on a single claim justifies a review at all.[4]
Justice Gorsuch makes a final retort to the USPTO’s final policy argument, that is, that partial institution allows the PTAB to focus on the most pressing challenged claim and avoid spending unnecessary resources on others:
Policy arguments are properly addressed to Congress, not this Court. It is Congress’s job to enact policy and it is this Court’s job to follow the policy Congress has prescribed. And whatever its virtues or vices, Congress’s prescribed policy here is clear: the petitioner in an inter partes review is entitled to a decision on all the claims it has challenged.[5]
Justice Gorsuch refused to make too much out of the Chevron deference, which requires the courts to defer to statute interpretations to the administrative agencies charged with enforcing them, unless those interpretations are unreasonable.
Even under Chevron, we owe an agency’s interpretation of the law no deference unless after “employing traditional tools of statutory construction,” we find ourselves unable to discern Congress’s meaning.[6] The statutory provisions before us deliver unmistakable commands. The statute hinges inter partes review on the filing of a petition challenging specific patent claims; it makes the petition the centerpiece of the proceeding both before and after institution; and it requires the Board’s final written decision to address every claim the petitioner presents of review. There is no room in this scheme for a wholly unmentioned “partial institution” power that lets the Director select only some challenged claims for decision.[7]
Justice Ginsburg dissented, joined by Justices Breyer, Sotomayor, and Kagan. She wrote:
Given the Court’s wooden reading of 35 U.S.C. §318(a), and with “no mandate to institute [inter partes] review” at all, the PTAB could simply deny a petition containing challenges having no “reasonable likelihood” of success. Simultaneously, the Board might note that one or more specified claims warrant reexamination, while others challenged in the petition do not. Petitioners would be free to file new or amended petitions shorn of challenges the Board finds unworthy of inter partes review. Why should the statute be read to preclude the Board’s more rational way to weed out insubstantial challenges? (Emphasis added.)[8]
Justice Breyer also dissented, joined in full by Justices Ginsburg and Sotomayor, and by Justice Kagan in all except Part III-A of his dissent. While Justice Gorsuch found no ambiguity in §318(a), Justice Breyer disagreed. First, he noted that the implementing regulations allow the Director to authorize inter partes review on all or some of the challenged claims.[9] Second, there is an ambiguity between §314(a) and §318(a): do the challenged claims refer to any claim challenged by the petitioner in the petitioner’s original petition, because “petitioner’s original petition” does not appear in §318(a). This may be hair-splitting, but Justice Breyer does, nonetheless, raise a possibility of an ambiguity in the statute. He noted:
The majority points out that had Congress meant anything other than “challenged in petition,” it might have said so more clearly. But similarly, if Congress had meant “challenged in the petition,” it might have used the words “in the petition.” After all, it used those very words only four sections earlier [in §314].[10]
Justice Breyer also discussed the Chevron deference in his section III(A) (the section of his dissent which Justice Kagan did not join):
In referring to Chevron, I do not mean that courts are to treat that case like a rigid, black-letter rule of law, instructing them always to allow agencies leeway to fill every gap in every statutory provision. Rather, I understand Chevron as a rule of thumb, guiding courts in an effort to respect that leeway which Congress intended the agencies to have. I recognize that Congress does not always consider such matters, but if not, courts can often implement a more general, virtually omnipresent congressional purpose – namely, the creation of a well-functioning statutory scheme – by using a canon-like, judicially created construct, the hypothetically reasonable legislator, and asking what such legislators would likely have intended had Congress considered the question of delegating gap-filling authority to the agency.[11]
SAS will have a major impact on the patent practice before the PTAB. The PTAB has already begun implementation of a new policy by issuing a temporary guidance in the wake of SAS. First, for all future IPR petitions, all challenged claims will be instituted as required by SAS. For all current IPRs, each panel will have optional “supplemental orders” instituting proceedings on all other challenged claims that were not previously instituted. As to the patent practice, first, patent strategy will have be reevaluated by both petitioners and patent owners as to issues of estoppel and patentability when deciding to pursue or defend an IPR. With a full set of claims at stake, it will benefit the patent owner by allowing estoppel to attach in a future judicial proceeding, assuming the final decision is favorable as to patentability. Conversely, for the petitioner, a decision on all challenged claims would favor it in the event of invalidity, but the cost issue could be prohibitively expensive especially with IPR processing and filing fees costing $15,500 up to 20 claims per petition, excluding the attorneys fees and costs, and then an additional $15,000 post-institution fee, and a further $300 fee per claim in excess of 20 claims. Post grant review and CBMs are even more expensive.
[1] 584 U.S.___ (2018), cert. granted, 581 U.S.___ (2017), rev’g and remanding SAS Inst. Inc. v. ComplementSoft, LLC, 825 F.3d 1341 (Fed. Cir. 2016).
[2] See Oxford English Dictionary (3d ed., Mar. 2016).
[3] See SAS, supra (slip op. at 4-5).
[4] Id. (slip op. at 7).
[5] Id. (slip op. at 10-11).
[6] See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).
[7] See SAS, supra (slip op. at 11-12).
[8] Id. (slip op. at 1) (Ginsburg, J., dissenting).
[9] See 37 C.F.R. §42.108(a).
[10] See SAS, supra (slip op. at 6) (Breyer, J., dissenting).
[11] Id. (slip op. at 9) (Breyer, J., dissenting).