Does 35 U.S.C. § 318(a) require the Patent Trial and Appeal Board to issue a written decision on every claim challenged by the petitioner?
This case arises from a suit in which ComplementSoft claimed SAS Institute infringed its patent and SAS responded by petitioning the Patent Trial and Appeal Board (“PTAB”) for a determination on the validity of ComplementSoft’s patent. SAS argues that, based on a straightforward reading of 35 U.S.C. § 318(a) and the legislative history of the America Invents Act (“the Act”), the PTAB must issue a final written decision on each of the petitioner’s claims. Relying on the same methods of analysis, ComplementSoft reaches the opposite conclusion, arguing that the PTAB must be allowed discretion to select specific claims for review. The Director of the Patent and Trademark Office, which sits above the PTAB, also asserts that the PTAB must have discretion in selecting claims for review. Accordingly, the Court’s decision will affect the efficiency of the PTAB’s review proceedings and impact how parties petition the PTAB.
Questions as Framed for the Court by the Parties
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?
Issued on September 19, 2006, United States Patent Number 7,110,936 (“’936 patent”) was thereafter assigned to ComplementSoft, LLC (“ComplementSoft”). SAS Institute, Inc. v. ComplementSoft, LLC., 825 F.3d 1341, 1343 (Fed. Cir. 2016). The ’936 patent described an “Integrated Development Environment” consisting of software tools focused on programming data manipulation languages using a document manager, an editor, a parser layer, and a visualizer. Id. SAS Institute, Inc. (“SAS”) is one such data manipulation language referred to by the patent. Id.
SAS petitioned under the America Invents Act (“the Act”), codified at 35 U.S.C. § 311 et seq., for inter partes review (“IPR”) of the ’936 patent, claiming that all sixteen claims of the ’936 patent were anticipated or obvious and therefore unpatentable. Id. at 1346. Under the relevant statute, any third party may file a petition for an IPR of any claim that is part of a patent granted at least nine months prior and which the third party believes is unpatentable under 35 U.S.C. §§ 102 or 103. 35 U.S.C. § 311. The Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“USPTO”) then considers the petition and decides whether it will institute and conduct a review of the claims in the petition. 35 U.S.C. § 316. Following its review, the PTAB issues a written decision regarding the patentability of the claims at the conclusion of its review. 35 U.S.C. § 318. The final written decision of the PTAB is appealable directly to the Court of Appeals for the Federal Circuit. 35 U.S.C. §§ 318, 141. In this case, the PTAB instituted IPR for claims 1 and 3-10, deciding not to review claims 2 and 11-16. SAS Institute, 825 F.3d at 1346. The PTAB concluded that claims 1, 3, and 5-10 were obvious and unpatentable, but that claim 4 was patentable. Id.
SAS appealed the decision of the PTAB to the Federal Circuit, arguing, among other things, that the PTAB should have reviewed the patentability of all sixteen of the claims included in the IPR petition, and not just the claims for which the IPR was instituted. Id. at 1347. This argument was based on SAS’s reading of 35 U.S.C. § 318(a), which says that when “an inter partes review is instituted . . . 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.” 35 U.S.C § 318.
The Federal Circuit rejected SAS’s argument, relying on its recent holding in Synopsys, Inc. v. Mentor Graphics Corp. where it answered the same argument by finding no statutory requirement that the PTAB review every claim challenged in an IPR petition. Id. at 1357. Specifically, the Federal Circuit said there, and repeated here, that although § 318(a) says “any patent claim challenged,” § 314(a) only concerns “claims challenged in the petition,” which the court interpreted as allowing a claim-by-claim approach to instituting an IPR. Id. at 1357. The Federal Circuit denied rehearing on November 7, 2016, and the United States Supreme Court granted certiorari on May 22, 2017. Orders and Proceedings, No. 16-784.
WHAT DOES THE PLAIN TEXT OF THE AMERICA INVENTS ACT SUGGEST?
SAS’s central argument is that the words of statute § 318(a) convey a clear and obvious meaning, requiring the PTAB to review all of SAS’s claims. Brief for Petitioner, SAS Institute Inc., at 18. SAS studies the language of the statute, focusing on the use of the word “shall” and the broad language requiring the PTAB to review “any patent claim challenged.” Id. at 20. SAS argues that “any” must be construed to mean “all,” citing United States v. Gonzales, Collector v. Hubbard, and United States v. Alvarez-Sanchez where the Supreme Court has interpreted statutes containing the word “any” to mean “all.” Id. at 21. In addition, SAS maintains that the “shall” used here means “must,” citing the Supreme Court case of United States v. Rosenwasser, where the Court held that the Fair Labor Standards Act’s mandate that the employer “shall” pay the minimum wage was equivalent to the employer “must” pay. Id. at 21–22. SAS expands on the Court’s decision in Rosenwasser, highlighting the Court’s interpretation of the phrase “any employee” to refer to “all employees . . . unless specifically excluded” by the Act. Id. at 22. SAS suggests that this analysis should be applied to the interpretation of §318(a), thus finding “any patent claim” to be referring to “all patent claims.” Id. at 22–23.
ComplementSoft, in contrast, emphasizes the Act’s explicit prevention of review of the PTAB’s refusal to issue a determination on a claim. Brief for Respondent, ComplementSoft, LLC, at 18. ComplementSoft argues that this clear departure from typical civil litigation, which allows the plaintiff to appeal dismissal of claims, is evidence of Congress’s intentional decision to limit review. Id. at 18–19. Thus, ComplementSoft contends that this limitation on review should be interpreted broadly to include a prohibition on review of the decision to dismiss a portion of the claims. Id. at 19. Additionally, ComplementSoft states that SAS’s all-or-nothing reading of the statute produces impractical results; based on SAS’s interpretation, the PTAB would be limited to hearing none of the claims or hearing all of the claims, including those which lack merit. Id. at 16. ComplementSoft focuses on § 312’s use of the word “challenged” as limiting the claims reviewable by the PTAB. Id. at 13. ComplementSoft reads §312 to require the petitioner to include sufficient evidence to show a likelihood of success on each claim; according to ComplementSoft, if a petitioner fails to “challenge” a claim, the PTAB should be able to deny review because it fails the standards set forth for reviewability. Id.
WHAT IS THE SIGNIFICANCE OF THE DIFFERENCES BETWEEN § 314(a) AND § 318(a)?
With regard to differences in the language of § 314(a) and §318(a), SAS contends that the slight change in word choice from “claims challenged in the petition” to “claim challenged by the petitioner” bears no significance. Brief for Petitioner at 23. Rather, SAS emphasizes that § 314(a) is listed as a “threshold” in the Act and therefore limits which claims are reviewable by the PTAB under § 318(a). Id. at 20. SAS argues that because § 314(a) states that all claims in petitions with at least one claim that has “a reasonable likelihood of prevailing” are reviewable and does not include any language authorizing the PTAB to review only a portion of the claims, the PTAB must review all challenged claims within a petition. Id. at 25.
ComplementSoft counters that the different phrases used in § 314(a) and § 318(a) are evidence of Congress’s intent to give the provisions different effect. Brief for Respondent, ComplementSoft at 11. To support this point, ComplementSoft cites Sosa v. Alvarez-Machain, which held that the legislature is presumed to have intended different meanings when it uses different word choice in different parts of a statute. Id. Additionally, ComplementSoft stresses interpretation of the statutes in light of the “progressive steps” of a review by the PTAB. Id. at 12. ComplementSoft argues that the statutes, beginning with § 314, progressively narrow the claims to be heard by the PTAB; therefore, according to ComplementSoft, § 318(a) should be interpreted as an additional method of limiting claims. Id.
HOW DOES THE LEGISLATIVE MANDATE INFORM THE INTERPRETATION?
Additionally, SAS argues that reading §318(a) as granting the PTAB the authority to selectively review claims negates the purpose of the Act: to establish a forum for efficient and final review of patent validity claims. Brief for Petitioner at 28. As an example, SAS cites the current case; SAS spent five years litigating its patent validity claims and the PTAB’s refusal to decide on seven out of sixteen of SAS’s claims will require SAS and the defendant to litigate in a district court. Id. at 29. SAS discusses statements made by the legislature in the process of passing the Act to affirm an interpretation of the Act as a final review, preventing further litigation on the claims. Id. at 31. Specifically, SAS references the House Judiciary Committee’s statement that the Act’s “estoppel” provisions, which end litigation on the issues raised, are anti-harassment mechanisms. SAS asserts that the estoppel provisions prevent parties from repeatedly raising patent issue claims to attack a patent holder. Id. Further, SAS emphasizes the lack of evidence suggesting an intention to allow the PTAB to selectively review the petitioner’s claims. Id. at 32.
ComplementSoft argues that SAS’s legislative interpretation relies on the faulty assumption that IPR was intended to be an exact replacement for litigation in a district court. Brief for Respondent, ComplementSoft at 20. In contrast, ComplementSoft argues that the multiple restrictions on review, such as the threshold requirement of a reasonable likelihood of success, show that the legislature approved of allowing the PTAB to limit the claims that were reviewable. Id. at 20–21. Furthermore, ComplementSoft emphasizes the nature of the patent system as “based on individual claims.” Id. at 21. ComplementSoft argues that the legislature must have considered this inherent characteristic when determining the proper bounds for review. Id. Therefore, ComplementSoft contends that claims were likely intended to be reviewable at an individual level. Id. Additionally, ComplementSoft highlights the absence of a requirement to bring every claim before the PTAB as evidence further suggesting that the legislature intended the PTAB to function as a complementary adjudicatory body, not a replacement for the district court. Id. at 22. With reference to the estoppel provisions, ComplementSoft argues that the legislature, per §315(e)(2), intended to limit estoppel to only those claims that result in a “final written decision.” Id. at 15.
HOW SHOULD THE COURT APPLY CHEVRON ANALYSIS?
SAS argues that the analysis from the Chevron v. National Resources Defense Council case indicates that the PTAB should not be permitted to selectively hear claims from a petition.
Brief for Petitioner at 33–35, 39–40. Under the first step of Chevron, SAS notes, if a statute’s language is clear, courts apply that clear meaning and the analysis ends. Id. SAS begins by stating that the relevant statute is § 318(a) because this provision specifically mentions “final written decisions,” the scope of which are at issue here. Id. Referencing the statute’s use of “shall” and “any,” SAS argues that the language of § 318(a) clearly does not allow the PTAB to narrow the petitioner’s claims. Id. SAS maintains that even if the Court relies on § 314(a), the language of that provision does not include any authorization of the PTAB to choose to hear only select claims from the petition. Id. at 34–35. Even if the Court decides that the statute is ambiguous and thus proceeds to the second step of Chevron, which asks whether an agency’s interpretation of the statute is permissible, SAS contends that PTAB’s interpretation is impermissible. Id. at 39. SAS explains that allowing the PTAB discretion to limit claims within a petition is impermissible because it violates the separation of powers by infringing on the Legislative Branch’s powers since it voids the legislature’s purposes in establishing the Act. Id. at 39–40.
ComplementSoft, however, argues that the statute is ambiguous and thus advances beyond step one of the Chevron analysis, allowing the PTAB to receive deference. Brief for Respondent, ComplementSoft at 19. According to ComplementSoft, the use of varying phrases without indication of intended different meanings as well as the inherent complexity of the review process, are among the ambiguities present in the statute. Id. at 19–20. In support, the Patent and Trademark Office (the “PTO”) argues that the Office’s interpretation of § 318(a)’s ambiguities is reasonable and therefore deserves deference because partial review increases efficiency. Brief for the Federal Respondent, Joseph Matal, Interim Director, United States Patent and Trademark Office, at 44. The PTO highlights the Act’s explicit grant of power to the Office to govern itself and thereby determine the interpretation of statutes which affect its processes. Id. at 45. It argues that this clear provision of authority overcomes the Chevron analysis. Id.
A THREAT TO THE EFFICIENCY OF THE INTER PARTES REVIEW
The Intellectual Property Owners Association (“IPO”), in support of SAS, argues that an IPR final written decision that does not cover all the claims challenged in the petition is ultimately inefficient because of the estoppel effects of the IPR process. Brief of Amicus Curiae Intellectual Property Owners Association, in Support of Petitioner, at 6. The IPO explains that under existing case law, the estoppel provision governing IPR decisions, 35 U.S.C. § 315(e), applies the issue-precluding effects of the final written decision on a claim-by-claim basis. Id. at 6. The IPO contends that, as a result, the validity of claims challenged in a petition but not reviewed by the PTAB and not mentioned in the PTAB’s final written decision remain subject to dispute. Id. at 7. This is inefficient, argues the IPO, because petitioners get a second chance to challenge the claims that were not included in the PTAB’s decision by bringing them to a district court. Id. at 8. The IPO points out that these proceedings will be largely duplicative of the proceedings before the PTAB, thus defeating a key IPR purpose of relieving the courts of burdensome litigation. Id. at 4, 8–9.
The IPO contends that these duplicative proceedings would increase litigation costs, unnecessarily delay resolution of claims, and potentially allow abusive litigation tactics. Id. at 9, 11. The IPO argues that these consequences could be avoided by requiring the PTAB to include its explanations of why it is not analyzing certain claims into the final written analysis. Id. at 12. On a more expansive note, SAS adds that it is important for the PTAB to review all the claims in a petition because the efficiency of the PTAB in determining validity incentivizes “development and commercialization of new science and technology.” Brief for Petitioner, SAS Institute Inc., at 42.
On the other hand, the Houston Intellectual Property Law Association (“HIPLA”), in support of the PTO, argues that “partial institution,” meaning only reviewing some of the claims raised by a third-party petitioner, is an efficient allocation of resources. Brief of Amicus Curiae Houston Intellectual Property Law Association, in Support of Respondents, at 5–6. The HIPLA points out that 35 U.S.C. § 316(a)(11) requires a final written decision in an IPR within one year of instituting the review, while a district court case litigating the same issues takes more than twice that long, on average. Id. at 5–7. The HIPLA adds that IPR petitions are beginning to rival district court patent cases in volume. Id. Partial institutions, argues the HIPLA, allows the PTAB to review only the weakest claims in the petition, focusing its efforts in a way the district court cannot. Id. at 8. If partial institutions were not allowed, contends HIPLA, then the PTAB would either have an incentive to grant fewer petitions, sending more cases to district courts, or the PTAB would have more cases in which it is forced to review more strong claims packaged in with the weak claims, thereby decreasing efficiency. Id. at 9. If the PTAB does institute fewer petitions, the HIPLA argues that the efficiency of the PTAB will be further harmed when patent-holders feel less of a need to file the preliminary responses that help the PTAB decide which petitions to institute. Id. at 9–11.
The HIPLA further contends that requiring the PTAB to institute all the claims presented will reduce the incentive for parties to file responses to petitions. Id. at 10. This lack of responses, HIPLA argues, will result in underdeveloped records which reduce the likelihood of settlements, as parties are unable to accurately evaluate their positions. Id. at 11–12. The underdeveloped records would similarly burden the courts of appeals when IPR decisions are ultimately appealed, according to the HIPLA. Id. at 12–14. The HIPLA also denies that partial institution leads to inefficient duplication in district courts because the PTAB is limited to reviewing patentability on only two grounds, so it argues that even claims reviewed by the PTAB are still challengeable in a district court on other grounds. Id. at 13–16.
- Scott A. McKeown, SAS Institute & The PTAB: Be Afraid Patent Owners, Lexology (October 17, 2017).
- Danielle Phillip & Allyn Elliott, What to Expect If High Court Rejects PTAB Partial Decisions, Law360 (November 1, 2017).
- Gene Quinn & Steve Brachmann, SCOTUS to Hear SAS Institute v. Lee, Could Impact Estoppel Effect of IPR Proceedings, IP Watchdog (May 23, 2017).