Guest post by Saurabh Vishnubhakat, Associate Professor at the Texas A&M University School of Law and the Texas A&M College of Engineering. Although Prof. Vishnubhakat was an advisor at the USPTO until June, 2015, his arguments here should not be imputed to the USPTO or to any other organization.
The Supreme Court’s decision in SAS Institute v. Iancu is likely to prove more immediately impactful to the status quo than the accompanying decision in Oil States Energy Services v. Greene’s Energy Group. The power of partial institution had been an integral part of the Patent Trial and Appeal Board’s decision-making from the start, and the all-or-nothing choice that the PTAB must now make raises four interrelated questions. One is how the agency will proceed in future cases. Another, and more pressing, is how the agency will deal with the crop of currently pending cases that were instituted as to some, but not all, patent claims in the original petition. Still another is how the litigants themselves, particularly would-be petitioners, will frame their challenges going forward. Finally, there is the question of what steps the Patent Office might take given its own altered incentives.
NB: The SAS Institute decision was the subject of a robust discussion at the April 26 Stanford IP Law and the Biosciences Conference panel on “Developments at the PTAB and the Federal Circuit.” I am indebted to my co-panelists Mark Lemley, David O’Brien, and Stefani Shanberg and to our moderator Lisa Larrimore Ouellette for sharpening my thinking on this developing issue.
Parsing the PTAB Guidance—Future Petitions
A helpful place to begin is the PTAB’s prompt and thoughtful Guidance on the Impact of SAS on AIA Trial Proceedings, issued just two days after the SAS Institute decision. As this blog pointed out in its recap of the Guidance, future petitions will be instituted as to all claims or as to none, as SAS Institute directly requires.
The Guidance goes further, however, to indicate that “if the PTAB institutes a trial, the PTAB will institute on all challenges raised in the petition.” This is notable because a “challenge” may be as broad as to refer to the statutory basis asserted for the invalidity of a claim, or to the prior art cited in support, or to both. For example, even if an inter partes review petition sought to invalidate just one patent claim, asserting both statutory grounds (§ 102 and § 103) and citing only two prior art references could conceivably constitute five separate “challenges” for purposes of an institution decision:
- anticipation in light of Reference A;
- anticipation in light of Reference B;
- obviousness in light of Reference A;
- obviousness in light of Reference B; and
- obviousness in light of the combination of References A and B.
It is not self-evident that this additional step is required by the opinion in SAS Institute, which focuses on patent claims—claims that the petitioner challenged in its petition and claims as to which 35 U.S.C. § 318(a) requires a final written decision. Nevertheless, it was the same regulation, 37 C.F.R. § 42.108(a), that articulated the authority to proceed both “on all or some of the challenged claims and on all or some or the grounds of unpatentability asserted for each claim.” It is appropriately cautious, then, for the agency to step back from both together. Moreover, the Federal Circuit’s recent string of cases remanding decisions back to the PTAB for further explanation under the Chenery doctrine also makes it sensible for the agency to err on the side of inclusion when it comes to fully exploring the potential grounds for its eventual decision. More on that in a bit.
Parsing the PTAB Guidance—Currently Pending Cases
As for what to do with still-pending cases in which the PTAB has already made partial institutions, the Guidance states a policy that may seem surprising on first impression. In such cases, “the panel may issue an order supplementing the institution decision to institute on all challenges raised in the petition” (emphasis added). In other words, now that the Court has made institution an all-or-nothing proposition, the PTAB may go back and retroactively grant institution as to the rest of the petition.
What makes this policy puzzling is its apparent discretion. After SAS Institute, is the PTAB not required to issue such an order instituting the additional challenged claims?
Not necessarily. For one thing, institution is not even the only retroactive thing that the PTAB can do in this situation. Though the Guidance does not mention it, the PTAB could instead retroactively deny the entire petition (including what had previously been instituted). The reason why both of these approaches are viable is the structure of the institution standard in § 314(a): the Director, it says, may not institute unless there is a reasonable likelihood that at least 1 of the claims challenged in the petition will be canceled. This “may not . . . unless” framing means that a reasonable likelihood of success is a necessary condition, but it may or may not be a sufficient condition. Once the standard is met, whether or not to institute is discretionary. This much even the Court’s opinion accepted:
The text says only that the Director can decide “whether” to institute the requested review—not “whether and to what extent” review should proceed.
Slip op. at 8 (emphasis in original). Along similar lines, the Court also pointed out that “the language anticipates a regime where a reasonable prospect of success on a single claim justifies review of all”—justifies, not compels.
For another thing, the parties themselves may render such a supplemental order unnecessary. A joint request to terminate the case, particularly where the PTAB has yet to decide the merits, has potential benefits. Under § 317(a), the settling petitioner in such a case would escape without estoppel attaching. The patent owner, meanwhile, would likely receive a termination of the IPR altogether. It is true that § 317(a) gives the agency the power to proceed to a final written decision even after all petitioners have exited the case. However, in this of all situations, it would be a poor solution indeed for the PTAB to force itself into a final written decision on claims that it previously denied under the expectation that it would not have to issue final written decisions as to them. The mid-stream disruption that SAS Institute creates for existing cases may make settlement and jointly requested termination attractive not only to the parties but also to the PTAB.
For these reasons, a supplemental order granting institution as to all additional claims in the original petition—while permissible and perhaps even desirable—is not necessary for the PTAB to issue.
While these pending cases are straightened out, of course, new would-be petitioners continually face a choice about whether and how to frame their petitions. For them, the stakes are now undoubtedly higher. Apart from cost constraints (including the PTAB’s recent fee increase before the SAS Institute decision was handed down) and page limits on petitions (which are difficult to circumvent only as a matter of additional cost), petitioners faced little disincentive against being overinclusive in their challenges. The possibility of partial institution meant that, so long as some arguments made it through, the remainder were not necessarily any great loss.
But now, a full denial of institution is a real possibility even for petitions that may contain some meritorious arguments, for the PTAB faces the responsibility of writing a final written decision as to every claim. That responsibility, moreover, requires increasingly through explanations under Chenery. The possibility of full denial is even more stark given that the Guidance promises that, if the PTAB institutes at all, it will institute not only as to all claims but also as to all challenges raised in the petition.
Thus, petitioners have an incentive to focus their petitions even further—when choosing claims to challenge, grounds to assert, and prior art to cite—in order to ensure that the likelihood of full institution is greater than the likelihood of full denial.
Patent Office Incentives
The incentive of the Patent Office, meanwhile, is likely to deny institution relatively more often in the wake of SAS Institute, at least initially. One reason is that the Court’s opinion has no effect on the PTAB’s ability to grant full institutions. Panels could already do so and still can. What panels now confront is the prospect of fully instituting even where some arguments in the petition may lack merit. Rather than dispense with these potentially unavailing arguments at the institution phase, where estoppel would at least arguably not attach, the only alternative left is to try all of these arguments fully, with all the Chenery obligations that such a choice entails, and the specter of estoppel looming larger than before for the petitioner. This represents a potentially significant increase in the PTAB’s workload and is not something that the Patent Office is likely to undertake lightly.
Another reason why the agency’s incentives now point more, if not entirely, toward denial is the workaround proposed in Justice Ginsburg’s dissent. Only a paragraph in length, it expressly contemplates precisely this sort of full denial of a petition, except that the PTAB in its decision to deny institution would also identify which claims were worthy of review and which claims were not. Petitioners could then refile in light of this guidance. Justice Ginsburg described this exercise as the PTAB spending its time “uselessly”—in contrast simply to allowing partial institutions and reaching the same point without the added step of refiling.
But this is actually a reasonable idea. Just as petitioners themselves now have greater incentive than before to focus their challenges in order to make full institution more tenable than full denial, the PTAB can also play a useful complementary role by explaining in its denials of institution just what it finds worthy or unworthy of review, and why. By channeling petitioners to “file new or amended petitions shorn of challenges the Board finds unworthy,” the PTAB may create additional work in the short run. Over time, however, its guidance would conserve the agency’s adjudicatory resources by discouraging the overinclusive petitioning that partial institution fostered because the PTAB had a way to manage its workload without having to discipline extravagant petitioners.
This is no longer the case, and the PTAB’s own workload is now more closely tied to the burdens that it allows petitioners to visit upon patent owners. The opinion of the Court purported not to take a stance on policy arguments about efficiency, directing such arguments to Congress. Nevertheless, the decision in SAS Institute may produce efficiency gains after all.