Is Termination a form of Institution (and thus Non-Appealable)

BioDelivery Sciences International, Inc. v. Aquestive Therapeutics, Inc., fka MonoSol RX, LLC, No. 19-1381 (Supreme Court 2020)

This case is procedural and it focuses – once again – on the unique two-step, two-decision-maker divide by Congress for inter partes review (IPR) proceeding.

  1. Step 1 – Institution: The USPTO Director decides whether to grant an IPR petition and “institute” proceedings.  This decision is “final and nonappealable.”
  2. Step 2 – Trial: Once the IPR is instituted, the PTAB takes-charge and moves the case to a final decision.

As the USPTO planned-out how to actually implement the proceedings, the Director at the time (Kappos) recognized that he didn’t want to personally decide all of the IPR decisions and also recognized that the USPTO petitions office was (is) not operating at peak efficiency (except for the automatically granted petitions). So, the the rules delegated the Director’s authority for instituting IPRs to the PTAB judges.  This effectively rewrote the proceedings as follows:

  1. Step 1: The USPTO Director PTAB decides whether to grant an IPR petition and “institute” proceedings.  This decision is “final and nonappealable.”
  2. Step 2: Once the IPR is instituted the PTAB then takes-charge and moves the case to a final decision.

Delegation of institution authority results in some amount of confusion about whether a given decision by the PTAB is associated with a non-appealable institutional decision or instead an appealable final judgment in the case.

BioDelivery began at the PTAB with three IPR petitions against Aquestive’s US8765167. This was pre-SAS, and the USPTO partially instituted the proceedings.  On appeal, the Federal Circuit vacated the final written decision on SAS grounds — holding that the USPTO cannot partially institute an IPR.  The partial-institution clearly falls on the side of step-1 nonappealable institution decision, but the Supreme Court created a limited exception in this situation.  See SAS Institute v. Iancu, 138 S. Ct. 1348 (2018) as limited by Thryv, Inc. v. Click-to-Call Techns., LP, 140 S. Ct. 1367 (2020).  You can read that original 2018 BioDelivery opinion here BioDelivery Scis. Intl., Inc. v. Aquestive Therapeutics, Inc., 898 F.3d 1205 (Fed. Cir. 2018).

In SAS, the Supreme Court held that at institution stage the Director must either (1) institute the proceeding as to all challenged claims or (2) deny the petition all together. Federal Circuit then extended SAS to also require that any final written decision address every ground for challenge (not just every claim). PGS Geophysical AS v. Iancu, 891 F.3d 1354 (Fed. Cir. 2018).

On remand, the PTAB decided it was faced with the question of whether to (1) proceed with a final decision on all grounds raised or (2) drop the whole case. It chose the latter–terminating all three IPR petitions.

The patent challenger then appealed again and the Federal Circuit had to figure out whether the termination of proceedings was more like an institution decision or a final written decision.  The court decided the former and held that the termination was final and nonappealable.  BioDelivery Scis. Intl., Inc. v. Aquestive Therapeutics, Inc., 935 F.3d 1362 (Fed. Cir. 2019) (opinion by Judge Reyna, dissent by Judge Newman); en banc petition denied at BioDelivery Scis. Intl., Inc. v. Aquestive Therapeutics, Inc., 946 F.3d 1382 (Fed. Cir. 2020) (dissent by Judge Newman).

Now comes the petition for writ of certiorari — arguing that “termination” should not be considered an institution decision. Questions presented:

1. Does the Judiciary have authority to review a Patent Office decision refusing to implement its mandate and this Court’s precedent?

2. May a petitioner appeal a decision terminating an instituted IPR, despite the decision being mislabeled as a nonappealable decision?

[BioDelivery Petition]

Although the situation is muddled by the PTAB/Director delegation, the basic question is whether ‘termination’ of an [improperly] instituted IPR is a furtherance of the institution process given to the discretion of the Director or is it instead a role given by statute directly to the PTAB.  The statute does discuss termination following settlement, but not in the particular context of this case.

The situation also reminds me of the recent essay by Brian Fry and Maybell Romero, The Right to Unmarry: A Proposal,  https://ssrn.com/abstract=3566944.

= = = =

I have included Fig. 1 from the challenged patent above. The claims are directed to an “oral film” that melts-in-your-mouth for drug delivery.  The film includes an “anti-tacking agent” such as vegetable oil or wax.

36 thoughts on “Is Termination a form of Institution (and thus Non-Appealable)

  1. 4

    Paul, the underlying statutory question raised by this petition is actually not as silly as it’s phrasing in the cert petition suggests.

    Section 318(a) states that “[i]f an inter partes review is instituted and not dismissed under this chapter,” then the PTAB “shall issue a final written decision…” In other words, the AIA mandates that the PTAB must issue a final written decision (FWD) unless unless the IPR is “dismissed under this chapter,” which refers to Chapter 31, 35 U.S.C. sections 311 though 319.

    This is the same section at issue in SAS, although the argument here is a little different. The argument goes as follows; although the AIA gives discretion to institute (or not institute) IPR, once IPR is instituted, section 318(a) requires a final written decision on the merits unless the IPR to be “dismissed” under some statutory provision in Chapter 31. But that chapter provides only two grounds for terminating an instituted IPR: (1) joint agreement or settlement (Section 317(a)), or (2) multiple related pending proceedings (Section 315(d)). Because neither of those sections applies here, the argument goes, the PTAB had no authority to terminate the IPR without issuing a final written decision on the merits.

    I’ve never been overly impressed with the argument, but it does have some intuitive and common sense appeal to it. The fact that Congress bothered to enact specific provisions authorizing termination only under prescribed conditions (such as settlement and multiple proceedings) does support the idea that Congress did not envision that the PTAB would have unfettered discretion to terminate an instituted IPR.

    1. 4.1

      LR,

      You need to stop steering at the shiny object being dangled in front of you.

      Because neither of those sections applies here, the argument goes, the PTAB had no authority to terminate the IPR without issuing a final written decision on the merits.

      You do NOT “get” there because the remand per SAS takes you all the way back to the institution decision, and it is the institution decision being decided anew that is at point.

      1. 4.1.1

        That’s not correct, anon. The institution decision already exists at the time of a remand under SAS. A remand under SAS is not about the institution decision; it’s about what the Final Written Decision has to address after IPR has been instituted. A remand under SAS is based on enforcing Section 318(a), which states that a Final Written Decision in an already-instituted IPR must address every claim discussed in the IPR petition.

        You “get there,” to Section 318(a), because trial was instituted. SAS does not take you “back to the institution decision,” and I don’t know how you could continue to believe that. As you know, the institution decision itself cannot be attacked on appeal, either at the Supreme Court or the Federal Circuit. An appeals court has ZERO authority to overturn or modify (in any way) an IPR institution decision, so your continued belief that a remand under SAS somehow nullifies the institution decision has no basis in the law. The only reason the Supreme Court could even issue the SAS decision is because an IPR institution decision already occurred, which allowed them to enforce the mandate of Section 318(a) that a FWD in an already-instituted IPR address every challenged claim.

        1. 4.1.1.1

          Sorry LR, but it is you that does not have the situation correct.

          Bottom line here is that the remand IS all the way back to the institution decision and whether or not institution will be made (so as to cover the all or nothing nature of the petitioner’s request).

          I have explained this previously.

    2. 4.2

      Besides the various counter-arguments already raised here, there is in addition the long standing inherent authority and practice of judicial bodies to dismiss cases without formal final decisions, which the Sup. Ct. would be highly unlikely to disregard. Especially here, where the consequence of dismissal is that the patent owner gets to keep its claims unharmed.

      1. 4.2.1

        Paul, it’s an open question in administrative law whether administrative courts like the PTAB possess any kind of inherent “judicial” powers, akin to what federal courts of general jurisdiction possess. The general consensus is that administrative courts, as purely creatures of statutes, must play strictly by the rules and do not have “inherent” powers to act in ways not authorized by the statute or validly-promulgated regulations.

        FWIW, even in federal district courts (which indisputably possess inherent judicial powers), they have to follow the Federal Rules of Civil Procedure in dismissing civil actions, most notably FRCP 41. The use of inherent power to dismiss a civil action in federal district court is exceedingly limited, and allowed only as a tool for sanctioning parties or punishing egregious litigation misconduct. So I don’t think you’ll get any support, from the Supreme Court or elsewhere, for the proposition that the PTAB has broad inherent powers to dismiss cases for reasons not authorized by the statute or regulations.

        1. 4.2.1.1

          LR,

          You are closer to the mark here.

          The adjudicative powers of Executive Branch agencies may exist along a spectrum, and are generally recognized as dependent on the parameters set for (through the Legislative Branch’s actions at the establishment of the agency).

  2. 3

    Delegation of the institution decision to the PTAB is blatant corruption. No reasonable reading of the statute could have arrived at that decision.

    1. 3.1

      Why?

      You are aware that this is not the first time such an interpretation has been implemented, right?

    2. 3.2

      According to MPEP 1002.02, there are over 100 different types of petitions where the authority to decide them is delegate to various parties. In almost all cases they are “Petitions to the Director” regarding some specific issue, so the Director delegates it to the person(s) who are most qualified and knowledgeable on that specific issue. Are all of these based on corruption? You seem to continuously advocate that the least qualified decision maker make all the decisions with respect to patents. Why? Is it because you got your balloons taken away by someone who knows something?

      1. 3.2.1

        Because the PTAB’s job is to invalidate patents.

        1. 3.2.1.1

          How do you come to the very silly proposition that the PTAB’s job is to invalidate patents? Everyone knows you have no evidence to support that assertion, so you doctor the statistics of their institution rate to support your continued assertion that they invalidate over 85% of all patents. You conveniently ignore the fact that about half of all petitions are denies, so you count on people who understand the numbers to not actually try and verify your false assertion. Sorry, the Emperor has no clothes when someone who actually understands the issues takes a closer look.

          1. 3.2.1.1.1

            Anon2,

            While I think that you and I are closer together in view of Josh’s comments here, I think that you stray into the weeds (with your eyes clenched tight) if you do not recognize that a view of “they were created to invalidate patents” is “silly.”

            Maybe read some of the courts writings or the propaganda as to why the property nature of a granted patent should be treated so thinly.

          2. 3.2.1.1.2

            That purpose is throughout the Congressional record and the government briefs defending the institution. They assert that PTAB is an efficient way to invalidate patents that never should have issued, or to reconsider the decision to grant the patent, or a method of correcting earlier mistakes. The undeniable purpose of the PTAB is to invalidate patents.

            As to my data, you tell us how many patents the PTAB has reviewed and how many have survived that review? And then show us one single patent that won’t be instituted on the next IPR filed against it. The phony statistics are the ones that count 1 institution and 2 denials as favorable to the inventor.

            1. 3.2.1.1.2.1

              As far as IPRs are concerned, the undeniable purpose of the PTAB is to conduct IPR proceedings. This is confirmed by the fact that claims aren’t cancelled 100% of the time.

              Your review statistics are meaningless because you are ignoring selection bias. You cannot simply ignore the IPR petitions that are denied any more than you can simply ignore the fact that most patents are not subject to an IPR petition.

              By the way, statistics don’t lie, but people often lie using statistics.

            2. 3.2.1.1.2.2

              Josh,

              You obviously did not read the Congressional debates about the AIA and IPRs if you come to that conclusion. Your comments also prove you wrong and that your position is silly. You say, and on this we agree, that the purpose of an IPR is to “reconsider the decision to grant the patent.” Our agreement ends there. You then, very erroneously, turn “reconsider” into “invalidate” which is completely wrong. You then take that mistake and compound it by suggesting that your conclusion is “undeniable”. This makes your silly assumption even worse. As for the government briefs regarding the purpose of the IPRs, you also take those out of context. They focus on reevaluating issued patents and invalidating patents that never should have issued in the first place (and there are lots of them) by providing a cost effective way to do it. Just like with your constant crying about how 85% of patents are invalidated, you take specific things you like out of context to support your otherwise unsupportable position.

              As for your data, you entirely ignore all of the petitions where institution is denied. You focus only on those where a final decision is reached. The PTAB considered every single one of those petitions where they did not institute an IPR for, and it is about 50% of all petitions. You look only at petitions that have survived filtering and been reviewed at least twice – first by the PTAB at institution and then by the patent holder in their response – while conveniently ignoring the rest. If you want valid data, you have to evaluate all of it. Cherry picking like you do, is complete garbage, and I would hope you’re smart enough to know that. Then again, you’ve been doing it so long, maybe you’ve deluded yourself into thinking it’s meaningful.

      2. 3.2.2

        and because “No reasonable reading of the statute could have arrived at that decision.”

        1. 3.2.2.1

          Josh,

          You entirely missed the point in that the opposite is actually in place — and long has been in place — that it IS reasonable for directions provided by Congress to the Director may be re-delegated to other people within the Patent Office.

          I “get” that you feel otherwise, but you have provided nothing to substantiate that feeling other than your assertion.

          Perhaps you should pause and reflect.

          1. 3.2.2.1.1

            Yes of course it can be delegated. The job of caring for hens on a farm can appropriately be delegated to a child, a hired hand, or a trained dog. It would be entirely improper for the farmer to delegate the guarding of the hens to the fox.

            With respect to the statute, there is a clear distinction between role of the PTAB in conducting a trial and the role of the Director in instituting. The current arrangement undermines checks and balances and introduces a conflict of interest.

            The situation is distinguishable from all other types of petitions.

            1. 3.2.2.1.1.1

              What is the actual “checks and balances” that you believe to be violated in this instance?

              I am not asking what you think is the structural fault (that much is already clear). I am asking what (precise) mechanism of “check and balance” is it that has been rent asunder with the delegation of initiation to the same body that will be acting as the (putative) neutral arbiter.

              And yes, I chose these specific words to frame the question, because I think that your “issue” may well be with a different aspect of those same “neutral arbiters.”

              1. 3.2.2.1.1.1.1

                (I hadn’t seen this comment when I posted. I think we have the same question)

              2. 3.2.2.1.1.1.2

                The mechanism such that the decider is not biased toward institution and does not benefit personally by instituting review.

                1. What is the “personal benefit” that you think is being obtained?

                  Perhaps the notion that the entity making the institution decision benefits by “guaranteeing” a revenue stream for themselves? A notion of an unfettered ability to “make work” and create a body of income for their own docket? (an ability to which Congress — in its [captured] wisdom, made un-reviewable by the courts?)

            2. 3.2.2.1.1.2

              How does the AIA establish “checks and balances” and what’s the “conflict of interest”? I take the general point that the statute assigns institution decisions to the director and “trials” to the PTAB, but that doesn’t make the Director and the PTAB adversaries or independent of each other in the way the Constitution separates the branches of government. Arthrex suggests that the constitution requires the PTAB not to be too independent of the Director.

              The hen-guarding/fox analogy seems to be based more on your feelings about the current director and the PTAB’s historic performance than anything in the statute.

              1. 3.2.2.1.1.2.1

                The rules should have been written to have an independent and unbiased decision-maker (given the case load would prevent the Director from personally deciding every petition.)

                It doesn’t matter to me who the Director is, they should be fair and impartial and removed when they behave otherwise.

                1. Josh,

                  I am still not seeing your issue.

                  Of course, my “not seeing’ is based on the ‘fact’ that the PTAB is

                  ALREADY

                  supposed to be a neutral third party conducting the review between the two opposing sides — and is NOT supposed to have any of those things that you mention above at 3.2.2.1.1.1.2 as somehow being a given.

                  I would instead posit that if you think those things DO exist, then there is a problem EVEN IF you had a completely different person/entity making the institution decision.

                  You “may” have a point, but it is NOT the point that you are trying to make here.

                  (look at my comments as constructive criticism)

                2. I get the criticism. If Michelle Lee had personally instituted 1000’s of IPRs we would still have a big problem.

                  If Michelle Lee had appointed a hundred cronies to an Institution Panel who found 70% of the most valuable and carefully examined patents to warrant reconsideration, we would still have a big problem.

                  But giving it to the PTAB is another level of abuse (what I referred to as corruption in the original post). The institution decision is very subjective such that there is no barrier to finding any allegation to raise a “reasonable likelihood of unpatentability”. Thus we find the PTAB instituting a nearly constant number of patents to keep their dockets sufficiently full to justify their jobs. If they didn’t institute they wouldn’t remain employed.

                  This appears corrupt to me.

                3. You now appear to see corruption REGARDLESS of any (still not shown) checks and balances.

                  You DO appear to have a different complaint than your “checks and balances” complaint.

                  May I suggest that you restructure your issue? Goodness knows that there are actual checks and balances problems in patent law right now — let’s save that term for places in which it directly applies.

                4. I think I get it. The PTAB is the “death squad” for patents and shouldn’t be allowed to touch anything that Congress didn’t explicitly give it. So no delegations from the director to decide institution. That’s a reasonable policy view that I imagine a fair number of patent owners share, but I don’t think it works as a legal argument. Thanks for responding to questions.

  3. 2

    I covered this in the original discussions.

    It is a misrepresentation to try to spin this as merely a ‘termination’ as opposed to a ‘go back and decide in the first instance whether you are going to institute.’

    That being said, and noting that this misrepresentation then leads to the comments that Paul notes below, I would allow that there may well be a reasoning for such a challenge, as the petition does tie to Newman’s (even giants sleep) dissent.

  4. 1

    The full text of the second “Question Presented” here includes the following unproven legal conclusion sentence, not presented as a question:
    “The Patent Office has no discretionary authority to terminate [rather than fully decide] an instituted IPR—as long as the petitioner remains involved.”
    One can think of several situations in which such termination is appropriate, and has been done before. Especially since IPR institution only requires a finding of one validly validity challenged claim. E.g., a settlement agreement whereby the one claim on which the institution decision was based was cancelled by the patent owner after institution but before trial.
    P.S. I cannot resist asking if the cited prior art here included chocolate covered children’s vitamin pills?

    1. 1.1

      The fact that 35 USC 317(a) allows IPR terminations by agreement or by the petitioner dropping out shows that terminations are possible and is not a prohibition against any other terminations.

    2. 1.2

      Especially since IPR institution only requires a finding of one validly validity challenged claim

      The use of “requires” is a nuanced one, as there BEING a finding of one validly challenged claim does NOT require institution.

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