SAS Institute, Inc. v. Iancu: Supreme Court Disallows Partial IPR Decisions

May 15, 2018

In a 5-4 decision, the Supreme Court rejected the Patent Trial and Appeal Board’s (PTAB) practice of granting partial institutions of inter partes reviews (IPR).  The decision squarely rejected the United States Patent and Trademark Office’s (USPTO) interpretation of 35 U.S.C. § 318(a) that the USPTO need not decide the patentability of all challenged claims. 

            SAS Institute. v. Iancu arose out of a patent dispute between SAS and ComplementSoft, LLC.  ComplementSoft sued SAS for infringement of U.S. Patent No. 7,110,936.  In response, SAS petitioned the PTAB for inter partes review of all 16 claims of the patent. The PTAB only instituted administrative review of nine of the sixteen claims, and reasoned that SAS was likely to succeed on the instituted claims. The PTAB subsequently issued a final decision confirming the patentability of one claim but found the eight other reviewed claims were unpatentable. No decision was issued with respect to the remaining seven claims because a review was not instituted for those claims.

SAS appealed to the Court of Appeals for the Federal Circuit, arguing that the PTAB should have issued a written decision for all 16 challenged claims.[1] SAS argued that the Director exceeded his statutory authority because 35 U.S.C. §318(a) required the PTAB to decide the patentability of every claim SAS challenged in its petition. The Federal Circuit rejected this argument and relied upon its recent decision in Synopsys, Inc. v. Mentor Graphics Corp., where it found no statutory requirement that the PTAB review every claim challenged in a petition for IPR.[2]

The Supreme Court reversed the Federal Circuit on the application of § 318(a), in a decision authored by Justice Gorsuch. In overturning USPTO rulemaking authority, Justice Gorsuch held that the Board is not authorized to render so-called “partial institution” decisions. Instead, the majority found that “the plain text of § 318(a)” dictates that once 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.”[3]

The Supreme Court also declined to address the Director’s suggestion that the Patent Office regulations should be afforded Chevron deference, in line with Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Instead, the Court noted that even under Chevron, the USPTO’s interpretation of law would only be afforded deference if the statute were ambiguous, which it was not.[4] The Court reversed and remanded to the Federal Circuit for further proceedings.

Justice Ginsburg authored a dissenting opinion, joined by Justices Breyer, Sotomayor, and Kagan, questioning why the statute should be read to preclude the PTAB’s “more rational way to weed out insubstantial challenges.”[5] Justice Breyer authored a second dissenting opinion, joined by Justices Ginsburg and Sotomayor. This dissent argued that the phrase “any patent claim challenged by the petitioner” in §318(a) does not unambiguously refer to the petitioner’s original petition.[6] The dissent concluded that under Chevron it was reasonable in light of the nature of the statute to give the Director discretion to grant partial institution of challenged claims. The dissent reasoned that the statute appears to give the Director discretion to avoid challenges that are not viable.[7]

In light of SAS, the PTAB issued a guidance memorandum on April 26, 2018, that provided that proceedings in which there was only a partial institution will need to be reinstituted on “all challenges in the petition.”[8] The Guidance goes on to indicate that if the PTAB institutes a trial, the PTAB will institute on all challenges raised in the petition.  And clarifies that the PTAB must now institute an IPR on all challenged claims, or deny institution. Accordingly, it follows that all claims challenged in an IPR will be addressed in a final written decision and, as a result, will also be appealable to the Federal Circuit.

 

[1] SAS Institute, Inc. v. ComplementSoft, LLC., 825 F.3d 1341 (Fed. Cir. 2016).

[2] See Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016).

[3] Slip op. at 8.

[4] Id. at 11. 

[5] Slip op. 1 (Justice Ginsgurg, dissenting).

[6] Slip op. at 4 (Justice Breyer, dissenting).

[7] Id.

[8]See Guidance on the Impact of SAS on AIA Trial Proceedings, available at https://www.uspto.gov/patents-application-process/patent-trial-and-appeal-board/trials/guidance-impact-sas-aia-trial (“Guidance”).