Supreme Court IPR Decisions Present Strategic Challenges to Patent Owners and Accused Infringers

The Supreme Court issued two significant decisions on the same day, both of which concern Inter Partes Reviews (IPRs), the administrative procedure to challenge patent validity. Since their creation, IPRs have been a potent tool for those accused of patent infringement to challenge patent validity while avoiding the expense and burden of district court litigation.

In Oil States Energy Services v. Greene’s Energy Group, the Court rejected a constitutional challenge to the IPR regime, finding that because patents are public rights, Congress may allow them to be reviewed and invalidated by a non-court proceeding.

In SAS Institute v. Iancu, the Court held that once an IPR is instituted, the PTO must issue a decision as to all patent claims that are challenged – it cannot decide to pass on some claims and avoid others.

Both cases will have an important impact on patent litigation practice.

Oil States means that IPRs will continue to be a significant, and often effective, tool in patent disputes.

SAS Institute will impact how parties petitioning for IPRs should structure their petitions. Before SAS Institute, a part could petition for review of all claims in a patent, and rely on the PTAB to initiate the procedure only on the most promising claims. But the decision in SAS Institute requires careful strategic thinking to determine whether to challenge all or just some of the claims in a patent.

IPRs were created by the America Invents Act of 2011 and are administered by the Patent Trial and Appeal Board (PTAB), a part of the PTO.

IPRs have many advantages. Apart from being faster and less expensive than litigation, the focus of such a proceeding is solely on the patents and their validity – no discovery is needed as to the accused infringer’s activities, an often intrusive and burdensome exercise. Even after litigation is instituted, many courts will stay the case until an IPR is concluded. So a party facing a claim of patent infringement often turns to IPRs as a means of challenging validity.

IPRs do have some limitations. Validity can only be challenged “on a ground that could be raised under Sections 102 [novelty] or 103 [nonobviousness] and only on the basis of prior art consisting of patents or printed publications.” That does not include other grounds for invalidating a patent.

For example, in Alice Corp. v. CLS Bank (2014) the Supreme Court held that claims that merely represent abstract ideas are not patentable subject matter under Section 101 of the Patent Act, even if they are implemented through computer technology. Hundreds of patents have been invalidated under Alice, particularly business method and financial industry patents. Since the PTAB has no statutory authority to invalidate a patent under Alice through an IPR procedure, where a party believes it has a strong argument on those grounds, it would likely be more advantageous not to seek an IPR.

Of the two decisions issued the same day, the more strategically challenging is SAS Institute v. Iancu. By statute, a party petitions the PTAB to institute an IPR, which in its discretion may institute the petition if “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Once instituted, the parties engage in discovery and then a trial before the PTAB, which then “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”

The question before the Court in SAS Institute was whether the PTAB could review only some of the challenged claims – in other words, grant the IPR petition only partially as to some claims in the challenged patent. The Federal Circuit upheld this “partial institution” practice, but a majority of the Court held that the statute did not permit that procedure – once instituted, the PTAB must pass on every patent claim challenged in the original petition.

In the short run, SAS Institute will likely create significant procedural practice before the PTAB. What is the status of IPRs pending where the PTAB has only granted partial institution as to some but not all claims? Will the PTAB now revisit its decision to institute these reviews? Will it now have to allow discovery or additional briefing on claims originally challenged but for which it did not institute review? These issues will need to be worked out.

In the long run, however, SAS Institute will require significant strategic thinking on the part of those seeking to institute IPRs. Just because one can file a challenge to all claims in a patent (SAS Institute petitioned to challenge all 20 claims in a patent that had been asserted against it), does not mean that that is the preferred strategy.

First, one should consider the chances of invalidating each claim. Before SAS Institute, the PTAB would only institute an IPR as to those claims it thought stood a good chance of being invalidated.

As to those claims for which an IPR was not instituted, there would be no decision, and then the parties would be free later to argue anything they wished as to validity.

Now, however, the PTAB is required to issue a decision as to all claims challenged. If the PTAB rules that some claims are valid, that will make it much harder to convince a court later otherwise. So, by challenging all claims, a petitioner runs the danger of strengthening the validity of some patent claims where the invalidity arguments are weaker.

Second, the Patent Act has tough estoppel provisions. If the PTAB issues a final written decision, then the petitioner and anyone in privity is barred from making any argument (either before the PTAB or a federal court) that “the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.” 35 USC § 315(e)(1, 2).

In other words, once an IPR is launched, the petitioner must be prepared to make all arguments as to the invalidity of all the claims it challenged. Failure to raise these arguments could result in preclusion later.

A third consideration arises because of PTAB policies. Two days after the Supreme Court issued its opinion in SAS Institute, the PTAB issued a document entitled “Guidance on the Impact of SAS on AIA Trial Proceedings.” Among other things, the PTAB stated that not only would it institute an IPR as to all challenged claims, but would institute it as to “all challenges raised in the petition.”

In other words, the PTAB has now accepted on itself to pass on all argued bases for invalidity as to each challenged patent claim. This again raises the stakes – parties petitioning for review now must make sure that all challenges are solid and that they are prepared to back them up with appropriate arguments. Otherwise, they may face rejection of their arguments and then estoppel based on the statute.

In short, after SAS Institute, parties petitioning for IPR review must carefully consider which claims in a patent they wish to challenge, and what arguments they wish to advance.