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Supreme Court’s Decision in Oil States Greases the Wheels for “All-In” PTAB Proceedings

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On April 24, 2018, the Supreme Court issued two important decisions addressing inter partes review (“IPR”) challenges before the U.S. Patent and Trademark Office (“PTO”). In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, No. 16-712 (U.S. Apr. 24, 2018), the Court affirmed the constitutionality of IPR proceedings, holding that patents are public rights that may be reconsidered and withdrawn under the authority granted to the PTO by Congress. Additionally, in SAS Institute Inc. v. Iancu, No. 16-969 (U.S. Apr. 24, 2018), the Court held that an instituted IPR must address the patentability of every claim challenged by the petitioner, ending the PTO’s practice of “partial institution” on some challenged claims and denying review of others.

Oil States involved a challenge to the constitutionality of IPR proceedings, which have been used to challenge thousands of issued patents at the PTO since 2012. The patent owner, Oil States, argued that IPRs violate Article III and the Seventh Amendment of the Constitution by terminating a private right in a non-Article III tribunal and without a jury. The Supreme Court, in a 7-2 decision authored by Justice Thomas, held that IPRs do not violate Article III because patents are public, not private, rights, for which Congress has broad authority to assign to non-Article III courts for adjudication. Justice Thomas explained that the Court has long recognized that the grant of a patent involves public rights, because it involves a matter “arising between the government and others” — the grant of a “public franchise.” The reconsideration of a granted patent in an IPR is no different, as it “involves the same basic matter” and “the same interests as the determination to grant a patent in the first instance.” The fact that an IPR occurs after a patent has issued makes no difference, as the patent remains subject to the PTO’s authority.

The Court further explained that its prior decisions referring to patent rights as “private property rights” did not foreclose post-issuance administrative review of patents and were merely descriptive of the statutory scheme of the 1870 Patent Act, which did not include any such post-issuance reviews. Indeed, 18th-century England had a system for canceling patents through the Privy Council that closely resembled the current IPR regime, and as such it was known at the Founding that a patent could be granted subject to administrative cancellation. The Court was careful to point out the limits of its decision, however, and noted that its holding concerning IPRs “should not be misconstrued as suggesting that patents are not property for the purposes of the Due Process Clause or the Takings Clause.” Finally, the Court held that its Article III holding also resolved Oil States’ Seventh Amendment challenge, because a jury is not required in a non-Article III tribunal. Justice Breyer authored a concurring opinion, joined by Justices Ginsburg and Sotomayor. Justice Gorsuch dissented, joined by Chief Justice Roberts.

In SAS Institute, SAS had filed an IPR petition challenging all claims of a patent, but the PTO instituted review on only some of those claims. SAS appealed that “partial institution” to the Federal Circuit, which affirmed the PTO’s practice. The Supreme Court, in a 5-4 decision authored by Justice Gorsuch, reversed and held that the plain language of 35 U.S.C. § 318(a) requires the PTO to address all claims challenged by a petitioner in instituted IPRs, not just the subset of claims deemed worthy of review by the PTO. Section 318(a) states that “[i]f an inter partes review is instituted and not dismissed under this chapter, 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 and any new claim added under section 316(d)” (emphases added). “Any” ordinarily refers to “every member of the class or group,” and therefore the statute’s mandatory use of “shall” means “the Board must address every claim the petitioner has challenged.”

The Court rejected the PTO’s argument that it retains discretion to decide which claims to review, stating that a “partial institution” power does not appear anywhere in the statutory text. If Congress had wanted to grant such a power, it knew how to do so, but instead Congress “chose to structure a process in which it’s the petitioner, not the Director, who gets to define the contours of the proceeding.” The PTO’s position was likewise not entitled to Chevron deference, given the clear language of the statute. Finally, the Court held that, although the decision to institute an IPR is “final and nonappealable,” judicial review remained available to ensure that the PTO does not exceed its statutory bounds. Justice Ginsburg filed a dissent, joined by Justices Breyer, Sotomayor, and Kagan. Justice Breyer also filed a dissenting opinion, joined by Justices Ginsburg and Sotomayor, and Justice Kagan in part.

What This Means for You

The Supreme Court’s decisions leave the IPR system intact and force the PTO to address all challenged claims in its final written decisions. This means petitioners will continue to have access to the PTAB as an alternative forum to pursue invalidation of patent claims based on prior art. The requirement that the PTAB must address all challenged claims in final written decisions may have interesting practical effects. It may mean greater application of IPR estoppel provisions, as there will no longer be “partial institutions” involving some uninstituted claims. It is also possible that the unavailability of a less-than-all approach, and concomitant increase in the PTAB’s workload, perhaps has a chilling effect on the grant of PTAB review. On the other hand, the Supreme Court’s decision may result in the PTAB altering its procedures, resulting in less detailed institution decisions that merely assess whether there is “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition,” 35 U.S.C. § 314(a), and reserving the claim-by-claim analysis of all challenged claims for the final written decision.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.