Supreme Court Issues Two Important Decisions Affecting Inter Partes Review Patent Challenges

The Supreme Court has issued two important decisions affecting Inter Partes Review (“IPR”) and other post-grant patent challenges conducted by the Patent Trial and Appeal Board (“PTAB”).

In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, the Supreme Court, in a 7–2 decision, affirmed the constitutionality of IPRs.  The issues before the Court were (1) whether IPRs violate Article III of the Constitution by allowing an executive agency (the PTAB, part of the Patent and Trademark Office)—rather than a court—to adjudicate the patentability of an issued patent and (2) whether IPRs violate the Seventh Amendment of the Constitution by adjudicating patentability without a jury.  Oil States argued that patents are private property that cannot be extinguished without a jury trial in court.  The Supreme Court disagreed, finding that patents are “public franchises” that Congress can constitutionally authorize the executive branch to revoke.

The practical result of this decision is that IPRs will continue to be an important strategic tool for challenging the validity of patents.

In SAS Institute, Inc. v. Iancu, the Supreme Court, in a 5–4 decision, reversed the PTAB’s long-standing practice of deciding whether to institute IPR challenges on a claim-by-claim basis.  The petitioner, SAS, filed a petition challenging 16 claims of a patent owned by ComplementSoft.  The PTAB instituted an IPR on only some of the challenged claims.  At the end of the IPR, the PTAB issued a final written decision that invalidated all of the instituted claims but did not address the non-instituted claims.

SAS argued on appeal, first to the Federal Circuit and then to the Supreme Court, that the PTAB is statutorily required to review, and issue a decision regarding, every claim that the petitioner challenges.  The Federal Circuit rejected this argument.  However, the Supreme Court reversed the Federal Circuit and adopted SAS’s position.  The Court focused on the plain language of the statute, which states that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”  The Court found that the word “shall” imposes a nondiscretionary duty, and the word “any” refers to every member of a group.  The Court explained that this language puts the petitioner—not the PTAB—in control of the issues that are to be decided in an IPR.  Therefore, the Court held that the decision whether to institute an IPR is an all-or-nothing choice, either requiring the denial of the entire petition, or, if an IPR is instituted, requiring the PTAB to review, and address in its final written decision, all challenged claims.

Two likely practical results of the SAS decision may affect petitioners’ decisions regarding which claims to challenge in IPRs.  First, the requirement to address all challenged claims in a final written decision will extend statutory estoppel to all challenged claims, possibly further restricting a petitioner’s ability to pursue additional validity challenges.  Second, because final written decisions are appealable to the Federal Circuit but non-institution decisions generally are not, SAS may make it easier for petitioners to appeal PTAB findings of patentability.  Further effects of the SAS decision, including how the PTAB will handle IPRs that already have been instituted against only some challenged claims, await further development.