Supreme Court Issues Two Decisions Impacting Practice Before the Patent Trial and Appeal Board

April 24, 2018

Today, the U.S. Supreme Court issued two decisions that will keep the Patent Trial and Appeal Board (PTAB) busier than ever. In Oil States Energy Services, LLC v. Greene's Energy Group, LLC,1 the Court affirmed that inter partes review (IPR) is constitutional. In SAS Institute Inc. v. Iancu,2 the Court reversed the PTAB's practice of limiting the patent claims considered during the trial stage. Although the cases involved IPRs, the issues decided also pertain to other PTAB proceedings, particularly post-grant review (PGR). As a result of these decisions, PGRs and IPRs will remain available to patent challengers, and the PTAB may have to look at more claims and more issues in reaching a final decision. While this is good news for petitioners seeking to challenge patents, patent owners see these decisions as further reason to seek relief from Congress.

In Oil States, the petitioner (Oil States) sued Greene's Energy for infringement. Greene's Energy responded with an IPR petition seeking a trial on the patentability of two Oil States' claims over prior art. The PTAB instituted review and ultimately held the claims unpatentable. Oil States challenged the constitutionality of IPRs; specifically, whether an agency's cancellation of a patent claim violated Article III of, or the Seventh Amendment to, the U.S. Constitution. The Article III argument urged that an agency was exercising judicial power, which is reserved for federal courts. The Seventh Amendment argument urged that claim cancellation results in a loss of property in violation of the guarantee to a jury trial. On direct appeal to the U.S. Court of Appeals for the Federal Circuit, Oil States made the same constitutional arguments; however, while the appeal was pending, the Federal Circuit decided in another appeal that neither argument was persuasive. The Federal Circuit summarily affirmed the PTAB decision. Oil States petitioned for Supreme Court review.

The Court's decision (by Justice Thomas, joined by six other justices) explained that patents are a federal-government created franchise rather than a private right. The Court has given Congress greater latitude in how "public rights" may be adjudicated, including assigning the adjudication to an agency. The Court reasoned that patents are public rights so Congress may assign review of patents, including by IPR, to an agency. Justice Breyer (with two other justices) concurred to emphasize that the decision should not be read to imply how private rights might be reviewed. Justice Gorsuch (with Chief Justice Roberts) dissented on historical grounds explaining that patents were the sort of interests that had always been determined by an independent judiciary.

In SAS, the question before the Court was whether the PTAB may elect not to address all of the challenged claims. The plain language of the statute3 indicates that the PTAB must address all challenged claims in the final decision, but this reading is in tension with other statutory provisions that grant the Board discretion in instituting and administering an IPR. The Director of the U.S. Patent and Trademark Office had resolved this tension in a rule limiting the PTAB's final decision to the claims on which the PTAB had instituted trial. SAS filed an IPR petition against ComplementSoft's software patent claims, but the PTAB only instituted review for some claims. SAS challenged this partial institution on appeal and again on petition to the Supreme Court. The new USPTO Director (Andre Iancu) replaced ComplementSoft as the respondent.

Justice Gorsuch wrote the Court's SAS opinion (joined by four justices), explaining that the Director did not have the authority to reinterpret the statute. The Court rejected the Director's assertion that the statutory design of IPRs is complex, holding instead that the institution decision is a simple yes-no decision with no other implications for the scope of the PTAB's final written decision. Congress, the Court explained, could have adopted the Director's proposed design, but did not. Many commentators had expressed hope or fear that the case would be used to undermine administrative agency discretion (the Chevron doctrine), but the Court expressly reserved that question for another day. Two dissents (involving varying combinations of the remaining four justices) attacked the majority opinion as too simplistic.

The net result is that the PTAB remains open for business reviewing patents and, if anything, must review even more than it previously has. The Supreme Court is also considering a petition to review the question of whether a patent owner who has assigned its patent to another may subsequently challenge patentability in a PTAB review, which is currently permitted.4 This has been a busy year at the Supreme Court for PTAB reviews and the results so far have been encouraging for petitioners, but disappointing for patent owners. Already Congress is considering bills to restrain PTAB reviews. These latest decisions may further shift the focus of the debate to Congress.

For further information about the Oil States or SAS decisions, please contact any member of WSGR's post-grant review practice.

Richard Torczon and Adam Burrowbridge contributed to the preparation of this WSGR Alert.

3 35 U.S.C. 318(a).
4 EVE-USA Inc. et al. v. Mentor Graphics Corp., No. 17-804.