SAS v. Matal – Overview of Oral Arguments in the Supreme Court

On Monday, November 27, 2017, the Supreme Court heard oral arguments in SAS Institute v. Matal.

Issue presented

Whether 35 U.S.C. § 318(a) requires that the Patent Trial and Appeal Board (PTAB or Board) issue a final written decision as to every claim challenged by a petitioner, or does it allow the Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner.

Background

On September 14, 2012, ComplementSoft sued SAS in the Northern District of Illinois for infringement of U.S. Patent No. 7,110,936.  On March 29, 2013, SAS filed a petition with the PTAB for inter partes review (IPR) of the ‘936 Patent, challenging patentability of all 16 claims of that patent.  The PTAB instituted IPR as to 9 claims (1 and 3-10) of the ‘936 patent and on August 6, 2014 issued a final written decision under 35 U.S.C. § 318(a), holding that claim 4 was not invalid over prior art, whereas claims 1-3 and 5-10 were unpatentable.  SAS’ request for rehearing before the Board was denied.  On June 10, 2016, the 2-1 divided Panel of the Federal Circuit Rejected SAS’s argument that the Board must address all claims challenged in an IPR petition in its final written decision, and affirmed the PTAB’s decision, except vacated with respect to claim 4.   The Panel consisted of Judges Stoll, Chen, and Newman, with Judge Newman dissenting in part.  As Judge Stoll stated, there is “no statutory requirement that the Board’s final decision address every claim raised in a petition for inter partes review.  Section 318(a) only requires the Board to address claims as to which review was granted.” The Federal Circuit reasoned that 35 U.S.C. § 314  and 35 U.S.C. § 318(a) are different and that § 318(a) “does not foreclose the claim-by-claim approach the Board adopted [in Synopsys] and in this case.” In a dissenting opinion, Judge Newman stated that 35 U.S.C. § 314(a) required USPTO either refuse to institute IPR entirely, or to review all challenged claims when "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”

In Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (2016), where Judge Newman also dissented, the Federal Circuit held that the PTAB can institute an IPR on a claim-by-claim basis such that a final written decision can address claims that are different than the claims raised in the petition.

On November 7, 2016, the Federal Circuit denied SAS’ petition for rehearing en banc on the issue of whether the Board was obligated to issue a final written decision on all 16 of the challenged claims. Judge Newman dissented on the same basis.

In the case before the Supreme Court, the Petitioner SAS argued that the plain text of 35 U.S.C. § 318 (“plainest of English”) required the PTAB to issue a final written decision with respect to the patentability of all of the claims challenged in a petition for an IPR before the PTAB. In particular, in its brief, SAS argued that “shall” is “the language of command,” and “any” claim in 35 U.S.C. §318 means “all” challenged claims.  The Respondent USPTO disagreed and argued that 35 U.S.C. §  314(a) explicitly requires claim-specific analysis and that, within Section 318(a), the phrase “any patent claim challenged by the petitioner” (35 U.S.C. 318(a)) is most naturally read to refer to the claims that are challenged within the instituted inter partes review itself—i.e., the claims as to which the USPTO previously instituted review.”  ComplementSoft’s arguments echoed the USPTO’s position, stating that the “bedrock principle that patent law involves an inherently claim-by-claim analysis, the decision to institute on some but not all claims is a determination whether to institute, and the no-appeal provision should apply to it”

November 27, 2017 Oral Arguments

Petitioner SAS

Justice Sotomayor questioned Petitioner SAS as to what exactly was the Petitioner challenging –  “the only power [the Board is] given is to decide the patentability of claims. So what exactly is it that you're asking them to do?” In response to Justice Sotomayor’s inquiry whether SAS was “trying to get around Cuozzo,” Petitioner stated that this was not the case and that SAS’ argument was “that 318(a) by its terms, by its text, requires a final written decision,” and that SAS’ position is “whatever institution means when the Board says we're only instituting as to these particular claims, it doesn't take into account the fact -- and this was not addressed in Cuozzo -- that 318(a) by its terms, by its text, requires a final written decision.”

Petitioner stated its view that a challenged, but then cancelled claim in an IPR petition does not need to be addressed in a final written decision.  Justice Kagan questioned the difference between a canceled claim and a non-instituted claim that the Board has determined “doesn’t pass the threshold” and therefore “there's nothing to adjudicate.”  In this respect, during Petitioner’s rebuttal argument, Justice Sotomayor asked whether SAS believes the Board must issue a final written decision on a settled claim which was “in the petition,” to which Petitioner responded in the negative – “it’s no longer a claim challenged by the petitioner.”

Petitioner SAS argued that “the statute invests the Board with the discretion at the outset whether or not, that  binary choice, whether or not to institute” IPR, but that the statute “doesn't say whether and if so as to which claims.”  Justice Kennedy asked “[c]ould the Board contact the parties and say, we will not grant review as to all of the challenges claimed, but if you reduce it to just claims 3 and 4, we will hear it,” and SAS agreed that “the Board could do that and then leave the Petitioner with the election at that point to say, you know what, we think we'd rather go challenge all the claims in district court and have -­ have to pay for one proceeding, rather than two.”

Respondent USPTO

The government started off by saying that, when the Board decided not to institute IPR on some of the challenged claims, those claims were “never part of the instituted proceeding, and there's nothing in the statute that requires the Board to institute or to include in its final decision claims that were never part of the proceeding in the first place.”

Justice Kennedy asked whether the Board could say that they “decline to grant [an IPR petition] unless you reduce the -- unless you eliminate this claim.”  The government indicated that the Board could do that.

Justice Alito questioned as to the ambiguity of the language of Section 318:

“If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final decision with respect to the patentability of any patent claim challenged by the Petitioner. What is ambiguous about that?”

The government responded that “challenged by the Petitioner” means “within the merits phase that the opening clause presupposes has taken place.”  And Justice Alito again questioned:

“If Congress wanted to say what you think this means, why in the world would they phrase it the way it is phrased in 318(a)? Why wouldn't they say with respect to the patentability of any claim found by the director to have at least some likelihood of success? Or any claim on which review was granted? Why in the world would they say any patent claim challenged by the Petitioner?”

Chief Justice Roberts similarly questioned the government’s interpretation of the term “any claim challenged by the Petitioner.”  And Justice Sotomayor stated that “there is one very telling sign that the ‘any patent claim challenged by the Petitioner’ has a different meaning, and that's in 314 itself, which says ‘claims challenged in the petition.’ If Congress intended claims challenged in the petition to be a part of 318, it could have used exactly the same words.”

Justice Alito asked why the Board needs to go through a full proceeding with respect claims that were found at the outset to have no likelihood of success claims – “can [the Board] just say in a summary form we found that these have no likelihood of success? And then that could be appealed to the Federal Circuit and the Federal Circuit could decide whether that -- that determination was permissible.”

Justice Gorsuch touched on the subject of efficiency – “could [efficiency from the economy's perspective] be a reason here why Congress might have wanted the Patent Office to review any -- and -- and issue a final decision on any and all claims brought to it?”  The government responded that the partial institution enhances efficiency and that an IPR, given that it is limited to 102 and 103 prior art and “to particular claims that this petitioner brings to the PTO,” “can't be viewed as a substitute for litigation such that someone could reasonably look at the scheme and say Congress wanted all of these claims decided either in one forum or the other. It's baked into the scheme that there will be this potential for some claims to be reviewed by the PTO and others in court.”  Justice Gorsuch also stated that, under Section 314 “all the PTO has to do is decide whether there is one non-frivolous claim,” but he questioned how the director is given authority to decide which claims to proceed with – “authority whether to grant review of this or that claim, the weeding out process.”

Conclusion

The discussion focused on the interpretation of statutory language, particularly the language of 35 U.S.C. § 318(a).  Both Petitioner and Respondents appear to set forth cogent arguments, though the Board seems to be somewhat more favorably inclined towards the government’s position.  Given the variety of Justices’ inquiries of counsel, it is not clear which way the Supreme Court will decide.  In the meantime, IPR practice remains the same and the Board will continue issuing final written decisions on instituted claims only.

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