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Posted on Thursday, May 24, 2018

Challenging Previously Issued Patents Under Inter Partes Reviews

In the April 24th decision of SAS Institute, Inc. v. Director of the U.S. Patent and Trademark Office, the U.S. Supreme Court reviewed a patent law case concerning a procedure known as inter partes review. At first blush, patent law may seem to be of little interest to the average reader. In today’s world, though, intellectual property is hugely important, and patents are an important part of intellectual property. It is unlikely that any businesses operate without using patented products, methods, or systems. Therefore, take a moment and learn a bit about inter partes review.

Inter partes review allows private parties to challenge previously issued patent claims in an adversarial process before the Patent and Trademark Office (PTO). At the outset, a party files a petition for review with the PTO and identifies the challenged claims and the grounds for challenge with particularity, 35 U. S. C. §312(a)(3). The patent owner, in turn, may file a response. §313.

The Director of the PTO has discretion to institute (proceed with) inter partes review. If the Director determines that “there is a reasonable likelihood that the petitioner would prevail on at least one of the claims challenged in the petition,” then the Director has discretion to institute review by the PTO’s Patent Trial and Appeal Board (Board). If inter partes review is instituted, the statute provides that at the end of the litigation the Board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” §318(a)(underlining supplied).

So, what is this SAS case about and how did it get to the Supreme Court? SAS filed a petition for inter partes review of a software patent of ComplementSoft. SAS challenged all 16 of the patent’s claims. The PTO’s Director determined that there was a reasonable likelihood that SAS would prevail on some of the challenged claims, but not on all challenged claims. Consequently, the Director instituted inter partes review on only some of the claims in the patent. In limiting review to only some claims, the Director relied on a Patent Office regulation recognizing a power of “partial institution” of review, 37 CFR §42.108(a). The Board’s final decision addressed only the claims on which the Director had instituted review. On appeal, the U.S. Court of Appeals for the Federal Circuit rejected SAS’s argument that §318(a) requires the Board to decide the patentability of every claim challenged in the petition.

The Supreme Court reversed and held that the plain text of §318(a) supplies a ready answer. The five-justice majority concluded that the statute is clear. The statute directs that if the Director institutes inter partes review, then the Board “shall issue” a final decision on the patentability of “any patent claim challenged by the petitioner . . . .” The word “shall” imposes a nondiscretionary duty, Lexecon, Inc. v. Milberg Weiss, 523 U.S. 26, 35 (1998), and the word “any” naturally carries an expansive meaning. United States v Gonzales, 520 U.S. 1, 5 (1997). If a statute’s language is plain, the duty of an administrative agency is to follow its commands as written, not supplant those commands with others that it may prefer.

The Court went on to say that if Congress meant to give the Director the selective power that he asserts, then Congress would have used different language expressly allowing the Board to review and reconsider only those claims on which the Director chose to institute inter partes review and to ignore other challenged claims. But the statute does not say that, and the Court will not change the statute or invent an “atextual explanation” for Congress’s drafting choices when the statute’s own terms supply the answer. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240-241 (1989). If a statute is coherent and consistent, then there is generally no need for a court to inquire beyond the plain language of the statute.

The Director also argued that the Court should defer to his interpretation of the statute, relying on Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), which held that if a statute is ambiguous, a court should defer to the interpretation of the administrative agency charged with implementing the statute. Justice Gorsuch, writing for the majority, shot this down, stating that even under Chevron a court owes an agency’s interpretation of the law no deference unless, after “employing traditional tools of statutory construction, the Court is unable to discern Congress’s meaning.” In this case, there is no uncertainty that could warrant deference. The Court also said that the Director may think that his approach makes for better policy, but policy considerations cannot create an ambiguity when the words on the page are clear.

This was a 5-to-4 decision. The dissenters, perhaps sensing a threat not only to the Chevron doctrine but also to the Court’s power to adjust statutes to achieve perceived policy goals, labored unsuccessfully to conjure a sufficient degree of statutory ambiguity to justify deference under Chevron.

Seth Berenzweig is a Managing Partner at Berenzweig Leonard LLP and can be reached at SBerenzweig@BerenzweigLaw.com. John Polk is of Special Counsel to Berenzweig Leonard and can be reached at JPolk@BerenzweigLaw.com