In another noteworthy year for patent law, the U.S. Supreme Court and the Federal Circuit issued several decisions that altered the patent landscape, including three Supreme Court decisions and three en banc Federal Circuit decisions. The topics of the key cases included the constitutionality and scope of inter partes reviews, venue, damages and tribal sovereign immunity.
This White Paper summarizes and explains some of the most significant patent law decisions of 2018. Each of these decisions has meaningful implications for patent owners, defendants and patent practitioners alike.
THE SUPREME COURT FINDS INTER PARTES REVIEWS CONSTITUTIONAL, BUT PTAB CANNOT CURATE CLAIMS
SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348 (2018) The Supreme Court addressed a straightforward question in SAS relating to inter partes reviews ("IPRs"): "When the Patent Office initiates an inter partes review, must it resolve all of the claims in the case, or may it choose to limit its review to only some of them?" 1
This case originated when SAS filed a petition seeking IPR of a patent owned by ComplementSoft. Although SAS sought review of all 16 claims in the patent, the Patent Trial and Appeals Board ("the Board") chose to institute review only on claims 1 and 3–10. The Board denied review with respect to claims 2 and 11–16, justifying its "partial institution" decision on U.S. Patent and Trademark Office ("PTO") regulations that provided the Board with discretion to institute review on some claims without requiring institution on all claims. Following institution, the Board found that claims 1, 3 and 5–10 were unpatentable but found that claim 4 was patentable.
SAS appealed the Board's determination, including its decision to institute review for only a subset of the claims that were included in SAS's petition. According to SAS, the America Invents Act ("AIA") (specifically, 35 U.S.C. § 318(a)2) required the Board to institute review on every claim that had been challenged in the petition. The Federal Circuit disagreed, holding that "§ 318(a) does not foreclose the claim-by-claim approach the Board adopted . . . in this case." 3 SAS (represented by Jones Day) subsequently sought (and was granted) a writ of certiorari.
The Supreme Court reversed the Federal Circuit, holding 5-4 in favor of SAS that the Board "cannot curate the claims at issue but must decide them all." 4 In a majority opinion authored by Justice Gorsuch (his first majority opinion in a patent case), the Court relied on an alternative interpretation of § 318(a). The Court focused on the statute's use of the terms "shall" and "any" in commanding that the Board "shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner" if institution is granted.5 According to the Court, the statute's use of "shall" imposes a "nondiscretionary duty" on the Board and the statute's use of "any" implies that "every" claim must be reviewed. "So when § 318(a) says the [Board's] final written decision 'shall' resolve the patentability of 'any patent claim challenged by the petitioner,' it means the Board must address every claim the petitioner has challenged." 6 In a significant passage, the Court rejected the PTO's Chevron deference argument, stating, "whether Chevron should remain is a question we may leave for another day." 7
Finally, the Court also disposed of the PTO's argument that Article III courts do not have jurisdiction to review the "partial institution" decision. Although the Supreme Court's earlier decision in Cuozzo had held that 35 U.S.C. § 314(d) precluded courts from substantively reviewing the Board's determination whether review should be granted, the Cuozzo decision did not prevent the judiciary from evaluating whether the Board had exceeded its statutory authority.8
SAS ends partial institutions and prevents the Board from picking and choosing which claims to review. Further, SAS has influenced petitioners' selection of claims to challenge and presented new issues of estoppel. Finally, SAS has caused the PTO to change its practices, such that instituted IPRs will encompass not only all challenged claims (as required by SAS), but also all grounds for challenge.9
Oil States Energy Servs., LLC v. Greene's Energy Grp., LLC 138 S. Ct. 1365 (2018)
Issued on the same day as SAS, the Supreme Court's Oil States decision was one of the most highly anticipated patent law decisions in recent memory.10 And for good reason: the Court was deciding whether the relatively new (and highly popular) IPR procedures violated Article III of the U.S. Constitution.
The case's origin followed a path that has become familiar to many in patent law: a patentee sued a competitor in a federal district court for patent infringement and, in response, the competitor challenged validity in both the district court action and by seeking IPR of the asserted patent.11 The district court and the Board reached different results—although the Board found all claims unpatentable, the district court held that some of the claims were patentable.12
On appeal to the Federal Circuit, the patentee argued that only Article III courts have jurisdiction to revoke or invalidate a patent.13 In other words, the patentee argued that the Board (part of an administrative agency) does not have jurisdiction to find the patent invalid. The Federal Circuit rejected the constitutional challenge, and the patentee sought Supreme Court review.14
In a 7-2 decision, the Court held that IPR does not violate Article III. According to the Court, resolution of the constitutional question centered on a distinction between "public rights" and "private rights." 15 The majority explained that "public rights" issues relate to matters "arising between the government and others." 16 According to Supreme Court precedent, "Congress [has] significant latitude to assign adjudication of public rights to entities other than Article III courts." 17 Thus, as the majority opinion framed the question: if patent validity relates to a matter of "public rights," then Congress may properly delegate the authority to invalidate patents to Article I bodies.
The Court then proceeded to explain that the authority to grant patents has long been considered an Article I power. Because IPR involves the "same basic matter" as issuing patents (which the Court characterized as "a second look at an earlier administrative grant of a patent"), it also falls into the "public rights" category.18 For good measure, the Court even looked to historical precedent (dating back to 17th century common law) to illustrate that both the courts and administrative bodies have the power to revoke patents.19 Finally, the Court rejected the argument that IPR violates Article III simply because it resembles district court litigation, holding that there are several differences in the rules, burdens, and procedures that distinguish IPR from district court litigation.20 Thus, the authority to cancel patents could properly be delegated to the Board in the form of IPR.
Oil States is a significant decision because it ended the "separation of powers" argument against IPRs that had been percolating in lower courts and avoided a potentially fatal blow to IPRs.
1 SAS Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1352-53 (2018) (emphasis in original).
2 35 U.S.C. § 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)."
3 SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1352 (Fed. Cir. 2016).
4 138 S. Ct. at 1353.
5 Id. at 1354 (emphasis added).
7 Id. at 1358.
9 AC Techs. S.A. v. Amazon.com, Inc., No. 2018-1433, 2019 WL 138176, at *3 (Fed. Cir. Jan. 9, 2019) ("And, we have held, if the Board institutes an IPR, it must similarly address all grounds of unpatentability raised by the petitioner.").
10 See Nix et al., "Key Patent Law Decisions of 2017" at *6-7.
11 Oil States Energy Servs, LLC v. Greene's Energy Grp., LLC, 138 S. Ct. 1365, 1372 (2018).
15 Id. at 1373.
18 Id. at 1373-75.
19 Id. at 1377.
20 Id. at 1378.
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