By Kevin E. Noonan --
Perhaps overlooked in the widespread assessments of the Supreme Court's questioning of the parties in Oil States Energy Services, LLC. v. Greene's Energy Group, LLC is the argument before the Court in SAS Institute, Inc. v. Complementsoft, LLC that immediately followed. Assuming the Court affirms the Federal Circuit in Oil States (considered likely, despite the "man bites dog" quality such decisions have had recently), the Court's decision should clarify how (and in individual cases whether) future inter parties review proceedings will proceed.
The case arose in litigation over U.S. Patent No. 7,110,936 assigned to Complementsoft. SAS filed its IPR petition on claims 1-16, and the Board instituted as to claims 1 and 3-10 on obviousness grounds. The PTAB found all instituted claims but claim 4 obvious and issued a final written decision on these claims. SAS appealed, arguing that "the Board's final written decision is deficient for failing to address the patentability of all claims SAS included in its IPR petition, including those for which the Board did not institute IPR."
The Federal Circuit held that the Board was not required to render a decision as to claims for which it did not institute the IPR, and that its decision in Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016) was controlling. In that case, the Federal Circuit held that "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." Id. at 1316–17. At least one basis for this decision was the differences between the statutory language in 35 U.S.C. § 318(a), which recited "claims challenged by the petitioner," and the language in 35 U.S.C. § 314, in which the language "claims challenged in the petition" was used to describe the institution decision. The Court held that this difference evinced a Congressional intent that the Board was able to institute on a claim-by-claim basis and was not compelled to render a decision on any non-instituted claim.
SAS's petition for certiorari set forth this Question Presented:
Whether 35 U.S.C. § 318(a), which provides that the Patent Trial and Appeal Board in an inter partes review "shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner," requires that Board to issue a final written decision as to every claim challenged by the petitioner, or whether it allows that Board to issue a final written decision with respect to the patentability of only some of the patent claims challenged by the petitioner, as the U.S. Court of Appeals for the Federal Circuit held.
At oral argument on November 27th, the Court, in particular Justice Sotomayor, questioned SAS's counsel (Gregory Castanias) on whether its argument was a poorly disguised attempt to circumvent the Court's decision in Cuozzo Speed Technologies LLC v. Lee (2016) ("Ah, you want to get around Cuozzo."). The Justice's challenge was in one way practical: how can the Board rule on claims that were not considered in the IPR because the Board exercised its discretion not to institute on those claims? And on appeal, the argument would need to be that the Board should have instituted on those claims, and that's exactly what the Court said a party could not do under the statute. Mr. Castanias's attempt to clarify his position was unavailing ("All right," said the Justice, "you do want to get around Cuozzo . . . . Because there is absolutely no way that that's anything other than that.") As to the practicalities of an appellate court reviewing patentability of uninstituted claims (where there would be "no record"), Mr. Castanias told the Court that the record before the Board is inherently fuller ("the petition filed here was a complete document") than a complaint before a district court, due to the requirement that the institution petition establish that at least one claim is unpatentable. That was not enough for the Justice ("You're asking the appellate court to decide patentability on the basis of an incomplete, undeveloped record") who expressed her view that what SAS wanted to argue was that "the Board shouldn't institute partial reviews" and that "once it determines you have enough evidence to challenge one claim, it should hold a hearing on everything. Because without that, you can't really decide patentability in a due process way, in a fair way" (perhaps being influenced somewhat by the arguments in Oil States that were heard by the Court immediately before this argument). To Mr. Castanias's agreement with those statements Justice Ginsberg rejoined "[b]ut the statute precludes you from contesting the Institution decision," putting SAS back at Square One. (At this point Mr. Castanias responded to Justice Ginsberg by answering a question the Justice had posed at the beginning of the argument.) Mr. Castanias argued that the section of PTAB regulations rejecting SAS's position that all claims should be considered did not do so in the context of § 318. His position was that Congress intended that the PTAB render a decision on "all challenged claims" and that this should include claims where review was instituted by the Board as well as claims where the Board did not grant review (as a matter of statutory interpretation).
Justice Kagan then asked about the status of cancelled claims, and whether the Board should be required to render a decision as to their patentability. In the Justice's view, SAS did not dispute that the Board was not required to render a patentability decision on cancelled claims and wanted to know what distinguished those two classes of claims. Mr. Castanias drew the distinction that "there's a world of difference between" cancelled claims and claims where the Board did not institute review, because cancelled claims "no longer exist." This was unavailing before the Justice, who understood the practical implications but did not see the difference with regard to the statutory interpretation issue.
Justice Kennedy suggested that the Board could give a petitioner the choice: either accept review on a subset of the challenged claims or forego the IPR proceeding in favor of district court litigation. While Mr. Castanias agreed, this colloquy was cut off by Justice Sotomayor who asked where in the statute was the Board "prohibited" from instituting partial review (i.e., on only some of the challenged claims). And the Justice then continued by asking why, if the Board was not so prohibited, should the Court read the statute differently than the Board has regarding the statutory requirements on the scope of the Final Written Decision under § 318? Which prompted Justice Kagan to state:
Well, one of the stories that the statute as written seems to tell is of great discretion to the Board with respect to the institution decision. . . . It says you never have to institute; it's your choice whether to institute; you can't get review of the institution decision, which is our Cuozzo case; you get to write your own rules about the institution decision, which is the -- the rule-making delegation. So it's a little bit odd to say, well, here's the one thing you don't have discretion over when it comes to institution: you can't say these claims but not those claims. In a -- in a context in which Congress said the institution decision is really for the Board, it's a discretionary decision that lies in its bailiwick, why should we carve out that one thing?
Mr. Castanias responded that as in litigation, it is typically the plaintiff who is the "master of the complaint" and that SAS petitioned the Board to institute with regard to all the claims; as it turned out what the Board actually did frustrated SAS's purpose for filing the IPR, in how it instituted with regard to one claim (claim 4) compared to another claim where it did not (claim 2). Justice Breyer raised the issue that, as SAS would have it, the Board would be subject to appeal on all challenged claims even under circumstances where petitioner had only established the likelihood that one of the claims was unpatentable ("why  would [someone] write a statute like that?") (later saying "I find it very practical to think of the statute as your opponents want it."). Mr. Castanias responded by saying that having all challenged claims capable of appeal and then properly having estoppel attach as to those claims was the reason Congress legislated IPRs.
Complementsoft's counsel, Jonathan Bond, was challenged by the Chief Justice on the differences between challenged and unchallenged claims put to the Court by SAS, which the Chief said "put[s] them in a difficult position." Mr. Bond relied on the discretion the statute gives the PTAB to make these distinctions and the burden on petitioners to make their case in the institution petition. Responding to Justice Kennedy's hypothetical that the Board could require a petitioner to withdraw a claim before institution, Mr. Bond said that it was an illustration of the "artificiality" of SAS's position that "the Board could get to the same result, just through a more cumbersome, multistage process." With regard to taking the district court option, as discussed with Mr. Castanias, Mr. Bond reminded the Court that SAS could have done that here as well ("A challenger here who's dissatisfied with the Board's decision about the scope of review can say, you know what, it's not worth our time, we can settle with the -- the Patent Owner our -- our IPR dispute, we can agree not to pursue it and can proceed in litigation.").
Justice Alito asked whether there was any ambiguity in the language of § 318 (and by implication why the statute should not be read as SAS had argued). Mr. Bond's argument was that the language was plain in context (even if ambiguous in isolation) and that this didn't pose a "hard question" (drawing an incredulous "You think that's not a hard question at least?" from Justice Alito). Justice Breyer suggested that the proper meaning of the term "patent claim" in the context of a challenged claim was only one where the Board instituted the IPR (an interpretation that the Chief characterized as "a stretch"). To Mr. Bond's reasonable foray into statutory language interpretation (on the word "any" in the statute being limited to instituted claims) Justice Alito echoed earlier argument by asking "why in the world would they phrase [its intention] 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?
Mr. Bond countered by cataloguing the many types of claims that can be encompassed by the statutory language (instituted claims, amended claims, cancelled claims, noninstituted claims), and Justice Breyer speculated that perhaps Congress enacted the statute to be intentionally vague, permitting the PTAB to "decide which way it wants to go." The Chief Justice reacted skeptically to that suggestion, and Justice Sotomayor directed the question to the differences between how Congress worded § 314 and § 318 ("If Congress intended claims challenged in the petition to be a part of 318, it could have used exactly the same words."). Mr. Bond readily agreed (although it appeared that Justice Alito did not). Justice Gorsuch raised the common-sense interpretation that the phrase as used in § 314 merely means all claims in the petition and in § 318 just means all those that are left after institution. Justice Gorsuch also interrogated Mr. Bond on the interplay of his interpretation of § 314 and § 318 with the provisions of § 316 and whether the Director has the authority to pick and choose which claims to review. Mr. Bond then presented his strongest statement of Complementsoft's position (with regard to policy and Congressional intent):
The Petitioner's all-or-nothing approach puts the Board to an untenable choice; either it wastes time on claims it's already determined don't have a reasonable likelihood of being invalidated at least based on the arguments presented in the petition, or it doesn't use this new tool at all and all of the work of creating inter partes review was for nothing.
Mr. Castanias in his rebuttal answered with "three specific responses to points made by my friend and then four broader points" (the efficiency with which he accomplished his objective caused the Chief to state at his argument's conclusion that "I thought you were being overly ambitious when you said you'd get to four points in rebuttal, but thank you, counsel" to laughter in the courtroom), addressing issues of scope, the requirements for means-plus-function claiming, the Board's purpose in rendering decisions to educate the public on the process, and Justice Breyer's speculation on the meaning of the word "any" in the statute. He also answered a question from Justice Sotomayor on the status of claims where the parties "settled" during the IPR, and a question from Justice Kagan regarding the statute's commandments prohibiting partial institution, saying clearly that "the Board has already [been] given the discretion whether to institute. The discretion whether to institute does not hide inside it a secret second level of discretion to decide to institute anything other than the petition."