When The USPTO Institutes Inter Partes Review, It Must Decide Patentability Of All Challenged Claims
On April 24, 2018, in a 5-4 decision the Supreme Court held in SAS Institute Inc. v. Iancu that when the U.S. Patent and Trademark Office (“USPTO”) institutes an inter partes review, it must decide the patentability of all of the claims the petitioner challenged, based on the plain text of 35 U.S.C. § 318(a).
SAS filed a petition seeking inter partes review of all 16 claims of ComplementSoft’s software patent. The USPTO concluded SAS was likely to succeed in showing that at least some of those claims were unpatentable. Pursuant to its “partial institution” practice as set forth in USPTO regulation 37 C.F.R. § 42.108(a) (purporting to authorize “review to proceed on all or some of the challenged claims and on all or some of the grounds of unpatentability asserted for each claim”), the USPTO instituted review on some but not all of the 16 claims. Consequently, the USPTO’s final written decision addressed the patentability of only some of the claims challenged in SAS’s petition.
The Court found no basis in the statutory text or framework for the USPTO’s partial institution practice. The statute’s § 318(a) states that “[i]f an inter partes review is instituted and not dismissed . . . the [USPTO] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner” (emphasis added). The Court found that “shall” means that the USPTO “must” address all claims the petitioner challenged, and that “any” patent claim means “every” patent claim. Reasoning that inter partes review is supposed to mimic civil litigation, the Court concluded that the scope of review is defined by the petitioner’s petition, not by the USPTO’s discretion. Although the statute’s § 314(a) gives the USPTO the discretion of whether to institute review, the Court explained that this decision is “a binary choice—either institute review or don’t”; “it doesn’t follow that the statute affords [the USPTO] discretion regarding what claims that review will encompass.”
Thus, the Court’s decision abrogates the first part of 37 C.F.R. § 42.108(a). Under the Court’s decision, a final written decision must address every challenged claim. Consequently, the final written decision with respect to every challenged claim is subject to appeal to the Federal Circuit. Previously, as a practical consequence of partial institution, a petitioner would not have been able to seek review of the patentability of challenged but non-instituted claims because (1) they would not have been addressed in the final written decision, and (2) the Court’s Cuozzo decision would have prevented the appeal of the non-institution decision on patentability grounds. The Court did not discuss whether the second part of § 42.108(a) is still in effect, and thus it appears that the USTPO may continue exercising its discretion to institute on less than all grounds raised by petitioner for any given claim. And the Court did not discuss the effect, if any, of its decision on IPR estoppel attaching to final written decisions.
An underlying current in the case was the issue of Chevron deference, specifically whether the Court would accept SAS’s invitation to abandon the judicial practice of deferring to an agency’s interpretation of ambiguous statutory language. Having found that the statutory text here was plain and unambiguous, the Court concluded that it did not owe Chevron deference to the USPTO’s interpretation, and it left open the question of whether Chevron deference should remain. The dissenting justices would have found the statute ambiguous and under Chevron would have found the USPTO’s regulation was a reasonable interpretation promoting the policy of efficient, streamlined review. In any event, the majority quickly dispensed with the USPTO’s policy argument, explaining that this was an argument properly addressed to Congress, not the Court. The USPTO “may (today) think [its] approach makes for better policy” but the Court explained that a policy argument cannot create an ambiguity when the statute’s text is clear. Thus, it is up to Congress to change the statute if it favors the USPTO’s approach.