Second Patent Case at Supreme Court Could Have Big Impact

Access practice tools, as well as industry leading news, customizable alerts, dockets, and primary content, including a comprehensive collection of case law, dockets, and regulations. Leverage...

By Tony Dutra

Alleged infringers could see their courtroom options curtailed if the U.S. Supreme Court forces the Patent and Trademark Office to address all arguments made against a patent’s validity in its final written decisions—ensuring they can’t be brought up again.

The high court will hear arguments Nov. 27 in SAS Institute Inc. v. Matal about whether the PTO failed to properly follow Congress’s wishes by letting its Patent Trial and Appeal Board, early on in the process, skip less compelling arguments in a patent challenge.

A Supreme Court reversal could have “ripple effects” at the PTAB, in patent litigation, and beyond, Jason E. Stach a partner who leads the PTAB trials practice at Finnegan, Henderson, Farabow, Garrett & Dunner LLP, Atlanta, said. That’s because the case deals directly with how administrative agencies, such as the PTO, build rules to implement laws.

Under current law, the PTAB’s rejection of some, but not all, invalidity arguments early in a trial doesn’t bar a challenger from reprising those losing arguments later in federal court or at the U.S. International Trade Commission. SAS Institute is asking the high court to reverse that standard and force the board to give a full accounting of each patent claim at the end of trial. The estoppel provisions of the America Invents Act of 2011 would then apply to every argument the petitioner made—blocking them from being used in court.

The case has largely been overshadowed by Oil States Energy Servs., LLC v. Greene’s Energy Grp., LLC, which the court will hear an hour earlier the same day. Only two friends-of-the-court briefs were filed in the SAS Institute case, while 58 amicus briefs were filed in Oil States. Oil States questions whether the PTAB patent validity trials are constitutional—potentially wiping out the entire system—but SAS Institute’s challenge is only on how the PTO set the rules for the proceedings.

The Supreme Court could make a broader point in SAS Institute, and administrative law watchers should be paying more attention, Stach said. SAS Institute wants the high court to overturn the PTO’s interpretation of certain AIA provisions, and the court could take the case in order to address deference to any administrative agency’s statutory interpretation, Stach said in an email.

Currently, federal courts are highly deferential to agency interpretations under the Supreme Court’s 1984 ruling in Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc. But the court’s newest member, Justice Neil M. Gorsuch, has signaled his desire to do away with Chevron deference, and SAS Institute may be the first opportunity he has to make that point to his colleagues, Stach said.

Patent Issue: Estoppel

The patent-related ambiguity in SAS Institute arises from the PTAB’s implementation of AIA challenges in two stages: a decision on the petition—whether to institute trial or not—and then a trial ending with a final written decision, “with respect to the patentability of any patent claim challenged by the petitioner.” SAS Institute argues that the final decision must encompass every claim in the original petition; the government maintains that “any” means only any claim addressed in the second stage, the trial.

Under current U.S. Court of Appeals for the Federal Circuit law, estoppel, as laid out in the AIA, doesn’t apply to the claims that don’t even reach trial; it only applies to claims addressed in the final decision.

A Supreme Court ruling that would make stage-one rejections a part of the stage-two decision would appear to favor patentees, giving broader estoppel. But the patent-owning community hasn’t come out in force for SAS Institute’s position. Only the Intellectual Property Owners Association supported reversal, while the Houston Intellectual Property Law Association supported the status quo.

Downside for Patent Owners

“Curiously, the patent bar seems conflicted as to whether a reversal would be good or bad for patentees,” David J. Thibodeau, a partner at VLP Law Group LLP, Boston, noted.

Thibodeau gave two reasons for why patent owners might not want the change SAS Institute seeks. A full trial on all claims challenged might “encourage petitioners to make as many arguments as possible,” he said. He also said that patent owners may benefit from partial coverage at the PTAB because of the impact on a parallel proceeding in federal court. A federal judge might be inclined to lift a stay on a case knowing that “at least some other claims will remain on the table after the PTAB’s decision,” Thibodeau said.

Another possible downside, according to Eugene M. Paige, a litigator with Keker, Van Nest & Peters, San Francisco, is that the AIA does not allow PTAB challengers to appeal stage-one decisions to the Federal Circuit. But if the Supreme Court ends partial trials, challengers would be able to appeal rulings on all claims challenged—not just the ones that went to trial.

One upside for patent owners is that the PTAB might grant fewer trials, Paige said. It could refuse to institute trials “where only one or two claims out of a large number of claims are likely to be invalid,” he said. The AIA doesn’t “command” that the PTAB institute review when it thinks one claim may be invalid, Paige said.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Intellectual Property on Bloomberg Law