The second of yesterday’s two patent decisions was SAS Institute v. Iancu. As I explained in my post about Oil States Energy Services v. Greene’s Energy Group, both cases involve the process for “inter partes review” that Congress added to the Patent Act in 2012, a process under which a competitor (or, for that matter, anyone at all) can ask the director of the Patent and Trademark Office to reconsider a previously issued patent. If the director agrees to reconsider the patent, the Patent Trial and Appeal Board then conducts a trial-like proceeding adjudicating the validity of the patent. The Supreme Court held yesterday in Oil States that Article III permits Congress to allocate that responsibility to an executive agency rather than an Article III court. This decision, though, invalidates a major part of the administrative rules under which the board has been conducting those reviews.

The specific topic before the court in SAS is the board’s practice of instituting a “partial” inter partes review, agreeing to review some but not all of the challenged claims of a patent. Commonly (as in this case), challengers file petitions that allege defects with all or substantially all of the claims in an issued patent. Seeking to allocate its adjudicative resources more efficiently, the board routinely agrees only to review the claims it finds substantial. At about the same time as it rejected constitutional challenges to the entire process, the U.S. Court of Appeals for the Federal Circuit approved the process for “partial” inter partes review. The justices, though, reject that process as wholly inconsistent with the statutory design. Notably, Justice Neil Gorsuch (who dissented sternly in Oil States) writes for a narrow 5-4 majority, over dissenting votes by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan (all of whom joined the majority in Oil States).

Gorsuch’s majority opinion does two things. The first is the less interesting – a workmanlike explanation of the reasons that persuade the majority that the partial-review process is not consistent with the best reading of the statute. To that end, Gorsuch starts by emphasizing the statute’s command that the board “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” Liberally sprinkling citations that I can omit here, he explains: “This directive is both mandatory and comprehensive. The word ‘shall’ generally imposes a nondiscretionary duty. And the word ‘any’ naturally carries ‘an expansive meaning.’ … So when [the statute] says the Board’s 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.”

Gorsuch buttresses that reading of the provision with a discussion of the statute’s structure, which contemplates a proceeding guided by the petitioner rather than the director:

This language doesn’t authorize the Director to start proceedings on his own initiative. … Instead, the statute envisions that a petitioner will seek an inter partes review … guided by a petitioner describing “each claim challenged.” … From the outset, we see that Congress chose to structure a process in which it’s the petitioner, not the Director, who gets to define the contours of the proceeding.

Similarly, the statute only authorizes the director to decide “whether to institute … review … pursuant to a petition.” For Gorsuch, the “language indicates a binary choice – either institute review or don’t. And by using the term ‘pursuant to,’ Congress told the Director what he must say yes or not to: an inter partes review that proceeds “'[i]n accordance with’ or ‘in conformance to’ the petition” (quoting definitions of “pursuant to” from the Oxford English Dictionary). Again, Gorsuch suggests that it would make no sense for the statute to require the patentholder to respond “to the petition” filed by the challenger if Congress expected the director to decide the scope of the proceeding; the statute would call for a response to the director’s institution notice.

Gorsuch is similarly unpersuaded by the director’s “attempts [at] a policy argument … that partial institution is efficient because it permits the Board to focus on the most promising challenges and avoid spending time and resources on others.” Gorsuch notes the competing arguments about institutional design from the challenger and briskly washes his hands of the matter: “Each side offers plausible reasons why its approach might make for the more efficient policy. But who should win that debate isn’t our call to make. Policy arguments are properly addressed to Congress, not this Court.”

The second thing the opinion does is far more interesting: It explains why the statute is not sufficiently ambiguous to warrant deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., which requires courts to defer to reasonable agency interpretations of ambiguous statutes. Remarkably, Gorsuch starts by noting SAS Institute’s bold suggestion that the Supreme Court abandon Chevron entirely. What Gorsuch does not do is dismiss the suggestion out of hand; indeed, he goes so far as to offer a citation to a well-regarded pre-Chevron opinion of Judge Henry Friendly explaining that “the meaning of a statutory term” is more suited for “judicial [rather than] administrative judgment.” Gorsuch then suggests that “whether Chevron should remain is a question we may leave for another day.” Falling back on the statutory analysis summarized above, Gorsuch can close by asserting that “[t]he statutory provisions before us deliver unmistakable commands,” leaving “no room in this scheme for a wholly unmentioned ‘partial institution’ power that lets the Director select only some challenged claims for decision.”

On the credibility of that discussion, suffice it to say that Breyer’s dissent (joined by Ginsburg, Sotomayor and Kagan) reads the ambiguity question quite differently. For the dissenters, the majority amends the statute to require adjudication of “‘any patent claim challenged by the petitioner’ in the petitioner’s original petition,” when the agency reasonably read the statute to require adjudication of “‘any patent claim challenged by the petitioner’ … ‘in the inter partes review proceeding.’”

If Sessions v. Dimaya, decided last week, and Oil States had not persuaded us, Gorsuch’s opinion here stakes out his position as the court’s leading skeptic of the administrative state. As I suggested in my post on Oil States yesterday, we can expect more on that front during the remaining weeks of the term.

Click for vote alignment by ideology.

Posted in SAS Institute Inc. v. Iancu, Featured, Merits Cases

Recommended Citation: Ronald Mann, Opinion analysis: Justices reject Patent and Trademark Office’s rules for partial consideration of petitions for inter partes review, SCOTUSblog (Apr. 25, 2018, 12:16 PM), http://www.scotusblog.com/2018/04/opinion-analysis-justices-reject-patent-and-trademark-offices-rules-for-partial-consideration-of-petitions-for-inter-partes-review/