Argument analysis: Justices debate Patent and Trademark Office’s rules limiting scope of inter partes review
on Nov 28, 2017 at 1:23 pm
The second case of yesterday’s Supreme Court patent day was SAS Institute v. Matal. I would not have been surprised if this little statutory case had been a letdown after the constitutional concerns with which the justices began their morning in Oil States Energy Services v. Greene’s Energy Group. But the justices seemed just as engaged in this one as they were in Oil States and, if anything, even less settled on how to move forward. Indeed, it is not much of an exaggeration to suggest that there were as many views on SAS Institute as there were talkative justices.
As I explained in the preview, this case involves the practice of the Patent Trial and Appeal Board’s instituting a “partial” inter-partes review, agreeing to review some but not all of the challenged claims of a patent. As the justices reaffirmed last year in Cuozzo Speed Technologies, LLC v. Lee, the statute gives the board unreviewable discretion over the decision whether to institute review; it only bars the board from initiating a proceeding unless it determines that “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”
Justice Sonia Sotomayor dominated the early minutes of the argument, which began with Gregory Castanias arguing on behalf of the challenger, SAS Institute, against partial decisions by the board. Castanias emphasized the language of Section 318 of the Patent Act, which obligates the board to “issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” In his view, the board’s practice of partial institution violates the statute because it leads to a final decision that addresses only those claims as to which the board has instituted review.
Sotomayor, though, suggested that Castanias’ argument was disingenuous: “I’m not at all clear what it is you’re challenging here. Are you challenging the Board’s right to initiate partial adjudications or are you challenging the fact that they are not addressing all of the claims in their final decision? What is it that you’re actually asking us to review?”
When Castanias responded that the board should issue a decision with regard to the unreviewed claims, she pounced: “Ahh, you want to get around Cuozzo.” After Castanias resisted, maintaining that he was asking only that the board comply with Section 318, Sotomayor interjected:
[T]hat’s exactly what you want to do. … Well, I don’t see what else you’re trying to do, because what will you do? You will come up on appeal and say the Board was wrong in not instituting review of those other claims? That’s what Cuozzo was about, us saying you can’t do that. …
Because there is absolutely no way that that’s anything other than that. …. [I]f you’re not challenging their decision not to institute review, why would that make any difference?
Sotomayor also emphasized the incongruity of forcing appellate review of the unreviewed claims, suggesting that the approach Castanias advocates would be wholly impractical: “If the Board didn’t institute review of those claims, there would be an incomplete record with respect to those other claims.” Castanias argued that the record was adequate, pointing out that under the board’s rules his client’s petition for review included an expert declaration. Sotomayor remained unconvinced: “But if the Board didn’t institute review of those other claims, the other side has not had an opportunity to present its evidence in contravention of your expert. You’re asking the appellate court to decide patentability on the basis of an incomplete, undeveloped record.”
Justice Elena Kagan also challenged Castanias, but her concerns related to the language of Section 318. Castanias agreed with Kagan that the board had no obligation to address patent claims that were cancelled before the conclusion of the proceeding, explaining that as a practical matter those claims were “no longer in dispute.” But for Kagan, that concession made it difficult to credit Castanias’ view that the statute obligates the board to issue a decision on unreviewed claims. As she put it, the statute makes no distinction between cancelled and noncancelled claims: “This one also is no longer in dispute. … And I think what the Board would say is that the same thing is true here, there’s nothing to adjudicate because they have said that it doesn’t pass the threshold, so they’re not in the business of adjudicating it.”
The broad statutory grant of discretion seemed to have persuaded Kagan, like Sotomayor, to tolerate the board’s practice. In the end, Kagan concluded:
[O]ne 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 … . So it’s a little bit odd to say, well, here’s 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 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?
Justice Stephen Breyer seemed to agree that the board’s approach, which allows it to focus its resources on the challenges that seem to it most substantial, makes sense as a practical matter. The language of the statute left enough “opening and ambiguity” to permit Breyer to accept Castanias’ reading of the text. He was reluctant to do so, he explained, because he “was having trouble … trying to imagine what the purpose would be of writing a statute the way you want, though I find it very practical to think of the statute as your opponents want it.”
Justice Anthony Kennedy offered yet another approach, proposing a Solomonic solution to Castanias: “Could the Board contact the parties and say, we will not grant review as to all of the challenges claimed, but if you reduce it to just claims 3 and 4, we will hear it? Could the Board do that?” Castanias happily embraced that solution, explaining that his client well might prefer to abandon the board’s process and proceed directly to litigation if it understood up front that the process would produce only a limited assessment of its claims. Kennedy offered the same suggestion to Jonathan Bond, who appeared on behalf of the government in defense of the board’s practice. As Kennedy put it, “why couldn’t the Board just say we decline to grant it unless you … eliminate this claim.” Kennedy seemed taken with this idea, pointing out that “then we can rule against you, and there’s no real problem, … because the challengers might say … in that event, we’ll just go to the district court. We don’t want [a partial review].”
On the other side of the matter, Justice Samuel Alito and Chief Justice John Roberts repeatedly challenged Bond, arguing that the board’s practice cannot be reconciled with the clear command of Section 318. Alito derided Bond when Bond argued, as he had in his brief, that the reference to a claim “challenged by the petitioner” is ambiguous: “[Y]ou think that is a serious interpretation of this challenge — they challenged it in a discussion in their office. They challenged it in a discussion in a bar. It means challenged it in this proceeding. What else could it mean?”
Sotomayor intervened in Bond’s support, commenting that “there is one very telling sign that the ‘any patent claim challenged by the Petitioner’ has a different meaning, and that’s in 314 [the section that grants the Board discretion over instituting review], which says ‘claims challenged in the petition.’ If Congress intended claims challenged in the petition to be a part of 318, it could have used exactly the same words.” But Roberts seemed no more persuaded than Alito, commenting to Bond that his reading of the statute seemed “a fairly complicated and refined stretch of any claim challenged by the Petitioner.”
Justice Neil Gorsuch took yet another tack, suggesting that the statutory framework gives the board’s director a narrower authority than some of his colleagues had discerned: “I’d agree with you that you’[r]e given great disc[ret]ion on the standards for showing sufficient grounds to institute a review. I’m not sure, I guess you can help me on how that also includes the authority whether to grant review of this or that claim, the weeding out process.” As Gorsuch read the statute, “it might affect the reasonable likelihood inquiry and how the director is going to go about doing that, but … I guess it’s a little less clear to me how it also grants him authority or her authority to decide which claims to proceed with.”
Apparently wedded to the premise that the statute accords the director little or no discretion on the point at issue here, Gorsuch repeatedly offered the idea that Section 314 “cut[s] against the government … by suggesting that all the PTO needs to do is decide whether there is one claim that isn’t frivolous … that’s the sum total of its job under the plain terms. … [A]nd beyond that, it need not go further.” As he put it, “in 314 … all the PTO has to do is decide whether there is one non-frivolous claim. It’s a thumbs-up or a thumbs-down decision … that’s anticipated there, … not a claim-by-claim examination.”
The wide variety of views makes it foolhardy to suggest how the case will come out. The most I can say is that it seems most unlikely that the justices will find a consensus that can bridge the disparity between the apparently settled views of justices as much at odds as Sotomayor and Gorsuch seemed at the argument. I would expect a wait of several months followed by a divided decision. Ironically, this relatively slight question of statutory interpretation might end up being more contentious than the weightier constitutional issues considered earlier in the day in Oil States.