The U.S. Patent and Trademark Office (PTO) has posted a notice of proposed rulemaking in response to a case decided by the Supreme Court in 2018, SAS v. Iancu, and the first item on the PTO agenda is to formally require that an inter partes review (IPR) consist of an exhaustive review of all the claims contested by the petitioner. However, Joseph Meara, a partner in the Madison, Wis., office of Foley & Lardner LLP, told BioWorld that the more significant element of the draft rule is the language questioning whether the IPR process should commence with a presumption in favor of the petitioner, a change Meara said patent owners might cheer as “a small, but potentially significant step to increase their chances of turning back petitioner challenges.”
The Supreme Court’s ruling in this case was driven by a petition from the SAS Institute Inc., of Cary, N.C., which had been involved in a lawsuit over a patent addressing methods of debugging software. SAS had sued to invalidate all 16 of the 7,110,936 patent’s claims as unpatentable, including for obviousness, but the Patent Trial and Appeal Board (PTAB) had reversed its initial finding that the fourth dependent claim could be invalidated based on evidence provided by SAS.
In that reversal, the PTAB said SAS was unable to show that prior art invalidated this claim in the ’936 patent, although the PTAB decision exercised a novel approach to claim construction analysis that had not been explicitly broached by either SAS or Complemensoft. The PTAB declined to give SAS another hearing to review the matter, and that outcome was appealed to the Court of Appeals for the Federal Circuit, which disagreed with the approach taken by the PTAB.
IPOA backed SAS over ‘plain language’
The case arrived at the Supreme Court along with a friend-of-the-court briefing by the Intellectual Property Owner’s Association (IPOA), which argued that the “plain language of the statute” as amended by the America Invents Act “requires the PTAB to issue a final written decision” for each of the claims challenged in an IPR. The IPOA briefing specifically quotes the statute as saying that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim” that is challenged. The brief further states that the Patent and Trademark Office, as the authority for the PTAB, is owed no deference because Section 318(a) of the Patent Act “plainly requires” the final decision by PTAB to address all challenged claims.
The Supreme Court found in favor of SAS, albeit in a 5-4 decision that fell along some familiar lines. Now-retired Justice Anthony Kennedy provided the swing vote as he so often did in his time at the Supreme Court, while Justices Kagan, Sotomayor, Breyer and Ginsburg dissented with the argument that the PTAB is properly executing its mandate by “weed[ing] out insubstantial challenges.” Justice Neil Gorsuch penned the majority opinion affirming that IPRs must address all contested claims, and Gorsuch made note of the fact that Judge Pauline Newman of the Federal Circuit had provided yet another dissenting view in that court’s handling of the case.
Meara said the PTO had previously adopted the practice of declining to hear some challenges for the sake of efficiency. “I think the Supreme Court decision shows that reasonable people could differ on whether the PTAB had authority to institute on less than all the challenged claims,” he said, adding that the final result at the Supreme Court suggested that the PTAB has “no authority to pick and choose” which challenges the board must address.
When asked whether the Supreme Court decision might encourage a lot of fluffy challenges to specific claims, Meara said the PTAB has already demonstrated in the months following the SAS case that it won’t reflexively institute an IPR if there seems little likelihood that the petitioner will prevail on at least one claim. Petitioners can thus damage their prospects with challenges that seem meritless to the board, Meara said, although he noted that a petitioner can challenge different claims in separate PTAB proceedings despite that the PTAB has grown wary of petitioners who evince an appetite for multiple bites at the IPR apple.
Conversely, the availability of repeated challenges seems to raise questions of estoppel, and Meara said there is a substantial debate as to whether the availability of multiple PTAB proceedings is fair to patent holders.
Effect of no presumption difficult to forecast
Meara said this first proposed change in the PTO’s Federal Register announcement reflects what has been going on at the PTAB over the past two years, however, thanks to PTO practice guidance issued in 2018. He noted that the proposal to eliminate the presumption in favor of the petitioner is an outgrowth of the case of Hulu v. Sound Innovations, itself the subject of an IPR. This change in presumption favoring the petitioner “is more interesting” than the other elements of the NPRM, Meara said, adding, “it’s unclear to me how big a change this will be,” he said.
The answer may depend on the perception of petitioners and patent owners, Meara said, adding that the current state of affairs may be seen by PTO as discouraging patent owners from filing preliminary responses to petitions for an IPR. Elimination of that presumption may encourage the patent holder to respond more vigorously at this stage of the proceedings if they perceive that their responses will have a greater effect on whether the petition is instituted. Thus, there may be a decline in rates of institution, and “potential petitioners may be concerned that this may reduce institution rates,” with the obvious benefit to patent holders, Meara noted.
“The PTO has been frankly stung by early criticism about how anti-patent the (IPR) process seemed to be,” Meara noted, and this change in presumption is part of a larger effort to correct what some in the private sector see as an inventor-unfriendly patent ecosystem. Pharmaceutical manufacturers are still big believers in the patent system, although Meara said makers of diagnostics have perhaps grown more skeptical in recent years, thanks in no small part to the subject matter eligibility question. At any rate, this change in presumption for the petitioner in IPRs “seems to be part of a trend … to try to shore up the value of a patent,” he said.