Supreme Court Strikes Down “Partial” Administrative Reviews of Patent Claims

Supreme Court Strikes Down “Partial” Administrative Reviews of Patent Claims

Legal Sidebari

Supreme Court Strikes Down “Partial”
Administrative Reviews of Patent Claims
May 23, 2018
In SAS Institute, Inc. v. Iancu, the U.S. Supreme Court concluded that the Director of the U.S. Patent and
Trademark Office (USPTO) has no authority to limit administrative review of previously issued patent
claims to only some of the claims challenged by a private party. The Court held that once the USPTO
Director (Director) chooses to institute an “inter partes review” (IPR) of patent claims, he must decide the
patentability of all claims challenged in the private party’s original petition requesting IPR. This Sidebar
discusses the case’s background, the Court’s decision, and its implications for the patent system.
Background
A patent is a type of intellectual property granted by the federal government pursuant to Congress’s
constitutional authority to promote and reward scientific and technological progress. Patents offer
individuals, companies, and institutions economic incentives to engage in research and development
activities that may lead to innovative designs and processes. Patent holders enjoy an exclusive right to
exclude others from making, using, offering for sale, or selling their invention throughout the United
States, or importing the invention into the United States, for a limited period of time, during which they
may try to recoup their investments through use of the invention, sale of licenses, and collection of
royalty payments. In exchange for this monopoly, patent holders must publicly share their discoveries and
creations; such disclosure may “stimulate further innovation” and permits the public to use the invention
upon expiration of the patent.
The Patent Act charges the USPTO with the responsibility for granting and issuing patents. Inventors are
entitled to a patent if USPTO examiners believe their invention satisfies statutory patentability standards.
Specifically, the new invention must be (1) patentable subject matter (a “process, machine, manufacture,
or composition of matter”) and (2) novel, nonobvious, and useful. An application for a patent consists of
two primary parts: (1) a “specification,” which is a written description of the invention that would enable
a person skilled in the particular technology field to make or use the invention, and (2) one or more
“claims” that describe the parameters of the subject matter that the applicant considers his invention or
discovery and define the scope of their patent rights.
Inter Partes Review. Although issued patents are presumed to be valid, the public may challenge their
validity either in litigation (as an affirmative defense or counterclaim when sued for patent infringement,
Congressional Research Service
https://crsreports.congress.gov
LSB10137
CRS INSIGHT
Prepared for Members and
Committees of Congress

Congressional Research Service
2
or in a declaratory judgment action) or request a review of the validity of patent claims in one of several
administrative proceedings conducted by an adjudicatory body within the USPTO called the Patent Trial
and Appeal Board (PTAB). During “inter partes review,” the PTAB has the authority to reexamine and
possibly cancel a patent claim that the USPTO had previously granted. An IPR may be instituted after a
petition is filed by “a person who is not the owner of a patent,” and only after “the Director determines
that the information presented in the petition . . . shows that there is a reasonable likelihood that the
petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” The petition
may request the cancellation of one or more issued patent claims on the grounds that they fail to satisfy
the patentability standards of novelty and nonobviousness.
If an IPR is instituted, the PTAB must issue a final written decision regarding the patentability of the
challenged claims within a year of the IPR’s commencement, with an extension of six months possible for
good cause shown. The Director must then issue a certificate that cancels patent claims determined to be
unpatentable; confirms claims determined to be patentable; and incorporates in the patent any new or
amended claims determined to be patentable. A party dissatisfied with the PTAB’s final written decision
may appeal to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit).
Partial Institution of IPR. In August 2012, the USPTO exercised its statutory authority to promulgate
regulations establishing and governing IPR. One of these regulations asserts the Director’s power to
institute an administrative review as to “all or some” of the patent claims challenged in the IPR petition,
and “on all or some of the grounds of unpatentability asserted for each claim.” (In this context, a “ground”
is the basis upon which the petitioner relies for arguing the invalidity of each patent claim.) The practice
of “partial institution” of IPR, in which the Director decides to review only certain patent claims
challenged in a petition, was the focus of the Supreme Court’s scrutiny in SAS Institute v. Iancu.
Lower Court Litigation. In SAS Institute v. Iancu, SAS Institute petitioned for IPR of all sixteen claims of
ComplementSoft’s software patent, alleging the patent claims were unpatentable because they were
obvious or not novel. Asserting authority under the USPTO’s “partial institution” regulation, the Director
agreed to review only nine of the claims challenged in SAS’s petition and denied IPR of the rest. The
PTAB issued a final written decision upholding one of the claims and finding the remaining eight to be
unpatentable; however, the decision did not address the seven claims that the Director declined to include
in the IPR. SAS appealed the PTAB’s decision to the Federal Circuit, arguing that the IPR statute
commands the PTAB to decide the validity of every patent claim SAS challenged in its petition. A divided
panel of the Federal Circuit disagreed, finding “no statutory requirement” that the PTAB must consider
the patentability of all claims raised in an IPR petition, and construing the IPR statute as “only requir[ing]
the Board to address claims as to which review was granted.”
The Supreme Court’s Decision
By a 5-4 vote, the Court determined that the USPTO Director lacks the statutory authority to “curate the
claims” challenged in an IPR petition. Instead, the Court held that once the Director agrees to institute an
IPR, the patentability of every claim challenged in the petition must be decided in the administrative
review proceeding. The Court’s opinion, authored by Justice Gorsuch, concluded that the “plain text” of
the IPR statute—which states that the PTAB “shall issue a final written decision with respect to the
patentability of any patent claim challenged by the petitioner”—imposes a “nondiscretionary duty” on the
Director to resolve the patentability of each and every claim the petitioner has challenged. In support of
this interpretation, Justice Gorsuch cited a dictionary definition of the word “any” and Supreme Court
precedents regarding the meaning of both “any” and “shall.” In addition, he observed that the IPR statute
does not authorize the Director to institute IPR proceedings on his own. Rather, the Director is authorized
to decide “whether to institute an [IPR] . . . pursuant to a petition” filed by a third party, statutory
“language [that] indicates [the Director has] a binary choice—either institute review or don’t.” Finally, the
Court reasoned that the statute’s use of the phrase “pursuant to a petition” indicates that the Director must

Congressional Research Service
3
choose to institute an IPR that is in accordance with, or in conformity to, the petition. Under this statutory
interpretation, the Court determined that the Director lacked the authority “to depart from the petition and
institute a different inter partes review of his own design.”
Justice Gorsuch found further support for the Court’s conclusion by contrasting the IPR statute with the
statute governing another type of administrative proceeding—ex parte reexamination—that allows the
Director to investigate a question of patentability “[o]n his own initiative, and any time” he chooses.
Compared to the “agency-led, inquisitorial” approach under the ex parte reexamination statute, Congress
elected to create a “party-directed, adversarial process” for IPR. Justice Gorsuch noted that the ex parte
reexamination statute permits “the Director to institute proceedings on a claim-by-claim and ground-by-
ground basis,” which is a “known and readily available approach” that Congress did not apply to IPR.
The Court dismissed the policy argument raised by the Director, and echoed in the dissenting opinions
written by Justice Ginsburg and Justice Breyer, claiming that partial institution promotes efficiency by
allowing the PTAB “to focus on the most promising challenges and avoid spending time and resources on
others.” (In contrast, SAS made a policy argument that partial institution creates inefficiencies by opening
up the possibility that patent claims the Director declines to include in IPR will be litigated in federal
court). While acknowledging that “[e]ach side offers plausible reasons why its approach might make for
the more efficient policy,” Justice Gorsuch stated that “[p]olicy arguments are properly addressed to
Congress, not this Court.” Finally, he rejected the Director’s assertion that because the IPR statute “is at
least ambiguous on the propriety of” partial institution, the Court should defer to the USPTO’s reasonable
interpretation of the statute under the Chevron framework for judicial review of agency actions. The Court
determined that there was “no uncertainty” as to the meaning of the IPR statute that would warrant the
application of Chevron deference to the USPTO’s interpretation. Justice Gorsuch also declined SAS’s
suggestion that the Court use this case as an opportunity to abandon Chevron, stating that “whether
Chevron should remain is a question we may leave for another day.”
Dissenting Opinions. In her dissenting opinion, Justice Ginsburg criticized “the Court’s wooden reading”
of the IPR statute that “preclude[s] the Board’s . . . rational way to weed out insubstantial challenges” to
patent claims. In a lengthier dissent, Justice Breyer concluded that the IPR statute “leaves a gap” after the
phrase “any patent claim challenged by the petitioner” that the USPTO has the authority to fill. He noted
that the phrase “challenged by the petitioner” could mean either the claims in the petitioner’s initial IPR
petition or only the claims that are admitted to the IPR proceeding. Given his stance that the statute
contains this ambiguity, Justice Breyer would have applied the Chevron doctrine and upheld the partial
institution regulation as a reasonable exercise of the USPTO’s rulemaking authority under the statute.
Implementation, Implications, and Potential Impacts
On April 26, 2018, the PTAB issued a preliminary guidance document describing how it will implement
the requirements of the Supreme Court’s decision. Among other things, the PTAB explained that, in light
of the Court’s opinion, it will decide to institute IPR “as to all claims or none” and, furthermore, if
instituted, the PTAB will consider “all challenges raised in the petition.” (Note that SAS Institute
addressed only whether the PTAB must review every patent claim challenged in a petition, and did not
expressly mention whether the PTAB must review every ground of unpatentability that the petitioner
asserted for each claim. Although the Chief PTAB Judge has acknowledged this potential ambiguity in
SAS Institute, the Board’s use of the phrase “all challenges” indicates it has chosen to review every claim
and every ground of unpatentability raised in a petition.) For any “partially instituted” proceedings
pending at the time SAS Institute was released, the PTAB “may issue an order supplementing the
institution decision” to consider the other claims and grounds raised in the petition and may allow the
parties additional briefing, time, discovery, or other actions to address the additional claims.

Congressional Research Service
4
SAS Institute has the potential to impact the USPTO’s operations and workload by eliminating a practice
that allowed the agency to limit the number of challenged patent claims that were analyzed in an IPR.
Instead, as discussed above, SAS Institute requires the PTAB to address all patent claims challenged in a
petition, which may increase its workload (and potentially, the workload of the Federal Circuit, which
hears appeals from the PTAB). It is possible that, because the decision to institute IPR is discretionary, the
PTAB could be wary of approving a petition that would likely consume a lot of PTAB resources and
potentially cause the IPR proceeding to exceed its statutory time limits of 1 or 1.5 years, potentially
leading the PTAB to deny a greater number of petitions. It is also possible that, because the PTAB’s final
written decision must now address the patentability of every claim, the PTAB may need to write longer
decisions in order to explain why it is upholding or invalidating each claim challenged in a petition (or
conversely, the decisions may become more cursory because there is more work to be done). In her
dissent, Justice Ginsburg noted that the PTAB could still find a way to conduct an IPR only with respect
to challenges that it determines have a “reasonable likelihood” of success: the Board could simply deny
the original petition and simultaneously inform the petitioner “that one or more specified claims warrant
reexamination, while others challenged in the petition do not. Petitioners would then be free to file new or
amended petitions shorn of challenges the Board finds unworthy of inter partes review.”
The Court’s decision also could raise strategic and procedural issues for parties involved in patent
litigation. For example, parties may want to consider carefully whether to challenge patent claims
administratively or in court (and, furthermore, which patent claims and on what grounds of
unpatentability). For instance, the Patent Act specifies that if a patent claim survives an IPR, the
individual who commenced the IPR (and his privies) are barred, in any future administrative or judicial
proceeding, from asserting that “the claim is invalid on any ground that the petitioner raised or reasonably
could have been raised during” IPR. This “estoppel” provision prevents a party from getting more than
one chance to seek an administrative or judicial review of patent claims. Before SAS Institute, courts were
somewhat divided about the extent to which a petitioner is foreclosed from judicially or administratively
challenging any claims for which IPR was not instituted. Following SAS Institute, the petitioner would
appear to be precluded from litigating, in another legal forum, the grounds for unpatentability of any
claim challenged in an IPR petition because the PTAB would have issued a final decision regarding every
ground asserted in the petition.
If Congress has concerns about SAS Institute’s consistency with legislative intent and its impact on the
patent system, Congress could respond to the Court’s opinion in several ways. For example, Congress
could choose to amend the Patent Act to codify the Director’s previous “partial institution” practice of
allowing IPR on a claim-by-claim basis. Congress may also conduct oversight as the PTAB implements
the Court’s decision to determine whether there is a decrease in the desirability or effectiveness of
administrative review proceedings following SAS Institute (due to, for example, the strategic choices
made by those deciding whether to file a IPR petition; if PTAB elects to institute fewer IPR proceedings;
or if IPR proceedings take longer to conclude), and consider whether further changes to the IPR process
are warranted based on its determinations.

Congressional Research Service
5

Author Information

Brian T. Yeh

Legislative Attorney

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

LSB10137 · VERSION 3 · NEW