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SAS decision could have chilling effect on university licensing

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The recent Supreme Court decision in SAS Institute v. Iancu could change how the Patent Trial and Appeal Board (PTAB) conducts future proceedings, with the Court directing it to provide a full written decision for all claims challenged.

The court rejected the PTAB’s practice of “partial institution,” in which it provided a written decision that only addressed claims under review post-institution. The Supreme Court decision limits PTAB’s discretion with inter partes reviews (IPRs).

The Court issued two decisions regarding PTAB on the same day. In the first, the court determined in Oil States Energy Services v. Greene’s Energy Group that IPRs do not violate Article III or the Seventh Amendment, leaving PTAB intact. In SAS Institute v. Iancu, the Supreme Court found that the PTAB’s practice of instituting review of only some challenged claims violated the plain language of 35 U.S.C. § 318(a), which requires the PTAB to decide the patentability of all claims challenged in a petition. (The Oil States decision is available online here. The SAS decision is available online here.)

SAS ruling may have bigger impact

The Oil States decision essentially confirms the constitutionality of IPR proceedings, but it does not completely shut down any future challenges, says Rubén H. Muñoz, JD, partner with the law firm of Akin Gump Strauss Hauer & Feld in Philadelphia. The Court hinted about two avenues that petitioners might still pursue — violations of due process or the takings clause.

“Someone is going to take that hint and bring those forward as challenges in the future,” he says. “So I don’t think we’ve heard the least of Constitutionality challenges to IPR proceedings.”

The SAS Institute ruling could have more immediate and significant impact on tech transfer, he says.

SAS had challenged the validity of a patent’s claims and PTO determined that some of the claims were likely valid and should proceed to trial. Other claims were not allowed to proceed to a final decision and SAS petitioned for a full written decision explaining why.

The decision notes that Section 314(a) of Title 35 prohibits the PTO director from initiating a review unless “there is a reasonable likelihood that the petitioner would prevail with respect to at least one of the claims challenged in the petition.” If the Director does initiate that review, Section 318(a) states that PTO “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added under section 316(d).”

Justice Neil Gorsuch wrote for the 5-4 majority in the SAS case, noting that the law seemed clear. Nevertheless, PTAB only instituted review and issued a final written decision on a subset of the claims that SAS initially challenged. The Federal Circuit had affirmed the PTAB’s “partial institution,” saying the board’s final written decision only needed to address the claims under review post-institution. The Supreme Court reversed the Federal Circuit and remanded the case for further proceedings.

The ruling affirms that when IPR is used, all claims should be reviewed and have a decision issued, says John Boswell, JD, chief legal counsel for SAS. “The court’s rulings are a great win for companies battling frivolous patent litigation,” he says.

The decision suggests that the Supreme Court is tightening the reins on PTO and showing little tolerance for the lax IPR procedures it criticized in a previous case, Cuozzo Speed Technologies, LLC v. Lee. Gorsuch noted in the SAS decision what the court called “shenanigans” from PTAB in the previous case.

Not good news for universities

The SAS decision may change how universities address patent challenges, Muñoz says. IPRs will now be a binary decision, either yes or no rather than one answer on some claims and no decision on others, he explains.

“Everything that was challenged will be subject to that decision from the moment of institution to the final written decision,” Muñoz says. “There is nothing the patent owner can do to change that other than withdrawing or amending claims along the way.”

Previously with PTAB’s partial institution practice in IPRs, the university might choose to forgo the other claims and go back to the district court saying that of the 10 claims that were challenged, for instance, only four were instituted.

“If the district court had stayed the patent infringement suit, the university could very go well go back and say it wanted to go forward with this case because it was only instituted on four claims and I have six I can still go forward with,” he says. “That will be less likely going forward, because even if the threshold weren’t met for all 10 claims to be under review, they’re still going to be part of the proceedings. This is not good news for universities, because now all the claims are at risk.”

Licensing could be harder

The SAS decision can be seen as yet another blow to patent owners, but it may be an especially troublesome complication for universities and research institutions trying to generate licensing revenue, says Lauren E. Schneider, partner with the Lewis Roca Rothgerber Christie law firm in Los Angeles. She works with many of Southern California’s major universities.

“Obtaining a decision of invalidity may be easier in an IPR in front of the PTAB than in a case before a federal district court, so the Supreme Court’s mandate that the PTAB decide the validity of every challenged claim in an instituted IPR may make IPRs even more attractive to potential patent challengers,” Schneider says. “And as the risk of being pulled into an IPR proceeding can have a deterrent effect on licensing, universities and research institutions may find procuring lucrative licensing agreements for their patents to be even more challenging, requiring innovative negotiation and licensing strategies.”

A recent proposal for changes to the claims construction standard, along with a bill in Congress, could strengthen university positions, she says. (See the story on p. 76 for more on the proposal and bill.)

A potential silver lining

There may be a silver lining, however. Claims subject to a final written decision by PTAB are subject to estoppel, meaning the validity of the claim could not be further challenged at the district level. Previously, when universities could take claims back to the district court, the other party could argue that it was not estopped from challenging the claim on any invalidity grounds because there was nothing instituted by PTAB. That is no longer possible.

“If some claims do survive after a final written decision, they seem pretty well bulletproof from the validity being challenged in district court litigation,” Muñoz explains. “That should give some certainty to patent owners, including universities.”

The SAS decision means universities will be more vulnerable to what plaintiffs do in district court, Muñoz says.

“Universities have no way to control their fate in that respect because it is the other side that is going to dictate what is put at risk before the patent office,” he says. “The petitioner decides what is challenged in the patent office, and there’s not much the university can do to control that.”

Less detailed decisions?

PTO has determined how it will implement the Supreme Court’s decision, Muñoz notes. For current proceedings, such as a partial decision that is post-institution, PTO says it will issue a supplemental institution decision that brings into play all the claims that were challenged but in which institution was denied. So those claims come back into play, Muñoz says.

“What I think is going to be very interesting is how the institution decisions are going to change. Are they going to be more detailed or less detailed now that you have a binary decision that covers all the claims, not just the ones said to have merit?” he poses. “The argument in front of the Supreme Court was that if there was even one claim on which you had a reasonable chance of success, all the claims go forward, but will they all go forward with detailed decisions? If the decisions are less detailed because some claims were folded in with the others, that can make it more difficult for the parties going forward to set up their strategies, like the patent owner response.”

It is possible that PTO will go in the other direction, providing detailed decisions on claims that otherwise would not have been included in a written decision previously, which would give both parties more guidance on any future strategies with those claims, he says.

“But the whole reason PTO was using partial institution was to manage its work load. They didn’t want to spend the time and effort on claims that had little chance of success,” Muñoz explains. “The Supreme Court has told them they have to include those claims, so that would be a tremendous increase in the work load if they provided detailed decisions on each one. So there is good reason to think their decisions are going to be less detailed now.”

Contact Muñoz at 215-965-1263 or; contact Schneider at 626-795-9900 or

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