Sarah Guske and Wayne Stacy

The arguments in the much-awaited Oil States case highlighted two chief issues for the Court to resolve: (1) whether an Executive Branch agency has the authority to revoke issued patent claims, and (2) whether the process is too judicial in nature for an Executive Branch agency.

Regarding the issue of whether the PTAB has the power to revoke issued patents, Oil States pressed its view that patents are a private right and, as a result, the PTAB does not have the authority to revoke those rights. Justice Gorsuch compared a patent right to historically private rights like land patents. The Court also questioned whether inter partes reviews should be available retroactively for pre-AIA patents. On behalf of the Executive Branch, the Deputy Solicitor General argued that because pre-AIA patents were sought with the understanding that the patents could be invalidated through reexamination, retroactive application is fair.

In working through whether the process is proper, the Court appeared focused on sorting out whether the IPR process are judicial in nature or is an Executive Branch mechanism for correcting its own errors. While the respondents were quick to compare the IPR process to other Federal agency proceedings, Oil States stressed that IPR proceedings are differently because a private party is prosecuting the claim as opposed to the government. Oil States and multiple justices also noted the use of judicial concepts in AIA reviews like “judges” and “trials.”

If the Supreme Court strikes down or restricts the Executive Branch’s ability to revoke patent rights, there is likely to be a period of chaos while parties and courts sort out the implications for claims previously invalidated in an AIA review. It is possible that the filing of new infringement suits will increase if patent owners who have been reluctant to file suit due to concerns about the AIA process feel emboldened by the removal of a hurdle. But other factors including the risk of § 101 challenges based on Alice may temper patent owners’ motivation to file suit.

If the Court finds that the PTAB has the power to revoke patent rights but determines that the process is too judicial in nature, Congress may attempt to change the process to comport with the Court’s findings.

The Supreme Court also heard arguments in SAS on the same day as the Oil States argument. If the Court’s questions for the parties are any indication, the outcome will turn on balancing the language of 35 U.S.C. § 318(a) with the Court’s prior determination in Cuozzo Speed Technologies, LLC v. Lee, 136 S. Ct. 2131 (2016) finding that institution decisions are final and non-appealable.

Counsel for SAS, the petitioner in the underlying AIA review, stressed the language in 35 U.S.C. § 318(a) specifying the required elements of final written decisions (emphasis added): “the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” While Justice Breyer indicated an agreement that the language of § 318(a) was helpful to SAS’s argument, he also indicated that he was struggling to “imagine what the purpose would be of writing a statute the way [SAS] want[s].”

Several justices, including Justices Sotomayor, expressed concern that SAS’s proposed reading of § 318(a) was an end-run around the Supreme Court’s holding in Cuozzo. When pressed by Justice Sotomayor to define what about uninstituted claims could ultimately be appealed if SAS’s argument is adopted, counsel for SAS conceded that petitioners would be able to appeal the PTAB’s finding that the uninstituted claims were not unpatentable. Justice Sotomayor interpreted SAS’s response as a confirmation that the scope of appeal of the final written decision as to uninstituted claims would be effectively the same as if a petitioner could appeal institution decision findings.

The Court had fewer questions for the respondents, who argued that the seemingly broad language of § 318(a) was necessarily narrowed by the context provided by the “[i]f an IPR proceeding is instituted” language found in § 318(a). Taking a cue from the questions for SAS, respondents attempted to reinforce the Court’s concerns about Cuozzo, arguing that SAS’s statutory interpretation circumvents Cuozzo.

While it may initially seem that final written decisions addressing all challenged claims would most benefit the petitioner for appellate review purposes, it is possible that patent owners would benefit the most. Under the PTAB’s current practice, there is no estoppel effect for uninstituted claims. If the Court holds that all challenged claims must be addressed in the final written decision, the estoppel provisions of 35 U.S.C. § 315 will then also apply to challenged claims that would have not previously have been addressed in final written decisions. The heightened risk of estoppel may add another factor to be weighed by petitioners in evaluating whether to seek review of a particular claim. Petitioners may elect to not challenge certain claims in an AIA review in order to preserve the ability to try paper art invalidity theories in court.

If the outcome of SAS leaves intact the PTAB’s practice of only addressing instituted claims in the final written decision, petitioners will need to continue to carefully evaluate the strength of their invalidity arguments and their desire to be able to litigate paper art in district court to determine whether it is worth pursing review. The PTAB would continue to not be obligated to issue a final, appealable decision on all challenged claims. A petitioner may find it preferable to not bring a PTAB challenge at all if the petitioner’s goal is to have a single proceeding resolve validity.

Sarah Guske is a partner in the Intellectual Property group at Baker Botts. She has litigated matters in district court and before the PTAB involving a wide variety of technologies, including telecommunication protocols and systems, MPEG Multimedia data for broadcast, telephonic voice recognition software and graphic chipset design.

Wayne Stacy is a partner in the firm’s Intellectual Property group. He is skilled in competitor-against-competitor cases where injunctions and large damages are at issue. He has tried cases in leading patent jurisdictions such as the Northern District of California and the Eastern District of Texas, and has represented clients before the Patent Trial and Appeal Board (PTAB).