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Recent Litigation News in Intellectual Property


                                                                                        September 2017


In This Issue

·    The Supreme Court Grants Certiorari to Consider Constitutionality of Inter Partes Review      

·    The Supreme Court Grants Certiorari to Consider Whether the PTAB Must Issue a Final Written Decision on Each Challenged Claim Regardless of Whether an IPR is Instituted With Respect Thereto     






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The Supreme Court Grants Certiorari to Consider Constitutionality of Inter Partes Review  


On June 12, 2017, the Supreme Court granted Certiorari to consider the constitutionality of inter partes review (“IPR”) proceedings in Oil States Energy Services LLC v. Greene’s Energy Group LLC. In its petition, Oil States argues that (i) because patents are private property, they can only be extinguished by a non-administrative court created under Article III of the U.S. Constitution and (ii) the right to a jury trial, which is not available in an IPR proceeding, is guaranteed under the Seventh Amendment. Greene’s Energy, on the other hand, responds that patents are public rights that can be taken away by administrative agencies.

By way of background, there is speculation that the Supreme Court’s decision (or at least Justice Thomas’s dissent) in B&B Hardware Inc. v. Hargis Indus. Inc. (2015) may have pushed the issue of public-versus-private rights to the forefront. In B&B Hardware, Hargis Industries tried to register its trademark for SEALTITE with the USPTO pursuant to the Lanham Act.  B&B Hardware opposed registration, claiming that SEALTITE is too similar to B&B’s own SEALTIGHT trademark.  The TTAB concluded that SEALTITE should not be registered because of the likelihood of confusion, and Hargis did not seek judicial review of that ruling.  In a subsequent infringement suit before the District Court, B&B argued that Hargis was precluded from contesting the likelihood of confusion because Hargis let the TTAB’s decision stand.  The District Court disagreed. The U.S. Court of Appeal for the Eighth Circuit then affirmed, holding that preclusion there was unwarranted because (i) the TTAB and the District Court used different factors to evaluate likelihood of confusion, (ii) the TTAB placed too much emphasis on the appearance and sound of the two marks, and (iii) Hargis bore the burden of persuasion before the TTAB, while B&B bore it before the district court.  The Supreme Court thereafter held that so long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially the same as those before a district court, issue preclusion should apply. The B&B decision was authored by Alito, and was joined by Roberts, Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan.

By way of further background, Justice Thomas’s dissent in B&B, joined by Justice Scalia, raised the issue of public-versus-private rights. As explained by Justice Thomas (with some citations omitted):

Executive agencies derive their authority from Article II of the Constitution, which vests “[t]he executive power” in “a President of the United States,” Art. II, §1, cl. 1. Executive agencies are thus part of the political branches of Government and make decisions “not by fixed rules of law, but by the application of governmental discretion or policy.” An agency “is entitled to assess administrative records and evaluate priorities in light of the philosophy of the administration.” They are not constituted to exercise “independent judgment,” but to be responsive to the pressures of the political branches.

Because federal administrative agencies are part of the Executive Branch, it is not clear that they have power to adjudicate claims involving core private rights. Under our Constitution, the “judicial power” belongs to Article III courts and cannot be shared with the Legislature or the Executive. Stern v. Marshall, 564 U. S. ___, ___–___ (2011) (slip op., at 16–17); see also Perez, ante, at 8–11 (opinion of THOMAS, J.). And some historical evidence suggests that the adjudication of core private rights is a function that can be performed only by Article III courts, at least absent the consent of the parties to adjudication in another forum.

To the extent that administrative agencies could, consistent with the Constitution, function as courts, they might only be able to do so with respect to claims involving public or quasi-private rights. Public rights are those belonging to the public as a whole, see Nelson 566, whereas quasi-private rights, or statutory entitlements, are those “‘privileges’” or “‘franchises’” that are bestowed by the government on individuals, id., at 567; see, e.g., Ex parte Bakelite Corp., 279 U. S. 438, 451 (1929) (discussing claims “arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it”).

. . .

Trademark registration under the Lanham Act has the characteristics of a quasi-private right. Registration is a creature of the Lanham Act, which “confers important legal rights and benefits on trademark owners who register their marks.” Ante, at 3 (internal quotation marks omitted). Because registration is merely a statutory government entitlement, no one disputes that the TTAB may constitutionally adjudicate a registration claim.

By contrast, the right to adopt and exclusively use a trademark appears to be a private property right that “has been long recognized by the common law and the chancery courts of England and of this country.” Trade-Mark Cases, 100 U. S. 82, 92 (1879). As this Court explained when addressing Congress’ first trademark statute, enacted in 1870, the exclusive right to use a trademark “was not created by the act of Congress, and does not now depend upon it for its enforcement.” Ibid. “The whole system of trade-mark property and the civil remedies for its protection existed long anterior to that act, and have remained in full force since its passage.” Ibid. Thus, it appears that the trademark infringement suit at issue in this case might be of a type that must be decided by “Article III judges in Article III courts.” Stern, 564 U. S., at ___ (slip op., at 18).

Oil State’s reply brief is due in November, and not surprisingly, there have been numerous amicus briefs filed.  Patent practitioners, patentees and potential infringers will be watching this appeal closely.     

The Supreme Court Grants Certiorari to Consider Whether the PTAB Must Issue a Final Written Decision on Each Challenged Claim Regardless of Whether an IPR is Instituted With Respect Thereto  

The question presented in SAS Institute v. Lee is whether the PTAB must issue a final written decision as to every claim challenged in an IPR petition or only the claims subject to the IPR if less than all challenged claims.  This distinction is noteworthy because should the PTAB be required to issue a final written decision on each challenged claim regardless of institution of an IPR with respect thereto, the decision will be appealable to the U.S. Court of Appeals for the Federal Circuit (“CAFC”).  But, if non-instituted claims remain exempt from written decisions, challenges to those claims must first be heard in a district court.

By way of background, the PTAB, in about a quarter of all IPR petitions — as in the case of the SAS IPR petition — institutes an IPR on only a subset of the challenged claims.  The PTAB’s practice in such cases, as well as in the case of Post-Grant Reviews (“PGRs”), limits the PTAB’s final written decision to the claims on which the review was instituted.  See Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309, 1317 (Fed. Cir. 2016); 37 C.F.R. §§ 42.108(a), 42.208(a). Under the AIA, the decision not to institute an IPR or PGR as to one or more claims is generally not appealable.  See Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2141 (2016); 35 U.S.C. §§ 314(d), 324(e).  Moreover, estoppel applies only to those claims that are subject to a final written decision under 35 U.S.C. § 318(a). See 35 U.S.C. §§ 315(e), 325(e).  Thus, claims that are challenged but not instituted in an IPR or PGR may be subject to further validity challenges in the district courts and PTAB, and the associated appeals thereafter.

At the CAFC, SAS framed the issue as a of statutory interpretation arguing that in relevant part, the IPR statute states that the PTAB “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner …,” and that the required showing for instituting an IPR is whether there is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Sections 318(a) and 314(a).  SAS accordingly concluded that the statute required the PTAB to issue written decisions addressing every claim for which there was a sufficient showing.

The government responded that the PTAB was not required to issue a written decision addressing non-instituted claims. The Federal Circuit concurred holding that there was a difference between the preliminary decision to institute an IPR and issuing a written decision.  The CAFC, in so doing, observed that the provisions of the statute governing written decisions expressly recites “claims challenged by the petitioner,” whereas the statute governing institution recites “claims challenged in the petition.”  Based upon this linguistic difference, the CAFC held that the statute does not preclude issuing a written decision on a claim-by-claim basis.

In its Petition for Certiorari, SAS argued that the CAFC’s decision should be reversed because the PTAB’s partial-decision practice violates the AIA’s “overall language, structure, and manifest purpose,” including the alleged “plain” language of Section 318(a), which states that “[i]f an inter partes review is instituted . . . [the PTAB] shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.”  In opposing SAS’ petition, the government argued that the AIA’s prohibition on appeals from institution decisions bars the courts from considering this issue, and to the extent that the Supreme Court took up the question, the USPTO’s rules and practice are in accordance with the AIA and, at a minimum, are based upon a reasonable interpretation of the statute, and thus entitled to deference.

Patentees have repeatedly argued that the PTAB’s practice of partial institution subjects patents to piecemeal litigation that the AIA’s estoppel provisions were designed to prevent.  This practice has also drawn the criticism of Judge Newman who, following her dissent in Synopsys, again dissented in the SAS appeal on the ground that partial institution “foils the legislative purpose” of the AIA’s administrative patent challenges.  See SAS Inst., Inc. v. ComplementSoft, LLC, 842 F.3d 1223, 1224 (Fed. Cir. 2016) (Newman, J., dissenting from decision denying rehearing en banc); SAS Inst., Inc. v. ComplementSoft, LLC, 825 F.3d 1341, 1358 (Fed. Cir. 2016) (Newman, J., dissenting).

From a patentee’s perspective, reversal by the Supreme Court of the PTAB’s current partial-decision practice would allow a successful patentee to enjoy broader estoppel in the district courts and in subsequent proceedings before the PTAB. Estoppel would still not be complete as to all validity challenges because, for example, the AIA’s IPR provisions are restricted to prior art challenges based on printed publications or patents. Such a reversal, however, would likely reduce serial validity challenges.  And, assuming such a holding was also applied to PGRs, the estoppel would be broader still, because the AIA’s PGR provisions permit additional types of validity challenges.

From the petitioner’s point of view, a reversal by the Supreme Court would allow the petitioner to appeal the PTAB’s determination of no invalidity as to any challenged claim in a granted petition, not just those claims on which the PTAB decided to institute the IPR. While it seems unlikely that this would significantly raise the chances of invalidating before the PTAB an otherwise uninstituted claim, it may make IPRs and PGRs more attractive to parties seeking to challenge the validity of patents in one proceeding with one appeal. 



The GREENBLUM & BERNSTEIN NEWSLETTER is issued by GREENBLUM & BERNSTEIN, P.L.C., an intellectual property firm, to provide timely news in the field of intellectual property.  The NEWSLETTER provides updates on recent issues of general interest in this field.  The views and/or opinions expressed herein do not necessarily reflect those of GREENBLUM & BERNSTEIN, P.LC.  Information regarding the contents of the Newsletter can be obtained by contacting P. Branko Pejic at GREENBLUM & BERNSTEIN, P.L.C., 1950 Roland Clarke Place, Reston, VA 20191.  Copyright © 2017 GREENBLUM & BERNSTEIN, P.L.C.