In This Issue
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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.
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