In a recent decision, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit ruled that the U.S. Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) acted properly in issuing a final decision as to some – but not all – claims challenged in an inter partes review proceeding under the America Invents Act. Synopsys, Inc. v. Mentor Graphics Corp., No. 2014-1516 (Fed. Cir. Feb. 10, 2016). As a result, the PTAB’s practice of declining to initiate review of all patent claims challenged in AIA trials, leaving the status of some patent claims in limbo, will continue.
Practice Points
- Divided Federal Circuit panel rules that PTAB may conduct IPR proceedings on less than all claims challenged in a petition, applying the “reasonable likelihood” test on a claim-by-claim basis.
- Following earlier decisions, the court effectively held that the PTAB’s decision whether to institute review is immune from appellate review.
- At least until the PTAB’s practice is reviewed by the Supreme Court, IPR final decisions may leave patents “wounded, but not dead” by invalidating some claims, but leaving others in place.
Background
Mentor owns U.S. Patent No. 6,240,376, relating to a process for tracing coding errors in the design of computer chips. Synopsys filed a petition for inter partes review (IPR) challenging 29 claims in the ‘376 patent on the grounds that they were invalid in light of cited prior art. The PTAB instituted review of 12 of the challenged claims, but declined to review 17 claims as Synopsys’ petition failed to meet the “reasonable likelihood” of success threshold. See 35 U.S.C. § 314(a). At the same time, the PTAB rejected Mentor’s argument that the petition was time-barred. During the ensuing IPR proceeding, the PTAB denied Mentor’s motion to amend several challenged claims. In its final decision, the PTAB found that three claims under review were invalid as anticipated, but the remaining 14 claims under review were not invalid. Both parties appealed to the Federal Circuit.
Federal Circuit Decision
In a 2-1 decision written by Circuit Judge Timothy B. Dyk, the Federal Circuit affirmed the PTAB proceedings in all respects. The court noted that, under its decision in In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015), which will be argued at the Supreme Court later this year, the PTAB’s decision to institute an IPR is not reviewable on appeal. Since Synopsys challenged the scope of the PTAB’s final decision, however, the Federal Circuit ruled that it was able to consider whether the PTAB was required to address all the challenged claims in its final decision.
The appeals court held that the PTAB’s practice of reviewing some, but not all, challenged patent claims in an IPR proceeding was consistent with both the text of the AIA and the USPTO’s regulations governing the AIA trial proceedings. The court pointed to language in the AIA that directs the USPTO to initiate review when a petitioner demonstrates a reasonable likelihood that it would prevail as to one or more of the “claims challenged in the petition[,]” 35 U.S.C. § 314(a), but the statute provides that the PTAB final written decision must include any “claim challenged by the petitioner.” 35 U.S.C. § 318(a). The court found the different words used by Congress a strong indication that they have different meanings, suggesting that the claims addressed in the final decision could be different from those challenged in the petition for review. In addition, the court noted that since a full record is created at trial only for claims for which the PTAB instituted review, it would make no sense to require the PTAB to rule on the validity of all claims challenged in the petition with an incomplete record. The court noted:
[The AIA] is quite clear that the PTO can choose whether to institute inter partes review on a claim-by-claim basis. In deciding when to institute IPR, the statute requires a claim-by-claim inquiry to determine whether “there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314(a) (emphasis added). Unless at least one of the claims satisfies this inquiry, the [PTAB] cannot institute. The statute strongly implies that the initiation decision be made on a claim-by-claim basis and that the [PTAB] can pick and choose among the claims in the decision to institute. In fact, nothing in § 314 requires institution of inter partes review under any circumstance.
Slip op. at 10. Furthermore, the court held that the regulations adopted to implement § 314(a), 37 C.F.R. § 41.108, were a reasonable interpretation of the statute and a proper exercise of regulatory authority. The court was not persuaded by isolated statements in the AIA legislative history indicating that AIA trials were intended to be a “complete substitute” for federal court litigation. It noted that, “[f]loor statements by a few members of the legislative branch cannot supplant the text of the bill as enacted.” Slip op. at 11. Thus, the Federal Circuit ruled that the AIA only requires that the IPR final written decision address the claims for which review was initiated.
On the merits of the PTAB’s decision, the Federal Circuit affirmed the PTAB’s decision that three claims in the ‘376 patent were invalid. The Court also turned aside the points on appeal raised by Mentor. First, it held that the PTAB’s decision that the petition for review was not time-barred was not appealable. Slip op. at 24, citing Achates Reference Publ’g, Inc. v. Apple Inc., 803 F.3d 652, 658 (Fed. Cir. 2015). The court also affirmed the PTAB’s ruling denying Mentor’s request to amend claims during the IPR proceeding. Consistent with recent Federal Circuit decisions, the court ruled that the PTAB rules properly place the burden on the patent owner to demonstrate that a proposed amendment presents claims that are patentable, and Mentor failed to demonstrate patentability over the very prior art cited by Synopsys in its petition.
Circuit Judge Pauline Newman wrote a lengthy dissent, arguing that the result was at odds with the purpose of the AIA by avoiding “finality” in administrative challenges to patent validity, and resulting in duplicative and potentially inconsistent federal court and PTAB rulings.
Practical Significance
Since the statutory and public policy arguments in Judge Newman’s dissent substantially overlap with appellant’s argument in Cuozzo, which will be argued at the Supreme Court this term, the Supreme Court’s decision in Cuozzo will likely shed some light on the divided opinion in Synopsys. While the specific issue of the proper scope of a final decision may not get addressed in Cuozzo, the ultimate issue of whether an institution decision is reviewable after final decision will be decided.
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