United States: PTAB Has Authority To Modify Initial Institution Decision In Light Of SAS

In a recent final written decision, the Patent Trial and Appeal Board (PTAB) has determined that it was not unlawful for it to modify its institution decision following the SAS Supreme Court case.

In the PTAB proceeding, Petitioners Cisco Systems and Oclaro filed a petition for inter partes review (IPR) of nearly all claims of Patent Owner Oyster Optics’ patent directed to a secure fiber optic telecommunications system—U.S. Patent No. 6,594,055 (the “’055 patent”). At the outset, Petitioners sought a review of Claims 1-13, 15-23 and 27 of the ’055 patent. The PTAB, however, instituted IPR on only a subset of the challenged claims, namely Claims 17-23 and 27, and only on some of the grounds that Petitioners asserted against Claim 27.  Following institution, the Supreme Court ruled in SAS that “the Patent Office must ‘issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.’ 35 U.S.C. § 318(a). In this context, as in so many others, ‘any’ means ‘every.’ The agency cannot curate the claims at issue but must decide them all.”  In response to SAS, the PTAB issued a modified institution decision that included all claims and grounds that Petitioners originally asserted in their petition.

Patent Owner responded by challenging the PTAB’s ability to issue a final written decision on all claims and grounds. In particular, Patent Owner argued that the PTAB’s modification of its initial institution decision was done without statutorily mandated rulemaking and therefore improperly attempted to address how to govern a proceeding covering all challenged claims, including those claims for which Petitioners failed to show a reasonable likelihood of prevailing.  Patent Owner also argued that the PTAB had no authority to modify its institution decision outside the statutory time frame for issuance.

As to the first argument, Patent Owner cited Patent Office regulations to demonstrate that the PTAB had the authority to “proceed on all or some of the challenged claims,” and “deny some or all grounds for unpatentability for some or all of the challenged claims’ prior to institution of inter partes review.” 37 C.F.R. §§ 42.108(a)-(b). Further, Patent Owner pointed to 37 C.F.R. § 42.108(c), which details how an IPR cannot be instituted, unless the PTAB “decides that the petition supporting the ground would demonstrate that there is a reasonable likelihood that at least one of the claims challenged in the petition is unpatentable.”  In its final written decision, the PTAB found that its current rules adequately covered post-SAS scenarios where all petitioned claims and grounds are included at institution. The PTAB noted that “[n]one of these referenced parts of 37 CFR § 42.108 requires exclusion of any claim or ground for an instituted proceeding,” including claims or grounds for which Petitioner had not shown a reasonable likelihood of establishing unpatentability (emphasis added). Indeed, the PTAB highlighted an occasion, in FMC Techs., Inc. v. OneSubsea IP UK Ltd., when it instituted review on all challenged claims and grounds upon a finding of reasonable likelihood of success as to one claim. IPR2016-00378 (PTAB June 30, 2016). Accordingly, the PTAB determined that the procedural rules governing the IPR were valid and that it had the ability to issue a final written decision on all claims.

In addition, the PTAB determined that it had not violated the statutory due date for determining whether to implement an IPR as set forth in 35 U.S.C. § 314(b). That statutory provision states that the determination of whether to institute an IPR must occur within three months from the date that a patent owner files a preliminary response. Patent Owner argued that it filed a preliminary response on October 31, 2017, so the due date for the PTAB’s IPR institution decision was January 31, 2018. However, because the PTAB modified its determination in the aftermath of SAS, Patent Owner contended that the PTAB did not make a full determination until May 3, 2018. The PTAB noted that its institution decision occurred on January 23, 2018—within the appropriate time frame—and its modified order on May 3 did not change the fact that the PTAB decided to institute review by January 23. Further, the PTAB responded to Patent Owner’s argument that SAS nullified partial institution decisions and explained that “the Court in SAS simply recognized that the Board instituted review, but incorrectly limited the scope of the review.” In sum, according to the PTAB, its modified institution decision did not violate IPR timing requirements because the initial institution decision was filed before the deadline.

Practice tip:  Post-SAS, patent owners may find it difficult to convince the PTAB that modified institution decisions violate the statutes or regulations governing IPR proceedings; therefore, patent owners should balance the effort expended in those types of procedural challenges (including as a means to preserve issues for appeal) vis-à-vis substantive challenges directed squarely to patentability.  

Cisco Sys. Inc. v. Oyster Optics, LLC, IPR2017-01720, Paper No. 31 (PTAB Jan. 22, 2019).

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