An updated discussion of this issue is available here: Supreme Court Decides that IPR Final Decisions Must Address All Challenged Claims
The Federal Circuit recently denied a petition for rehearing en banc, effectively reiterating that the PTAB may, in its sole discretion, choose to institute an IPR proceeding on some, but not all, of the patent claims challenged in an IPR petition. The rehearing petition sought the full court’s review of a split three-judge panel decision in SAS Institute, Inc. v. Complementsoft, LLC, Nos. 2015-1346, -1347 (Fed. Cir. Jun. 10, 2016), that applied Synopsys, Inc. v. Mentor Graphics Corp., 814 F.3d 1309 (Fed. Cir. 2016), to conclude that there is no statutory requirement that a PTAB final written decision address every claim raised in an IPR petition.
SAS Institute, Inc. filed a petition for inter partes review, IPR2013-00226, seeking to cancel all sixteen claims of ComplementSoft’s U.S. Patent No. 7,110,936 (the ‘936 patent), which is directed to an integrated development environment for generating and maintaining source code programmed in data manipulation languages. The Board instituted a trial to review claims 1 and 3-10, but did not agree to review the patentability of claims 2 and 11-16.
In its final written decision, the Board concluded that claims 1, 3, and 5-10 were unpatentable as obvious in view of prior art, and concluded that claim 4 is patentable over the prior art because the prior art did not disclose its “graphical representations of data flows” limitation. The Board’s final written decision construed this unmet claim limitation differently than the construction used to justify the institution of review. SAS sought rehearing, contending that the Board must conduct an IPR on all of the challenged claims of the ’936 patent, and challenging the re-interpretation of the “data flows” limitation. After the Board denied SAS’s request, SAS appealed to the Federal Circuit on these issues.
Federal Circuit Decision and Denial of the Rehearing En Banc Petition
Although the Federal Circuit agreed with the Board’s ultimate construction of the term “graphical representations of data flows” as “a graphical representation comprised of icons depicting data processing steps and arrows to depict the movement of data through source code,” the Federal Circuit disagreed with the Board’s approach in changing its claim construction from that included in its institution decision. Slip Op. at 10 and 15.
The court explained that IPR proceedings are formal administrative adjudications subject to the Administrative Procedure Act (‘APA’) and, thus, “‘an agency may not change theories in midstream without giving respondents reasonable notice of the change’ and ‘the opportunity to present argument under the new theory.’” Id. at 17 (quoting Rodale Press, Inc. v. FTC, 407 F.2d 1252, 1256–57 (D.C. Cir. 1968)). The court noted that SAS had focused its argument on the Board’s original claim construction, and reasoned that it would have been unreasonable to expect SAS to argue, “in the alternative, hypothetical constructions not asserted by [its] opponent.” Id. at 18. Thus, the Federal Circuit vacated the Board’s patentability determination of claim 4 and remanded the case to allow the parties to properly address the final claim construction. Id. at 20.
The court additionally held that the Board need not address every patent claim originally challenged in an IPR petition. The court found significant the fact that the statute directing issuance of a final written decision refers to “claims challenged by the petitioner” (see 35 U.S.C. § 318(a)), while the statute directed to the institution of review refers more broadly to “claims challenged in the petition” (see 35 U.S.C. § 314). In the court’s view this “implies a distinction between the two subsections such that § 318(a) does not foreclose the claim-by-claim approach the Board adopted … in this case.” Id. at 19. The court additionally highlighted 37 C.F.R. § 42.108 which authorizes the Board “to proceed on all or some of the challenged claims.” Id.
While the two-judge majority agreed that the Board need not institute review of all challenged claims, Judge Newman dissented, contending that this practice does not conform to the America Invents Act (AIA). In her opinion, § 318(a) makes clear that the Board shall issue a final written decision on any patent claim challenged by the petitioner. Dissent Slip Op. at 1 and 15.
SAS filed a petition for rehearing en banc, which the Federal Circuit denied on November 7, 2016. Judge Newman again dissented. In this dissent, she recounted numerous statutory provisions relevant to IPR proceedings. Further, she emphasized that the Board’s decisions are meant to completely substitute for certain portions of civil litigation, which aligns with the goal of the AIA to provide “the efficient and reliable resolution of certain patent disputes without the cost and delay and uncertainty of district court litigation.” Id. at 2. She argued that the Board’s ability to decide some, but not all, of the challenged claims prevents “the expediency and economy and efficiency that motivated the [AIA].” Id. at 3.
IPR petitioners should not expect the Board to institute an IPR proceeding on all challenged claims.
PTAB panels may be hesitant to bind themselves to the claim construction relied upon at institution. The PTAB may consider evidence presented during the proceedings before finally settling on a claim construction. However, if the Board is inclined to change its initial claim interpretation, the court’s decision in SAS appears to compel the Board to offer parties notice of that change and an opportunity for further briefing. Additionally, for now, IPR petitioners should not expect the Board to institute an IPR proceeding on all challenged claims.