SAS Institute v. ComplementSoft LLC – Partial IPR Institution Is a Mixed Bag for Both Patent Owners and Patent Challengers

By: Tammy Dunn and Peter Schechter

The Patent Trial and Appeal Board (PTAB) currently decides whether to review validity of patent claims challenged in petitions for inter partes review (IPR) on a claim-by-claim basis, often resulting in “partial institution” of the IPR trial proceedings.  While this practice has been criticized, it was most recently approved by the U.S. Court of Appeals for the Federal Circuit in SAS Institute v. ComplementSoft. Thus the Board’s practice of partial institution of IPRs, in which at least one challenged patent claim is not reviewed and thus is not mentioned in the Board’s final written decision, will continue for at least for the foreseeable future.

What does this mean for petitioners (i.e., patent challengers) and patent owners?  Is it good for one but not the other?  The answer is less obvious and more strategically nuanced than one might think.  This article points out some potential benefits as well as disadvantages of IPR partial institution decisions, from the perspectives of both petitioners and patent owners.

The importance of a partial institution decision stems from the estoppel provisions of the America Invents Act relating to post-grant validity challenges including IPRs.  Specifically, a petitioner is barred from raising any future validity challenge that it reasonably could have raised, whether in other U.S. Patent & Trademark Office, PTAB, or court proceedings, only with respect to those patent claims that are included in an IPR final written decision.  There may thus be litigation estoppel effects for the instituted and reviewed claims, but not the challenged yet non-instituted claims, of the same patent.  Many people think that Congress could not have intended this seemingly curious result, because the indisputable benefits of streamlining patent litigation by substituting the IPR procedure for district court validity disputes are largely lost.

Dissenting from the Federal Circuit’s denial of en banc review in SAS Institute v. ComplementSoft, Circuit Judge Newman makes logical and persuasive arguments why the Board’s practice of partial institution of IPRs is not authorized by the America Invents Act (AIA).  Echoing often-heard criticism of the practice, she wrote that “[t]his practice foils the legislative purpose of resolving certain patent issues in an administrative forum, newly available to litigants previously confined to the district court.”  However, Circuit Judge Newman focuses primarily, if not exclusively, on the biggest problem faced by patent owners as a result of IPR partial institution decisions – namely, that the patent owner may well be forced to defend successive patent validity challenges in different venues, first in the PTAB and then in district court, because of the absence of any estoppel effects for the non-instituted claims.  She also notes that the PTAB’s practice of partial institution even allows a petitioner to file multiple successive IPR petitions, assuming all other prerequisites (such as time bars) are met.  In our experience, and generally speaking, such “Round 2” petitions face much tougher scrutiny and must clear additional hurdles in order to result in IPR trials of the originally non-instituted claims.   In any event, partial institution decisions can result in even greater litigation expenses than had the IPR petition not been filed in the first place – a result seemingly at odds with Congress’ purpose in establishing IPRs.

There are, however, situations where partial institutions can be used to a party’s advantage.  A petitioner could, for example, decide to terminate an IPR after the institution decision and decide instead to focus its resources on the typically concurrently pending district court litigation.  By terminating the IPR at this point, the petitioner would save itself the further expense of the IPR and would avoid the estoppel risks that come along with a final written decision by the PTAB.  The petitioner would also have the benefit of having received some guidance from the Board and, if the patent owner filed a Patent Owner Preliminary Response, the petitioner would have a preview of at least some of the patent owner’s presumably best arguments against the prior art.  The likelihood of any petitioner choosing this course of action, or any patent owner agreeing to it, is low, however; the PTAB has only very rarely terminated an instituted IPR over the objection of the patent owner, and only in very unusual circumstances.

On the other hand, a patent owner also can take strategic advantage of a partial institution decision in the right situation.  For example, where the district court has stayed (that is, suspended) the litigation for the entire duration of the IPR and any appeals (which happens in many cases), a patent owner might choose to withdraw its assertion of infringement of the instituted claims of the patent-in-suit, proceed in the litigation only on the non-instituted claims, and then ask the district court to lift the stay of litigation.  The patent owner may also consider disclaiming (that is, dedicating to the public) the patent claims that were instituted in the IPR in order to set up termination of the IPR, thereby saving the additional expense of that concurrent PTAB proceeding.  The PTAB routinely terminates IPRs after all instituted claims have been disclaimed by the patent owner, for there is nothing left to be decided in the proceeding.

The different possibilities require careful consideration by qualified legal counsel, of course, but the overarching point is that though partial institutions may seem unjust in some situations, they can also be used to one’s advantage in the right situation.  Since partial institutions will continue to be part of the IPR landscape, they will need to be dealt with as part of a comprehensive legal strategy when enforcing or defending against enforcement of patent rights in the United States.