Dispute Over AIA Trial Institution Practices …Be Careful What You Wish For

Since the advent of AIA trials, opponents of the system have attempted to unravel them.  First, BRI was challenged, then 7th amendment constitutionality, and a host of other administrative issues; all have failed to date. Yet, a few challenges to fundamental AIA trial practices persist. Earlier this week, the Federal Circuit denied en banc review in one such remaining challenge, in SAS Institute Inc., v. ComplemenSoft LLC.  

As previously discussed, SAS challenged all sixteen claims of ComplementSoft’s patent 7,110,936 in inter partes review (IPR). Trial was instituted for claims 1 and 3-10, but claims 2 and 11-16 were denied institution. On appeal to the CAFC, SAS argued that it was inefficient to institute on only a subset of claims, and that the controlling rule authorizing partial institution (37 C.F.R. § 42.108(a) was in direct conflict with statutes 35 U.S.C. §§ 314(a)/318(a); the Federal Circuit disagreed (Judge Newman dissenting).

If it were agreed that the statute “at least one claim” is in conflict with the rule (perhaps on eventual appeal to the SCOTUS) is this really something petitioners or patentees should want?  

Probably not.

In the abstract, arguing the legislative intent behind the AIA is all well and good (efficiency of the PTAB alternative, public policy against concurrent proceedings). Yet, in practice, partial institutions provide balanced benefits to both petitioner and patentees.

First, for petitioners, while a partial institution is a disappointment, statutory estoppel does not apply. This is because the non-instituted claims are not part of the trial, and are not part of any Final Written Decision (FWD).  Shaw Industries Group Inc. v. Automated Creel Systems Inc. (CAFC 2016).  Forcing such claims to FWD simply adds an estoppel that could be otherwise avoided. Failed challenges, whether at institution or FWD are bound to go back to the courts — inefficiency on some level is inevitable in this regard.  If anything, the earlier a weak challenge to a given claim is identified (i.e., institution) the more likely the parties are to settle. While theoretically speaking a partial institution might lead to a second petition filing of a failed petitioner, the PTAB has made clear that such a filing is highly likely to be denied.  Conopco, Inc. dba Unilever v. The Procter & Gamble Company (IPR2014-00628, Paper 23, March 20, 2015).  In my experience, partial institutions provide leverage points for settlement.  Creating shorter dispute timelines is entirely consistent with the legislative intent of the AIA.

On the patent owner side, partial institutions are of significant value.  Frequently, stays are avoided since “simplification of issues for trial,” a factor in such determinations, is effectively mooted when it is clear the trial will need to go forward as to at least non-instituted claims. As between the two options, Patentees, even if later winning on some claims at FWD, will not want their litigation efforts needlessly stalled for a 12 month PTAB trial.  This would limit settlement leverage and unnecessarily expand legal spend.

Theoretical inefficiencies in competing legal frameworks should not trump the practical, settlement advantages of the current system.