Patent Owners Will Not Like the Post-SAS PTAB

Last month, I predicted a 7-2 affirmance of Oil States (although I had Kennedy in the dissent with Gorsuch rather than Roberts). Still, the outcome of this closely watched case was hardly a surprise, nor was the content of the dissent. (here) While some will read the “narrow” holding characterization of the Oil States majority as a beacon of hope for further constitutional challenges, I don’t see that at all. Rather, I see the Court making clear that it is not indirectly endorsing any PTAB practices highlighted in the briefing, oral argument, and in the dissent — panel stacking perhaps being the most noteworthy. Going forward, I don’t see much Oil States impact at the PTAB.

SAS Institute on the other hand, will bring about some of the most significant PTAB practice changes to date.

As a reminder, SAS argued that partial PTAB trial institutions are inconsistent with the controlling statutes of the America Invents Act (AIA). That is, if the PTAB finds that at least one claim is demonstrated as likely unpatentable, the PTAB should institute trial for all petitioned claims. The High Court agreed that partial institutions are precluded by the AIA statutes. (here)

So, now what?

First, losing partial institutions will be a significant problem for litigating patent owners (i.e., a majority of patent owners at the PTAB). This is because stays of concurrent litigation are frequently avoided when claims are pruned from PTAB trial proceedings. As between the pre-SAS and post-SAS institution models, patent owners, even if later winning on some claims at FWD that would have been pruned pre-SAS, will not want their litigation efforts needlessly stalled for an 18 month PTAB proceeding (trial + preliminary proceeding). Likewise, it would seem unlikely that courts would be interested in lifting a stay during the pendency of a Federal Circuit appeal covering all challenged (and presumably litigated) claims. This alteration to the existing stay calculus will degrade settlement opportunities and unnecessarily expand legal spend for claims that would have otherwise been pruned pre-SAS. Likewise, prosecution history will be expanded for claims that would have otherwise been pruned pre-SAS.

Second, patent owners have only recently secured the right to submit new testimonial evidence to avoid institution.  With the post-SAS all or nothing institution model, there will be even less of an appetite to submit this testimony.  Pre-SAS, there was value in such submissions since avoiding trial on even a subset of dependent claims is, as noted above, of significant strategic value. Patent owners now have to defeat every ground to avoid trial, arguably, they are better off keeping their evidence and arguments for trial rather than providing an unnecessary preview. In my experience the submission of early evidence fosters settlement.

Third, the PTAB need only find a single claim of a challenged set susceptible to unpatentability to institute post-SAS. So, there is no reason for the PTAB to go beyond the analysis of a single claim. An institution decision that analyzes a single claim is a drastic change in the degree of information compared to pre-SAS institution decisions. For example, as post-SAS institution decisions will likely analyze the broadest claim, meaningful discussions of narrower claim terms wouldn’t need to be addressed in the institution decision. Likewise, it is human nature that institution will become far more attractive from the agency perspective (or so it will be argued by critics). This is because it is far easier to author an opinion to institute on a single claim as opposed to authoring a denial that would need to address every ground and distinct claim grouping.  As it stands, institution decisions offer a great deal of guidance to the parties, and also help facilitate settlements. The degradation of the institution decision post-SAS will be a loss for both sides. Moreover, the information no longer provided at the time of institution might need to come from the parties before any meaningful briefing can be filed. One way to introduce such would be to conduct a Markman-like briefing exchange shortly after institution; likely to increase costs. Given this shift in work, perhaps the institution portion of the filing fee will be reduced?

To the extent there is any benefit to an “all or nothing” system for patent owners it would be the simplification of estoppel determinations. With no partial institutions issues to deal with, district courts may have an easier time grappling with the scope of statutory estoppel. But, patent owners may not find this incremental value worth the significant drawbacks noted above.

Finally, it remains unclear how the Board will handle ongoing, partial institution proceedings. Presumably those trials will now need to be adjusted to account for the previously pruned claims, which will likely disrupt existing trial schedules.

There is certainly a fire drill going on right now at the PTAB.