Source: http://yalejreg.com/nc/sas-institute-inc-v-lee-the-chevron-challenge-below-the-surface-and-why-administrative-lawyers-should-sometimes-care-about-patent-cases-by-bill-burgess/
Timestamp: 2018-02-19 11:47:08
Document Index: 627629570

Matched Legal Cases: ['§ 312', '§ 314', '§ 314', '§ 318', '§ 318', '§ 42', '§ 316', '§ 316', '§ 314', '§ 318', '§ 318', '§ 316']

SAS Institute Inc. v. Lee: The Chevron Challenge Below the Surface, and Why Administrative Lawyers Should Sometimes Care About Patent Cases, by Bill Burgess | Notice & Comment
SAS Institute Inc. v. Lee: The Chevron Challenge Below the Surface, and Why Administrative Lawyers Should Sometimes Care About Patent Cases, by Bill Burgess
In 2011, Congress gave the Patent Office new rulemaking power, and created new adjudicative proceedings at the Patent Office before panels of “administrative patent judges.” These proceedings have generated hundreds of new appeals to the Federal Circuit, some of which are exceptionally well-lawyered and present interesting administrative law issues. These cases have recently started to reach the Supreme Court, beginning with Cuozzo Speed Technologies, LLC v. Lee, decided last Term.
On Monday, the Supreme Court granted certiorari in its second case arising out of these new Patent Office proceedings: SAS Institute Inc. v. Lee. The Question Presented’s sleep-inducing phrasing makes SAS sound like a narrow, boring patent case. It isn’t—or at least not necessarily. SAS’s briefing takes a few shots at Chevron and invites the Court to confront what Justice Thomas’s concurring opinion in Cuozzo called “Chevron’s fiction that ambiguity in a statutory term is best construed as an implicit delegation of power to an administrative agency to determine the bounds of the law.” In this vein, SAS also cites recent concurring opinions by then-Judge Gorsuch in Gutierrez-Brizuela, and Judge Brown in Waterkeeper Alliance v. EPA, both questioning whether Chevron and its progeny have ceded too much authority to agencies to say what the law is. “Whatever the wisdom of Chevron,” SAS’s petition argues, “it cannot be allowed such free rein as to allow” what the Patent Office did here.
So, what did the Patent Office actually do, and how did Chevron get into this case?
The Statute: New Adjudicative Proceedings at the Patent Office.
At bottom, SAS seems to accuse the Patent Office of (a) promulgating a regulation that may or may not be consistent with the statute it purports to interpret, and then (b) using that regulation as a reason to disobey a different statute that is unambiguous on its face. In SAS’s view, if there is a clash between a regulation and an unambiguous statute, then the regulation must yield.
What statutes, what regulation, and what’s the conflict? Some background explanation is necessary.
The unit of patent litigation is the “claim.” Every patent contains numbered claims that define the protected invention(s), and individual claims of patents can be infringed and/or invalid. In 2011, Congress created new adjudicative proceedings at the Patent Office (appealable to the Federal Circuit) where parties can challenge the validity of some or all of a patent’s claims. If the challenger wins, the claim is cancelled; if the challenger loses, there are (sometimes) estoppel consequences. Congress also gave the Patent Office new rulemaking power to set those proceedings up. By statute, the proceedings have three main steps. (There are different types of proceedings, but the differences don’t matter here, so I’ll focus on the one in SAS).
Step 1. Petition. Under 35 U.S.C. § 312, the proceedings start with a petition that must specify which patent claims the petitioner believes are invalid, and—individually for each claim—why and based on what evidence.
Step 2. Institution. Under 35 U.S.C. § 314(a), the Patent Office Director decides (based on the petition and an optional response) whether to “institute”—i.e., whether proceedings go forward or not. The Director can only institute if she finds “that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” If the Director decides not to “institute,” proceedings are over. Under 35 U.S.C. § 314(d), “[t]he determination … whether to institute … [is] final and nonappealable.”
As I’ll explain, section 314 is the statute the Patent Office’s regulation purports to interpret.
Step 3. Final Written Decision. If a proceeding is instituted and not dismissed (e.g., for settlement), the final step is a “final written decision” (appealable to the Federal Circuit). 35 U.S.C. § 318(a) provides as follows (emphasis added): “If an inter partes review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner ….”
As I’ll also explain, section 318 is the statute that SAS insists is clear on its face and that the Patent Office disobeyed.
SAS and Chevron
The question in SAS is whether, under 35 U.S.C. § 318(a), a final written decision (step 3) must address every claim challenged in the petition (step 1), or whether it can address a subset of those claims.
Neither side disputes that, where the Patent Office decides not to institute at all (step 2), proceedings end, and there is no final written decision. Complications arise because a Patent Office regulation, 37 C.F.R. § 42.108, provides for the Patent Office to institute in part. Among other things, the Patent Office may institute review on some, but not all of the claims challenged. That is what happened in SAS. At step 1, SAS’s petition asked the Patent Office to review and invalidate all 16 claims of a patent SAS had been sued for infringing. At step 2, the Patent Office agreed to “institute” as to 9 of the 16 claims, but not the other 7.
It therefore follows, according to the Patent Office, that any claims not “instituted” at step 2 drop out of the case and need not be addressed in the final written decision. Thus, the final written decision in SAS addressed only the validity of the 9 instituted claims, but not the other 7.
In a decision that bound the Federal Circuit panel in SAS, the court upheld the Patent Office’s “partial institution” regulation as both (1) a valid exercise of its rulemaking authority under 35 U.S.C. § 316(a)(2) to promulgate regulations “setting for the the standard for the showing of sufficient grounds to institute,” and (2) at least, “[u]nder Chevron … a reasonable interpretation of the statutory provision governing … institution.” That same decision also upheld the Patent Office’s practice of issuing final written decisions that only addressed instituted claims. Section 318(a)’s reference to “any claim challenged by the petitioner,” in the court’s view, did not necessarily mean “every claim challenged in the petition”—it could also be fairly read to mean “the claims for which [review] was instituted.”
According to SAS, the Patent Office’s partial institution regulation is at least a dubious interpretation of section 314. That statute is best read, in SAS’s view, as making institution a binary, all-or-nothing decision. The petitioner tells the Patent Office Director which claims it wants reviewed. And the Director’s institution decision is either “yes,” or “no”—depending largely on whether the Director perceives “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.”
More importantly, according to SAS, even if the “partial institution” regulation is an otherwise valid exercise of the Patent Office’s rulemaking authority under § 316(d), and even if that regulation is a reasonable interpretation of § 314(a)—the Patent Office cannot cite its own regulation as a basis for disobeying § 318(a). Section 318(a) is clear on its face (“written in the plainest of English,” SAS argues) that, once the Patent Office decides to institute, it “shall issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” (emphasis added) The statute’s reference to “[a]ny patent claim challenged by the petitioner,” according to SAS, clearly means any claim properly raised in the petition (step 1). Further, SAS argues, the Patent Office’s partial institution regulation does not purport to interpret section 318(a), nor does the Patent Office have rulemaking authority to interpret that provision.
Thus, SAS argues, the Patent Office may not use its own regulation to contravene an otherwise-clear statute: if the consequences that the Patent Office says flow from its regulation clash with § 318(a)’s text, then the regulation must yield, not the statute. “Whatever the wisdom of Chevron, SAS argues, “it cannot be allowed such free rein as to allow the agency … to rewrite the law’s procedures to serve its interest in convenience.” Nor, SAS argues, should the Patent Office be heard to argue that section 318(a) is ambiguous, and therefore an implicit delegation of power to the Patent Office to interpret it. Either argument, SAS contends, “raises precisely the concerns about the structure of our representative government that have been voiced by Justice Thomas, by now-Justice Gorsuch, and most recently, by Judge Brown of the D.C. Circuit.”
Will the Supreme Court confront “Chevron’s fiction”?
SAS’s petition and the Patent Office’s brief in opposition each offer the Court multiple paths to a ruling in the filer’s favor, some of which avoid any need to revisit Chevron. Among other things, the Patent Office disputes SAS’s framing, disputes whether this case implicates Justice Thomas’s concerns about “Chevron’s fiction,” and argues that everything the Patent Office did was within its express rulemaking authority under 35 U.S.C. § 316.
It remains to be seen whose framing and whose arguments will prevail. In the end, SAS could turn out to be a big deal in administrative law, or it could be just another patent case. Either way, SAS’s petition has already shown that taking shots at Chevron may be one way to get the Supreme Court’s attention.
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