Court Opinion

ID: 4096058
Source: CourtListenerOpinion
Date Created: 2016-11-07 16:01:22.939738+00
Date Added: 2024-06-11T07:45:31.221074
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

               SAS INSTITUTE, INC.,
                     Appellant

                           v.

             COMPLEMENTSOFT, LLC.,
                   Cross-Appellant
               ______________________

                 2015-1346, 2015-1347
                ______________________

   Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in No.
IPR2013-00226.
               ______________________

    ON PETITION FOR REHEARING EN BANC
             ______________________

    JOHN MARLOTT, Jones Day, Chicago, IL, for appellant.
Also represented by GREGORY A. CASTANIAS, Washington,
DC; DAVID B. COCHRAN, Cleveland, OH; MATTHEW
JOHNSON, Pittsburgh, PA.

    MATTHEW TOPIC, Loevy & Loevy, Chicago, IL, for
cross-appellant.

    NATHAN K. KELLEY, Office of the Solicitor, United
States Patent and Trademark Office, Alexandria, VA, for
intervenor Michelle K. Lee. Also represented by SCOTT
WEIDENFELLER, JOSEPH GERARD PICCOLO, STACY BETH
MARGOLIES, SARAH E. CRAVEN.
2                     SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

                       ______________________

  Before PROST, Chief Judge, NEWMAN, LOURIE, DYK,
MOORE, REYNA, WALLACH, TARANTO, CHEN, HUGHES, and
               STOLL, Circuit Judges.*
    NEWMAN, Circuit Judge, dissents from the denial of the
              petition for rehearing en banc.
PER CURIAM.
                                   ORDER
     Appellant SAS Institute, Inc. filed a petition for re-
hearing en banc. Responses to the petition were invited by
the court and filed by intervenor Michelle K. Lee and
cross-appellant Complementsoft, LLC. The petition was
first referred as a petition for rehearing to the panel that
heard the appeal, and thereafter the petition for rehear-
ing en banc was referred to the circuit judges who are in
regular active service. A poll was requested, taken, and
failed.
      Upon consideration thereof,
      IT IS ORDERED THAT:
      The petition for panel rehearing is denied.
      The petition for rehearing en banc is denied.
   The mandate of the court will issue on November 14,
2016.

                                      FOR THE COURT

November 7, 2016                      /s/ Peter R. Marksteiner
     Date                             Peter R. Marksteiner
                                      Clerk of Court

________________________________

*     Circuit Judge O’Malley did not participate.
  United States Court of Appeals
      for the Federal Circuit
                 ______________________

                SAS INSTITUTE, INC.,
                      Appellant

                            v.

             COMPLEMENTSOFT, LLC.,
                   Cross-Appellant
               ______________________

                  2015-1346, 2015-1347
                 ______________________

   Appeals from the United States Patent and Trade-
mark Office, Patent Trial and Appeal Board in No.
IPR2013-00226.
               ______________________

NEWMAN, Circuit Judge, dissenting from denial of the
petition for rehearing en banc.
    Administrative agency practices are required to con-
form to the authorizing legislation and the statutory
purpose. The Patent and Trademark Office (“PTO”),
charged with administering the Leahy–Smith America
Invents Act (“AIA”), P.L. 112–29, has adopted some
implementing practices that are not authorized by the
statute and not in accord with the legislative purpose of
achieving final resolution of disputed patent validity
issues by agency action in place of litigation.
    This case concerns the PTO’s adoption of the practice
whereby on inter partes review (“IPR”) the PTO may, in
its sole discretion, choose to decide some, but not all, of
2               SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

the patent claims that are challenged under the statute.
This practice foils the legislative purpose of resolving
certain patent issues in an administrative forum, newly
available to litigants previously confined to the district
court. From my colleagues’ refusal to reconsider this
agency practice en banc, I respectfully dissent.
                       DISCUSSION
    The America Invents Act established a new adjudica-
tory body called the Patent Trial and Appeal Board
(“PTAB”), an administrative tribunal vested with authori-
ty to conduct trials including discovery, evidence, testi-
mony, briefs, argument, and final decision. The PTAB’s
decisions produce estoppel in all subsequent proceedings
between the parties, both administrative and judicial.
The goal is the efficient and reliable resolution of certain
patent disputes without the cost and delay and uncertain-
ty of district court litigation. As explained by Senator
Kyl, a principal architect of the legislation, this system
“ideally [will] completely substitute for at least the pa-
tents-and-printed-publication portion of the civil litiga-
tion.” 157 CONG. REC. S1376 (daily ed. Mar. 8, 2011)
(statement of Sen. Kyl).
    This goal was paramount during the years of genesis
of the America Invents Act. “It is clearly appropriate to
have an administrative process for challenging patent
validity, but it should exist within a structure that guar-
antees a quick–and final–determination.” Patent Reform
Act of 2009: Hearing on H.R. 1260, House Comm. on the
Judiciary, 111th Cong. 153 (April 30, 2009) (statement of
Rep. Manzullo). The AIA provides for final determination
of validity as to the grounds asserted against the claims
challenged in the petition.
    However, the PTO adopted regulations that authoriz-
es the PTAB to choose to decide some, but not all, of the
challenged claims. The practice, called “partial” or “selec-
tive” institution, leaves the unselected claims dangling,
SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.               3

lacking both finality and estoppel, preventing the expedi-
ency and economy and efficiency that motivated the
America Invents Act. Senator Kyl stressed a primary
purpose of the Act “to force a party to bring all of [its]
claims in one forum . . . and therefore to eliminate the
need to press any claims in other fora.” 154 CONG. REC.
S9989 (daily ed. Sept. 27, 2008) (statement of Sen. Kyl).
    Instead, by “partial institution” the petitioner is not
only mired in the proceeding for the claims that the PTAB
has selected, but may also be obliged to litigate the other
claims in other for a, even though those claims were
properly presented to the PTAB for adjudication. The
matter requires en banc correction, for this court has
endorsed the PTO’s position that “the final order of the
Board need not address every claim raised in the petition
for review” Synopsys, Inc., v. Mentor Graphics Corp., 814
F.3d 1309, 1311 (Fed. Cir. 2016).
                          THE STATUTE
     The provisions of the AIA form a coherent whole only
when all of the properly challenged claims are decided by
the PTAB. “The cardinal rule of statutory interpretation
[is] that no provision should be construed to be entirely
redundant.” Kungys v. United States, 485 U.S. 759, 778
(1988). “It is the duty of the court to give effect, if possi-
ble, to every clause and word of a statute” Inhabitants of
Montclair Tp. v. Ramsdell, 107 U.S. 147, 152 (1883).
    Relevant statutory provisions include—
          35 U.S.C § 311 Inter Partes Review
    Section 311 authorizes the defined post-grant chal-
lenges in the PTO. The purpose is not only to avoid or
reduce the burdens and costs and delays of litigation, but
potentially to avert litigation. See 157 CONG. REC. S1053
(Mar. 1, 2011) (statement of Sen. Whitehouse) (“[T]he bill
will improve administrative processes so that disputes
over patents can be resolved quickly and cheaply without
4               SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

patents being tied up for years in expensive litigation.”);
see also H.R. REP. NO. 112-98 pt.1 at 48 (2011) (“[T]he
purpose of the section is providing quick and cost effective
alternatives to litigation.”):
    § 311(a) In general.–– Subject to the provisions
    of this chapter, a person who is not the owner of a
    patent may file with the Office a petition to insti-
    tute an inter partes review of the patent. . . .
    (b) Scope.— A petitioner in an inter partes review
    may request to cancel as unpatentable 1 or more
    claims of a patent only on a ground that could be
    raised under section 102 or 103 and only on the
    basis of prior art consisting of patents or printed
    publications.
The PTO’s then-Director Dudas explained that the major-
ity of validity challenges are on § 102 or §103 grounds
based on reference patents and printed publications. See
Patent Reform: The Future of American Innovation:
Hearing Before the Senate Comm. on the Judiciary, 110th
Cong. 7 (2007) (statement of Director Jon Dudas).
    The legislative record is unambiguous: the purpose of
the AIA procedure is to move these validity challenges
into the PTO, whose expertise in technology and experi-
ence in the relevant law are intended to produce decisions
entitled to estoppel in any judicial or administrative
proceeding between these parties or their privies. Sena-
tor Grassley explained the intended effect: “If an inter
partes review is instituted while litigation is pending, that
review will completely substitute for at least the patents-
and-printed-publications portion of the civil litigation.”
157 CONG. REC. S1376 (daily ed. Mar. 8, 2011) (statement
of Sen. Grassley). This complete substitution, as enacted
by Congress, cannot occur if the validity of only some of
the challenged claims is decided, leaving the other chal-
lenged claims untouched.
SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.            5

                35 U.S.C. § 312 Petitions
    Section 312 states the required content of these post-
grant petitions. When the specified content is not provid-
ed, the petition must be denied. When the specified
content is provided, the petition may or may not be “insti-
tuted,” in the PTO’s unchallenged discretion. However,
the statute does not contemplate the partial institution of
only those parts selected by the PTO:
    § 312(a) Requirements of petition. — A petition
    filed under section 311 may be considered only
    if—
        ....
        (3) the petition identified, in writing and
        with particularity, each claim challenged,
        the grounds on which the challenge to
        each claim is based, and the evidence that
        supports the grounds for the challenge to
        each claim, including— . . . .
    At enactment Senator Grassley explained that “by re-
quiring petitioners to tie their challenges to particular
validity arguments against particular claims, the new
threshold will prevent challenges from ‘mushrooming’
after the review is instituted into additional arguments
employing other prior art or attacking other claims.” 157
CONG. REC. S1376 (daily ed. Mar. 8, 2011). Emphasis on
this requirement pervaded the genesis of the legislation.
Senator Kyl explained that the petitioner “must present a
full affirmative case” as to every challenged claim. 154
CONG. REC. S9987 (daily ed. Sept. 25, 2008) (statement by
Sen. Kyl on S. 3600).
    While § 314(d), discussed infra, provides that the PTO
may refuse to accept any petition in its entirety, it was
never contemplated that only some of the challenged
claims might be reviewed, nor does § 314(d) provide such
discretion, for this defeats the purpose of the proceeding.
6                SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

The legislative record stresses the intent “to eliminate the
need to press any claims in other fora.” 154 CONG. REC.
S9989 (daily ed. Sept. 27, 2008) (statement of Sen. Kyl).
    35 U.S.C. § 313 Preliminary response to petition
   The patent owner is authorized to respond, and to ar-
gue that “no inter partes review should be instituted.”
There is no suggestion of partial institution.
    35 U.S.C. § 314 Institution of inter partes review
     “What the bill does . . . is very simple. It says the Pa-
tent Office will make an administrative determination
before the years of litigation as to whether this patent is a
legitimate patent so as not to allow the kind of abuse we
have seen.” 157 CONG. REC. S5437 (daily ed. Sept. 8, 2011)
(Statement of Sen. Schumer on Senate consideration of
H.R. 1249). Section 314 provides for the threshold deter-
mination of whether to proceed at all and sets time limits
for the decision of whether to institute review:
     § 314(a) Threshold.—The Director may not au-
     thorize an inter partes review to be instituted un-
     less the director determines that the information
     presented in the petition filed in section 311 and
     any response filed under section 313 shows that
     there is a reasonable likelihood that the petitioner
     would prevail with respect to at least 1 of the
     claims challenged in the petition.
     (b) Timing.—The Director shall determine whe-
     ther to institute an inter partes review under this
     chapter pursuant to a petition filed under section
     311 within 3 months after––
        (1) receiving a preliminary response to the
        petition under section 313; or
        (2) if no such preliminary response is filed,
        the last date on which such response may
        be filed.
SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.              7

    In legislative response to the PTO’s concern about its
ability to meet a sudden increase in workload, the statute
provides that the PTO is not obligated to accept every
petition, even when meritorious. Senator Kyl explained
that this “reflects a legislative judgment that it is better
that the Office turn away some petitions that otherwise
satisfy the threshold for instituting and inter partes or
post-grant review than it is to allow the Office to develop
a backlog of instituted reviews that precludes the Office
from timely completing proceedings.” 157 CONG. REC.
S1377 (daily ed. Mar. 8, 2011) (statement of Sen. Kyl). As
part of this expedient, as well as to avert delay due to
interlocutory appeal, the Act provides that the threshold
decision whether to institute review is not appealable:
    (d) No appeal.–– The determination by the Di-
    rector whether to institute an inter partes review
    under this section shall be final and nonappeala-
    ble.
Thus, when a petition for review is declined, litigation
may proceed. The statutory plan is for an alternative to
litigation, not duplicative litigation as may arise from
partial institution.
    35 U.S.C § 315 Relation to other proceedings
    or actions
    A primary focus of the AIA is to avoid the cost and de-
lay and uncertainty of patent litigation. Thus the statute
places controls on the relation between these PTO pro-
ceedings and district court and ITC litigation. Of particu-
lar concern is the effect of partial institution on the
integrity of the new estoppel provisions:
    § 315(e) Estoppel––
    (1) Proceedings before the Office.––The peti-
    tioner in an inter partes review of a claim in a pa-
    tent under this chapter that results in a final
    written decision under section 318(a), or the real
8                SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

    party in interest or privy of the petitioner, may
    not request or maintain a proceeding before the
    Office with respect to that claim on any ground
    that the petitioner raised or reasonably could
    have raised during that inter partes review.
    (2) Civil actions and other proceedings.—The
    petitioner in an inter partes review of a claim in a
    patent under this chapter that results in a final
    written decision under section 318(a), or the real
    party in interest or privy of the petitioner, may
    not assert either in a civil action arising in whole
    or in part under section 1338 of title 28 or in a
    proceeding before the International Trade Com-
    mission under section 337 of the Tariff Act of 1930
    that the claim is invalid on any ground that the
    petitioner raised or reasonably could have raised
    during that inter partes review.
A goal of these new PTO proceedings is finality of deci-
sion. As the legislation evolved, it was stressed that “if
[such] proceedings are to be permitted, they should gen-
erally serve as a complete substitute for at least some
phase of the litigation.” S. REP. NO. 110-259, at 67 (2008)
(Additional Views of Sen. Specter joined with Minority
Views of Sens. Kyl, Grassley, Coburn and Brownback).
    The estoppel provisions were controversial. See, e.g.,
S. REP. NO. 111-18, at 17 (2009) (“Many businesses also
have described could-have-raised estoppel as a powerful
brake on their use of inter partes reexamination. They
find this standard vague and uncertain, and fear that if
they challenge a patent in an inter partes reexamination,
they will lose the ability to raise later-discovered prior art
against the patent if they are subsequently sued for
infringement.”). The statute as enacted embodies the
dominant policy weight on the benefits of finality and
estoppel, as explained by then-Director of the USPTO
David Kappos: “Those estoppel provisions mean that your
SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.              9

patent is largely unchallengeable by the same party.”
Hearing on H.R. 1249 before the Subcomm. on Intell.
Prop., Competition and the Internet of the House Comm.
on the Judiciary, 112th Cong. (2011).
   On enactment, Senator Grassley flagged the purpose
and significance of the estoppel provisions:
    In addition, the bill would improve the current in-
    ter partes administrative process for challenging
    the validity of a patent. It would establish an ad-
    versarial inter partes review, with a higher
    threshold for initiating a proceeding and proce-
    dural safeguards to prevent a challenger from us-
    ing the process to harass patent owners. It also
    would include a strengthened estoppel standard to
    prevent petitioners from raising in a subsequent
    challenge the same patent issues that were raised
    or reasonably could have been raised in a prior
    challenge. The bill would significantly reduce the
    ability to use post-grant procedures for abusive
    serial challenges to patents. These new proce-
    dures would also provide faster, less costly, alter-
    natives to civil litigation.
157 CONG. REC. S952 (daily ed. Feb. 28, 2011) (statement
of Sen. Grassley). These goals are thwarted by the partial
institution practice.
     Estoppel cannot arise as to claims that the PTO de-
clined to review. Partial institution negates the purpose
that any patent claim challenged by the petitioner and
any new claim added during the proceeding could be fully
and finally decided, thereby bringing “more certainty in
litigation.” 157 CONG. REC. S948 (daily ed. Feb. 28, 2011)
(statement of Sen. Leahy).
    35 U.S.C § 316 Conduct of inter partes review
    Section 316 authorizes the PTO Director to issue reg-
ulations, sets some evidentiary standards, and provides
10               SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

rules whereby the patent owner may file one motion to
amend its claims. The rules here of concern are 37 C.F.R.
42.108(a) (“When instituting inter partes review, the
Board may authorize the review to proceed on all or some
of the challenged claims and on all or some of the grounds
of unpatentability asserted for each claim.”); 37 C.F.R.
42.108(b) (“At any time prior to institution of inter partes
review, the Board may deny some or all grounds for
unpatentability for some or all of the challenged claims.
Denial of a ground is a Board decision not to institute
inter partes review on that ground.”). These practices
work against the statutory purpose of final resolution of
§ 102 and § 103 issues. 1
    The Administrative Procedure Act requires that a re-
viewing court “shall hold unlawful and set aside agency
action, findings, and conclusions found to be in excess of
statutory jurisdiction, authority, or limitations, or short of
statutory right.” 5 U.S.C. § 706(2)(C). “If the intent of
Congress is clear, that is the end of the matter; for the
court, as well as the agency, must give effect to the unam-
biguously expressed intent of Congress.” Chevron U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S.
837, 842-43 (1984).
         35 U.S.C. § 318 Decision of the Board

     1  The estoppel in IPR proceedings differs from the
estoppel in the CBM transitional proceedings, 35 U.S.C.
§ 18(a)(1)(D) (“The petitioner in a transitional proceeding
that … results in a final written decision… may not
assert … that the claim is invalid on any ground that the
petitioner raised during that transitional proceeding.”).
Both the “raised” and “could-have-raised” standards are
affected by partial institution.
SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.              11

    The legislation requires a final decision as to every
claim challenged in the petition.
    § 318(a) Final Written Decision–– If an inter
    partes review is instituted and not dismissed un-
    der this chapter, the Patent Trial and Appeal
    Board shall issue a final written decision with re-
    spect to the patentability of any patent claim chal-
    lenged by the petitioner and any new claim added
    under section 316(d).
The statute requires the Board’s final decision to encom-
pass “the patentability of any patent claim challenged by
the petitioner and any new claim added under section
316(d).”
     This requirement to render a final decision for each of
the challenged claims directly comports with the estoppel
provisions. Fidelity to this legislative purpose is a neces-
sity if the AIA’s new adjudicatory proceeding is to substi-
tute for major aspects of patent validity litigation. 2 Such
substitution will serve the Nation’s interest in technologi-
cal innovation and resultant societal benefits.
                          CONCLUSION
    On this petition for rehearing en banc, the judicial ob-
ligation is to assure fidelity to the intent of Congress, as
expressed in the statute and the legislative record, lest we

    2   I have focused on the question of partial institu-
tion, mindful that other aspects of AIA implementation
are arising in other cases, all of which together affect the
vitality of the statute. See Davis v. Michigan Dept. of
Treasury, 489 U.S. 803, 809 (1989) (“A court must there-
fore interpret the statute ‘as a symmetrical and coherent
regulatory scheme,’ and ‘fit, if possible, all parts into an
harmonious whole.’”) (internal citations omitted).
12               SAS INSTITUTE, INC.   v. COMPLEMENTSOFT, LLC.

become complicit in “frustrating the policy that Congress
sought to implement:”
     [T]he courts are the final authorities on issues of
     statutory construction. They must reject adminis-
     trative constructions of the statute, whether
     reached by adjudication or by rulemaking, that
     are inconsistent with the statutory mandate or
     that frustrate the policy that Congress sought to
     implement.
Fed. Energy Comm’n v. Democratic Senatorial Campaign
Comm., 454 U.S. 27, 32 (1981). Thus I must, respectfully,
dissent from the denial of rehearing en banc.