A Deadbeat Patent Office... Has Institution Discretion Become an Excuse for Head Burying?

A recent case from the US Court of Appeals for the Federal Circuit tests the boundaries of Director discretion in deciding whether to institute an inter partes review. BioDelivery Sciences International v. Aquestive Therapeutics et al., Case Nos: 2019-1643, -1644 & -1645 (Fed. Cir. Aug. 29, 2019). Since the enactment of the America Invents Act, courts have identified what they term to be Director “discretion” on whether to institute inter partes reviews, even after there has been a showing of “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged...” under 35 USC §314(a). See e.g., Harmonic v. Avid Technology, 815 F.3d 1356, 1366-68 (Fed. Cir. 2016)(“the PTO is permitted, but never compelled, to institute an IPR proceeding.”).

One will recall that though the US Supreme Court suggested that “§314(a) invests the Director with discretion on the question whether to institute review,” the Court mandated review of all claims once an IPR is instituted in SAS Institute. Accordingly, partial review of a patent in AIA trials is no longer available.

BioDelivery was on appeal when SAS issued and the Court of Appeals remanded the case to the Patent Trial and Appeal Board to require institution on all the claims as opposed to a subset of the claims. Instead of reviewing all claims, a purposefully ignorant PTAB panel—applying “Director discretion”—reneged on institution of the IPR altogether. In a split decision, the subsequent Federal Circuit panel affirmed the Board’s ability to reverse its institution decision in full. The majority pointed to a discretionary nature of institutions in that they are generally unreviewable under §314(d). at p6. Also, the majority stated that the Board’s ability to dismiss proceedings under §318(a) suggests another form of discretion, an option to terminate a pending IPR, analogous to a preference to (even retroactively) refuse institution in total.

Judge Newman dissented, stating that the Board’s refusal to review all claims under SAS was disobedient to the specific instructions of the Remand Order. While Judge Newman seems to endorse the Board’s ability to institute trials according to its discretion, in this instance, the same was inappropriate since the SAS Remand required a more thorough review. Defying remand instructions, under 28 USC §2106, is (in her view) decidedly not within the Board’s discretion.

Straining discretion, might cause some to accuse the Patent Office of shamelessly avoiding its responsibilities, exercising preferential treatment to some petitioners and not others, tantamount to a deadbeat parent. What harm, after all, could come from a competent review of patentability by the now “inferior officers” of the Patent Trial and Appeal Board? (Arthrex v. Smith & Nephew, Case No.: 2018-2140 (Fed. Cir. Oct. 31, 2019)).

I am not a fan of the Board exercising its discretion to leave IPR petitions half-asked, in the general interests of judicial economy and without universal applicability. It is merely administrative review after all... not certiorari. Section 314(a) requires that

"The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under 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."

Section 314(a)’s “may not” clause has been interpreted more like a “may” clause. See Harmonic at 1367. Under Chevron, the plain language of “may not” traditionally has been construed synonymously with “shall not.” So, the Director shall not institute an IPR unless there is a showing that the petitioner has a “reasonable likelihood” of success on at least one claim. Does that, however, really mean that notwithstanding a showing of a reasonable likelihood of success, the Director “may” non-statutorily refuse institution?

Even though §316(a) enables the Director to make regulations pertaining to IPRs, the same must be done “under section 314(a).” The “may not” clause of §314 mandates a condition precedent to institution but may not sanction unbridled institution-discretion. Pun intended. As to §316(b), even though PTO regulations should consider “the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings....” it does not necessarily follow that interpretations of §314 (or regulations made under §316) can permissibly defy congressional intent in the interests of “the economy, the integrity of the patent system...” and so forth. SAS.

There have been other instances where the Board has refused to institute IPRs, even when §314(a) is met, e.g., where there is a time bar (Wi-Fi One), AIA or district-court-litigation redundancy (NHK Spring Co., Case IPR 2018-00752 (Paper 8)(PTAB Sept. 12, 2018)), or sovereign immunity (Saint Regis Mohawk Tribe). However, in these instances, the patentability challenge is either legally impossible to hear or the merits are being heard elsewhere, i.e., no lawful patentability challenge is going unheard, unlike Chevron Oronite (where institution was denied when two of 20 claims showed a reasonable likelihood of unpatentability) and Deeper, UAB v. Vexilar (where institution was denied even though two of 23 claims were reasonably unlikely to be patentable). Case IPR2018-00923 (Paper 9)(PTAB Nov. 7, 2018) and Case IPR2018-01310 (Paper 7)(PTAB Jan. 24, 2019).

Consider the purposes of IPRs: “to improve patent quality and make the patent system more efficient...” General Plastic, Case IPR2016-01357 (Paper 19)(PTAB Sept. 6, 2017), pp16-17. Do arbitrary declinations serve the purposes of the statute? Is it prudent for the Patent Office to make admissions as to the likelihood of a claim (or claims) being unpatentable and then not remedy the same? If not the Patent Office, then who should administratively correct unpatentable claims? If not on IPR petition—or in a less interactive, ex parte reexamination or more expensive civil litigation—then when? Does the PTO need more ALJs? I know I have applied.

As patent professionals, we must ask ourselves: is this level of Board discretion desirable and in line with the gist of the AIA? If not, what is the price of such Board abridges?