Section 314(d)’s Bar on Appeals Applies to Challenges Arising Under 35 U.S.C. § 315(b)

In an opinion by Justice Ginsburg, joined by Chief Justice Roberts and Justices Breyer, Kagan, Kavanaugh, Thomas (except as to the policy arguments), and Alito (same), the Supreme Court held that the 35 U.S.C. § 314(d)’s bar on appealing a decision by the PTO “whether to institute an inter partes review” applies to the one-year bar of 35 U.S.C. § 315(b). Justice Gorsuch filed a full-throated dissent, which Justice Sotomayor joined (except as to Part V).

A.           Statutory Background

Section 314(d) of the Patent Act states: “The determination by the Director whether to institute an inter partes review under this section shall be final and nonappeallable.” 35 U.S.C. § 314(d).

In Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2141 (2016), the Supreme Court held that despite the “strong presumption” in favor of judicial review, 35 U.S.C. § 314(d) precluded judicial review of “where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review.” The Court noted that its decision was narrow and would not apply; for example, to cancelling patent claims for “indefiniteness” in an inter partes review or where grant of an IPR petition would raise due process concerns. Id. at 2141-42 (“Such ‘shenanigans’ may be properly reviewable in the context of § 319 and under the Administrative Procedure Act, which enables reviewing courts to ‘set aside agency action’ that is ‘contrary to constitutional right,’ ‘in excess of statutory jurisdiction,’ or ‘arbitrary [and] capricious.’”).

In Cuozzo, the Court specifically noted that Section 314(d) did not inoculate from judicial review agency action that is “outside its statutory limits.” Section 315(b) of the Patent Act states in relevant part: “An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner … is served with a complaint alleging infringement of the patent.” In Thryv, Inc. v. Click-to-Call Techs., LP, No. 18-916, the Court addressed the issue of whether the Patent Trial and Appeal Board’s decision whether a petition is barred by 35 U.S.C. § 315(b) is “final and nonappeallable” under § 314(d).

B.           Factual Background

Inforocket.com, Inc.—an exclusive licensee of Click-to-Call—filed a patent infringement lawsuit in 2001 against a predecessor in interest of Thryv’s (Keen). While the lawsuit was pending, Keen acquired Inforocket.Com, which led to the lawsuit being voluntarily dismissed without prejudice.

In 2013, Thryv filed a petition seeking inter parte review of the patent-in-suit (U.S. Patent No. 5,818,836). Click-to-Call opposed institution of IPR review based on the 2001 lawsuit. The PTAB rejected that argument because in its opinion “a complaint dismissed without prejudice does not trigger § 315(b)’s one-year limit.”

Click-to-Call appealed. The Federal Circuit dismissed the appeal based on 35 U.S.C. § 314(d)’s bar on appealing the Director’s decision “to institute an inter partes review.” The Supreme Court vacated that decision in 2016 based on its intervening decision in Cuozzo. On remand, the Federal Circuit again dismissed the appeal on the same grounds.

Following that second dismissal, the Federal Circuit held, en banc, in Wi-Fi One, LLC v. Broadcom Corp., 878 F.3d 1364, 1367 (2018), that “‘time-bar determinations under § 315(b) are appealable’ notwithstanding § 314(d).” The en banc majority concluded that § 315(b)’s timeliness determinations are “not ‘closely related’ to the institution decision addressed in §314(a).” Id. at 1374.

In light of the Wi-Fi One decision, the Federal Circuit granted rehearing of Click-to-Call’s appeal and reversed the PTAB “because the 2001 infringement complaint, though dismissed without prejudice, started the one-year clock under § 315(b).”

C.           Analysis

The Court began its analysis by, again, defining the scope of Section 314(d). The plain language of § 314(d) “indicates that a party generally cannot contend on appeal that the agency should have refused ‘to institute an inter partes review.’” The Court emphasized that language from Cuozzo regarding “where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review.”

Based on that language, the majority found the issue of whether § 314(d) precluded a challenge based on the one-year timeliness requirement of § 315(b) to be a no-brainer. Slip Op. at 7 (“We need not venture beyond Cuozzo’s holding … for a § 315(b) challenge easily meets that measurement.”).

“Section 315(b)’s time limitation is integral to, indeed a condition on, institution. After all, §315(b) sets forth a circumstance in which ‘[a]n inter partes review may not be instituted.’” Slip Op. at 7. “A challenge to a petition’s timeliness under § 315(b) thus raises ‘an ordinary dispute about the application of’ an institution-related statute. Cuozzo, 579 U. S., at ___ (slip op., at 7). In this case as in Cuozzo, therefore, §314(d) overcomes the presumption favoring judicial review.”

In portion III-C of the opinion, which was not joined by Justices Thomas and Alito, the Court went on to discuss the “AIA’s purpose and design” and stated: “By providing for inter partes review, Congress, concerned about overpatenting and its diminishment of competition, sought to weed out bad patent claims efficiently.” Slip Op. at 8. “Allowing § 315(b) appeals would tug against that objective, wasting the resources spent resolving patentability and leaving bad patents enforceable.” Id. at 9. The fact that even if one petitioner was time barred, others could challenge a patent and that a time-barred party can join a proceeding initiated by another petitioner under § 315(c) provided further support to the Court’s statement that: “It is unsurprising that a statutory scheme so consistently elevating resolution of patentability above a petitioner’s compliance with §315(b) would exclude §315(b) appeals, thereby preserving the Board’s adjudication of the merits.” Id. at 9.

In the final section of its opinion, the Court rejected Click-to-Call’s narrower interpretation of Section 314(d) as applying only to § 314(a)’s “threshold determination … of the question of whether the petitioner has a reasonable likelihood of prevailing.” Slip Op. at 10. Click-to-Call’s argument was based on the reference in Section 314(d) to “under this section.”

The Court found its decision in Cuozzo fatal to this argument because in Cuozzo the Court had held that § 314(d) applied to a challenge rising under § 312(a)(3). Slip Op. at 10. Because the Director’s decision to institute an IPR must take into account other sections of the Patent Act, if Congress had intended to limit § 314(d) as Click-to-Call argued it could have done that by adopting language similar to what governed challenges to the Director’s decision to institute inter partes reexaminations. Slip Op. at 11 (“A determination by the Director under subsection (a) shall be final and non-appealable.” 35 U.S.C. § 312(c) (2006 ed.)”) (emphasis added).

The Court also rejected Click-to-Call’s arguments grounded in SAS Institute Inc. v. Iancu, 584 U.S. __ (2018). Contrary to Click-to-Call’s assertion, the Court held that SAS Institute and Cuozzo were not in conflict because in SAS Institute the Court reviewed “the manner in which the agency’s review ‘proceeds’ once instituted, [not] whether the agency should have instituted review at all.” Slip Op. at 12.

In a full-throated dissent, Justice Gorsuch characterized the Court’s decision as taking “a flawed premise--that the Constitution permits a politically guided agency to revoke an inventor’s property right in an issued patent—and bends it further, allowing the agency’s decision to stand immune from judicial review.” Dissent at 1.

Section V of the dissent, which Justice Sotomayor did not join is worth reading in its entirety and is likely be quoted frequently and oft by those who believe the AIA did more harm than good and that the pendulum has swung too far against patentees. In relevant part Justice Gorsuch stated:

We started the wrong turn in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U. S. ___ (2018). There, a majority of this Court acquiesced to the AIA’s provisions allowing agency officials to withdraw already-issued patents subject to very limited judicial review. As the majority saw it, patents are merely another public franchise that can be withdrawn more or less by executive grace. So what if patents were, for centuries, regarded as a form of personal property that, like any other, could be taken only by a judgment of a court of law. So what if our separation of powers and history frown on unfettered executive power over individuals, their liberty, and their property. What the government gives, the government may take away—with or without the involvement of the independent Judiciary. Today, a majority compounds that error by abandoning a good part of what little judicial review even the AIA left behind.

D.           Conclusion and Take-Aways

This decision sharply narrows the ability of patentees to challenge the PTAB’s decision to institute IPR review. Although the PTAB’s conduct of the review, once it is instituted, can still be challenged, it is difficult to see where the line on whether to institute IPR review will be drawn. It is hard to argue with Justice Gorsuch’s observation that:

For most of this Nation’s history it was thought an invention patent holder “holds a property in his invention by as good a title as the farmer holds his farm and flock.” Hovey v. Henry, 12 F. Cas. 603, 604 (No. 6,742) (CC Mass. 1846) (Woodbury, J., for the court). Yet now inventors hold nothing for long without executive grace. An issued patent becomes nothing more than a transfer slip from one agency window to another.