In the most anticipated patent case of the year, the U.S. Supreme Court recently upheld the CAFC in Oil States Energy Services v. Greenes's Energy Group, supporting Congress' power to institute inter partes reviews (IPRs) in the American Invents Act's (AIA) post-grant review process. However, they only ruled on the narrow grounds raised in Oil States petition, and declined to reach other grounds advanced by the amici against the current IPR regime. Indeed, much like the In re Bilski decision a few years ago, which narrowly upheld the validity of business method patents, only to be mostly undone a few years later in Alice, Oil States may turn out to be only a temporary stay of execution for IPRs.

Much of the opinion was an historic review of the patent right, particularly focusing on the question of whether it was a “public” or “private” right, finding that it is a “public franchise”:

“The public-rights doctrine applies to matters “'arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.'”… Inter partes review involves one such matter: reconsideration of the Government's decision to grant a public franchise … [and] falls squarely within the public rights doctrine.”… Congress has permissibly reserved the PTO's authority to conduct that reconsideration.”

However, while holding the historical power of Congress to legislate the basic scheme, they noted that they're not deciding all possible regulatory questions, nor due process or retroactivity issues. Indeed, Thomas stated definitively: “we emphasize the narrowness of our holding.”

In dissent, for himself and the chief justice, Justice Neil Gorsuch also went through an historical review and analysis, but comes out in a different place, equating the patent grant as more equivalent to real property grants. He also ringingly endorsed the patent system, and its necessary stability and expectations:

“Just because you give a gift doesn't mean you forever enjoy the right to reclaim it. And, as we've seen, just because the executive could issue an invention (or land) patent did not mean the Executive could revoke i t… The law requires us to honor those historical rights, not diminish them.”

He further admonishes the majority for ignoring the possible influence of the political process on agency functions and the IPR as a “retreat from judicial independence”:

“Can a political appointee and his administrative agents, instead of an independent judge, resolve the dispute? The court says yes. Respectfully, I disagree … When an independent Judiciary gives ground to bureaucrats in the adjudication of cases, the losers will often prove the unpopular and vulnerable? Powerful interests are capable of amassing armies of lobbyists and lawyers to influence (and even capture) politically accountable bureaucracies. But what about everyone else?”

Normally this might be seen as the rhetoric of a free-wheeling but still two vote dissent. However, in the now-companion opinion, issued the same day, SAS Institute v. Iancu, Justice Gorsuch, now writing for a 5-4 majority, reinforced his concerns about agency bureaucracies and their actions. In so-doing , the Supreme Court has likely fundamentally reshaped the Patent Trials and Appeals Board (PTAB) rulemaking and interpretation process. .

In this case, the specific issue was the PTAB rule permitting so-called “partial institutions” of only some of the claims in an IPR petition. The U.S. Court of Appeals for the Federal Circuit had allowed the PTAB to institute inter partes review of only a subset of the grounds advanced by the Petitioner and held that the estoppel provisions of 35 U.S.C. sec. 315(e) applied only to those ground on which review was instituted. See Shaw v. Automated Creel (Fed Cir. 2016); HP v. MPHJ (Fed Cir. 2016). District courts have split on how broadly to apply these decisions, with some districts applying estoppel narrowly, see e.g Phillips v. Wangs (D. Mass. 2018), while others have effectively limited Shaw and HP to their facts, see Network-1 v. Alcatel-Lucent (E.D. Tex. 2017).

In SAS, the Supreme Court reversed the Federal Circuit and required the PTAB to consider and decide all grounds advanced in an IPR petition. This is a profound change in the PTAB practice, resulting in a number of new strategic and tactical decisions for the parties to an IPR. One very significant result is that it will likely affect both the scope of estoppel in parallel district court proceedings and, as a result, the likelihood and frequency of stays in district court litigation. Indeed, one of the most immediate impact of the Oil States/SAS decisions will be on felt in how district courts will treat IPRs in terms of stays and estoppel.

By way of background, a key inquiry into whether a district court should grant a stay of a pending patent infringement case pending resolution of an IPR is the potential simplification of the case resulting from the IPR. Now that the PTAB is required to resolve all issues raised in the IPR petition and, not, as has been the case in the past, only the ones it thought important, the potential for simplification of the issues in the case is certainly increased.

For example, under the previous regime of partial institutions, there would be significant simplification of the case only in cases in which the petitioner actually prevailed in showing the asserted claims were invalid. But in cases where the petitioner failed to show invalidity, there was very little simplification because the defendant was allowed to re-litigate the issue of validity in district court, with estoppel applying only the grounds that were actually instituted.

Whether SAS will actually increase the potential for simplification of the issues in the district court case will thus depend on how the courts will apply SAS in terms of estoppel. Patent owners will likely interpret SAS as requiring estoppel under 35 U.S.C. Sec. 315(e) to apply to all grounds raised in the IPR petition. If that view is adopted, then an IPR will likely result in significant simplification of the invalidity issues before the district court because win or lose, the parties will not be able to re-litigate the grounds already decided by the PTAB. Defendants on the other hand, will try to preserve as much of the status quo by arguing that estoppel should continue to apply only to grounds that were actually instituted.

In other words, under this reading of Shaw and HP, if the PTAB institutes review of a ground of invalidity and decides the patent is valid, there would be estoppel, while if the PTAB declines to institute review of a ground of invalidity, the defendant would be able to raise the same issue again at the district court level.

Another issue that is sure to be litigated is what effect, if any, SAS will have on the scope of estoppel of previous IPR decisions. For example, how will courts treat a previous decision not to institute on a certain ground, which under SAS would have required the PTAB to decide the merits of that ground? Will they treat it as a finding of validity in the patent owner's favor (as may now be the case under SAS) or will they continue to treat it as a mulligan for the defendant?

Leaving the specific issue of partial institutions aside, what's also interesting about the Gorsuch opinion (read with his dissent in Oil States) is that the court seems to be concerned about the way the PTAB has implemented and interpreted its rules and practices generally, issues that have been actively discussed in the stakeholder community, as well as the broad question of Chevron deference generally, a trendy legal target in Justice Gorsuch's world.

Justice Gorsuch may have also poked a large hole, or possibly even gutted, the court's 2-year old opinion in Cuozzo, which generally upheld the “unappealability” of IPR institutions on statutory construction grounds. In dissent in Cuozzo, Justice Samuel Alito warned about the possibility of regulatory agency “shenanigans” if judicial review were too constricted. Consistent with his Chevron philosophy, Justice Gosuch has now elevated the “shenanigans” concern into the court's majority in SAS.

One likely practical outcome would be support for PTO Director Andrei Iancu's initiative to review and amend PTAB processes, and possibly legislative efforts such as Sen. Christopher Coons' STRONGER Patents Act.

Q. Todd Dickinson is senior partner at Polsinelli in Washington, D.C. and a former director of the U.S. Patent and Trademark Office.

Fabio Marino is vice chair of the IP division, chair of the IP litigation practice and managing shareholder of the firm's Silicon Valley office.