To Institute or Not to Institute IPR? That Question Is Not Immediately Reviewable by the Federal Circuit

May 5, 2014

In a series of three opinions issued on April 24, 2014, the Federal Circuit has decided that decisions by the Director of the U.S. Patent & Trademark Office to institute — or not to institute — an inter partes review ("IPR") under 35 U.S.C. § 314 are not immediately reviewable by the Federal Circuit, either through an appeal or a petition for mandamus relief.  These holdings have important implications for patent owners and patent defendants, as they limit the options available to parties dissatisfied with the Patent Office’s decisions on IPR petitions.  Below, we provide background regarding the IPR process, we summarize the Federal Circuit’s new decisions, and we explain how these decisions can impact patent litigants.

A.        Background Regarding Inter Partes Review

The IPR statute, created by Congress as part of the America Invents Act of 2012, codified at 35 U.S.C. §§ 311, et. seq., allows certain parties to challenge the validity of an issued patent at the Patent Office.  IPR proceedings are similar to patent reexamination proceedings in some respects, as both start with a petition by a party seeking review of an issued patent, and both can result in decisions by the Patent Office to cancel some or all claims of the patent.  But while reexaminations are conducted by patent examiners in the first instance, and can take several years to reach completion, IPR proceedings move more quickly and are heard directly by Administrative Law Judges of the Patent Trial and Appeal Board ("PTAB").  There are limits on a party’s ability to seek IPR, however.  For example, pursuant to section 315(a), a party who has first filed a declaratory judgment action seeking to invalidate a patent in district court generally cannot then seek IPR of that patent.

Since its inception, IPR has become increasingly popular with defendants in patent litigation, and with others threatened by patent owners, as an avenue for challenging validity.  The IPR process to date has been characterized by the Patent Office’s willingness to institute proceedings, by quick resolutions (usually within one year of institution), and by final decisions that typically find at least some claims unpatentable.  For example, statistics released by the PTAB show that of the decisions the Director has made to date in 2014 regarding whether to institute an IPR proceeding, the Director has agreed to institute IPR proceedings in approximately 79% of those decisions (272 out of 346 decisions).[1]  Moreover, one practitioner review concludes that as of April 2, 2014, approximately 95% of claims addressed in final written IPR decisions have been found unpatentable.[2] 

Because IPR proceedings result so often in the cancellation of claims, the Patent Office’s decision to grant a petition for IPR has become a very strong indicator that at least some claims of the challenged patent will be found unpatentable.  Consequently, the Director’s decision to institute (or not to institute) an IPR proceeding has important implications for both patent owners and patent defendants.  Below, we review the Federal Circuit’s new decisions and how they may affect stakeholders in the patent system.

B.        The Federal Circuit’s New Decisions

St. Jude Medical, Cardiology Division, Inc. v. Volcano Corp.,
No. 2014-1183 (Fed. Cir. Apr. 24, 2014).

In this opinion, the Federal Circuit held that it does not have jurisdiction to hear an appeal from the Director’s denial of a petition for IPR.  The appellant, St. Jude, sought review of the Director’s decision denying St. Jude’s petition for IPR as untimely.  St. Jude had sued Volcano Corp. for patent infringement in 2010, after which Volcano filed a counterclaim against St. Jude alleging infringement of U.S. Patent 7,134,994, the patent at issue here.  More than two years later, the parties stipulated to dismiss all claims relating to the ‘994 Patent from the litigation.  Six months after that, St. Jude filed a petition for IPR of the ‘994 Patent.  In October 2013, the Director, through the PTAB as her delegee,[3] denied the petition as untimely, explaining that 35 U.S.C. § 315(b) bars the institution of IPR proceedings sought more than one year after the petitioner is served with a "complaint" alleging infringement of the patent at issue.  The Director held that Volcano’s counterclaim against St. Jude alleging infringement of the ‘994 patent constituted a "complaint" for purposes of section 315(b), and because it was filed more than one year before St. Jude’s IPR petition, the petition was time barred.

St. Jude appealed the Director’s decision to the Federal Circuit.  On appeal, the Federal Circuit conducted a thorough examination of the statutory framework underlying the Director’s authority to institute and conduct an IPR, and determined that the Federal Circuit did not have jurisdiction to hear St. Jude’s appeal of the Director’s denial of its petition for IPR.  First, the Federal Circuit concluded that the statutory grant of its appellate authority over IPR proceedings at 35 U.S.C. §§ 319 and 141(c) limits the Federal Circuit’s review to the "final written decision[s] of the Board under section 318(a)."  Because the Federal Circuit determined that the Director’s decision not to grant St. Jude’s petition for IPR was made pursuant to sections 314(a) and (b), it was not a "final written decision" by the PTAB under section 318(a), and thus sections 319 and 141(c) did not provide jurisdiction to the Federal Circuit to hear St. Jude’s appeal.  Moreover, the Federal Circuit held that 35 U.S.C. § 314(d) expressly bars the Federal Circuit from reviewing the Director’s decision on whether to institute an IPR.  Section 314(d) declares that "[t]he determination by the Director whether to institute an IPR under this section shall be final and nonappealable."  35 U.S.C. § 314(d).  The Federal Circuit further held that St. Jude could not obtain jurisdiction under 28 U.S.C. § 1295(a)(4)(A), which generally permits the Federal Circuit to hear appeals of "a decision of the Patent Trial and Appeal Board of the United States Patent and Trademark Office with respect to a[n] . . . inter partes review under title 35."  Despite this broad statutory language, the Federal Circuit determined that this jurisdictional statute was "most naturally" read to refer to the Federal Circuit’s ability to hear appeals of the final decisions on the merits made by the Board under section 318(a), rather than the initial decision to institute or not institute an IPR.  Accordingly, the Federal Circuit dismissed St. Jude’s appeal for lack of jurisdiction.

In re Dominion Dealer Solutions, LLC,
No. 2014-109 (Fed. Cir. Apr. 24, 2014).

In a companion to its opinion in the St. Jude Medical case, here the Federal Circuit denied a petition for mandamus review of the Director’s refusal to institute IPR proceedings.   Petitioner Dominion Dealer Solutions had sought to institute IPR proceedings to invalidate several of a litigation adversary’s patents.  While Dominion’s IPR petitions were timely filed in the Patent Office, the Director nevertheless denied Dominion’s petitions on the ground that they failed to meet the substantive standard for IPR — i.e., because the petitions failed to demonstrate that "there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged."  35 U.S.C. § 314(a).   Dominion then sought review of the Director’s decision in district court and also directly in the Federal Circuit, by petitioning the Federal Circuit for a writ of mandamus under 28 U.S.C. § 1651.

The Federal Circuit, drawing on its decision in St. Jude Medical discussed above, held that the Director’s decision not to institute an IPR for failure to meet the "reasonable likelihood" requirement of section 314(a) is not reviewable directly by the Federal Circuit through the extraordinary means of mandamus.  The Federal Circuit declined to decide whether section 314(d) also precludes review by a district court of the Director’s decision to institute an IPR, leaving that question open for a future resolution.   

In re Proctor & Gamble Company,
No. 2014-121 (Fed. Cir. Apr. 24, 2014).

Finally, in this third opinion, the Federal Circuit denied a petition for mandamus review of the Director’s decision to institute an IPR of petitioner’s patents.  As background, petitioner Proctor & Gamble ("P&G") sued defendant Team Technologies for patent infringement of three patents relating to teeth whitening technology in the Southern District of Ohio.  Subsequently, an unrelated party, Clio USA, Inc., filed a declaratory judgment action against P&G in the District of New Jersey, alleging that those same three patents were invalid, unenforceable, or not infringed.  P&G then amended its complaint in the Ohio action to add Clio as a co-defendant.  Shortly thereafter, Clio moved under Federal Rule of Civil Procedure 41(a)(1)(B) to dismiss its declaratory judgment action.  The district court in New Jersey granted Clio’s dismissal without prejudice.  Clio then filed petitions for IPR of the three patents asserted against it by P&G in Ohio.  P&G opposed Clio’s petitions, arguing that section 315(a) barred the institution of IPR proceedings because Clio had previously filed a declaratory judgment action regarding these same patents, and that therefore Clio’s petitions were barred.  The Director disagreed and granted the petitions, determining that because Clio’s declaratory judgment action had been dismissed without prejudice, it did not bar the institution of IPR proceedings under section 315(a).

P&G filed a petition at the Federal Circuit for a writ of mandamus directing the Director to withdraw its orders instituting IPR proceedings on the patents at issue.  But the Federal Circuit denied P&G’s petition, holding that the rationale underlying its decisions in St. Jude Medical and Dominion Dealer Solutions applied here as well:  just as the Director’s decision denying a petition for IPR is not immediately reviewable by the Federal Circuit, neither is the Director’s decision granting a petition for IPR.  However, the Federal Circuit left open the possibility that the Director’s decision to institute an IPR proceeding may be reviewable later, on an appeal under section 319 of the Patent Act from a final decision on the merits of an IPR proceeding reached by the PTAB under section 318(a). 

*      *      *

In conclusion, the Federal Circuit’s recent decisions provide that patent owners and patent challengers cannot obtain immediate review in the Federal Circuit of the Director’s decision to institute — or not to institute — an IPR proceeding.  The Federal Circuit left open the possibility that there may be a right to obtain immediate review in the district court, or to obtain review eventually in the Federal Circuit (after an IPR proceeding has been completed on the merits).  However, those avenues are not clearly open yet, as the Federal Circuit has yet to hear an appeal on point.  And at least one district court recently decided that it lacks authority to review the Director’s decisions on this issue.  See Dominion Dealer Solutions, LLC v. Lee, No. 3:13CV699 (E.D. Va. Apr. 18, 2014).

C.        Implications of the Federal Circuit’s New Decisions

While the full impact of these decisions remains to be seen, petitioners seeking to institute IPR proceedings, and patent owners responding to such petitions, need to take extra care to put their best foot forward when filing IPR petitions and responses thereto.  Under these Federal Circuit decisions, there is no avenue to challenge the Director’s decision to institute or not institute IPR at the Federal Circuit, at least not until an IPR proceeding is completed on the merits.  Therefore, once the Director has instituted an IPR proceeding, it may not be possible for the patent owner to stop the proceeding on the ground that it was improperly instituted.  Likewise, once the Director has refused to institute an IPR proceeding, it may be practically impossible to compel the Director to change course.  

For patent owners, these Federal Circuit decisions present an added challenge.  Many patent owners believe it is in their interest to decline to file a response when faced with an IPR petition, and to wait instead until the Director has made a decision about whether to institute the IPR proceeding before submitting arguments to the PTAB (in order to avoid showing one’s cards to the petitioner before the PTAB has indicated which of the petitioner’s grounds for IPR are persuasive and which are unpersuasive or redundant).  In light of these Federal Circuit decisions, however, patent owners ought to strongly consider contesting petitions for IPR in the first instance — at least with respect to questions about timeliness, or other issues besides the merits of the petitioner’s arguments about patentability — as patent owners may not have any subsequent opportunity to raise such arguments.

In sum, these new Federal Circuit decisions require parties to take extra care when faced with the possibility of an IPR proceeding.  Consultation with knowledgeable counsel is a critical part of this process, as the landscape of IPR and other post-grant proceedings is constantly evolving.



   [3]   The Director of the U.S. Patent & Trademark Office has chosen to delegate her decision-making authority on IPR petitions to the PTAB.  37 C.F.R. §§ 42.4 & 42.108.  The PTAB, in making the decision to grant the petition for IPR, is exercising the Director’s 35 U.S.C. § 314 authority.  For clarity, we refer to the "Director’s" decision on whether to institute an IPR pursuant to sections 314(a), (b), and the "PTAB’s" decision on the substantive issues of the IPR under section 318.  

Gibson, Dunn & Crutcher LLP     

Gibson, Dunn & Crutcher’s lawyers are available to assist with any questions you may have regarding these issues.  For further information, please contact the Gibson Dunn lawyer with whom you usually work or the authors of this alert:

Stuart M. Rosenberg – Palo Alto (650-849-5389, [email protected])
Brooke Myers Wallace – Los Angeles (213-229-7074, [email protected])

Please also feel free to contact any of the following Intellectual Property Practice Group co-chairs and attorneys with PTO expertise, or the co-chairs of the Appellate and Constitutional Law Practice Group:

Intellectual Property Group:
Josh Krevitt – New York (212-351-2490, [email protected])
Wayne Barsky - Los Angeles (310-557-8183, [email protected])
Mark Reiter – Dallas (214-698-3360, [email protected])
Mark Lyon – Palo Alto (650-849-5307, [email protected])
Brian Buroker – Washington, D.C. (202-955-8541, [email protected])

Appellate and Constitutional Law Group:
Theodore B. Olson – Washington, D.C. (202-955-8500, [email protected])
Theodore J. Boutrous, Jr. – Los Angeles (213-229-7000, [email protected])
Daniel M. Kolkey – San Francisco (415-393-8200, [email protected])
Thomas G. Hungar - Washington, D.C. (202-955-8500, [email protected])
Miguel A. Estrada – Washington, D.C. (202-955-8500, [email protected])

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