A Likely Uphill Battle for Synopsys In Suit Against The Patent Office

| June 13, 2014

In a complaint recently filed in a Virginia federal court, Synopsys accused the Patent and Trademark Office (“the Patent Office”) of prescribing rules and regulations for inter partes review (77 Fed. Reg. 48727) that are procedurally defective and ultra vires. Synopsys took issue specifically with Patent Office’s Rules 42.108(a) and (b), which govern the institution of review and instruct that:

(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;

(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 rules, Synopsys argued, are inconsistent with Sections 314(a) and 318(a) of the America Invents Act (“AIA”). Section 314(a) sets the threshold for instituting inter partes review at “a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Synopsys interpreted this statutory language to mean that where the threshold is met, the Patent Office must grant a petition for inter partes review in whole.

If an inter partes review is instituted, Section 318(a) then requires that the Board “issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner and any new claim added”. Synopsys’s interpretation of Section 318(a) would require that the Board’s final written decision address all of the patent claims being challenged.

Relying on Section 706 of the Administrative Procedure Act (“APA”), Synopsys lambasted the Patent Office’s Rule 42.108 as “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” under 5 U.S.C. §706(2)(A);“in excess of statutory jurisdiction, authority, or limitations, or short of statutory right” under 5 U.S.C. §706(2)(C); and “without observance of procedure required by law” under 5 U.S.C. §706(2)(D).

At the heart of Synopsys’s grievance was that the Patent Office’s inter partes review practice prevented Synopsys from seeking the Federal Circuit’s judicial review of all the patent claims that it had originally challenged. Those challenged claims that did not make the cut for inter partes review, and therefore were omitted from the Board’s final decision, were ineligible for judicial review.

Unfortunately, Synopsys’s arguments seem to suffer one possibly crippling weakness—they target Rule 42.108, which is a procedural rule. Congress has empowered the Patent Office with broad procedural rulemaking authority to establish regulations that “govern the conduct of proceedings in the Office”, so long as the regulations are consistent with the text of the law and the intent of Congress. 35 U.S.C. §2(b)(2). Had Synopsys targeted a substantive patent rule instead, Synopsys might have eventually been able to rally the Federal Circuit, and its precedents, to its cause. It is no secret that the Patent Office and the Federal Circuit have long been engaged in a power struggle over substantive issues of patent law, in which the Federal Circuit prefers to reserve substantive rulemaking authority for itself.[1] The Patent Office’s procedural rulemaking authority, on the other hand, the Federal Circuit has never denied.

To prevail against the Patent Office, Synopsys’s only recourse would be to successfully argue that the Patent Office’s Rules 42.108(a) and (b) are unfaithful, in text or in spirit, to Sections 314(a) and 318(a) of AIA. Success, however, would likely prove elusive.

As Synopsys noted, the federal court is authorized to invalidate Rule 42.108, if the rule is found to fall within any of the categories under Section 706(2) of APA. As the validity of Rule 42.108 hinges on the propriety of the Patent Office’s interpretation of Sections 314(a) and 318(a) of AIA, at issue in Synopsys’s lawsuit would likely be whether Chevron deference should be given to the Patent Office’s statutory interpretation. Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984).

The Supreme Court in Chevron held that courts must defer to an agency’s reasonable interpretation of a statute, not only when Congress expressly delegates interpretative authority to the agency, but also when Congress is silent or leaves ambiguity in a statute that the agency is charged with administering. Id., at 842-44. Deference is not appropriate where Congress has spoken directly on the statute at issue, that is, where the search for the plain meaning of the statute yields a clear result and the intent of Congress is unambiguous.

Here, the Patent Office’s interpretation of Sections 314(a) and 318(a), as manifested in Rule 42.108, seems to be the ideal candidate for Chevron deference. The text of the statutes permits the Patent Office’s interpretation. The statutes, when read plainly, do not require that the Patent Office institute inter partes review of all the claims being challenged, whenever one of the claims meets the threshold for institution. Section 314(a) is silent on this point. Section 318(a) provides that a final written decision shall be issued “with respect to the patentability of any patent claim challenged.” A plain and ordinary meaning of “any” is “one or some indiscriminately of whatever kind” or “one, some, or all indiscriminately of whatever quantity.” Merriam-Webster Collegiate Dictionary 56 (2003). “Any” does not necessarily mean “all.”

The legislative intent also permits the Patent Office’s interpretation. Section 316 of AIA gives the Patent Office practically a free rein to prescribe rules and regulations governing various aspects of inter partes review. 35 U.S.C. §316(a) (for example, “[t] he Director shall prescribe regulations . . . (4) establishing and governing inter partes review under this chapter . . . .”).

The Patent Office’s rulemaking authority is bounded only by the restriction that “the Direction shall consider the effect of any such regulation on the economy, the integrity of the patent system, the efficient administration of the Office, and the ability of the Office to timely complete proceedings instituted under this chapter.” 35 U.S.C. §316(b). However, at least the latter two of those four considerations seem to tilt unquestionably in favor of the Patent Office’s Rule 42.108.

For instance, legislative history shows that the new inter partes review under AIA is designed to “to weed out marginal challenges and preserve the office’s own resources,” and to “force parties to front-load their cases, allowing theseproceedings to be resolved more quickly.” Patent Reform Act of 2011, S. 1041, 157th Cong. (2011). Synopsys’s interpretation of the statutes to require that the Patent Office review and issue a determination on all challenged claims, even those that fall short of the threshold of institution, would seem to contradict the legislative focus on efficiency and preservation of administrative resources.

Synopsys’s arguments painting Rule 42.108 as arbitrary or capricious, as ultra vires, and as unlawful therefore seems lackluster. The Patent Office has not yet responded to Synopsys’s complaint.

As a final note, Synopsys asserted in its complaint that it had no remedy with respect to those challenged claims that were denied review. However, some petitioners have circumvented the denial of review by filing a second inter partes review petition for the same patent, but directed to claims that were denied review in the first petition. See, e.g., IPR 2013-00373. The Patent Office does not yet seem to be clamping down on such practice, unless the subsequent inter partes review petitions are essentially duplicating the earlier petitions. Filing a subsequent inter partes review petition could have been a viable option for Synopsys at the time of the Patent Office’s decision to deny review of some of the claims Synopsys was challenging.

 

[1] See, e.g., Koninklijke Philips Elecs. N.V. v. Cardiac Sci., 590 F.3d 1326 (Fed. Cir. 2010); Tafas v. Doll, 559 F.3d 1345 (Fed. Cir. 2009); Cooper Techs. Co. v. Dudas, 536 F.3d 1330 (Fed. Cir. 2008); Merck & Co. v. Kessler, 80 F.3d 1543 (Fed. Cir. 1996).

Category: Inter Partes Review

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