Federal Circuit: PTAB's "Ultimate Authority to Invalidate" Rulings are Reviewable on Appeal

Federal Circuit: PTAB's "Ultimate Authority to Invalidate" Rulings are Reviewable on Appeal

The Leahy-Smith America Invents Act, commonly called the AIA, was enacted by Congress in 2011 and ushered in a new regime of post-grant review of issued U.S. patents. Under that regime, which includes both inter partes reviews ("IPR") and covered business method ("CBM") reviews, the Patent Trial and Appeals Board ("PTAB") conducts reviews in two stages: First, the PTAB makes a decision to "institute" an IPR or CBM review; if it institutes a review, the PTAB then proceeds to a trial and issues a final written decision, which may be reviewed by the Federal Circuit on appeal. The Federal Circuit's decisions to date, including its recent revised decision in In re Cuozzo Speed Technologies, have uniformly held that the decision to institute an IPR or CBM review is not reviewable by the Federal Circuit by appeal (but may be by writ of mandamus).

But, in Versata Development Group, Inc. v. SAP America, Inc., decided on July 9, 2015, a divided panel of the Federal Circuit held that the question of whether the PTAB exceeded its statutory authority to invalidate only patents claiming "covered business methods" was reviewable on appeal from a final written decision of the PTAB in a CBM trial. The panel distinguished Cuozzo and its other prior decisions as holding only that institution decisions are unreviewable on substantive matters; Versata, by contrast, holds that limits on the Board's "ultimate invalidation authority," such as whether a patent is a "covered business method" patent as defined by the AIA, are reviewable on appeal from a final written decision. And this is the case regardless of whether the PTAB made decisions on those matters at the institution phase.

The panel's decision was grounded in substantial part on the long-recognized principle that an agency has a "heavy burden" to overcome the "strong presumption" that "Congress intends judicial review of agency action." Nothing in the statute, the panel majority concluded, sufficed to carry that "heavy burden," and so it declined to read the AIA as granting the PTAB complete, and completely unreviewable, authority to determine whether its actions were within the limits of the statutory authority granted to it by Congress.

The panel declined to fully enumerate exactly which issues are questions of the PTAB's ultimate invalidation authority, and thus available to challenge on appeal to the Federal Circuit, finding it sufficient to hold that the question of whether a patent claims a "covered business method," as defined in the AIA, is one of those issues. The Federal Circuit's opinion was authored by Senior Judge Plager and joined by Judge Newman; Judge Hughes dissented on this jurisdictional issue, believing that "the statute precludes review of the Board's institution decision that Versata's patent is a 'covered business method patent.'"

On the merits, the Federal Circuit unanimously held that the PTAB was correct to find that the Versata patent, with claims directed to determining prices of products offered to purchasing organizations, was a covered business method patent and did not fall into the "technological invention" safe harbor of the statute. Further, the panel affirmed the PTAB's holding that Versata's claims were drawn principally to abstract ideas without an additional inventive concept and thus failed to satisfy the standards for patent-eligibility in 35 U.S.C. § 101.

The most important facet of the Versata decision for future cases is that it maintains an avenue for judicial review of PTAB decisions to institute IPRs and CBM reviews that many had thought closed by Cuozzo and prior Federal Circuit decisions. Further review of the Versata decision—whether by the full en banc Federal Circuit or by the U.S. Supreme Court, remains possible.

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