District Court Refuses to Review USPTO Decision to Institute Post Grant Review of Versata Covered Business Method Patent

15 August 2013 PharmaPatents Blog

In Versata Development Corp. v. Rea, the U.S. District Court for the Eastern District of Virginia dismissed Versata’s challenge of the PTAB’s decision to institute post grant review of its patent for lack of jurisdiction. The court based its decision on alternative grounds, finding that the America Invents Act (AIA) “precludes judicial review of the PTAB’s decision to institute post-grant review,” and, alternatively, that the decision to institute post-grant review was not a “final” agency decision that could be reviewed under the Administrative Procedures Act (APA).  

The Covered Business Method Patent Post Grant Review Proceeding

SAP filed a petition for Covered Business Method (CBM) patent review of  Versata’s U.S. Patent 6,553,350, on the first day that CBM procedures became available, September 16, 2012. SAP challenged the validity of the patent claims under 35 USC §§ 101, 102, and 112. On January 9, 2013, the PTAB issued a decision granting the petition. The PTAB issued its decision on the merits on June 11, 2013, but that decision was not before the district court.

The District Court Decision 

While the CBM proceeding was still pending, Versata brought suit in the U.S. District Court for the Eastern District of Virginia to challenge the PTAB’s decision to to institute CBM post grant review of the ’350 patent. The USPTO and SAP moved to dismiss for lack of subject matter jurisdiction.  The court considered two separate grounds for dismissal.

Subject Matter Jurisdiction Under the AIA

The court addressed the first ground under Rule 12(b)(1) of the Federal Rules of Civil Procedure, in view of the AIA:

The first issue is whether the AIA precludes judicial review of the PTAB’s decision to institute post-grant review in accordance with the AIA. The Court holds that it lacks subject matter jurisdiction over Plaintiff’s claim because the AIA’s express language, detailed structure and scheme for administrative and judicial review, legislative purpose, and nature of the administrative action evince Congress’s clear intent to preclude subject matter jurisdiction over the PTAB’s decision to institute patent reexamination proceedings. Therefore, Plaintiff’s claims are dismissed for want of subject matter jurisdiction under the clear statutory guidance provided by the AIA.

The court noted “three ways by which the AIA evinces clear congressional intent to preclude actions that seek judicial intervention under the APA.”

  1. The express language of the statute: 35 USC § 324(e) states, “[t]he determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable.” (The court rejected Versata’s argument that “this language refers only to the non-availability of direct appeal to the Federal Circuit and not to an interlocutory appeal to a district court.”)
  2. The structure of the Post Grant Review statutes. The statutes set forth “detailed procedures for post-grant review and a detailed scheme for administrative and judicial review of those post-grant review proceedings,” none of which include district court review.
  3. The statute provides for appeal to the Federal Circuit. 35 USC § 329 provides that “A party dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 328(a) may appeal the decision pursuant to sections 141 through 144 [to the Federal Circuit."

Failure to State a Claim Under the APA

The court addressed the second ground under Rule 12(b)(6) of the Federal Rules of Civil Procedure, in view of the APA:

The second issue is whether the PTAB's statutory interpretation regarding institution of post-grant review proceedings constituted a "final agency action" for which there is no other adequate remedy in a court, thereby providing Plaintiff a cause of action to bring challenge to such decision in this Court. The Court holds that the decision to institute post-grant review is merely an initial step in the PTAB's process to resolve the ultimate question of patent validity, not a final agency action as contemplated by [the APA]. The decision to institute patent reexamination proceedings is not the consummation of an agency’s decision making process, nor does it elicit rights or obligations, and Plaintiff retains an alternative adequate remedy through appeal to the Court of Appeals for the Federal Circuit.

Thus, the court granted the motions to dismiss.

Issues of First Impression

While some may wonder why Versata even brought this case given the plain language of 35 USC § 324(e), it is important to keep in mind that nearly every issue in a new patent trial proceeding is an issue of first impression, including where and when issues should be raised, challenged, and finally decided. Indeed, parties will have to raise issues like this in district court and Federal Circuit proceedings in order for the courts to develop a body of law that will guide the interpretation and application of the intricate provisions of the inter partes review, covered business method patent, and post grant review statutes.
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