United States Court of Appeals
`for the Federal Circuit
`______________________
`
`VERSATA DEVELOPMENT GROUP, INC.,
`Appellant
`
`v.
`
`SAP AMERICA, INC., SAP AG,
`Appellees
`
`UNDER SECRETARY OF COMMERCE FOR
`INTELLECTUAL PROPERTY, DIRECTOR OF THE
`UNITED STATES PATENT AND TRADEMARK
`OFFICE,
`Intervenor
`______________________
`
`2014-1194
`______________________
`
`Appeal from the United States Patent and Trademark
`Office, Patent Trial and Appeal Board, in No. CBM2012-
`00001.
`
`______________________
`
`Decided: July 9, 2015
`______________________
`
`JEFFREY A. LAMKEN, MoloLamken LLP, Washington,
`DC, argued for appellant. Also represented by NANCY JO
`LINCK, MARTIN MOSS ZOLTICK, ROBERT DANNY
`
`1
`
`SAMSUNG 1042
`Samsung Electronics v. SmartFlash
`CBM2014-00192
`
`
`for the Federal Circuit
`______________________
`
`VERSATA DEVELOPMENT GROUP, INC.,
`Appellant
`
`v.
`
`SAP AMERICA, INC., SAP AG,
`Appellees
`
`UNDER SECRETARY OF COMMERCE FOR
`INTELLECTUAL PROPERTY, DIRECTOR OF THE
`UNITED STATES PATENT AND TRADEMARK
`OFFICE,
`Intervenor
`______________________
`
`2014-1194
`______________________
`
`Appeal from the United States Patent and Trademark
`Office, Patent Trial and Appeal Board, in No. CBM2012-
`00001.
`
`______________________
`
`Decided: July 9, 2015
`______________________
`
`JEFFREY A. LAMKEN, MoloLamken LLP, Washington,
`DC, argued for appellant. Also represented by NANCY JO
`LINCK, MARTIN MOSS ZOLTICK, ROBERT DANNY
`
`1
`
`SAMSUNG 1042
`Samsung Electronics v. SmartFlash
`CBM2014-00192
`
`
`
`
`
` 2
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`HUNTINGTON, BRIAN S. ROSENBLOOM, Rothwell, Figg,
`Ernst & Manbeck, P.C., Washington, DC.
`
`ERIKA ARNER, Finnegan, Henderson, Farabow, Gar-
`rett & Dunner, LLP, Reston, VA, argued for appellees.
`Also represented by J. MICHAEL JAKES, MICHAEL A.
`MORIN, Washington, DC; EDWARD R. REINES, Weil, Got-
`shal & Manges LLP, Redwood Shores, CA.
`
`MELISSA N. PATTERSON, Appellate Staff, Civil Divi-
`sion, United States Department of Justice, Washington,
`DC, argued for intervenor. Also represented by STUART F.
`DELERY, MARK R. FREEMAN; SCOTT WEIDENFELLER,
`NATHAN K. KELLEY, JOSEPH MATAL, WILLIAM LAMARCA,
`Office of the Solicitor, United States Patent and Trade-
`mark Office, Alexandria, VA.
`
`DAN L. BAGATELL, CHRISTOPHER S. COLEMAN, Perkins
`Coie LLP, Phoenix, AZ, for amici curiae Intel Corporation,
`Asustek Computer, Inc., Broadcom Corporation, HTC
`Corporation, ZTE (USA) Inc.
`
`
`ANN A. BYUN, Hewlett-Packard Company, Wayne, PA,
`for amicus curiae Hewlett-Packard Company.
`
`DARYL JOSEFFER, ASHLEY CHARLES PARRIS, King &
`Spalding LLP, Washington, DC, for amicus curiae The
`Internet Association.
`
`MICHAEL E. JOFFRE, MELANIE L. BOSTWICK, Kellogg,
`Huber, Hansen, Todd, Evans & Figel, PLLC, Washington,
`DC, for amici curiae Dell Inc., eBay Inc., Facebook, Inc.,
`
`2
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`3
`
`Limelight Networks, Inc., Newegg Inc., QVC, Inc., Rack-
`space Hosting, Inc., Red Hat, Inc., SAS Institute Inc.,
`VIZIO, Inc., Xilinx, Inc. Dell Inc. also represented by
`ANTHONY PETERMAN, Dell Inc., Round Rock, TX.
`
`SUZANNE MICHEL, Google Inc., Washington, DC, for
`amicus curiae Google Inc.
`
`BARBARA A. FIACCO, DONALD ROSS WARE, SARAH BURG,
`Foley Hoag LLP, Boston, MA, for amici curiae 3M Com-
`pany, Caterpillar Inc., Eli Lilly and Company, General
`Electric Company, Johnson & Johnson, The Procter &
`Gamble Company, Amgen Inc., BP America, Inc., Glax-
`osmithkline LLC, Illinois Tool Works, Inc., Pfizer Inc.,
`Qualcomm Incorporated, Sanofi US.
`______________________
`
`Before NEWMAN, PLAGER, and HUGHES, Circuit
`Judges.
`Opinion for the court filed by Circuit Judge PLAGER.
`Opinion concurring in part and dissenting in part
`filed by Circuit Judge HUGHES.
`PLAGER, Circuit Judge.
`INTRODUCTION
`This is a covered business method (“CBM”) patent
`case, under § 18 of the Leahy-Smith America Invents Act
`(“AIA”), Pub. L. No. 112-29, 125 Stat. 284 (2011). It
`comes to us as an appeal of a final written decision of the
`
`3
`
`
`
`
`
` 4
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`Patent Trial and Appeal Board (“PTAB”),1 the recently-
`created adjudicatory arm of the United States Patent and
`Trademark Office (“USPTO” or “Government”).2 The case
`originated as a petition to the USPTO, submitted by
`appellees SAP America, Inc. and SAP AG (collectively,
`“SAP”), pursuant to the provisions of the AIA.
`SAP requested that the USPTO institute review of the
`validity of certain claims in U.S. Patent No. 6,553,350
`(“’350 patent”). The ’350 patent is owned by the appel-
`lant, Versata Development Group, Inc. (“Versata”), who
`had sued SAP for infringing the patent. In its petition to
`the USPTO, SAP alleged that the patent was a covered
`business method patent.
`Covered business method patents are subject to the
`special provisions of AIA § 18. See 125 Stat. at 329–31.3
`Section 18 establishes a separately-designated transition-
`
`
`1 For oral argument purposes, this case, denomi-
`nated as Versata I, was consolidated with Case No. 2014-
`1145, on appeal from the United States District Court for
`the Eastern District of Virginia, involving the same
`parties, the same patent, and essentially the same issues.
`That case will issue as Versata II.
`2 The PTAB, established by § 7 of the AIA, is the
`successor to the Board of Patent Appeals and Interfer-
`ences (“BPAI”). Compare 35 U.S.C. § 6 (2006) (concerning
`the BPAI) with 35 U.S.C. § 6 (2012) (concerning the
`PTAB).
`3
`In general, the AIA is codified in various parts of
`35 U.S. Code. Section 18 of the AIA is not however codi-
`fied; it is found in 125 Stat. References to § 18 in this
`opinion are to pages 329–31 of 125 Stat.
`
`4
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`5
`
`al program4 under which the USPTO conducts post-grant
`review proceedings concerning the validity of covered
`business method patents. As the title suggests, the
`special program provided by § 18 is available only for
`“covered business method patents,” as that term is de-
`fined by the statute. However, for purposes of conducting
`proceedings thereunder, § 18 is considered a part of the
`broader chapter 32 provisions of title 35, U.S. Code,
`governing post-grant review (“PGR”), 35 U.S.C. §§ 321–
`329; § 18 expressly incorporates, with certain exceptions
`not relevant here, the standards and procedures found in
`that chapter.5 § 18(a)(1).
`In addition to the merits of the decision rendered by
`the PTAB (which held the claims at issue invalid), the
`parties to the appeal dispute several predicate issues.
`These include:
`
`4 The program is called ‘transitional’ because it is
`scheduled to ‘sunset’ eight years after implementing
`regulations are issued. § 18(a)(3)(A).
`5 A note on terminology: The potential under the
`AIA for more than the usual confusion that accompanies
`new congressional mandates stems in part from inci-
`dental features of the AIA. In particular, various new
`procedures intersect with earlier procedures of a similar-
`sounding kind, e.g., inter partes review (“IPR”) has re-
`placed inter partes reexamination, compare 35 U.S.C.
`§§ 311–318 (2006) (concerning inter partes reexamina-
`tion), with 35 U.S.C. §§ 311–319 (2012) (concerning IPR).
`The statute also employs identical terminology to mean
`different things, e.g., the heading of AIA § 6 is entitled
`“Post-Grant Review Proceedings,” 125 Stat. at 299, while
`one of the programs thereunder shares the same name—
`“Chapter 32—Post-Grant Review.” It is not uncommon
`for the entirety of AIA proceedings to be referred to in-
`formally as ‘post-grant review.’
`
`5
`
`
`
`
`
` 6
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`•
`
`•
`
`•
`
`•
`
`•
`
`if the PTAB makes an initial determination
`under § 18 of the AIA that the patented in-
`vention qualifies
`for “covered business
`method” treatment under § 18, may a court
`review that issue when reviewing as part of
`a final written decision the invalidation of
`claims under the authority of § 18?
`if the answer is yes, for purposes of post-
`grant review by the USPTO how is the term
`“covered business method patent” to be un-
`derstood, and does the patent at issue here
`qualify as a CBM patent?
`if the PTAB correctly determines that un-
`der § 18 of the AIA a patent comes within
`the definition of a CBM patent, what are
`the criteria for determining whether the pa-
`tent is excluded from review under § 18 be-
`cause
`the patent
`falls within
`the
`statutorily-excepted category of “technologi-
`cal invention,” and how do those criteria
`apply to the ’350 patent?
`if, in deciding the merits of the case—the
`validity of the challenged claims in the pa-
`tent—the PTAB is called upon to engage in
`claim construction, does the PTAB apply
`the USPTO’s general rule of the “broadest
`reasonable interpretation,” or does it apply
`the judicial standard of the “one correct
`construction”?
`finally, on appeal at the final written deci-
`sion stage to this court, during which we
`must decide whether the PTAB applied the
`substantive tests for validity correctly, may
`a court determine whether as an initial
`matter the PTAB chose the correct substan-
`
`6
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`7
`
`tive tests to apply, and did the PTAB apply
`them correctly here?
`After determining the answers to these queries, con-
`tested by the parties, as explained below, we address their
`application to the ’350 patent at issue.
`BACKGROUND
`The ’350 Patent
`Versata owns the ’350 patent, entitled “method and
`apparatus for pricing products in multi-level product and
`organizational groups.” ’350 patent, col. 1, ll. 1–3. The
`“invention operates under the paradigm of WHO (the
`purchasing organization) is buying WHAT (the product).”
`Id. at col. 3, ll. 24–25. An example of the WHO/WHAT
`paradigm, known in the prior art according to the patent,
`is depicted in Figure 1 of the ’350 patent, reproduced
`below:
`
`
`See id. at col. 4, ll. 17–18.
`The ’350 patent, however, states that prior art pricing
`tables for WHO/WHAT required large data tables. See id.
`at col. 1, ll. 52–59. The patent is said to improve upon the
`prior art and reduce the need for large data tables by,
`
`
`
`7
`
`
`
`
`
` 8
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`inter alia, arranging customers (purchasing organiza-
`tions) into a hierarchy of customer groups and products
`into a hierarchy of product groups. Id. at col. 3, ll. 24–27,
`41–42, 66 – col. 4, l. 14. WHO is defined by the creation of
`an organizational hierarchy of organizational groups,
`where each group represents a characteristic of the organ-
`izational group. Id. at col. 3, ll. 24–27. Figure 4A of the
`patent, below, shows an example of an arrangement of an
`organizational group:
`
`
`
`
`See id. at col. 4, ll. 24–25.
`Similarly, a product group hierarchy is defined that
`can be applied to products (WHAT). Id. at col. 3, ll. 41–
`42. Pricing information is then associated with the cus-
`tomer and product groups. Id. at col. 8, ll. 17–25. Special
`pricing adjustments may be defined as applying to all
`members of a specific customer group or a specific product
`group. Id. at col. 3, ll. 26–49.
`We are concerned with claims 17 and 26–29. Claim
`17 recites a “method for determining a price of a product
`offered to a purchasing organization” comprising certain
`steps. Id. at col. 20, l. 66 – col. 21, l. 29. Claim 26 recites
`a “computer readable storage media comprising: computer
`
`8
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`9
`
`instructions to implement the method of claim 17.” Id. at
`col. 21, ll. 61–62. Claim 27 recites a “computer imple-
`mented method for determining a price of a product
`offered to a purchasing organization” comprising certain
`steps. Id. at col. 21, l. 63 – col. 22, l. 12. Claim 28 recites
`a “computer readable storage media comprising: computer
`instructions to implement the method of claim 27.” Id. at
`col. 22, ll. 13–14. Claim 29 recites an “apparatus for
`determining a price of a product offered to a purchasing
`organization” comprising certain limitations. Id. at col.
`22, ll. 15–35.
`Claim 17 is representative:
`A method for determining a price of a product of-
`fered to a purchasing organization comprising: ar-
`ranging a hierarchy of organizational groups
`comprising a plurality of branches such that an
`organizational group below a higher organization-
`al group in each of the branches is a subset of the
`higher organizational group; arranging a hierar-
`chy of product groups comprising a plurality of
`branches such that a product group below a high-
`er product group in each of the branches in a sub-
`set of the higher product group; storing pricing
`information in a data source, wherein the pricing
`information is associated, with (i) a pricing type,
`(ii) the organizational groups, and (iii) the product
`groups; retrieving applicable pricing information
`corresponding to the product, the purchasing or-
`ganization, each product group above the product
`group in each branch of the hierarchy of product
`groups in which the product is a member, and
`each organizational group above the purchasing
`organization in each branch of the hierarchy of
`organizational groups in which the purchasing or-
`ganization is a member; sorting the pricing infor-
`mation according to the pricing types, the product,
`the purchasing organization, the hierarchy of
`
`9
`
`
`
`
`
` 10
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`product groups, and the hierarchy of organiza-
`tional groups; eliminating any of the pricing in-
`formation that is less restrictive; and determining
`the product price using the sorted pricing infor-
`mation.
`Id. at col. 20, l. 66 – col. 21, l. 29.
`Prior Litigation
`On April 20, 2007, Versata, along with Versata Soft-
`ware, Inc. and Versata Computer Industry Solutions, Inc.,
`sued SAP for, inter alia, infringement of the ’350 patent in
`the U.S. District Court for the Eastern District of Texas.
`The case proceeded to trial, and a jury found infringement
`and awarded damages. The district court upheld the
`infringement verdict but reversed other rulings unrelated
`to the ’350 patent, resulting in a new trial on damages. A
`jury then found that SAP’s post-patch software continued
`to infringe and awarded lost-profits damages and reason-
`able royalty damages. The district court upheld those
`awards.
`SAP appealed the district court’s final judgment to
`our court. In Versata Software, Inc. v. SAP Am., Inc., 717
`F.3d 1255 (Fed. Cir. 2013), we affirmed the jury’s in-
`fringement verdict and damages award, but vacated as
`overbroad a permanent injunction entered by the district
`court. Id. at 1258. The case was remanded for the dis-
`trict court to enter an order conforming to our opinion.
`Id.; see also Versata Computer Indus. Solutions, Inc. v.
`SAP AG, 564 F. App’x 600 (Fed. Cir. 2014) (per curiam).
`Covered Business Method Patent Review
`While all that was going on, SAP on September 16,
`2012, petitioned the PTAB to institute a covered business
`method review of Versata’s ’350 patent on the grounds
`that claims 17 and 26–29 of the patent were unpatentable
`for failure to comply with 35 U.S.C. §§ 101, 102, and 112,
`
`10
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`11
`
`1st and 2nd paragraphs. On January 9, 2013, the PTAB
`granted SAP’s petition and instituted a covered business
`method review of the ’350 patent. In accordance with the
`statutory standard for instituting a review, the PTAB
`determined that claims 17 and 26–29 were more likely
`than not unpatentable under 35 U.S.C. §§ 101 and 102.
`The PTAB declined to review the claims under § 112
`because, in the PTAB’s view, SAP had not met the stand-
`ard in that regard. Versata did not seek rehearing of the
`decision to institute.
`Subsequently, at SAP’s request, the PTAB agreed to
`forego the § 102 review and expedite the § 101 review. On
`June 11, 2013, the PTAB issued its final written decision
`cancelling claims 17 and 26–29 as unpatentable under
`§ 101. Versata sought rehearing of the final written
`decision, which the PTAB denied. Versata then appealed
`the final written decision to this court; that is the case we
`decide here.
`Proceedings Before the District Court
`Before turning to the case before us, there is one addi-
`tional litigation to be noted which is of direct relevance to
`this case. On March 13, 2013, while the PTAB was con-
`ducting its CBM review, Versata sued the USPTO in the
`U.S. District Court for the Eastern District of Virginia,
`seeking to set aside the PTAB’s decision to institute CBM
`review. SAP filed a motion to intervene, which the dis-
`trict court granted. On August 7, 2013, the district court
`granted the USPTO’s motions to dismiss for lack of sub-
`ject matter jurisdiction and failure to state a claim, and
`SAP’s motion to dismiss for lack of subject matter juris-
`diction.
`The district court held that it lacked subject matter
`jurisdiction “because the AIA’s express language, detailed
`structure and scheme for administrative and judicial
`review, legislative purpose, and nature of the administra-
`
`11
`
`
`
`
`
` 12
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`tive action evince Congress’s clear intent to preclude
`subject matter jurisdiction over the PTAB’s decision to
`institute patent reexamination [sic] proceedings.” Versata
`Dev. Corp. v. Rea, 959 F. Supp. 2d 912, 915 (E.D. Va.
`2013). The district court also held 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 5
`U.S.C. § 704. . . . Plaintiff retains an alternative adequate
`remedy through appeal to the Court of Appeals for the
`Federal Circuit.” Id. On October 5, 2013, the district
`court denied Versata’s motion to alter or amend the
`judgment. Versata appealed the district court’s judgment
`to this court; that appeal is pending as Versata II.
`We have jurisdiction over this case, Versata I, pursu-
`ant to 28 U.S.C. § 1295(a)(4)(A).
`DISCUSSION
`Ultimately the issue to be decided on appeal concerns
`the substantive merits: whether the PTAB ruled correctly
`that the challenged earlier-issued claims of the ’350
`patent are invalid for the reasons given by the PTAB,
`namely, non-compliance with 35 U.S.C. § 101. Before
`addressing this ultimate merits issue, however, we must
`address the several predicate issues of process and proce-
`dure that the parties raise—issues that could have deci-
`sive effect on the outcome of the case regardless of its
`substantive merits.
`Issue Number 1—Judicial Review
`The initial decision to institute review in response to a
`petition is the first step in the post-grant review process.
`In this case, the PTAB at the initial decision to institute
`stage determined that the petition to review the ’350
`patent should be granted. In making that determination,
`the PTAB’s three-judge panel concluded:
`
`12
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`13
`
`• that the ’350 patent was a “covered busi-
`ness method patent” as that term is defined
`in the statute;
`• that it was not a “technological invention,”
`a statutorily-stated exception to that defini-
`tion;
`• that § 101 was applicable to patents re-
`viewed under the CBM process;
`• and that, as required by § 324(a), “it is more
`likely than not that at least 1 of the claims
`challenged in the petition is unpatentable.”
`In its patent owner’s preliminary response at the de-
`cision to institute stage, Versata had challenged each of
`these propositions. The PTAB addressed Versata’s argu-
`ments and rejected them.
`
`After a review is instituted, the review proceeds to a
`trial before the PTAB, and concludes with the PTAB’s
`‘final written decision’: “the [PTAB] shall issue a final
`written decision with respect to the patentability of any
`patent claim challenged by the petitioner.” § 328(a).
`Section 329 further provides for appeal of that decision to
`the Court of Appeals for the Federal Circuit pursuant to
`§§ 141–144; section 144 provides that “[t]he United States
`Court of Appeals for the Federal Circuit shall review the
`decision from which an appeal is taken on the record
`before the Patent and Trademark Office.”
`
`Before us then are the merits of the final written
`decision rendered by the PTAB in this case. To be clear, it
`is the merits of the final written decision that are on
`appeal; we are not here called upon to review the deter-
`mination by the PTAB whether to institute a CBM re-
`view, and indeed the statute expressly instructs that we
`may not:
`
`13
`
`
`
`
`
` 14
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`The determination by the Director whether to in-
`stitute a post-grant review under this section shall
`be final and nonappealable.
`35 U.S.C. § 324(e) (emphasis added). As noted, this
`statute is applicable to post-grant reviews and CBM
`proceedings; the PTAB acts for the Director in deciding
`whether to institute a review, see 35 U.S.C. § 326(c); 37
`C.F.R. § 42.4 (2014).
`
`Turning to the merits, the PTAB, in its final written
`decision, held Versata’s CBM patent claims 17 and 26–29
`unpatentable under 35 U.S.C. § 101, and ordered them
`cancelled. Versata on appeal challenges that holding on
`multiple grounds:
`• Versata’s patent does not claim a “covered
`business method,” and in any event falls
`within the safe harbor of a “technological
`invention”;
`• The PTAB does not have authority to re-
`view CBM patents for subject-matter eligi-
`bility under 35 U.S.C. § 101;
`• The PTAB’s claim construction is wrong, it
`applied the “broadest reasonable interpre-
`tation” to its claim construction, which it
`should not have, and had it correctly ana-
`lyzed § 101 under the proper claim con-
`struction it would not have reached the
`holding it did.
`SAP responds that, absent a finding that these issues
`are either non-appealable or waived, on the merits the
`USPTO correctly held that the ’350 patent is a “covered
`business method patent” under § 18(a)(1)(E), and that the
`AIA authorizes § 101 subject-matter eligibility as a
`ground for CBM review.
`
`14
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`15
`
`The USPTO entered the case as intervenor, as author-
`ized by § 143. The USPTO devotes a substantial part of
`its brief to the argument that this court lacks jurisdiction
`to review the Director’s decision to institute a post-grant
`review of the ’350 patent. On its face that argument
`would appear curious, since as earlier explained the issue
`on appeal before the court is only the merits of the final
`written decision. However, the USPTO makes the point
`that the question of whether the patent at issue here falls
`within the scope of the PTAB’s authority under § 18 as a
`“covered business method patent” (not one claiming a
`“technological invention”) was decided by the PTAB at the
`decision to institute stage, and on that basis it is immun-
`ized from later judicial review at the final decision stage.
` SAP, but not the USPTO, makes the additional ar-
`gument that, under the specific terms of the judicial
`review bar in § 324(e), supra, we do not have authority to
`review any questions decided by the PTAB in the course
`of making its initial decision to institute review, including
`whether ineligibility under § 101 is a permissible ground
`for invalidation under the CBM authority invoked by the
`PTAB.
`Thus, the USPTO contends that the CBM-specific in-
`validation here must be upheld even if the PTAB incor-
`rectly interpreted the statute regarding what is a CBM
`patent and the patent is not a CBM patent under the
`correct law, and SAP further contends that the invalida-
`tion under § 101 must be upheld even if the PTAB’s CBM-
`invalidation authority does not permit invalidation under
`§ 101.
`This is the first case challenging the scope of § 324(e)
`at the final written decision stage. There are, however,
`several recent cases decided by this court construing a
`parallel statutory review bar—§ 314(d) under separate
`chapter 31 of the AIA, Inter Partes Review. With one
`
`15
`
`
`
`
`
` 16
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`exception to be addressed later, these cases have arisen in
`the context of attempts at interlocutory review of PTAB
`IPR decisions to institute.
`In St. Jude Medical, Cardiology Division, Inc. v. Vol-
`cano Corp., 749 F.3d 1373 (Fed. Cir. 2014), the first of the
`interlocutory review cases, the patentee had initiated an
`infringement suit. The defendant in the suit counter-
`claimed, asserting infringement of the defendant’s patent
`by the initiating patentee. The initiating patentee then
`sought post-grant review of the defendant’s patent under
`the IPR provisions. The PTAB decided not to institute
`review, a decision the patentee appealed directly to this
`court.
`We held that the patentee’s appeal of the PTAB deci-
`sion was statutorily barred by § 314(d), and granted the
`motion by the defendant and the USPTO to dismiss the
`appeal. In its decision to deny direct review, our court
`examined the application of § 314(d) to the case. As
`noted, this section—314(d)—is the counter-part to the one
`with which we are concerned here—§ 324(e), except that
`314(d) applies specifically to IPR cases, whereas 324(e)
`applies to PGR and CBM (§ 18) cases.
`The court commented that § 314(d) “may well pre-
`clude all review by any route, which we need not decide.
`It certainly bars an appeal of the non-institution decision
`here.” 749 F.3d at 1376. The court thus distinguished the
`question of the availability of immediate “appeal” under
`35 U.S.C. §§ 141(c) and 319, which it was deciding, from
`the question of “review” (in the course of bringing other
`actions, such as appeals from final decisions or APA
`actions in district court), which it expressly said it was
`not deciding. The court based its holding “on the struc-
`ture of the inter partes review provisions, on the language
`of section 314(d) within that structure, and on our juris-
`
`16
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`17
`
`dictional statute read in light of those provisions.” Id. at
`1375.
`The same day the court issued St. Jude, we issued two
`other opinions reaching the same result under the same
`statute, though in different procedural contexts. See In re
`Dominion Dealer Solutions, LLC, 749 F.3d 1379 (Fed. Cir.
`2014) (PTAB declined to institute IPR review; held, for
`the reasons explained in St. Jude, we did not have juris-
`diction to hear petitioner’s mandamus action challenging
`the PTAB’s decision); In re Procter & Gamble Co., 749
`F.3d 1376, 1377 (Fed. Cir. 2014) (PTAB granted rather
`than refused to institute IPR review; held, that for the
`same reasons, the difference between a denial and a grant
`of review made no difference to our mandamus jurisdic-
`tion—“immediate review of such a decision is not availa-
`ble in this court.”).
`In its opinion in In re Procter & Gamble Co., the court
`explained what it was not deciding:
`It is a separate question whether section 314(d)
`means that the decision to institute the review is
`unchallengeable later—if the Board reaches a de-
`cision under section 318(a) and an appeal is taken
`under section 319 [appeal to this court of the final
`written decision of the PTAB]. Perhaps section
`314(d)’s broad language precludes all judicial re-
`view of the institution decision, even in an even-
`tual section 319 appeal. We need not decide that
`question, which can be addressed in a section 319
`appeal. Nor need we address whether an imme-
`diate challenge could be brought in district court
`[through an APA action].
`749 F.3d at 1379.
`Again, the statutory references are to the IPR ch. 31
`provisions, which, though not directly applicable to CBM
`
`17
`
`
`
`
`
` 18
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`cases, parallel those of the PGR ch. 32 provisions with
`which we are concerned here.
`Two other recent opinions by this court warrant com-
`ment since they arise directly under chapter 32 and § 18,
`and, though they involve different fact settings from those
`discussed above, they cast light on how we are to under-
`stand § 18.6 In VirtualAgility Inc. v. Salesforce.com, Inc.,
`759 F.3d 1307 (Fed. Cir. 2014), the issue was whether a
`district court had properly denied a request for a stay of
`previously-commenced litigation. The defendant in the
`district court litigation had petitioned the USPTO for
`post-grant review of an alleged CBM patent under § 18.
`The PTAB had instituted review, and trial by the PTAB of
`the validity of the patent claims was on-going when the
`stay was requested.
`This court reversed the district court’s denial of the
`stay. We noted that the district court had erred to the
`extent it had undertaken a review of the merits of the
`PTAB decision to institute review. We said:
`Indeed, a challenge to the PTAB’s “more likely
`than not” determination at this stage amounts to
`an improper collateral attack on the PTAB’s deci-
`sion to institute CBM review, and allowing it
`would create serious practical problems. . . . Con-
`gress clearly did not intend district courts to hold
`mini-trials reviewing the PTAB’s decision on the
`merits of the CBM review. . . . The stay determi-
`nation is not the time or the place to review the
`PTAB’s decisions to institute a CBM proceeding.
`
`
`6 See also GTNX, Inc. v. INTTRA, Inc., Nos. 15-
`1349, -1350, -1352, -1353, 2015 WL 3692319 (Fed. Cir.
`June 16, 2015) (a third case).
`
`18
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`19
`
`Id. at 1313.7
`And in Benefit Funding Systems LLC v. Advance
`America Cash Advance Centers Inc., 767 F.3d 1383 (Fed.
`Cir. 2014), the question was whether a district court
`decision to grant a stay of proceedings was proper pending
`the outcome of an on-going post-grant review at the
`PTAB.
`The patentee’s sole argument on appeal was that the
`USPTO could not institute review proceedings of a CBM
`patent on the grounds of a violation of § 101. Section 101
`specifies the kinds of inventions that are patentable and
`is an issue in this case as well. In affirming the district
`court’s stay determination, we said “‘[t]he stay determina-
`tion is not the time or the place to review the PTAB’s
`decisions to institute a CBM proceeding.’” Id. at 1386
`(quoting VirtualAgility, 759 F.3d at 1313). We then
`added:
`This is not to say that a patent owner could never
`attack the PTAB’s authority to conduct CBM re-
`view. Indeed, Appellants might potentially chal-
`lenge that authority in the context of a direct
`appeal of the PTAB’s final decision. . . . They
`simply cannot mount such a challenge as a collat-
`eral attack in opposition to a stay. Having reject-
`ed Appellants’ argument as an impermissible
`collateral attack, we do not address the underly-
`ing merits of that attack, namely whether § 101 is
`a valid ground for CBM review.
`
`Id.
`
`
`7 Judge Newman dissented on the ground that the
`district court in its decision was not given the deference to
`which it was entitled.
`
`19
`
`
`
`
`
` 20
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`Returning to the case before us, Versata, as earlier
`noted, had brought an action in the U.S. District Court for
`the Eastern District of Virginia, under the Administrative
`Procedure Act (“APA”), to prevent the PTAB from pro-
`ceeding with the § 18 CBM review of the ’350 patent at
`issue in this case. Versata challenged the authority of the
`PTAB to have instituted the review of the ’350 patent
`under § 18; SAP and the USPTO moved to dismiss the
`complaint.
`In support of its motions to dismiss, the USPTO ar-
`gued, consistent with the suggestion noted supra in
`Benefit Funding, that there was an available remedy
`under the AIA statute—the issues decided by the PTAB
`at the institution stage are preserved for review at the
`time of an appeal to the Federal Circuit of the PTAB’s
`final written decision. The district court granted the
`USPTO’s motions and SAP’s motion and dismissed Versa-
`ta’s APA complaint on two alternative grounds, including
`that “an adequate remedy exists by way of direct appeal
`[of the final written decision] to the Federal Circuit.”
`Versata Dev. Corp., 959 F. Supp. 2d at 927.
`The district court suit involved essentially the same
`parties, the same patent, and the same basic issues.
`Accordingly, based on the USPTO’s representations to the
`district court, despite (or in accordance with) the provi-
`sions of § 324(e), this court should entertain and decide
`the predicate questions raised by the parties regarding
`the USPTO’s authority over this patent, and whether the
`proper law was applied. This is so even though the chal-
`lenged decisions were initially made at the decision to
`institute stage.
`The USPTO, however, now represented in this appeal
`by the Department of Justice Civil Division Appellate
`Staff, advises the court that the Government has recon-
`sidered its position. The Government now argues for
`
`20
`
`
`
`VERSATA DEVELOPMENT GROUP v. SAP AMERICA, INC.
`
`21
`
`what it characterizes as a “jurisdiction[al]” bar on this
`court’s review of at least some of the issues decided at the
`initial
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