Versata v. Rea: No Challenging an Initiation of Post-Grant Review in District Court

 Category: Administrative Law
By: Jesus Hernandez, Blog Editor/Contributor   
TitleVersata Dev. Corp. v. Rea, Case No. 1:13-cv-328 (GBL/IDD) (E.D. Va. Aug. 7, 2013).
Issues“The first issue is whether the AIA precludes judicial review of the PTAB's decision to institute post-grant review in accordance with AIA.” Versata Dev. Corp., at *1.
"The second issue is whether the PTAB's statutory interpretation regarding insistution of post-grant review proceedings constituted a "final agency decision" for which there is no other adequate remedy in a court, thereby providing Plaintiff a cause of action to bring challenge to such a decision to this Court." Id. at *1.
Holdings"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' 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 AIA." Id. at *1-2.
"This 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 5 U.S.C. sec. 704." Id. at *2.

Procedural History"Versata and SAP were involved in separate litigation arising out of Versata's claims of patent infringement by SAP concerning United State Patent No. 6,533,350 ("the '350 patent"), entitled "Method and Apparatus for Pricing Products in Multi-Level Produce and Organizational Groups." Those proceedings resulted in a jury verdict for Versata and against SAP, which the Federal Circuit affirmed. Pursuant to the recently-enacted Leahy-Smith America Invents Act ("AIA"), Pub. L. No. 112-29, sec. 18, 125 Stat. 284, 329, 31 (2011), SAP filed a separate petition with the PTAB, arguing essentially that Versata's '350 patent constituted a "covered business method" and was therefore not patentable subject matter. Upon consideration of written arguments by both Versata and SAP, the PTAB issued a lengthy opinion instituting a post-grant review of Versata's '350 patent. The PTAB's post grant review proceedings have included discovery, expert witnesses, and oral hearings. Versata filed the instant action prior to the PTAB's issuance of its final decision to ask this Court to conduct an interlocutory review of the PTAB's decisionn to institute post-grant review proceedings." Versata Dev. Corp., at *2-3.
Legal Reasoning
AIA Precludes Judicial Review of Post-Grant Initiation
Congressional Intent“There are three ways by which the AIA evinces clear congressional intent to preclude actions that seek judicial intervention under the APA for reexamination proceedings. First, the express language of the statute indicates Congress's intent to preclude judicial review of a PTAB decision to institute post-grant proceedings. Section 324(e) states, "[t]he determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable." 35 U.S.C. sec. 324(e) […] Second, Chapter 32 provides detailed procedures for post-grant review proceedings. See 35 U.S.C. secs. 322-329 […] Third, the AIA dictates the court in which a disappointed party may appeal the PTAB decision, demonstrating Cngress's intent to cabin the forums for challenging post-grant review determinations.“ Versata Dev. Corp., at *10-11.
Effect of Statutory Amendment (AIA)“Comparing the original statute with the AIA makes plain that Congress intended to limit the apppealability of the decision to institute a post-grant review related to any of the factors making up that determination. Statutory amendments are indicative of congressional intent, thus the material differences in the statutory language before and after the passage of the AIA necessitate the conclusion that Congress intended a different meaning in the amended statute. […] The pre-AIA wording of the "final and non-appealable" provision related only to the Director's determination. […] Conversely, the AIA language broaden the application of "final and non-appealable" to the decision whether to institute post-grant review under the entire section See 35 U.S.C. sec. 324(e) […]” Id. at *13-14.
Distinguishing Callaway“In Callaway Golf Company v. Kappos, 802 F. Supp. 2d 678 (E.D. Va. 2011), the PTO denied a petition to vacate inter partes reexaminations. […] While it may be possible at first glance, to draw similarities between Callaway's disposition and Versata's claim in the instant case due to the issue of a PTO decision regarding reexamination, the AIA provides the Court with substantially more context and congressional intent with which to answer the instant jurisdictional question. The current language, as modified by the AIA, in setting forth the structure and procedure of post-grant review, explicitly removes from judicial scrutiny the determination of whether to initiate the post-grant review. 35 U.S.C. sec.324(e).” Id. at *14-15.
Post-Grant Review Initiation is Not Ripe of Interlocutory Review
Final Agency Action
Inquiry 1: Consummation of Agency's Decisionmaking Process"The challenged decision here - institution of a post-grant review - is not the consummation of the PTO's decision making process; rather, it is the commencement of it […] Upon consideration of supplemental information, evidence revealed through discovery, oral hearings, and written comments, the PTAB could find in the patent owner's favor. Indeed '[a] decision confirming the patent's validity renders moot the question whether the reexamination petition should have been granted […]' Furthermore, post-grant review proceedings are terminated in the event of settlement between parties, save for the circumstance where the PTAB has already decided the merits prior to receiving the request for termination 35 U.S.C. sec. 327(a). All this indicates that the institution of post-grant review is merely an initial step. Consummation of a process does not occur where the process allows for additional event that can alter preliminary actions." Versata Dev. Corp., at *18-19.
Inquiry 2: Legal Consequences Flowing from Determination of Legal Rights/Obligations"The decision to institute post-grant review similarly does not result in the determination of legal rights or obligations 'from which legal consequence flow.' Bennet, 520 U.S. at 177-78 The decision must have a direct and immediate effect on the party's legal rights. […] Furthermore, the Supreme Court has long held that although the practical requirement to participate in post-grant review proceedings may be a substantial burden, 'it is different in kind and legal effect from the burdens attending what heretofore has been considered to be final agency action.' […] The decision to institute post-grant review is the first step of the process wherein the legal rights and remedies are ultimately determined." Id. at *19-20.
Existence of Adequate Remedies“Congress's intent was to create a streamlined system while providing all parties with full access to judicial review. Accordingly, not only is the PTAB's decision to institute post-grant review not a 'final agency action,'adequate remedies also exist for Plaintiff to appeal the decision, namely appeal to the Federal Circuit, at which Versata may present arguments concerning the decision to initiate review and, if necessary, the prudence of reviewing this decision on an appeal from the substantive and final decision. “ Id. at *22-23.
"ORDERED the Defendant's Motions to Dismiss for lack of subject matter jurisdiction and failure to state a claim (Docs. 16, 17) and Intervenors' Motion to Dismiss (Doc. 39) are GRANTED. Plaintiff's Complaint is hereby DISMISSED without prejudice." Versata Dev. Corp., at *24.
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