On February 4, 2015, the Federal Circuit issued an opinion in In re Cuozzo Speed Technologies, LLC, No. 2014-1301, upholding a final decision of the Patent Trial and Appeal Board (PTAB) to invalidate claims of a patent undergoing inter partes review (IPR). IPR is a new Patent Office procedure established under the America Invents Act (AIA). It provides a mechanism for challenging the validity of an issued patent in the Patent Office rather than in the courts. The Federal Circuit's opinion is the first ever in an appeal from an IPR.
Two rulings in the Cuozzo opinion are particularly significant to the future conduct of post-AIA reviews. First, according to the Federal Circuit, the IPR-enabling statutes, specifically 35 U.S.C. § 314(d), titled "No Appeal," preclude judicial review of the Patent Office's decision whether to institute inter partes review, either interlocutory or after the PTAB issues a final written decision. Second, the Federal Circuit concluded that the Patent Office properly adopted the "broadest reasonable interpretation" standard for construing claims in inter partes review. Judge Pauline Newman dissented on both points, arguing that the panel majority's rulings are contrary to Congress' intent in establishing the America Invents Act to make IPRs adjudicatory proceedings as opposed to examination proceedings. Given the large number of IPRs currently pending in the Patent Office, Judge Newman's dissent appears to lay an interesting framework for possible en banc consideration, if not a writ of certiorari to the United States Supreme Court.
Background Facts
Garmin International petitioned the Patent Office to invalidate certain claims of U.S. Patent No. 6,778,074 ("the '074 patent") assigned to Cuozzo Speed Technologies. The claims of the '074 patent recite a speedometer that utilizes GPS signals to alert drivers to the speed limit at the driver's present location. In its November 2013 final written IPR decision, the PTAB held that independent Claim 10 and its dependent Claims 14 and 17 of the '074 Patent were obvious based on prior art Garmin had cited against Claim 17 but not Claims 10 and 14. Cuozzo appealed this decision to the Federal Circuit, arguing that the PTAB had improperly granted Garmin's petition to institute the IPR.1 Cuozzo further argued that the PTAB, in construing the '074 claims, incorrectly applied the broadest reasonable interpretation standard rather than the narrower standard employed by district courts, leading to an erroneous finding of obviousness. Finally, Cuozzo argued that the PTAB had improperly denied Cuozzo's motion to amend the claims.
In a 2-1 decision written by Judge Timothy Dyk, the Federal Circuit affirmed the PTAB's final determination, holding that the IPR statute precluded appeal of the PTAB's determination of whether to initiate an IPR. The Federal Circuit also found no error in the PTAB's claim construction under the broadest reasonable interpretation standard, the PTAB's obviousness determination, or the PTAB's denial of Cuozzo's motion to amend the claims of the '074 Patent. Judge Newman's dissent argued that patent owners should be allowed to appeal PTAB decisions granting or denying institution of IPRs, and that the PTAB when conducting IPRs should be required to use the same claim construction standard as district courts, which would make it more difficult to find prior art to invalidate patents.
No Appellate Review of Institution Decision
In holding that it lacked jurisdiction to review the PTAB's decision to institute the IPR, the Federal Circuit pointed to language in § 314(d) stating that the PTAB's decision to institute reviews "shall be final and nonappealable." The majority of the panel concluded that the statute "prohibits review of the decision to institute IPR even after a final decision." The panel majority further held that, "[o]n its face, the provision is not directed to precluding review only before a final decision. It is written to exclude all review of the decision whether to institute review."2
Cuozzo tried to attack the PTAB's decision to institute review of the '074 Patent on the grounds that Garmin's petition, when laying out the rationale for invalidating Claims 10 and 14, failed to identify the prior art references the PTAB ultimately used to invalidate Claims 10 and 14. This, according to Cuozzo, contravened the statute authorizing IPRs, which states that any petition for IPR must "identif[y]...with particularity...the ground on which the challenge to each claim is based..." 35 U.S.C. §312(a)(3). The Federal Circuit countered that Garmin had in fact identified the prior art the PTAB used to invalidate Claims 10 and 14, albeit in the context of Claim 17. From the Federal Circuit's standpoint, this identification was logically sufficient, insofar as prior art that served to invalidate Claim 17 – a claim dependent from Claims 10 and 14 – would necessarily serve to invalidate Claims 10 and 14 as well.
The question of whether Garmin's IPR petition de facto met the requirements of §312(a)(3) because identifying prior art that invalidates a dependent claim inherently identifies prior art that invalidates the precedent independent claim may be perceived as minor in context. The real issue is that the Federal Circuit has now provided the PTAB unfettered discretion to determine whether to institute inter partes review in a particular case, without the ability for petitioner and patentee alike to challenge that decision during appellate review. Certainly, Judge Newman disagreed with the majority on this point, arguing that the "purpose of the 'nonappealable' provision is to bar interlocutory proceedings and harassing filings by those seeking to immobilize the patent or exhaust the patentee." Judge Newman further argued that the majority departs "from the fundamental rule of administrative action, that agency decisions must be reviewable on appeal." Judge Newman believed the statute requires "thoughtful adjustment to the legislative purpose, not heavy-handed foreclosure of all review of anything related to the petition." Whether Judge Newman's arguments about appellate review of IPR institution decisions gain any traction among future Federal Circuit panels, or perhaps in an en banc Federal Circuit or Supreme Court consideration of In re Cuozzo, remains to be seen.
Interpretation of Claims Under Broadest Reasonable Interpretation Standard
Framing another major issue, Cuozzo argued that the PTAB should not have used the "broadest reasonable interpretation" standard for construing claims in AIA reviews. According to Cuozzo, the PTO lacked authority to promulgate 37 C.F.R. § 42.100(b) calling for application of the broadest reasonable interpretation standard, 3 and the broadest reasonable interpretation standard is inappropriate for an IPR Proceeding, which is conducted in adjudicatory fashion. Cuozzo contrasted use of the broadest reasonable interpretation standard in other Patent Office proceedings, where patent owners have an unfettered chance to amend their claims, with the limited ability to amend claims during IPR reviews.
The Federal Circuit ruled that AIA reviews are "not materially different" from other Patent Office proceedings, even though the PTAB has imposed conditions that limit the availability of amendments. The Court noted that the broadest reasonable interpretation standard has been applied for more than 100 years in every type of PTO proceeding involving unexpired patents, a fact known to Congress when it enacted the AIA legislation. Therefore, the Court held that the broadest reasonable interpretation standard was properly adopted by the PTAB for AIA reviews. 4] "Although the opportunity to amend is cabined in the IPR setting, it is thus nonetheless available," the Federal Circuit said. "The fact that the patent owner may be limited to a single amendment, may not broaden the claims, and must address the ground of unpatentability [in an IPR] is not a material difference."
Judge Newman disagreed in dissent. She argued that claims in inter partes review should not be interpreted under the broadest reasonable interpretation standard, urging that the "standard is not a rule of law, but a pragmatic protocol applied in patentability examination and reexamination." For Judge Newman, the standard for adjudication of validity in the adversarial environment of an IPR ought to be that set forth in Phillips v. AWH Corp., where claims are given their "proper meaning" as understood by a person of ordinary skill in in the field of the invention. Adoption of a broadest reasonable interpretation standard for IPRs would "render[] the PTAB rulings legally unreliable" in Judge Newman's view, "leaving the parties to district court proceedings" in order to ultimately resolve questions of patent validity. Judge Newman contended that is precisely what Congress intended to avoid when it enacted IPR legislation. Again, whether Judge Newman's rationale in dissent gains any traction in the future remains to be seen.
Conclusion
The Federal Circuit's Cuozzo opinion restricts the ability of patent owners and petitioners to appeal Patent Office decisions on whether to institute inter partes review. Meanwhile, Judge Newman's concerns notwithstanding, the Cuozzo opinion confirms that, at least for now, the broadest reasonable interpretation standard applies in IPRs. Application of that standard is one of the major reasons behind the popularity of IPR petitions.5
Footnotes
[1] Garmin withdrew from the appeal as part of a settlement with Cuozzo, leaving the Patent Office to pursue the appeal on its own.
[2] Although holding that § 314(d) precluded appeal of the Patent Office's decision to institute an IPR, the Federal Circuit went on to discuss the possibility that mandamus might be used to challenge such decisions in situations where the PTO "clearly and indisputably" exceeded its authority. Cuozzo did not seek mandamus.
[3] 37 C.F.R. § 42.100(b) provides that "[a] claim in an unexpired patent shall be given its broadest reasonable construction in light of the specification of the patent in which it appears."
[4] In affirming the PTAB's claim construction, which was based solely on intrinsic evidence, the Federal Circuit reviewed the construction de novo under Teva Pharm. USA, Inc. v. Sandoz, Inc., 135 S. Ct. 831 (2015).
[5] As of January 15, 2015, the PTAB had published 208 IPR Final Written decisions. In 129 of these decisions all instituted claims were canceled, in 44 decisions some but not all instituted claims were invalidated, and in 35 decisions all claims were upheld as patentable. In re Cuozzo affirms the authority of the Patent Office to conduct inter partes reviews in the manner the Patent Office has interpreted the AIA.
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