On June 20, 2016, the United States Supreme Court issued its
opinion in Cuozzo Speed Technologies, LLC v. Lee, marking
a rare instance in which the Court affirmed the Federal Circuit on
all issues presented. The Supreme Court addressed two key
questions: (i) whether decisions by the Patent Trial and Appeal
Board ("Board") to institute inter partes review
("IPR") proceedings are appealable; and (ii) whether the
Board's use of the "broadest reasonable construction"
is a proper standard for interpreting claims during such
proceedings, rather than the "ordinary meaning" standard
applied by district courts. The Supreme Court granted certiorari in
Cuozzo after the Federal Circuit declined a petition for
en banc rehearing of a divided panel decision, which held
that 35 U.S.C. § 314(d) requires that the Board's
institutions decisions are not appealable, and that the Patent
Office was within its rulemaking authority to adopt the broadest
reasonable interpretation standard for use in IPR
proceedings.
Institution Decisions Are Not Appealable, Except in Rare
Circumstances
First, addressing whether the Board's institution decisions are
subject to appeal, Justice Breyer, writing for the majority, held
that such decisions cannot be appealed because the statutory
language of Section 314(d)—"No Appeal. The determination
by the [Patent Office] Director whether to institute an [IPR] under
this section shall be final and non-appealable"—means
precisely what it says. Justice Breyer explained that the
"'No Appeal' provision's language must, at the
least, forbid an appeal that attacks a 'determination ...
whether to institute' review" of the Board's grounds
for reviewing patentability of challenged claims. According to
Justice Breyer, "a contrary holding would undercut one
important congressional objective, namely, giving the Patent Office
significant power to revisit and revise earlier patent
grants." Justice Breyer reasoned that Congress would not have
conferred such "significant power" to the Patent Office
"if it had thought that the agency's final decision could
be unwound under some minor statutory technicality related to its
preliminary decision to institute" IPR proceedings.
Noting the dissent's position (written by Justice Alito and
joined by Justice Sotomayor) that the "No Appeal"
provision in Section 314(d) applied only to bar interlocutory
appeals, Justice Breyer wrote that "[w]e cannot accept this
interpretation" because "it reads into the provision a
limitation (to interlocutory decisions) that the language nowhere
mentions and that is
unnecessary."
The majority therefore held that a rule "that courts may not
revisit th[e] [Board's] initial determination gives effect to
th[e] statutory command" that institution decisions are
"final" and "nonappealable." In doing so,
however, the majority also stated that "we do not
categorically preclude review of a final decision" when, for
example, "there is a due process problem with the entire
proceeding" or the Patent Office "act[ed] outside its
statutory limits," such as canceling claims based on
patentability grounds not contemplated by statute. The majority
thus left open the possibility that the Board's institution
decision could be subject to appellate review if it
"implicate[d] constitutional questions" or presented
"other questions of interpretation that reach ... well
beyond" the statutory framework for IPR proceedings. Justice
Alito's dissent acknowledged the majority's stated intent
to prohibit the Patent Office from "act[ing] outside its
statutory limits" but criticized this portion of the majority
opinion because "how to get there from the Court's
reasoning—and how to determine which 'statutory
limits' we should enforce and which we should not—remains
a mystery."
"Broadest Reasonable Construction" Standard is
Approved
Turning to the second question, Justice Breyer, now writing for a
unanimous Court, held that the Patent Office's decision to
apply the broadest reasonable construction standard in IPR
proceedings comported with the agency's administrative
authority. Starting from Chevron deference principles, the
Court noted that "where a statute leaves a 'gap' or is
'ambiguous,' we typically interpret it as granting leeway
to enact rules that are reasonable in light of the text, nature,
and purpose of the statute." The Court found that the IPR
statutory framework "contains such a gap" because
"[n]o statutory provision unambiguously directs that agency to
use one standard or the other." Accordingly, in view of the
Patent Office's authority to issue "regulations ...
establishing and governing inter partes review," 35 U.S.C.
§316(a)(4), the Court held that a regulation directing the
Board to use the broadest reasonable construction of a patent claim
was a valid exercise of the agency's rulemaking
authority.
The Court explained that the broadest reasonable construction
"helps to protect the public" because the Patent
Office's "standard increases the possibility that the
examiner will find the claim too broad (and deny it)." To that
end, applying the broadest reasonable construction "encourages
the applicant to draft narrowly" and avoids "unlawfully
broad claim[s] [that] might discourage the use of the invention by
a member of the public."
The Court further recognized that the Patent Office has used the
broadest reasonable construction standard "for more than 100
years" in a variety of proceedings, including interferences
and reexaminations that, like IPRs, "resemble district court
litigation." The Court did acknowledge the possibility
"that the use of the broadest reasonable construction standard
in [IPR proceedings], together with the use of an ordinary meaning
standard in district court, may produce inconsistent results and
cause added confusion." The Court concluded, however, that
such possibilities are facts of life that "ha[ve] long been
present in our patent system," and that "different
evidentiary burdens" for IPR and district-court proceedings
"mean that the possibility of inconsistent results is inherent
to Congress's regulatory design."
Take-Aways from
Cuozzo
Cuozzo represented a critical test of the Patent
Office's and Federal Circuit's interpretation and
application of the IPR statute, resulting in the Supreme
Court's affirmance of the existing approaches to two issues
common to nearly all IPR proceedings. Thus, going forward, the
handling of IPRs will likely remain unchanged at the Patent Office,
with appellate review of institution decisions by the Federal
Circuit arising only if such decisions involve constitutional
issues or go well beyond the IPR statute.
And the Patent Trial and Appeal Board will continue to interpret
nonexpired patent claims using the "broadest reasonable
construction" standard perceived to be more favorable to IPR
petitioners, rather than the "plain and ordinary meaning"
standard used in district court litigation. At the same time,
several observers have noted that the Federal Circuit's recent
decisions applying the "broadest reasonable
interpretation" standard have brought that approach to patent
claim construction more in line with the "ordinary
meaning" approach that holds sway in district-court cases. If
that is so, then the difference between a "broadest reasonable
interpretation" and the "ordinary meaning" of a
patent claim may not be that great at all.
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