On February 4, 2015, in a 2–1 decision addressing two
novel and foundational issues arising under the newly created
inter partes review ("IPR") proceedings of the
America Invents Act of 2011 ("AIA"), the Federal Circuit
held that (i) institution decisions by the Patent Trial and Appeal
Board ("PTAB") are almost never reviewable on appeal, and
(ii) the PTAB is entitled to apply the "broadest reasonable
interpretation" standard for claim constructions in IPRs. Both
holdings, as well as the court's affirmance of the PTAB's
decision on the merits, are a decisive victory for the United
States Patent and Trademark Office, which participated as the sole
party defending the PTAB's decision after the two private
parties settled their dispute during the pendency of the appeal.
Judge Dyk, joined by Senior Judge Clevenger, authored the majority
opinion, which was the first to address a final written decision
from an IPR.
On reviewing PTAB institution decisions, at issue was the proper
construction of 35 U.S.C. § 314(d), which states that
"[t]he determination by the Director whether to institute an
inter partes review under this section shall be final and
nonappealable." The patentee argued on appeal that the PTAB
had erred in instituting an IPR on grounds not expressly set forth
in the petition seeking review. Although the Federal Circuit had
decided in prior cases that it would not address institution
decisions before a final written decision, the patentee argued that
the institution decision could be reviewed after a final written
decision by the PTAB. The Federal Circuit disagreed. Pointing to
other provisions that prohibit all interlocutory appeals, the court
concluded that § 314(d) must have been intended to do more
than prevent interlocutory appeals of institution decisions. The
court thus declined to review the PTAB's decision to institute
an IPR on grounds not expressly set forth in the petition.
The court acknowledged the possibility that its rule was not
without exception. In certain unspecified circumstances, mandamus
relief could be available, although only if the party sought such
relief after the IPR trial is conducted and the PTAB issues its
final written decision. But, the court concluded that the standard
for mandamus relief was not met in this case.
On the claim construction standard, the court emphasized the
lengthy history of use of the broadest reasonable interpretation
standard in proceedings at the PTO. Finding "no indication
that the AIA was designed to change the claim construction standard
that the PTO has applied for more than 100 years," the court
concluded that Congress implicitly adopted in the AIA the broadest
reasonable interpretation standard for IPR proceedings. The court
further held that, even if that standard were not codified by
statute, the PTO was entitled to establish the standard under its
rule-making authority and the deference to be accorded the agency
under a Chevron analysis.
Finally, applying the standard of review for claim construction
set forth by the U.S. Supreme Court in its recent decision in
Teva Pharmaceuticals U.S.A. v. Sandoz, Inc., the court
found no issue with the Board's construction of the claims, its
determination that the claims were obvious, or its determination
that the patentee was not entitled to amend its claims.
In dissent, Judge Newman took issue with the majority's
opinion as a departure from the "fundamental rule of
administrative action, that agency decisions must be reviewable on
appeal." With respect to application of the broadest
reasonable interpretation standard, Judge Newman would have applied
the claim construction standard applicable in district court, on
the view that Congress intended to "convert inter
partes reexamination from an examinational proceeding to an
adjudicative proceeding," akin to district court
proceedings.
This decision, which has been long awaited by the patent bar,
will have wide effect given the numerous IPR appeals already in the
pipeline, proceedings pending before the PTO, and those to come.
Further review of these rulings, either by the en banc
Federal Circuit or by the U.S. Supreme Court, may be in the cards
given the fundamental nature of these rules to IPRs. Further Jones
Day commentary on the decision will follow.
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