United States: Supreme Court Hears Oral Arguments In First Appeal From AIA Post-Grant Proceeding: Justices Focus On Practical Consequences Of Dual Claim Construction Standards

On April 25, 2016, the U.S. Supreme Court heard oral arguments in its first appeal from a decision by the USPTO's Patent Trial and Appeal Board ("PTAB" or "Board") in an inter partes review proceeding ("IPR") under the Leahy-Smith America Invents Act of 2011 ("AIA"). Cuozzo Speed Techs., LLC v. Lee, Case No. 15-446. The case presents two procedural issues under the AIA trial format: First, whether the PTAB should construe claims during an IPR using the USPTO's "broadest reasonable interpretation" (or "BRI") construction standard; and second, whether the PTAB's decision to institute review is subject to review by the U.S. Court of Appeals for the Federal Circuit. The transcript of the Supreme Court argument is available at [http://www.supremecourt.gov/oral_arguments/argument_transcripts/15-446_2dp3.pdf].


Cuozzo Speed Technologies, LLC owns U.S. Patent No. 6,778,074, titled "Speed limit indicator and method for displaying speed and the relevant speed limit." The patent claims a speed display connected to a global positioning system device that displays a vehicle's current speed and indicates when the speed exceeds the legal speed limit for the vehicle's exact location. Garmin International, Inc. filed a petition for inter partes review of three claims of the '074 patent, contending that specific combinations of prior art references created a reasonable likelihood that the three challenged claims were invalid. See 35 U.S.C. § 312(a). The PTAB instituted review on the three claims, although the PTAB based its decision on two of the claims by applying references that Garmin did not identify as relevant to those claims. During the IPR proceedings, the PTAB construed the claims by giving them the "broadest reasonable construction in light of the specification of the patent in which it appears." 37 C.F.R. § 42.100(b). Ultimately the PTAB ruled that all three claims were invalid as obvious.

Cuozzo appealed the result to the Federal Circuit. In a February 4, 2015 divided decision, the court ruled that the USPTO's decision to institute an IPR proceeding was not appealable, either prior to or after the PTAB's final decision. See 35 U.S.C. § 314(d) ("[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable."). The majority also held that the "broadest reasonable interpretation" standard was appropriate.

The Federal Circuit then declined the request for en banc review by a razor-thin margin. In a set of revised opinions from the panel hearing the appeal, and three additional opinions, the court exposed sharp division on the proper claim construction standard applicable to AIA trial proceedings. In re Cuozzo Speed Technologies, LLC, No. 2014-1301 (Fed. Cir. Jun. 8, 2015)(revised panel decision and order denying motion for rehearing en banc).  Five judges joined an opinion written by Chief Judge Sharon Prost, dissenting from the denial. Four other judges joined an opinion by Circuit Judge Timothy B. Dyk, concurring in the denial. Judge Newman also wrote a separate dissenting opinion. After Garmin exited the litigation through settlement, Cuozzo petitioned for certiorari to the Supreme Court.

BRI Issue Dominates Oral Arguments

The Supreme Court spent the vast majority of the argument questioning counsel about the BRI claim construction standard, and discussed the patent owner's ability to appeal PTAB institution decisions only briefly.

Cuozzo argued that the BRI standard, used by the USPTO across the board in examinations, reexamination, reissues, and other administrative settings, is not appropriate for AIA trials for two reasons. First, Congress intended the AIA post-grant proceedings to be a substitute for federal court litigation, in which court's use a different claim construction approach based on Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc). Second, BRI is a conservative standard applicable only in "examinational" proceedings in which the patentee may amend the pending claims. In AIA proceedings, however, patent owners do not have the unfettered right to amend claims, and in most cases requests to amend claims are denied. Instead of BRI, Cuozzo argues that the PTAB must use the Phillips claims construction analysis applicable in federal court proceedings, where claims are construed to have their "actual" meaning to a person skilled in the art based on the claim language, specification, prosecution history, and – occasionally – other extrinsic evidence.

The USPTO argues that the AIA supports the use of BRI in AIA proceedings. Although the statute is silent on the claim construction standard to be used, Congress was aware that the USPTO has long used BRI for administrative proceedings and Congress gave the USPTO broad authority to adopt AIA trial procedures.

At oral argument, counsel for Cuozzo argued that the PTAB should apply the Phillips claim construction analysis to IPR proceedings for several reasons: 1) BRI only applies when a claim under review may be freely amended; 2) Congress intended the IPR process to be "adjudicatory" rather than "examinational;" and 3)  the two different standards would result in anomalies, including situations where claims mean "one thing for patentability in the Board, but a wholly different thing for infringement in the district courts."

Cuozzo's counsel suggested that the BRI standard is one designed to address ambiguity in claims under examination, not necessarily the patentability of the claims. "What it does is try to test for ambiguity in the inter partes claim language, not patentability. Patentability is the standard that Congress set in inter partes review. But what the broadest reasonable interpretation does is try to test for ambiguity in the patent language so it can be amended. So the fact that a patented invention or an application may not pass the broadest reasonable expedient does not mean that the inventor has not claimed a patentable invention. It simply means that the language is ambiguous, and the language needs to be refined. And that is a wholly different exercise."

Justice Breyer suggested that, although a Phillips-based standard might be appropriate if Congress intended to create a "little court proceeding," the BRI standard might be appropriate if Congress intended IPR proceedings as a mechanism to allow the public to force a second look at many patents controlled by patent trolls that never should have been allowed. He suggested that it the intent was to "tell the [patent] office, you've been doing too much too fast. Go back and let people who are hurt by this come in and get rid of those patents that shouldn't have been issued. Now, we will give you, again, once the same chance we gave you before, and that is you can amend it once if you convince the judge you should have done it before. But if, on the broadest possible interpretation, you know, reasonable interpretation, it shouldn't have been issued, we're canceling it. And ­­ and that is for the benefit of those people who were suffering from too many patents that shouldn't have been issued in the first place. I don't know. If it's that second purpose, then I would think, well, maybe [the BRI standard] is right, what they're doing. And if it's ambiguous between those two purposes, I would begin to think, well, maybe they should have the power themselves under Chevron, Meade, or whatever, to decide which to do."

The Solicitor General argued that, although IPR proceedings include a hybrid of features found in ex parte patent examination and district court litigation, the proceedings are similar enough to examination to require the BRI standard. It argued that the patent owner has the right to request amendment, and although amendments have been entered in only a few cases, that usually has been because the patent owner failed to prove that the amended claims were patentable.

From a practical point of view, the difference between the BRI standard and a Phillips-based standard is not likely to make a significant difference in most post-grant proceedings. Although Cuozzo argues that its claims would have survived if the PTAB had used a different standard, it appears from the briefs (including an amicus brief filed by Dell Computer) that the standard does not affect the outcome in most cases.

The Court seemed most concerned by the procedural impact of claim construction in PTAB trials, and the potential effect on district court litigation concerning the same patents. Chief Justice Roberts and Justice Ginsburg expressed a general concern about consistency between the district court actions and AIA proceedings concerning the same patent.  Chief Justice Roberts noted that "it's a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results[.]" The panel also questioned counsel on the preclusive effect a decision by either the PTAB or a district court could have over a proceeding involving the same patent in the other forum.

Appellate Review of Institution Decisions.

The second issue before the Court, whether the Federal Circuit may review the PTAB's decision to institute review (at least in connection with an appeal of the final written decision), has greater potential to affect AIA trial practice, but was hardly mentioned by the Court during argument.

The AIA provides that the PTAB's decision "whether to institute an inter partes review . . . shall be final and nonappealable." 35 U.S.C. § 314(d). The USPTO interprets this provision as foreclosing all review of the institution decision, including review as part of a review of the final written decision on the merits. Cuozzo argues that principles of judicial oversight of administrative proceedings mandate the availability of judicial review.

The Solicitor General argued that § 314(d) should be read to preclude all appeals from a decision whether to institute review, not just a potential appeal of a refusal to institute. The government noted that a similar provision governing ex parte reexamination proceedings prevents appeals of decisions that a request for reexamination does not demonstrate a substantial new question of patentability, 35 U.S.C. § 303(c), and thus Congress could have adopted that approach in the AIA. By precluding all appeals, it argued, § 314(d) only permits challenges to PTAB institution decisions through a writ of mandamus.

Given the minimal discussion, it is difficult to determine the outcome of the appeability issue.  One thing is certain, the Supreme Court's ruling will have a significant impact on a patent owner's ability to seek appellate review of a PTAB decision to institute an IPR proceeding.

A decision is expected in June.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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