United States: U.S. Supreme Court Upholds Broadest Reasonable Interpretation Standard, And Affirms Federal Circuit's Lack Of Authority To Review Inter Partes Review Institution Decisions

The Appeal by Cuozzo Speed Technologies

On June 20, 2016, the U.S. Supreme Court issued its opinion in Cuozzo Speed v. Lee, affirming the Federal Circuit's prior ruling on an appeal taken from the Patent Trial and Appeal Board's (PTAB or Board) final written decision in an inter partes review (IPR). As previously reported on January 19, 2016, the Supreme Court granted certiorari without limitation, thus agreeing to resolve both questions presented in patent owner Cuozzo Speed Technologies' petition for certiorari:

  1. Whether the Court of Appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
  2. Whether the Court of Appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board's decision whether to institute an IPR proceeding is judicially unreviewable.

The Court's decision essentially maintains the status quo with respect to the Board's use of the broadest reasonable interpretation standard and the Federal Circuit's inability to review the Board's institution decisions in most contexts. However, the Court expressly acknowledges that the inability to review institution decisions generally, in most run-of-the mill cases, does not bar review of Board decisions under §319 which would enable reviewing courts to set aside a Board decision that is either unconstitutional, in excess of statutory jurisdiction, or arbitrary and capricious.

Claim Interpretation Standard — Unanimous

The Board's "broadest reasonable interpretation" (BRI) standard was promulgated by the United States Patent and Trademark Office (USPTO) by rule, and not by statute.1 As to that standard, the Court unanimously affirmed the Federal Circuit's ruling that the Board's application of the BRI standard to unexpired claims under review in an IPR is reasonable and within the Patent Office's rulemaking authority.

In doing so, the Court noted that the "broadest reasonable construction standard helps ensure precision in drafting claims and prevents a patent from tying up too much knowledge, which, in turn, helps members of the public draw useful information from the disclosed invention and understand the lawful limits of the claim," and that the "Patent Office has used this standard for more than 100 years and has applied it in proceedings which, as here, resemble district court litigation."2

In response to arguments made by patent owner Cuozzo Speed Technologies that application of the BRI standard was unfair in the context of IPR proceedings, where there is no "absolute right to amend any challenged patent claims," the Court disagreed.3 In particular, the Court noted that "[t]he patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim. §316(d) (2012 ed.). This opportunity to amend, together with the fact that the original application process may have presented several additional opportunities to amend the patent, means that use of the broadest reasonable construction standard is, as a general matter, not unfair to the patent holder in any obvious way."4 The recent change in the PTAB rules to allow patent owners to submit new evidence and expert testimony in the pre-institution phase will also likely address some of the unfairness of the process that has been argued by some patent owners.

As to any potential inconsistent results between a district court proceeding that applies the "ordinary meaning" or Phillips standard, and an IPR that applies the BRI standard, the Court noted that "[t]his possibility, however, has long been present in our patent system, which provides different tracks — one in the Patent Office and one in the courts — for the review and adjudication of patent claims. As we have explained above, inter partes review imposes a different burden of proof on the challenger. These different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress' regulatory design."5

Thus, the BRI standard for claim interpretation of unexpired patents in IPRs remains unchanged, eliminating a potential upheaval of reviews currently pending at the Board and on appeal at the Federal Circuit.

No Appeal Provision of § 314(d)

Section 314(d) states that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." (emphasis added). In the underlying IPR of Cuozzo Speed's patent, the Board instituted review of claim 17, which depended from claims 14 and 10. In addition to claim 17, the Board also instituted review of claims 10 and 14, which patent owner Cuozzo Speed argued were not addressed "with particularity" in the original IPR petition. The Court affirmed the Federal Circuit's ruling that it lacked authority, in view of 35 U.S.C. §314(d), to review the propriety of the Board's decision to institute an IPR as claims 10 and 14, with Justices Alito and Sotomayor dissenting.

In affirming the Federal Circuit's decision, the Court noted that prior patent office challenge proceedings, including the replaced inter partes reexamination, included a similar "nonappealable" provision.6 The Court also noted that "[w]e doubt that Congress would have granted the Patent Office this authority, including, for example, the ability to continue proceedings even after the original petitioner settles and drops out, §317(a), 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 inter partes review."7

The Court further noted that "contrary to the dissent's suggestion, we do not categorically preclude review of a final decision where a petition fails to give 'sufficient notice' such that there is a due process problem with the entire proceeding, nor does our interpretation enable the agency to act outside its statutory limits by, for example, canceling a patent claim for 'indefiniteness under §112' in inter partes review.8 Such 'shenanigans' may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to 'set aside agency action' that is 'contrary to constitutional right,' 'in excess of statutory jurisdiction,' or 'arbitrary [and] capricious.'"9

For its part, the Dissent primarily argued that "consistent with the strong presumption favoring judicial review, Congress required only that judicial review, including of issues bearing on the institution of patent review proceedings, be channeled through an appeal from the agency's final decision."10 The Dissent argues that "§314(d) does not say that an institution decision is 'not subject to review.'"11 Instead, the Dissent interprets Section 314(d) to preclude only interlocutory appeals, namely "to bar only an appeal from the institution decision itself, while allowing review of institution-related issues in an appeal from the Patent Office's final written decision at the end of the proceeding."12

Thus, under the Dissent's reading "while the decision to institute inter partes review is 'final and nonappealable' in the sense that a court cannot stop the proceeding from going forward, the question whether it was lawful to institute review will not escape judicial scrutiny."13

Nevertheless, the Court's majority opinion rules, and the Patent Office retains significant discretion regarding institution decisions in IPRs that will generally not be reviewed by the Federal Circuit on appeal.

Conclusion

The Supreme Court's affirmance of the BRI standard for unexpired patents subject to inter partes review proceedings confirms the existing interpretation framework, thus avoiding any potential upheaval of reviews currently pending at the Board and on appeal at the Federal Circuit. In addition, the Court's affirmance that the Federal Circuit lacks authority to review Board institution decisions in IPRs under Section 314(d) demonstrates that patent owners and petitioners have limited abilities to challenge such decisions, namely where an issue arises under Section 319. The decision also shows the Court's deference to Congress in crafting the America Invents Act (AIA) statute and unwillingness to read any additional words into the language of the statute, as well as what it considered to be the Patent Office's reasonable exercise of its rule making authority.

Footnotes

1 See 37 CFR 42.100(b)
2 Slip Op. at 3
3 Slip Op. at 18
4 Slip Op. 18-19
5 Slip Op. 19
6 Slip Op. at 8
7 Slip Op. at 8
8 Post, at 10–13
9 Slip Op. at 11-12
10 Dissent Slip Op. at 1
11 Dissent Slip Op. at 5
12 Dissent Slip Op. at 5 (emphasis in original)
13 Dissent Slip Op. at 5-6

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