United States: Supreme Court's Cuozzo Decision Endorses AIA Trial Proceedings, But Preserves Key Roles For Both The PTAB And Federal Courts In Patent Disputes

In Cuozzo Speed Techs., LLC v. Lee,1 the U.S. Supreme Court rejected the patent owner's challenge to the U.S. Patent and Trademark Office's implementation of the Leahy-Smith America Invents Act's new post grant proceedings. The Court held that Cuozzo could not challenge the Patent Trial and Appeal Board's decision to institute inter partes review and that the USPTO reasonably exercised its rulemaking authority in requiring the PTAB to construe claims under review using the USPTO's "broadest reasonable interpretation" standard. The decision affirmed the U.S. Court of Appeals for the Federal Circuit and endorsed the USPTO's positions on both issues.

Looking beyond that headline, however, the decision signals a balance between the federal courts' traditional role in patent litigation, including ruling on the validity and unenforceability of issued patents, and the PTAB's administrative role in reviewing challenged patents.

Background

Following inter partes review, patent owner Cuozzo Speed Technologies, LLC appealed a final written decision by the PTAB that found claims 10, 14 and 17 in U.S. Patent No. 6,788,074 unpatentable.  In its petition for inter partes review, Garmin International, Inc., had challenged inter alia the patentability of claim 17 in light of three prior art patents. The PTAB initiated review of not only claim 17 but also claims 10 and 14, in view of the three asserted prior art patents.2

On appeal to the Federal Circuit, Cuozzo argued that the PTAB erred in instituting review of two claims that were not part of the asserted grounds.  Specifically, Cuozzo argued that the PTAB erred in instituting review of claims 10 and 14 because they had not been challenged "with particularity" as required by 35 U.S.C. § 312(a)(3).  Cuozzo also argued that the PTAB had erred in construing the claims under the USPTO's broadest reasonable interpretation ("BRI") construction standard, rather than affording the claims their meaning under the Phillips analysis.3 In a divided decision, the Federal Circuit affirmed the PTAB by ruling that the decision to institute was not subject to appeal and that the PTAB reasonably acted within its rulemaking authority in construing claims under the BRI standard.4 In a dissent, Circuit Judge Newman argued that Congress intended AIA trials to be functional substitutes for federal court litigation over patent validity. As a result, she argued, PTAB proceedings must be consistent with federal court proceedings, necessitating the adoption of the Phillips analysis used in federal court litigation. Cuozzo filed a petition for certiorari to the Supreme Court, which heard the appeal.

Supreme Court Leaves Door Open for Certain Challenges of Institution Decisions

In a unanimous decision written by Justice Breyer, the Supreme Court affirmed the Federal Circuit on both issues. It held that §314(d) prevented Cuozzo from challenging on appeal the PTAB's institution decision, either through an interlocutory appeal or in an appeal from the final written decision. It also ruled that 37 C.F.R. § 42.100(b), which implements the BRI standard, was a reasonable exercise of administrative rulemaking under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc..5 Although the Court found against Cuozzo on both issues, the decision suggests that the Court views the AIA post grant proceedings as events akin to reexamination – a procedure to correct shortcomings during the earlier examination of the claims under review – rather than a streamlined, quasi-judicial procedure to invalidate suspect patents.

First, the Court ruled that § 314(d) prevented "mine-run" challenges to PTAB institution decisions.  It characterized Cuozzo's contention that the petition did not fairly target two claims for which the Board instituted review as "an ordinary dispute about the application of certain relevant patent statutes" concerning the institution decision. It held that the plain language of §314(d) "must, at the least, forbid an appeal that attacks [an institution decision] by raising this kind of legal question and little more."6

Equally important, the Court observed that judicial responsibility for overseeing agency proceedings possibly warrants appellate review in other situations. It "emphasize[d]" that its holding applied to attacks on institution decisions involving "questions that are closely tied to the application and interpretation of statutes" related to the institution decision.7 The Court recognized that the ruling did not foreclose appeals of institution decisions raising constitutional questions. It also suggested that institution decisions could be appealed that impact "other, less closely related statutes," or based on issues that extend beyond the reach of §314.8

The Court's opinions specifically identified two possible future grounds for appeal. Justice Breyer noted that appeal may be available when a PTAB decision fails to provide due process, or when the decision goes beyond the "statutory" limits of the AIA, such as when the review is premised on a violation of 35 U.S.C. § 112, which is not an available challenge for inter partes review proceedings. Furthermore, in his dissent, Justice Alito suggested that issues relating to the PTAB's jurisdiction also may be subject to appeal. For example, an appeal may be appropriate if the PTAB instituted an inter partes review more than one year after the petitioner asserted invalidity in a court action.9  A jurisdictional issue could also arise in proceedings instituted under the transitional program for covered business method patents based on the PTAB's incorrect interpretation of the terms "financial product or service" or "technological invention."10 Justice Alito summed up the issue by stating that, "I take the Court at its word that today's opinion will not permit the Patent Office 'to act outside its statutory limits' in these ways."11

Thus, the Court's Cuozzo decision settles that § 314(d) precludes a petitioner from challenging an institution decision based on a substantive issue of patent law, or the interpretation of a cited reference. It does, however, leave the door ajar to certain other challenges, ranging from constitutional due process issues associated with the AIA and PTAB procedures, to jurisdictional issues. Despite rejecting Cuozzo's appeal, the Supreme Court decision appears to envision a continuing federal court role in overseeing the AIA trial process.

Supreme Court Concludes That AIA Trials Are Administrative, Not Judicial in Nature

The Supreme Court also signaled a continuing role for federal courts in construing patent claims even after the conclusion of AIA trials. The Court unanimously rejected Cuozzo's contention that the USPTO erred in promulgating rules requiring the PTAB to construe claims using the BRI standard. Responding to Judge Newman's dissent, Justice Breyer emphasized that AIA trials are very different from federal court proceedings considering patent validity, observing that in significant respects, "inter partes review is less like a judicial proceeding and more like a specialized agency proceeding."12

In addition to applying different claim construction standards, the Court listed a number of differences between AIA trials and federal court litigation: the lack of a constitutional standing requirement for petitioners, the PTAB practice of reaching a final decision even after the petitioner settles out, and a lower burden of proof. It concluded:

Most importantly, these features, as well as inter partes review's predecessors, indicate that the purpose of the proceeding is not quite the same as the purpose of district court litigation. The proceeding involves what used to be called a reexamination (and, as noted above, a cousin of inter partes review, ex parte reexamination, 35 U.S C. §302 et seq., still bears that name). The name and accompanying procedures suggest that the proceeding offers a second look at an earlier administrative grant of a patent. Although Congress changed the name from "reexamination" to "review," nothing convinces us that, in doing so, Congress wanted to change its basic purposes, namely, to reexamine an earlier agency decision.13

The long-term impact of this statement will need to observed, to see whether PTAB rulings on factual issues are given preclusive effect in subsequent federal court litigation. In B&B Hardware, Inc. v. Hargis Industries, Inc.,14 which considered the preclusive effect of fact finding in proceedings before the Trademark Trial and Appeal Board, the Court rejected categorical rules governing the doctrine of issue preclusion based on administrative agency rulings.  The Court opted for a case-by-case application of principles from the Restatement (Second) of Judgments. Although the decision does not directly address AIA trials, the procedural differences between inter partes review proceedings and federal court litigation may impact the preclusive effect of PTAB factual findings.

Conclusion

Although the Supreme Court's Cuozzo decision did not disagree with the USPTO's procedures for instituting and conducting AIA trials, it also did not embrace the proceedings as interchangeable substitutes for federal court litigation of patent validity issues. The actual impact of the case will become clearer as future court decisions apply it.

Footnotes 

1. 579 U.S. ___, No. 15-446, 2016 WL 3369425 (U.S. June 20, 2016).

2. Garmin Int'l, Inc. v. Cuozzo Speed Technologies LLC, No. IPR2012-0001 (Nov. 13, 2013).

3. See Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc).

4. In re Cuozzo Speed Techs. LLC, 793 F.3d 1268 (Fed. Cir. 2015).

5. 467 U.S. 837 (1984).

6. Slip op. at 8.

7. Id. at 11.

8. Id.

9. See 35 U.S.C. § 315(a)(1) and (b).

10. See AIA §§18(a)(1)(E), (d)(1).

11. Alito J., dissenting, at 13-14.

12. Slip op. at 15.

13. Id. at 16.

14. 135 S.Ct. 696 (Mar. 24, 2015).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions