Cuozzo Speed Technologies v. Lee

The US Supreme Court today issued an opinion that: 1) upheld the broadest reasonable interpretation (BRI) standard for claim construction in inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB); and 2) ruled that the PTAB’s decision on whether to institute review is final and nonappealable. This was the first time the Supreme Court had the opportunity to review the new AIA proceeding.

In 2012, Garmin International and Garmin USA, Inc. petitioned the PTAB for IPR of the claims in Cuozzo’s patent. The PTAB agreed to review the claims, construed them under the BRI standard instead of their plain and ordinary meaning, and determined that claims 10, 14, and 17 were obvious. During the appeal, the Federal Circuit upheld the PTAB’s decision in applying the BRI standard when reviewing claims in IPR proceedings. In addition, the Federal Circuit ruled that it lacks authority to review the Patent Office’s decision on whether to institute an IPR proceeding.

The opinion, authored by Justice Breyer, stated that “where a statute leaves a ‘gap’ or is ‘ambigu[ous],’ we typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute.” The Court stated that the statute governing IPR proceedings contains such a gap because “[n]o statutory provision unambiguously directs the agency to use one standard or the other.” Furthermore, §316(a) (4) grants the Patent Office authority to issue rules governing IPR, and the BRI is a standard that governs IPR. Accordingly, the Court ruled that the Patent Office reasonably exercised its rulemaking authority in adopting the BRI standard in light of the statutory context.

The Court noted that while an IPR proceeding may have similar adjudicatory characteristics to those in a district court proceeding, there are many significant aspects in an IPR that make it “less like a judicial proceeding and more like a specialized agency proceeding,” and that Congress intended to create a hybrid proceeding.

The Court also points out that the possibility of inconsistent outcomes resulting from applying different standards in an IPR and in a district court proceeding is consistent with past practice, as there have always been different tracks for reviewing and adjudicating patent claims.

On the issue of instituting review, the Court held that Congress intended that the Patent Office’s decision on whether to institute review be considered final, as §314(d) expressly provides that “determination by the [Patent Office] whether to institute an inter partes review under this section shall be final and nonappealable.” Also, “a contrary holding would undercut one important congressional objective, namely, giving the Patent Office significant power to revisit and revise earlier patent grants.” That is, to screen out bad patents and bolster valid ones.

In light of this holding, the BRI standard in IPR proceedings survived Supreme Court review, and the PTAB can continue to use BRI when construing claims in IPR proceedings. Also, the PTAB’s determination on whether to institute an IPR is final and not subject to review by courts.