In Cuozzo Speed Technologies, Inc., v. Lee, the Supreme Court affirmed the Federal Circuit’s decision, upholding the PTAB’s use of the BRI standard for claim interpretation in IPRs, and determining that 35 U.S.C. § 314(d) bars judicial review of the PTAB’s decision to institute review on grounds not specifically raised in the IPR petition.

Broadest Reasonable Interpretation

In an opinion authored by Justice Breyer, the Court determined that the USPTO’s rule requiring application of the BRI standard for claim interpretation in IPRs, 37 C.F.R. § 42.100(b), was a reasonable exercise of the agency’s rulemaking authority delegated in the AIA, 35 U.S.C. § 316(a)(4).

The Court explained that rulemaking authority was properly granted to the USPTO under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), which permits an agency to enact rules that are reasonable in view of the statute governing the agency’s actions, if the statute contains a gap in its provisions. The Court determined that the AIA contains a gap concerning the proper standard for claim construction, in that the AIA does not specify a claim construction standard, and that the AIA expressly permits the USPTO to issue rules “governing inter partes review,” 35 U.S.C. § 316(a)(4).

In evaluating the reasonableness of the rule, which provides a different claim construction standard than the Phillips standard applied in district court proceedings, the Court noted that IPR proceedings are a hybrid between a judicial proceeding and an agency proceeding, with a burden of proving unpatentability by a preponderance of the evidence, unlike the district court burden for proving invalidity by clear and convincing evidence. The Court also noted that the USPTO had used the BRI standard for more than 100 years, including in other inter partes proceedings, such as patent interferences and reexaminations. The Court also noted that claim amendments are permitted in IPRs, and that although motions to amend have rarely been granted, the manner in which the agency has ruled on motions to amend was not before the Court in this case, because Cuozzo did not contend that the agency’s decision denying its motion to amend was arbitrary and capricious or otherwise unlawful.

Appeal of Decision to Institute

The Court also upheld the Federal Circuit’s decision that 35 U.S.C. § 314(d) does not permit appeal of the USPTO’s decision to institute an IPR. In particular, Cuozzo had argued that the IPR was not properly instituted with respect to two dependent claims because the petition had not addressed those specific claims, only another claim from which they depend, and the Federal Circuit determined that this was not an appealable decision.

The Court determined that the particular issue raised with respect to institution of the IPR was not appealable under § 314(d), which states that a decision to institute is “nonappealable.” However the Court stated that in deciding this case it need not decide the precise effect of § 314(d) on appeals that may implicate constitutional questions or that raise issues of the agency acting outside its statutory limits, which may be reviewable on appeal.

A dissenting-in-part opinion (authored by Justice Alito) argued that appellants should be permitted to raise issues concerning the USPTO’s institution decision, as long as such issues are raised in the context of an appeal from the agency’s final decision, and that § 314(d) simply prohibits appeals from the institution decision itself.