In re Cuozzo Speed Techs., LLC, — F.3d – (Fed. Cir. Feb. 4, 2015) (Newman (dissent), Clevenger, DYK)

Background

The Federal Circuit has issued its first decision involving an appeal of a final written decision in an inter partes review (“IPR”) proceeding at the Patent Trial and Appeal Board (“PTAB”), rejecting the patentee’s arguments on appeal on all grounds in a 2-1 decision. The America Invents Act (“AIA”) introduced IPR as one of several new ways to challenge the validity of a patent’s claims based on other patents and printed publications before the PTAB. Over 2,300 IPR petitions have been filed since the procedure became available in September 2012, with hundreds of IPR final written decisions now on appeal.

This first Federal Circuit opinion is significant because it clarified two key issues in the law that have been hotly debated among practitioners: (1) whether the Federal Circuit has jurisdiction to hear an appeal of a PTAB decision to institute an IPR; and (2) the proper standard for claim construction in an IPR.

Garmin filed the IPR at issue, challenging claims 10, 14, and 17 of U.S. Patent No. 6,778,074 (“the ‘074 Patent”). The ‘074 Patent claims an invention that links GPS navigation systems with a speed limit database to give the driver color-coded speedometer warnings. The PTAB instituted IPR, finding that there was a reasonable likelihood that the challenged claims were obvious under § 103(a). While Garmin’s petition on claim 17 did include the prior art patents on which the PTAB instituted IPR, the petition did not name some of the prior art patents on which the PTAB instituted review for claims 10 and 14. The PTAB held trial and determined that claims 10, 14, and 17 were invalid as obvious over the prior art.

The Appeal

On appeal, Cuozzo first contended that the PTAB erred in instituting the IPR on grounds different than those that Garmin asserted. The Federal Circuit panel determined that it did not have jurisdiction to hear Cuozzo’s appeal on this issue under 35 U.S.C. § 314(d), which states that IPR institution decisions are “final and nonappealable.” In doing so, the panel expanded upon the Federal Circuit’s earlier decision in St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373 (Fed. Cir. 2014), where it held that § 314(d) barred interlocutory review of an institution decision. The panel found that the posture of Cuozzo’s appeal presented no meaningful difference from that in St. Jude, stating that Section 314(d) “must be read to bar review of all institution decisions, even after the Board issues a final decision.” Notably, the panel suggested that a mandamus action could potentially be available if the PTAB “clearly and indisputably exceeded its authority” in instituting an IPR, but did not decide this issue as it was not before the Court.

Next, Cuozzo argued that the PTAB erred in using the “broadest reasonable interpretation” (“BRI”) claim construction standard in its obviousness determination. The Federal Circuit panel concluded that the BRI standard was appropriate given that it has been used in all other areas of PTO practice for over 100 years, and Congress expressly gave the PTO the authority to promulgate its own regulations governing IPR and the other AIA proceedings. The panel reasoned that this broad standard is justified in an IPR proceeding because a patentee has the ability to amend claims like it does during prosecution, stating that the “cabined” opportunity in IPR did not present a “material difference” that should affect the standard applied in claim construction.

Noting that the AIA was enacted to provide “quick and cost effective alternatives to litigation,” Judge Newman authored a strongly-worded dissent and argued that the PTAB should apply the same claim construction standards as applied by district courts. Judge Newman noted that the BRI standard in PTO proceedings is premised on the patentee’s “unfettered right to amend,” while the availability of amendment in IPR is “almost entirely illusory,” as less than 1% of motions to amend have been granted thus far. She noted that the PTO approved and used the BRI standard as an expedient in examination and reexamination, but the adjudicative nature of IPR with a specialized tribunal undermined the need for that expedient. Judge Newman also disagreed with the majority on appeals taken from institution decisions, writing that the Federal Circuit should not completely bar appellate review of institution decisions through a “heavy handed foreclosure.”

Takeaway

In all, the Federal Circuit’s first opinion following a final PTAB IPR decision is a blow to patent owners. Given the PTAB’s high grant rate for IPR petitions, and given the fact that institution decisions cannot be appealed (or at least will be very difficult to appeal), it is likely that accused infringers will continue to consider, and often times file, an IPR petition shortly after being sued for patent infringement. While several patent owners have succeeded in convincing the PTAB to uphold the validity of challenged patent claims, this Federal Circuit decision upholds the PTAB’s use of the broader BRI claim construction standard even though there has been, to date, little opportunity to amend. It is likely that this decision will head to en banc review by the Federal Circuit. In the interim, the Federal Circuit will continue to shape the law regarding AIA proceedings through subsequent appeals of several more IPR final decisions in the near future (three more are scheduled to be heard this week).