The Appeal by Cuozzo Speed Technologies

The U.S. Supreme Court accepted its first appeal from the Federal Circuit involving an inter partes review (IPR) styled Cuozzo Speed v. Lee, which is also the first time the Supreme Court will address an America Invents Act (AIA) proceeding. As reported in February 2015, the Federal Circuit affirmed the Patent Trial and Appeal Board’s (PTAB or Board) use of a “broadest reasonable interpretation” (BRI) standard during IPR proceedings, a standard that was promulgated by the United States Patent and Trademark Office (USPTO) by rule, and not by statute. The Federal Circuit also held that it lacked authority, in view of 35 U.S.C. §314(d), to review the propriety of the PTAB’s decision to institute an IPR. The Supreme Court’s grant of certiorari will give significant pause to those utilizing the IPR process, particularly those who are relying heavily on the BRI standard in seeking to invalidate a patent.

On January 15, 2016, the Supreme Court granted certiorari without limitation, thus agreeing to resolve both questions presented in patent holder 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.

Potential Impact on AIA Post-Grant Proceedings: Claim Construction

Based on the questions presented in the petition for certiorari, the appeal and subsequent decision is likely to have a significant impact on AIA post-grant proceedings. As noted above, the Court will address whether it is appropriate for the PTAB to apply the BRI standard to claim construction, which may partially account for the higher rate of patent invalidity in AIA post-grant proceedings up to this point — over three years from their date of availability. The decision to hear the case by the Supreme Court may signal an intent to modify the BRI standard applied by the PTAB, which could benefit patent owners. The alternative is a “plain and ordinary meaning” or Phillips standard applied by courts in district court litigation and at the International Trade Commission (ITC), which may result in a narrower interpretation of claim terms.

The Federal Circuit supported the use of the BRI standard by noting that it was the standard used by the USPTO for more than 100 years, and that Congress would have been well aware of that standard. One of the primary arguments against the use of BRI — which was relied upon by Judge Newman in her dissent in the Federal Circuit’s original decision — is the fact that the PTAB does not provide a reasonable way for patent owners to amend their claims during post-grant proceedings. This limited ability to amend differs from other patent office proceedings where BRI is applied — such as ex parte patent prosecution — where there are various ways a patent applicant may submit claim amendments during prosecution, including requests for continued examination and continuation applications.

Given the practical challenges in meeting the high standard set by the PTAB for making an amendment, patent owners, including Cuozzo Speed, contend that BRI should not be used. Instead, Cuozzo Speed argues that the standard for claim construction in IPR proceedings should be the same as that used by courts in district court litigation and at the ITC — the “plain and ordinary meaning” or Phillips standard — thus providing a real “alternative to litigation.” Notably, the USPTO already applies the Phillips standard to the claims of expired patents during reexamination and IPRs.

The two different standards can pose complications for litigants and courts, where, in the midst of claim construction proceedings, a patent holder will often point out that the accused infringer is taking a contradictory position in PTAB proceedings. This, of course, leads to the natural response from the accused infringer that the standards are different. And while that may be true, at least for now, courts still often seem skeptical.

Changing the standard midstream will lead to even more confusion. What will happen to the cases currently pending before the Board or at the Federal Circuit if the standard is suddenly changed? How would the Board deal with that issue and still meet the statutorily mandated deadlines? What about cases on appeal? Parties currently seeking to institute IPRs or now proceeding before the Board would be wise to consider invalidity arguments that can be invoked under either standard.

Potential Impact on AIA Post-Grant Proceedings: Institution

The net effect of the Cuozzo Speed Federal Circuit decision, and the decisions in earlier cases, is that the PTAB has unchecked institution authority. If a petition was clearly deficient, but the Board instituted anyway, and then ultimately found the patents invalid (even correctly), patent holder’s like Cuozzo Speed want to be able to seek a reversal on the basis of the deficient petition. While the Federal Circuit relied on the statutory language of §314(d), the unchecked authority bothered Judge Newman, as articulated in her dissent, and likely bothered the U.S. Supreme Court as well.

The issue in some way seems to elevate form over substance. In certain limited situations a new petition could be filed to include any missing art or argument, or to otherwise correct deficiencies, provided the Board does not exercise its discretion under §325(d) to not institute on the grounds of the petition being based on “the same or substantially the same prior art or arguments previously … presented to the Office.”

But with the statutory deadlines, and as these cases go forward in parallel litigation and race to the Federal Circuit, timing is critical. There is little time for a do-over.

Regardless of the outcome, the grant of certiorari is a reminder of the significance of getting the petition right the first time.

Conclusion

While the application of BRI does not always lead to different claim constructions between the courts and the PTAB, the precise construction applied by the PTAB to claims during IPR proceedings can be critical to the final written decision. Further, any change to the existing BRI standard applied at the PTAB will likely complicate the interplay between existing patent litigation and co-pending AIA post-grant proceedings. Parties currently proceeding before the Board or contemplating IPRs would be wise to carefully consider their claim construction positions.