On February 4, 2015,  the United States Court of Appeal for the Federal Circuit issued its decision in the first appeal of a final decision by the Patent Trial and Appeal Board (“PTAB”) in an inter partes review (“IPR”) proceeding. In its decision, the Federal Circuit held that institution decisions rendered by the PTAB are never reviewable on appeal, and the PTAB is entitled to apply the “broadest reasonable interpretation” standard for claim constructions in IPR proceedings.

Cuozzo Speed Technologies, LLC (“Cuozzo”) owns the patent at issue, which relates to a vehicle navigation system “interface which displays a vehicle’s current speed as well as the speed limit.” On September 16, 2012 Garmin International, Inc. and Garmin USA, Inc. (collectively, “Garmin”) petitioned the USPTO for inter partes review of claims 10, 14, and 17 of the ’074 patent, and the USPTO granted Garmin’s Petition.  The Board found that claims 10, 14, and 17 were invalid for obviousness in view of the prior art.  The Board also denied Cuozzo’s motion to amend claims 10, 14, and 17 by replacing them with new claims 21, 22, and 23, respectively.

On appeal, the Federal Circuit began its analysis by stating that inter partes review proceedings occur in two phases: (1) the PTO determines whether to institute inter partesreview and a (2) “the Board conducts the [inter partes review] proceeding and issues a final decision.”  Cuozzo argued that during the first phase the Board erred in instituting inter partes review.  The Federal Circuit disagreed, holding that 35 U.S.C. § 314(d) prohibits the review of a Board decision to institute inter partes review, “even after a final decision.”

Cuozzo also challenged the Board’s obviousness conclusions, arguing “that the Board should not have applied the broadest reasonable interpretation standard in claim construction.” In response, the Federal Circuit discussed the history of applying this standard and found “no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.” The Federal Circuit concluded that Congress implicitly adopted in the AIA the broadest reasonable interpretation standard for inter partesreview proceedings. The Federal Circuit further mentioned that even if the Board went beyond the requirements outlined by the statute, the PTO was entitled to establish the standard under its rule-making authority and that deference would be given to the agency under a Chevron analysis.

The Federal Circuit applied the standard of review for claim construction recently set forth by the U.S. Supreme Court in Teva Pharmaceuticals U.S.A. v. Sandoz, Inc. In doing so, the Federal Circuit found no issue with the Board’s construction of the claims, its determination that the claims were obvious, or its determination that the patentee was not entitled to amend its claims.

Judge Newman dissented pointing out that the Board should be using the same standards for claim construction that district courts apply, and that the decision to institute should be reviewable on appeal of a final written decision. Ultimately, Judge Newman concluded that the USPTO is incapable of “serv[ing] as a surrogate for district court litigation if the PTAB does not apply the same law to the same evidence."