High Court Upholds BRI & Appeal Bar for AIA Trial Proceedings

In Cuozzo Speed Technologies, LLC v. Lee, the Supreme Court unanimously upheld the use of the broadest reasonable interpretation (BRI) of patent claims in AIA trial proceedings, and, upheld (6-2) the appeal bar for AIA trial institution decisions. While many simply assumed that the High Court would not have granted certiorari absent an interest in reversing the Federal Circuit, my take all along was that this was just a "kick of the tires" on a BRI issue the Court had not had occasion to address previously. As I, and the rest of the patent world, have beaten the BRI topic to death, let's move onto the second issue as this one is more than a bit murky going forward.

To my eyes, the second issue was less predictable. That is, did the appeal bar of 35 U.S.C. § 314(d) bar all appeals, or just interlocutory appeals of institution decisions? The High Court upheld the appeal bar, but in the process may have called into question the reviewability of a patent's CBM eligibility as held by the Federal Circuit in Versata Development Group v. SAP America, Inc.

By way of reminder, the patent owner in Versata challenged the PTAB's determination to institute a CBM, arguing that its patent was outside of the proper definition of a "business method" patent under § 18 of the AIA. For its part, the USPTO argued that the appeal bar of 35 U.S.C. § 324(e) prevented any challenge to the PTAB's CBM classification decision. In its decision, the Federal Circuit determined that the classification of a CBM patent was a consideration of the "ultimate invalidation authority" under Section 18 of the AIA, and as such, appealable despite 324(e). In this regard, the Federal Circuit explained:

[O]ne of the limits on § 18 invalidation authority is that the patent at issue be a CBM patent. Congress created a special review regime, over and above any other authority the PTAB might have, for reviewing and invalidating patents that qualify as CBM patents. . . .This requirement defines the PTAB’s authority to invalidate under § 18. If a particular patent is not a CBM patent, there is no proper pleading that could be filed to bring it within the PTAB’s § 18 authority. In so concluding, we need not and do not consider all of the various determinations the PTAB may make to initiate proceedings and which may constitute limits on ultimate invalidation authority, reviewable on appeal from a final written decision invalidating a patent. It is enough for us to determine here that the defining characteristic of a patent as a CBM patent, subjecting it to a special PTAB power to invalidate, is such a limit.

(emphasis added)

Contrast the above language of the Versata holding with the majority decision in yesterday's Cuozzo decision (here), upholding the appeal bar for IPR:

[W]e emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review. See §314(d) (barring appeals of "determinations . . . to initiate an inter partes review under this section" (emphasis added)). This means that we need not, and do not, decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond "this section."

(underline added, other emphasis in original)

The High Court's rationale (albeit in the context of IPR) appears to be that questions arising under the AIA statutes are not reviewable, only those questions relating to "constitutional" or "other less closely related statutes", or questions beyond "this section" of the AIA. This analysis would almost certainly exclude the Versata rationale noted above, which rests entirely on the "special power" accorded by AIA Section to the agency. Indeed, it is worth emphasizing that the definition for the "technological invention" aspect of this "special power" was left entirely to the agency to formulate. This type of "gap" filling was highlighted in the High Court's discussion of Chevron deference.

Sec. 18 (d) DEFINITION.--
(1) IN GENERAL.--For purposes of this section, the term “covered business method patent” means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.

(2) REGULATIONS.--To assist in implementing the transitional proceeding authorized by this subsection, the Director shall issue regulations for determining whether a patent is for a technological invention.

(emphasis added)

If there were any doubt over the potential applicability of the Cuozzo analysis to Versata, the dissent highlighted the concern:

Even more striking are the consequences that today’s decision portends for the AIA’s other patent review mechanisms, post-grant review and CBM review, which are subject to a “no appeal” provision virtually identical to §314(d). See §324(e) . . . . Congress imposed a subject matter restriction: The Patent Office “may institute a [CBM review] proceeding only for a patent that is a covered business method patent,” which Congress defined to cover certain patents with claims relating to “a financial product or service.” AIA §§18(a)(1)(E), (d)(1), at 1442; see §18(a)(1)(A) . . . . suppose that the Patent Office purported to forgive the post-grant review petition’s tardiness by declaring the challenged patent a “covered business method patent,” even though the patent has nothing to do with financial products or services (it claims, say, a new kind of tempered glass). Again, this involves the application of statutes related to the Patent Office’s institution decision. See AIA §18(a)(1)(E), at 1442 (Patent Office “may institute a [CBM review] proceeding only for a patent that is a covered business method patent”). So is this specious determination immune from judicial scrutiny under the Court’s reasoning?

The Federal Circuit may have some rethinking to do on the question of CBM standing.