CAFC Decides First IPR Trial Appeal

Today, in In Re Cuozzo Speed Technologies, LLC, the Court of Appeals for the Federal Circuit (CAFC) decided that the broadest reasonable interpretation (BRI) construct was appropriate for interpreting patent claims in AIA trial proceedings. (here)

As previously discussed, oral argument in Cuozzo was held back on November 3, 2014. The notable issues in dispute included: (1) whether the Patent Trial & Appeal Board (PTAB) was free to depart from the district court style claim construction standard enunciated in Phillips v. AWH (CAFC 2005) in favor of BRI as applied by the USPTO in all agency proceedings; and (2) whether trial institution decisions become appeallable once a final written decision is issued. (Note: Interlocutory appeal of such decisions had already been foreclosed by the CAFC).  

In a 2-1 decision, the majority held that Congress passed legislation fully aware of BRI practices at the PTAB, especially as it related to patent reexamination. And, in any event, the USPTO was given rule making authority by statute for implementing specifics of AIA trial proceedings. Further, the majority found the ability to amend, long the justification for applying BRI, is available during AIA trials. 

On the question of institution decision review, the Court found that a complete bar to appeal was intended by the language of  35 U.S.C. § 314(d), which states institution decision are final and non-appealable.

Judge Newman authored the dissent as to both issues.

Judge Newman, long a vocal opponent of inconsistent results between the USPTO and courts took issue with the ability to amend as illusory, and in any event, not the same opportunity as compared to the "give and take" of examination practices. She also cited the statute's recitation of  "invalidity" as opposed to patentabiliity, and, more aggressively, concluded that the intent of Congress cannot be served by a BRI standard.

Although the PTAB is authorized to apply trial and evidentiary procedures, my colleagues hold that the PTAB need not apply the same rules of law and evidence as in the district courts. It is critical to the success of Inter Partes Review that it serve its purpose as a district court surrogate, yet it is not disputed that the "broadest reasonable interpretation" of claims and technology can differ from the ultimately correct decision on the standards of Phillips v. AWH Corp., 45 F.3d 1303 (Fed. Cir. 2005) (en banc). This built-in discrepancy defeats the legislative purpose of substituting administrative adjudication for district court adjudication, for a PTAB decision based on this artificial "broadest" standard cannot substitute for litigation directed to the correct result.    

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Adoption of a broadest interpretation renders the PTAB rulings legally unreliable, leaving the parties to district court proceedings, whatever the decision of the PTAB. That was not the legislative plan.

While the dissent is correct that the PTAB cannot be a true, "surrogate" using different standards, I don't agree that was the intention of the AIA statutes. That is, the reason patent challengers went to the USPTO for patent reexamination was to avail themselves of more favorable standards (i.e., evidentiary, claim construction, lack of presumption of validity). Congress looked at reexamination as a base model for IPR, saw favorable results for challengers, but concluded it needed to be faster. There was never any consideration of making it harder. Indeed, the AIA was drafted against the backdrop of the dreaded "patent troll" crisis.  

As to the diseent's reference to parties needing to resort to district court proceedings no matter what the PTAB decision, I'm not sure I follow. The patentee's claims in this case are now cancelled, there is no ability to go to court—this is the true intention of IPR.

On the issue of reviewing institution decisions once a final written decision issues, the dissent argues 314(d) to provide only an interlocutory bar.

The ultimate authority regarding what a statute says and how it applies is the judiciary. The purpose of the "nonappealable" provision apparently is to bar interlocutory proceedings and harassing filings by those seeking to immobilize the patent or exhaust the patentee. The bar of interlocutory appeals is routine. However, sensitive scrutiny is required, not blanket enlargement for all circumstances.

With patent reform back on tap for Congress this spring, presumably any needed change to this decision can be efficiently legislated away in the short term. Yet, in my opinion, this decision needs to be maintained, as-is, to achieve the goal of Congress.  IPR was designed, in large part, to provide relief from the costs of defending frivolous patent litigation, not to simply provide another forum for it. In this regard, Congress has hit it out of the park with the AIA.