On January 15, 2016, the United States Supreme Court agreed to consider whether it is appropriate to give claims challenged ininter partes review their “broadest reasonable construction.” See Cuozzo Speed Tech., LLC v. Lee. Given the Federal Circuit’s dismal recent track record when the Supreme Court has injected itself into disputed patent issues, practitioners are likely girding for a tectonic shift in IPR proceedings. For those beleaguered by litigation from non-practicing entities, they may be justified in fearing that coveted IPR proceedings will become less useful as a bulwark against such cases.
The Supreme Court has specifically granted certiorari on the following two questions:
- 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.
- 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.
Previously, in In re Cuozzo Speed Tech., LLC, 793 F.3d 1268 (Fed. Cir.), reh’g en banc denied, 793 F.3d 1297 (Fed. Cir. 2015), a divided panel of the Federal Circuit Court of Appeals affirmed the Patent Trial and Appeal Board’s practice of according claims their broadest reasonable construction for purposes of assessing these post-grant challenges to their validity. The Federal Circuit subsequently rejected a request for en banc review of that panel decision (previously reported in this blog), which then set up the current petition for Supreme Court review.
"The loser in this debate is the nation, for the ambitious plan of the America Invents Act is thwarted—a plan to rehabilitate the patent-based innovation incentive by creating a new and powerful adjudicatory tribunal in the PTO, a tribunal that would apply the law reliably and expertly, to achieve expedited and correct determination of patent validity.” Judge Pauline Newman, dissenting.
That split decision (2-1) of a panel of Federal Circuit judges acknowledged that no express statutory basis exists for the Patent Office’s application of the broadest reasonable construction standard. However, the panel majority acknowledged that the Patent Office has employed this standard for more than 100 years. The panel majority further observed that the Federal Circuit had approved use of this standard in variety of Patent Office proceedings, “including initial examinations, interferences, and post-grant proceedings such as reissues and reexaminations.” Id. at 1276-77. The panel majority concluded that because “Congress is presumed to legislate against the background of the kind of longstanding, consistent existing law that is present here,” the passage of the America Invents Act (AIA) was not intended to work a change in this practice.
The panel majority rejected arguments that it was unreasonable to infer such Congressional intent with respect to inter partes review because inter partes review is adjudicatory in nature (rather than in the nature of examination) and because earlier approvals of the broader standard related to proceedings that offered patentees more robust opportunities to amend their claims to overcome rejection. The majority noted that earlier stated rationales for use of the broader standard did not depend upon whether the Patent Office identified validity concerns through adjudication or by examination. Id. at 1278. The majority also disagreed that admittedly more restricted opportunities for amendment during inter partes review justified departure from the broader standard.
Beyond inferring Congressional intent, the majority also found support for the broader standard in the AIA’s grant of rule-making authority. The majority cited Section 316(a)(2) of the Patent Act, which empowered the Patent Office to establish regulations “setting forth the standards for showing of sufficient grounds to institute review.” The majority also pointed to Section 316(a)(4) granting the Patent Office the authority for “establishing and governing inter partes review under this chapter and the relationship of such review to other proceedings under this title.” The majority further noted that Congress had expressly permitted the Patent Office to consolidate IPR proceedings with other proceedings before it—a fact that the majority felt acknowledged the appropriateness of a single standard. Id. at 1279.
The majority’s reasoning was met with a vigorous dissent from Judge Newman. Judge Newman countered that the majority’s decision actually “distorts, indeed defeats, the legislative purpose of providing an administrative surrogate for district court determination of patent validity.” In Judge Newman’s view, issued claims should not be construed more broadly in judging their validity than in determining their infringement. Id. at 1286. Judge Newman voiced fears that the public interest was undermined where “the tribunals charged with determination of patent validity as a matter of law, that is, the PTAB and the district court, could validly reach a different result on the same evidence.” Id. at 1290. Judge Newman remains a staunch advocate of consistent validity determinations in both the Patent Office and the Federal Courts. See, e.g.,Fresenius USA, Inc. v. Baxter Intern’l, Inc., 721 F.3d 1330 (Fed. Cir. 2013) (Newman, J. dissenting).
Cuozzo Speed sought en banc review by the Federal Circuit. That request was denied. Judge Newman again dissented—this time finding four more judges of similar mind (Prost, Moore, O’Malley and Reyna). Writing for herself, Judge Newman offered an even more pointed attack on the majority decrying, “The loser in this debate is the nation, for the ambitious plan of the America Invents Act is thwarted—a plan to rehabilitate the patent-based innovation incentive by creating a new and powerful adjudicatory tribunal in the PTO, a tribunal that would apply the law reliably and expertly, to achieve expedited and correct determination of patent validity.” I expect many who pressed for passage of the AIA would voice surprise with Judge Newman’s notion that the AIA was intended to “rehabilitate the patent-based innovation incentive.”
Those who see IPRs as a more favorable, more expeditious, and less costly alternative to challenging patents of questionable validity in the District Courts, will no doubt view the Supreme Court’s recent action with trepidation. Not only would elimination of the broadest reasonable construction standard likely result in the cancellation of fewer claims, but permitting appellate review of the PTAB’s institution decisions will likely increase costs and impose delays for a mechanism originally intended to achieve the opposite.