Justin J. Oliver July 11 2016 Supreme Court affirms non-appealable nature of institution decisions and use of broadest reasonable construction standard Venable LLP | Intellectual Property - USA Justin J. Oliver Intellectual Property FactsDecisionIn a split decision issued on June 20 2016, the US Supreme Court held that 35 USC Section 314(d) bars challenge to the US Patent and Trademark Office's (USPTO) decision to institute an inter partes review, and that the USPTO's application of the 'broadest reasonable construction' standard to interpret patent claims is a reasonable exercise of the rulemaking authority granted by Congress.FactsIn 2012 Garmin sought an inter partes review of the claims of a patent held by Cuozzo Speed Technologies, LLC. Garmin asserted, in part, that Claim 17 was obvious in view of a combination of three prior patents and the USPTO instituted review. The USPTO also instituted review of Claims 10 and 14, believing that Garmin "implicitly" challenged those additional claims by virtue of Claim 17's dependency.The Patent Trial and Appeal Board ultimately found Claims 10, 14, and 17 obvious and denied Cuozzo's motion to amend the claims. Cuozzo appealed, asserting that the USPTO had improperly instituted the inter partes review with respect to Claims 10 and 14, and improperly used the broadest reasonable construction standard, rather than the Phillips standard. The Federal Circuit rejected both arguments and Cuozzo appealed to the Supreme Court.DecisionThe court affirmed the Federal Circuit on both issues.Non-appealable nature of institution decisionsThe court determined that Section 314(d) should be interpreted to bar appeals of the USPTO's determinations on whether to institute inter partes reviews. The court looked to the plain language of the statute, which states that the "determination by the [USPTO] whether to institute an inter partes review under this section shall be final and nonappealable" (emphasis added). The court concluded that Congress was clear when drafting Section 314(d) that institution decisions are non-appealable. However, in addressing the dissent by Justices Alito and Sotomayor, the court left open the possibility of appeal in some situations.The dissent argued that Section 314(d) should preclude only interlocutory appeals and expressed concern that precluding all appeals would prevent any redress for instances in which the USPTO overstepped its statutory authority. Addressing these concerns, the majority stated that the bar created by Section 314(d) precludes review of questions tied to the application and interpretation of statutes related to the institution of an inter partes review. The majority expressly left open the option of review of constitutional questions (eg, due process) and cases in which the USPTO has acted outside its statutory limits (eg, cancelling a claim under Section 112 in an inter partes review). Thus, the decision places control of determining whether the threshold for institution has been met solely within the purview of the USPTO, but leaves some flexibility for larger legal questions.Use of broadest reasonable construction standardThe court affirmed the properness of the USPTO regulation implementing the broadest reasonable construction standard for claim interpretation. In doing so, the court first addressed arguments concerning whether Congress intended inter partes reviews to be more like a court proceeding or an agency proceeding (eg, a re-examination or interference). In reviewing that question, the court noted that Congress mandated a different burden of proof in inter partes reviews, as compared to district court trials, which implicitly embraced potential inconsistencies in outcomes.The court also noted that the statute and legislative history did not suggest which claim construction standard Congress intended to be the "proper" standard, but did not find that lack of clarity a problem insofar as the statute was clear in its "express delegation of rulemaking authority" to the USPTO.The court found that the application of the broadest reasonable construction standard was a reasonable exercise of the USPTO's rulemaking authority, noting that the USPTO has used the broadest reasonable construction standard for over 100 years in other proceedings, including in similarly structured interference proceedings. The court noted that the inter partes review statute expressly contemplated the consolidation of inter partes reviews with other USPTO proceedings (eg, re-examinations) which already use the broadest reasonable construction standard. That consolidation option forced the USPTO to decide between being inconsistent with its other agency proceedings or with the district courts. The court stated that it could not find unreasonable the USPTO's decision to maintain consistency among its own proceedings.The court found unpersuasive Cuozzo's argument focusing on the low success rate of motions to amend as a basis for precluding the broadest reasonable construction. The court saw the argument as one aimed at the manner in which the USPTO exercised its authority – a question that the court did not believe was at issue on appeal. Ultimately, the court viewed the application of a particular claim construction standard as the execution of reasonable rulemaking authority to fill gaps raised by ambiguity in the statutory language.For further information on this topic please contact Justin J Oliver or John E Nappi by telephone (+1 212 218 2100) or email ([email protected] or [email protected]). The Fitzpatrick, Cella, Harper & Scinto website can be accessed at www.fitzpatrickcella.com.