Why it matters: On June 20, 2016, the Supreme Court decided Cuozzo Speed Technologies v. Lee, where it rejected challenges to the Patent Trial and Appeal Board (PTAB) inter partes review (IPR) process and held that (1) PTAB decisions regarding whether to institute IPR proceedings are by statute not subject to judicial review, and (2) the rule promulgated by the U.S. Patent and Trademark Office (PTO) directing the PTAB to use the "broadest reasonable interpretation" construction standard in IPR proceedings is a reasonable exercise of its valid statutory rulemaking authority. In so ruling, the Supreme Court effectively approved the manner in which the PTAB has been conducting IPRs since the new post-grant review system became operational in 2012.
Detailed discussion: On June 20, 2016, the Supreme Court decided Cuozzo Speed Technologies v. Lee, where the Court affirmed the Federal Circuit in rejecting challenges to the Patent Trial and Appeal Board inter partes review process and held that:
- Section 314(d) of the Leahy-Smith America Invents Act (AIA) bars Cuozzo's challenge to the PTAB's decision to institute the IPR proceeding, and
- The PTO's regulation requiring the PTAB to apply the "broadest reasonable interpretation" construction standard to interpret patent claims is a reasonable exercise of the statutory rulemaking authority granted to the PTO.
- Procedural history: See our coverage of the April 25, 2016 oral argument in Cuozzo in our June 6, 2016 newsletter for more detail, but to briefly review, on the first day the PTAB post-patent grant review process went into effect in September 2012, Garmin International, Inc. and Garmin USA, Inc. (collectively, Garmin) filed an IPR petition challenging three claims of a navigational patent held by Cuozzo Speed Technologies (Cuozzo). The PTAB granted the petition and instituted the IPR proceeding. The PTAB, applying the "broadest reasonable interpretation" claims construction standard to the claim phrase "integrally attached," invalidated Cuozzo's patent claims as obvious. Cuozzo appealed to the Federal Circuit, and although Cuozzo and Garmin settled their dispute, the U.S. Patent and Trademark Office intervened to defend the PTAB's decision. In February 2015, the Federal Circuit (with one judge dissenting) affirmed, holding (1) the PTAB properly applied the broadest reasonable interpretation standard and (2) the PTAB's decision to institute the IPR proceeding was not subject to judicial review. The Federal Circuit denied en banc review with a 6-5 vote, and Cuozzo filed a Petition for a Writ of Certiorari to the Supreme Court in October 2015. The Court granted certiorari and heard oral argument on April 25, 2016.
The Supreme Court's decision: The Court's opinion is divided into three parts and is detailed below. With respect to Parts "I" and "III," the Court said that its decision was unanimous. With respect to Part "II," all of the Justices joined with the majority, with one Justice (Thomas) concurring and two Justices (Alito, joined by Sotomayor) concurring in part and dissenting in part.
Part I: Justice Breyer began this part of the opinion with a review of the facts and procedural history of the case and an overview of the patent issuance and review process leading to the present day PTAB post-claim review proceedings established by the AIA. The Court noted specific provisions contained in the AIA that govern the way the PTAB should conduct IPRs, including specifically the language contained in Section 314(d) of the AIA that says that the PTAB's initial decision as to "whether to institute an inter partes review" is "final and nonappealable."
Part II: The Court's majority opinion, authored by Justice Breyer, held that the plain language of Section 314(d) was dispositive of the issue: "Like the Court of Appeals, we believe that Cuozzo's contention that the Patent Office unlawfully initiated its agency review is not appealable." The Court cited to legislative history, congressional intent and the language of similar provisions in the AIA and other patent statutes to support its conclusion. The Court specifically rejected the dissenting Justices' argument here that the "no appeal" provision should be limited to interlocutory appeals and that the decision whether to institute the IPR in the first place should be able to be included in any appeal of the final IPR decision. While recognizing the "strong presumption" in favor of judicial review in most cases, the Court said the presumption did not apply in this case where the statutory language and the legislative intent were so clear. The Court did limit the scope of its holding in this regard, however, stating that:
[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."
Looking to the facts of the case, the Court ended Part II by stating that "Cuozzo's claim that Garmin's petition was not pleaded 'with particularity' under §312 is little more than a challenge to the Patent Office's conclusion, under §314(a), that the 'information presented in the petition' warranted reviewWe therefore conclude that §314(d) bars Cuozzo's efforts to attack the Patent Office's determination to institute inter partes review in this case."
Part III: The Court next addressed and rejected Cuozzo's arguments that (1) the PTO lacked authority to issue its regulation requiring the PTAB to use the "broadest reasonable interpretation" construction standard when conducting IPRs and (2) the PTAB should be governed by the same "ordinary meaning" standard used by the district courts that was established by the Federal Circuit in Phillips for consistency.
The Court began by saying that the AIA "contains a provision that grants the Patent Office authority to issue 'regulations . . . establishing and governing inter partes review under this chapter. 35 U. S. C. §316(a)(4). The Court agreed with the Federal Circuit that this statute gives the Patent Office the legal authority to issue its broadest reasonable construction regulation."
The Court disagreed with Cuozzo that an IPR proceeding should be governed by the same "ordinary meaning" construction standard used by the district courts, stating that "[t]he problem with Cuozzo's argument . . . is that, in other significant respects, inter partes review is less like a judicial proceeding and more like a specialized agency proceeding" with different burdens of proof. The Court further pointed out that, unlike court proceedings, IPRs are reexaminations of PTO patent issuances that allow for a "second look" at that agency's prior issuance decisions. Furthermore, the Court said that neither the statutory language nor the legislative history of the AIA suggests that Congress ever considered what construction standard the PTAB should use in IPR proceedings and left it for the PTO to decide. While the Court acknowledged the validity of Cuozzo's argument that the use of different construction standards by the PTAB and the courts could lead to inconsistent results and cause confusion, it said that "[t]his possibility, however, has long been present in our patent system, which provides different tracks—one in the Patent Office and one in the courts—for the review and adjudication of patent claims. As we have explained above, inter partes review imposes a different burden of proof on the challenger. These different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress' regulatory design."
Once the Court found "an express delegation of rulemaking authority" to exist in this case, it next turned to the question of whether the PTO's regulation was a reasonable exercise of that rulemaking authority. The Court ruled that it was because (1) "construing a patent claim according to its broadest reasonable construction helps to protect the public" by encouraging the patent applicant to draft narrowly, and (2) "past practice supports the Patent Office's regulation. . . . The Patent Office has used [the broadest reasonable interpretation] standard for more than 100 years."
The Court concluded:
Finally, Cuozzo and its supporting amici offer various policy arguments in favor of the ordinary meaning standard. The Patent Office is legally free to accept or reject such policy arguments on the basis of its own reasoned analysis. Having concluded that the Patent Office's regulation, selecting the broadest reasonable construction standard, is reasonable in light of the rationales described above, we do not decide whether there is a better alternative as a policy matter. That is a question that Congress left to the particular expertise of the Patent Office.
See here to read the Supreme Court's 6/20/16 opinion in Cuozzo Speed Technologies v. Lee.