On June 20, 2016, the Supreme Court issued its ruling in Cuozzo Speed Technologies, LLC v. Lee. There were two issues presented in Cuozzo: (1) whether the Board’s institution decision of an IPR is appealable, and (2) whether the broadest reasonable construction standard is appropriate to apply in patent office proceedings. For both of these issues, the Court affirmed the Federal Circuit’s previous ruling.
With respect to the first issue, Cuozzo appealed the Board’s inter partes review institution decision because, according to Cuozzo, the Board improperly instituted inter partes review of claims that were not challenged in an inter partes review petition. Cuozzo argued that the Board’s institution of claims 10 and 14 which were not challenged “with particularity” in the petition. In the Board’s view, claims 10 and 14 were implicitly challenged since claim 17 was challenged and “claim 17 depends on claim 14 which depends on claim 10.”
The Federal Circuit denied Cuozzo’s appeal, and the Supreme Court affirmed the Federal Circuit’s ruling that a decision to institute an inter partes review is not appealable. In its decision, the Court relied heavily on statutory language which states, “[t]he determination by the Director [of the Patent Office] whether to institute an inter partes review under this section shall be final and non-appealable.” §314(d).
Specifically, the Court held that “the ‘No Appeal’ provision’s language must, at the least, forbid an appeal” on an institution decision. Further, the Court noted that allowing appeals on institution decisions would “undercut one important congressional objective, namely, giving the Patent Office significant power to revisit and revise earlier patent grants.” As an example of the Patent Office’s power granted by the statute to “revisit and revise earlier patent grants,” the Court cited to the Patent Office’s authority to continue an IPR proceeding even after a petitioner drops out of the proceeding.
Interestingly, the Court’s holding does not go so far as to say that an institution decision is never appealable or reversible. For example, in response to the dissent’s position that this ruling could allow 112 rejections to be improperly reviewed in an IPR proceeding, the Court responded that “such ‘shenanigans’ may be properly reviewable in the context of §319 and under the Administrative Procedure Act, which enables reviewing courts to ‘set aside agency action’ that is ‘contrary to constitutional right,’ ‘in excess of statutory jurisdiction,’ or ‘arbitrary [and] capricious.'”
For the second issue, Cuozzo argued that the Board improperly used the “broadest reasonable construction” standard, and instead, should have applied the Phillips standard.
For its analysis, the Court again looked to the AIA statute which grants the Patent Office authority to issue “regulations . . . establishing and governing inter partes review under this chapter.” 35 U. S. C. §316(a)(4). In its opinion, the Court disagreed with Cuozzo that the Patent Office should follow a similar standard as in the district court because an IPR is “lesslike a judicial proceeding and more like a specialized agency proceeding.” Further, the court noted that the statute is ambiguous as it does not call for a specific standard, and when the statute is ambiguous the agency has discretion to enact reasonable rules.
The Court further concluded that the broadest reasonable interpretation standard for IPRs was reasonable. The court pointed to the patent owner’s ability to amend claims during an IPR as one factor in its determination. Further, the Court was not bothered by the possibility that two standards might produce different outcomes in the district court and the patent office. Instead, the Courted held that inconsistent results are inherent to Congress’ regulatory design.