In yet another highly anticipated patent decision, the Supreme Court decided Monday that the Patent Trial and Appeal Board (PTAB) can continue to use the "broadest reasonable interpretation" standard to interpret the claims of patents challenged in inter partes review (IPR) proceedings. The Supreme Court also upheld the America Invents Act (AIA) provision barring judicial review of Patent Office decisions to institute an IPR. The Supreme Court's decision in Cuozzo Speed Technologies, LLC v. Lee leaves intact the IPR system, which, contrary to the hopes of many patent holders, will likely remain a popular avenue to challenge the validity of patents.
The AIA created the IPR system that allows a third-party to ask the Patent Office to reexamine the claims in an already-issued patent and to cancel any claims the agency finds to be unpatentable in light of the prior art. The AIA does not set forth what claim construction standard the Patent Office should apply when reviewing a patent in an IPR proceeding. Rather, the AIA explicitly grants the Patent Office authority to issue "regulations … establishing and governing inter partes review." 35 U.S.C. §316(a)(4). A Patent Office regulation issued pursuant to that statutory authority provides a patent claim "shall be given its broadest reasonable construction in light of the specification of the patent in which it appears." 37 C.F.R. §42.100(b).
Garmin International and Garmin USA, Inc. petitioned for inter partes review of all 20 claims in a patent owned by Cuozzo Speed Technologies, LLC (Cuozzo). The PTAB agreed to reexamine claim 17 based on a collection of cited prior art, as well as claims 10 and 14 although Garmin et al. had not challenged these claims on the same invalidity grounds. The PTAB ultimately found all three claims invalid.
Cuozzo argued on appeal that the PTAB should be required to use the same claim construction standard as district courts, which construe claims more narrowly using their "ordinary meaning as understood by a person of skill in the art." The Supreme Court unanimously disagreed. The Supreme Court held that the Patent Office regulation requiring use of the broadest reasonable construction in light of the specification in IPR proceedings "represents a reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office."
Justice Breyer, who authored the opinion of the Court, emphasized that construing a patent claim according to its broadest reasonable construction helps protect the public by preventing a patent from tying up too much knowledge and encouraging the applicant to draft claims narrowly. Justice Breyer also noted that the PTAB's use of the broadest reasonable construction standard is consistent with past practice of the Patent Office, which "has used this standard for more than 100 years." While the Court acknowledged that the PTAB rarely allows a patent owner to amend claims in an IPR proceeding, Cuozzo did not contend and thus the question was not before the Court as to whether the PTAB's denial of its amendment was arbitrary, capricious or otherwise unlawful.
The Court's decision confirms that patent litigants will face different standards and evidentiary burdens of proof on validity in Patent Office proceedings and district court litigation. As a practical matter, with no guarantee that a district court will stay pending infringement litigation if the asserted patent(s) are the subject of an IPR (or other post-grant proceeding), patent litigants face the real possibility of inconsistent results in parallel proceedings.
In a separate issue raised by Cuozzo, the Supreme Court confirmed that 35 U.S.C. § 314(d) bars judicial review of the PTAB's decision to institute an IPR (Justice Alito issued a dissenting opinion on this issue, joined by Justice Kagan, offering to limit the statute as preventing only interlocutory appeals.). The statutory provision at issues states that the PTAB's initial decision "whether to institute an inter partes review" is "final and non-appealable." 35 U.S.C. § 314(d). The Supreme Court confirmed that the statutory text precludes review of institution decisions — "where a patent holder merely challenges the Patent Office's determination that the information presented in the petition shows that there is a reasonable likelihood of success with respect to at least 1 of the claims challenged, §314(a), or where a patent holder grounds its claim in a statute closely related to that decision to institute inter partes review, §314(d) bars judicial review."
Justice Breyer emphasized, however, that the statutory bar does not preclude an appellant from seeking judicial review of agency action that is "contrary to constitutional rights," "in excess of statutory jurisdiction," or "arbitrary and capricious." As recognized in Judge Alito's dissent, the Court’s decision may dramatically impact other AIA review mechanisms, including post-grant review and Covered Business Method (CBM) review, which have similar "no appeal" provisions but allow for a much broader range of invalidity challenges than an IPR.
The Cuozzo decision deals a major blow to patent holders, many of whom hoped the Supreme Court would level the IPR playing field. Cuozzo all but guarantees the IPR system, which is generally viewed as unfavorable to patent owners because challenged patents are overwhelmingly invalidated, will continue to play a significant role in patent disputes.