Not So Fast: Split Federal Circuit Panel Sided with PTO on Novel IPR Issues

In In re Cuozzo Speed Technologies, LLC,[1] the first ever appeal of the final written decision from an inter partes review (“IPR”) before the Patent Trial and Appeal Board (“PTAB” or the “Board”),[2] the Federal Circuit decided two novel and fundamental questions arising under the newly enacted IPR proceedings created by the America Invents Act of 2011 (“AIA”).  On both issues, the Federal Circuit agreed with the PTO,[3] holding (1) institution decisions by the Board are almost never reviewable on appeal, either interlocutory or after the Board’s final written decision, and (2) that the “broadest reasonable interpretation” standard is the proper standard for claim construction in IPR proceedings.[4]

No Appellate Review of Institution Decisions

In denying to review the institution decision, the panel majority reasoned that because Section 314(d) states that the decision to institute an IPR “shall be final and nonappealable[,]” it must mean to “bar review of all institution decisions, even after the Board issues a final decision.”

In the case, the patent owner faulted the Board for instituting the petition on grounds not raised in the petition.  Specifically, the Board instituted two grounds to review an independent claim based on prior art only cited against a second level dependent claim.  The majority rejected this argument because “there is no bar here to finding [the independent claim] unpatentable based on [grounds not raised in the petition.]”

The majority does believes that “in situations where the PTO has clearly and indisputably exceeded its authority[,]” a party may seek a writ of mandamus to challenge the institution decision.[5]  The party seeking the writ, however, must satisfy three “demanding” conditions enumerated in the Cheney v. U.S. District Court for the D.C..[6]  The majority noted that, even if this appeal were treated as a mandamus, this case cannot satisfy the clear-and-indisputable requirement for mandamus because “[i]t is not clear that IPR is strictly limited to the grounds asserted in the petition” as grounds to invalidate a dependent claim would also invalidate the independent claim from which the dependent claim stems.

Claims Construed Under The Broadest Reasonable Interpretation Standard

Next, the panel considered whether the broadest reasonable interpretation (“BRI”) standard should be applied in claim construction in IPR proceedings, and the majority concluded that it does apply.  To support its conclusion, the majority took a historical approach, emphasizing that the BRI standard has been used by the PTO and approved by the court for over 100 years in various types of PTO proceedings.  Congress, when enacting the AIA, did not intend to change this practice.  Although the patent owner argued that IPR proceedings differ from other PTO proceedings because the availability of amending a claim is very limited in IPR proceedings, the majority rejected this approach, finding that, under Section 316(d)(1), amending claims is available even though it is “cabined in the IPR setting.”

The majority also found a second ground to affirm the BRI standard.  Because the AIA granted rulemaking authority to the PTO,[7] the validity of the regulation is analyzed under the Chevron standard.  If the statute is silent, like the claim construction standard here, the question is “whether the agency’s interpretation is based on a permissible construction of the statutory language at issue.”  The majority found several justifications for applying the BRI standard,[8] and therefore concluded that the BRI standard is properly adopted under PTO’s ruling making authority.

Judge Newman’s Strong Dissent

Judge Newman disagreed on both issues, vehemently arguing that the majority’s decision contradicts the legislative intent in making IPRs adjudicatory proceedings as alternatives to district court proceedings, rather than examination proceedings.  She reasoned that because Congress enacted IPR proceedings to be “a surrogate for district court litigation,” the same legal and evidentiary standards applied in district court proceedings, including the claim construction standard, should apply to IPR proceedings.

She also argued that appellate review over institution decisions should not be foreclosed completely, stating that whether a statute precludes judicial review of a final agency decision must be determined “not only from its express language, but also from the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved.”[9]  In her dissent, she criticized the majority, indicating that they failed to perform the required analysis.

The Dissent Indicates That Administrative Law Challenges May Be Brought In the Future

Judge Newman’s dissent opens the door for future proceedings to using administrative law to challenge the institution decision because administrative law requires a court to review agency compliance with procedural requirements.

Furthermore, administrative law may also be used to challenge the BRI standard for IPRs.[10]  First, the PTO did not follow the rule-making procedures in promulgating certain PTAB regulations.  Second, the administrative law would not permit the Board, on the one hand, to apply the BRI standard based on the assumption that claims may be amended during IPR proceedings, but on the other hand, to deny almost all amendment requests.   Unfortunately, the patent owner in this case did not raise such arguments, so this possible avenue remains untested.

Takeaways

Until Judge Newman’s dissent gains enough support from other Federal Circuit judges for rehearing en banc, or a petition to the Supreme Court for certiorari is successful, the majority decision will remain to be the law.  Several lessons can be learned here:

  • the Board has a great deal of discretion in determining whether to institute a petition due to the lack of appellate review;
  • the Board may rely on additional grounds not explicitly raised in the petition to invalidate a patent or narrow the claims;
  • the BRI remains the standard for claim construction in IPR; and
  • the PTO may step in to defend its own interpretations and regulations and thus, settlement between the parties may not end the case.

 


[1] __ F.3d. __, 2015 WL 448667 (Fed. Cir. Feb. 4, 2015).

[2] In re Cuozzo Speed Technologies, LLC claims several “first” in the short history of IPR: it was the first IPR (IPR2012-00001) ever filed (on September 16, 2012, the first day IPR became available), the first IPR ever instituted by the Board (on January 9, 2013), and the first appeal ever decided by the Federal Circuit.

[3] The PTO intervened before appellees Garmin International Inc. and Garmin USA Inc. settled and withdrew from the appeal, keeping the appeal alive.

[4] With respect to other questions directed to the patent at issue, the Federal Circuit affirmed the Board’s obvious determination and the denial of patent owner’s motion to amend claims.

[5] One possible situation is when the Board instituted IPR on grounds of prior public use.

[6] 542 U.S. 367, 380 (2004).  The three conditions are (1) “the party seeking issuance of the writ [must] have no other adequate means to attain the relief he desires[;]” (2) the petitioner must satisfy “ the burden of showing that [his] right to issuance of the writ is clear and indisputable[;]” and (3) “the issuing court, in the exercise of its discretion, must be satisfied that the writ is appropriate under the circumstances.”  Id. at 380-81.

[7] 35 U.S.C. § 316(a).

[8] The three main justifications are the standard’s lengthy history, the policy rationales as to other examination proceedings applied to IPRs, and the benefit of having a single standard in case of consolidation with other PTO proceedings.

[9] Block v. Cmty. Nutrition Inst., 467 U.S. 340, 345 (1984).

[10] For a thorough analysis on what administrative law arguments could be raised, see David Boundy, Guest Post: Why Administrative Law Matters to Patent Attorneys—In re Cuozzo Speed Technologies LLC, posted on February 8, 2015 at http://patentlyo.com/patent/2015/02/administrative-attorneys-technologies.html.

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Dan Liu

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