On February 4, 2015, the Federal Circuit issued its long-awaited decision in In re Cuozzo Speed Technologies LLC, Case No. 2014-1301 (Feb. 4, 2015), which addresses several novel issues concerning the new AIA procedure for Inter Partes Review. The Court affirmed the Patent Trial and Appeal Board’s (PTAB) holding certain claims of a patent relating to speed indication on navigation systems invalid as obvious. Significantly, the Court ruled that it did not possess jurisdiction to review the PTAB’s threshold decision to institute an inter partes review and confirmed the PTAB’s use of the so-called “broadest reasonable interpretation” (BRI) standard for claim construction of unexpired patent claims rather than the Phillips1 standard applicable in federal courts.
As part of the sweeping changes brought about by the passage of the America Invents Act (AIA), Congress created three new post-grant patent review proceedings: the limited-purpose covered business method review (CBM); post-grant review (PGR); and the immensely popular inter partes review (IPR). In the short time since their September 16, 2012 implementation, the AIA post-grant proceedings – and especially IPRs – have demonstrated popular appeal among patent practitioners. As of late January 2015, there have been a total of 2,397 IPR petitions, 291 CBM petitions and 3 PGR petitions filed with the PTAB.2,3 Of those petitions filed, the PTAB has issued decisions on institution in 1,414 IPR requests (with 1,090 IPR trials instituted and 324 denied) and 171 CBM requests (with 128 CBM trials instituted and 43 denied).4 Of those trial proceedings instituted, final written decisions on the merits were issued in 217 IPR proceedings and 28 CBM proceedings. Moreover, as anticipated,5 these procedures are in the process of creating a glut of appeals: as of late January 2015, the Federal Circuit had received appeals from final written decisions in 73 IPR proceedings and 14 CBM proceedings.
The appeal from the PTAB’s decision in Cuozzo, represents the first of the initial wave of such IPR appeals. The Federal Circuit heard oral arguments in Cuozzo on November 3, 2014. Naturally, given its position at the crest of this appeals wave, Cuozzo raised a number of issues on appeal whose resolution may prove critical to defining the contours of PTAB jurisprudence.
First, Cuozzo questioned whether the PTAB’s threshold decision on institution is appealable after the issuance of a final written decision. Second, Cuozzo argued that claims construction at the PTAB should be the same as in district court, conducted under the so-called Phillips standard, rather than the BRI standard employed during patent prosecution. Finally, Cuozzo appealed from the PTAB’s denial of the patent owner’s motion to amend certain claims of the patent-in-suit.
With respect to the initial issue of the appealability of the PTAB’s decision on institution, the panel majority stated in no uncertain terms that the relevant statute, 35 U.S.C. § 314(d),6 “prohibits review of the decision to institute IPR even after a final decision.”7 In this respect, the Federal Circuit had previously held that the statute prohibited interlocutory appeals from decisions not to institute.8 In Cuozzo, based on the wording of § 314(d) that a decision on institution is “final” and “nonappealable”, along with the mandate of 35 U.S.C. § 141(c), which authorizes only appeals by a party dissatisfied by final written decision in an IPR, the Court concluded that § 314(d) “is written to exclude all review of the decision whether to institute review.”9, 10
Notably, the panel majority upheld the non-appealability of a decision on institution even where the PTAB’s institution decision was premised on grounds that were not specifically raised by the IPR petitioner. Specifically, in Cuozzo, the PTAB had instituted inter partes review of claims 10 and 14 of the patent-in-suit on the grounds presented for claim 17, even though these grounds had not been specifically listed for claims 10 and 14 (from which claim 17 depended). To explain why this is allowable, the Court cited to its 1998 decision in In re Hiniker Co.11 Hiniker involved reexamination – a proceeding in which the PTO is allowed to institute review only if the request presents “a substantial new question of patentability,” i.e., is premised on new prior art. In Hiniker, the Federal Circuit allowed appellate review of a final reexamination decision even where the reexamination had been instituted based on prior art that was before the examiner during prosecution, because the ensuring final decision relied on art that had not been before the examiner. In so doing, the Court stated that its “jurisdiction was only ‘over Hiniker’s appeal from the [final] decision of the Board.’”12 Similarly, in Cuozzo, the majority noted that that “[i]t is not clear that IPR is strictly limited to the grounds asserted in the petition,” and held that “there is no clear and indisputable right that precludes institution of the IPR proceeding.”13
Regarding the second issue raised on appeal – the PTAB’s conduct of claims construction under the BRI standard – the panel majority held that BRI “was properly adopted by PTO regulation.” Specifically, the majority noted that because the legislative history shows that Congress knew of the PTO’s use of BRI, and because the AIA through 35 U.S.C. § 316 conveyed rulemaking authority to the PTO (which has promulgated 37 C.F.R. § 42.100(b) setting forth that review is conducted under the BRI standard), “[t]here is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.”
With respect to BRI, the appellant in Cuozzo had argued that although case law suggests that the use of BRI is justified by the patent owner’s ability to amend the claims of an extant patent when before the PTO,14 IPR proceedings provide no appreciable opportunity for such amendment. Indeed this would appear so, because in practice thus far, only three motions to amend a patent’s claims have been granted by the PTAB in IPR proceedings, due in part to the detailed requirements that a patent owner must meet before being granted a claim amendment.15 However, the majority held that “[a]lthough the opportunity to amend is cabined in the IPR setting it is nonetheless available,” and the difference between the limited amendment allowed in the IPR setting and other proceedings and prosecution before the PTO is “not a material difference,” thus making the PTAB’s use of BRI proper.
Finally, the Court affirmed the PTAB’s denial of the patent owner’s motion to amend the claims, agreeing that the proposed amendment would have been broadening. Of note, the Court invoked the recent Supreme Court decision in Teva v. Sandoz,16 to find that no extrinsic evidence had been relied upon for purposes of claim construction in the present case, and therefore de novo review was appropriate.17 Against that background, the Court upheld the PTAB’s finding that the claims under review were invalid as obvious.
Judge Newman dissented from the majority’s opinion, finding it “contrary to the legislative purposes of the [AIA],” which are, inter alia, to create the PTAB as “a surrogate for district court litigation of patent validity.”18 Specifically, Judge Newman opined that the majority decision “precludes achieving review of patent validity in [IPRs] comparable to that of the district courts, where validity is determined based on the correct claim construction, not an artificially ‘broadest’ construction.” In this respect, she noted that BRI has been previously approved by the Federal Circuit “based on the unfettered opportunity to amend,” which is not present in the IPR context. Additionally, Judge Newman opined that the majority’s position that § 314(d) bars review of institution decisions serves to further negate the purposes of the AIA to achieve correct adjudication of patent validity.
Given the importance of Cuozzo in defining the jurisprudential scope of post-grant review at the PTAB, a request for rehearing en banc appears likely, meaning that this might not be the final word in this saga. Nevertheless, this decision appears to legitimize and reinforce the PTAB’s current practice with respect to IPRs and post-grant review in general. While the holding may disappoint some patent owners and has the potential to create some uncertainty with respect to divergent outcomes caused by the differing claim construction standards to which issued patents are subject, it also appears to further the intent of the AIA by cementing the PTAB’s place as a major forum for patent validity review.
1Phillips v. AWH Corp., 415 F.3d 1303, 1313 (Fed. Cir. 2005) (“[T]he ordinary and customary meaning of a claim term is the meaning that the term would have to a person of ordinary skill in the art in question at the time of the invention, i.e., as of the effective filing date of the patent application.”).
2Trial institution statistics presented herein include joinders. These statistics were derived from those published by the U.S. Patent and Trademark Office. See U.S.P.T.O., AIA Progress Statistics (as of January 29, 2015).
3The popularity of these proceedings has been attributed to their confined timetable, with final written decisions mandated to issue within eighteen months of filing (in most cases), and reduced litigation costs.
4AIA Progress Statistics, supra note 2.
5See Erin M. Dunston & Philip L. Hirschhorn, IPR and CBM – You May Be In For A Trip To The Fed. Circ., IPLAW360.COM (Oct. 22, 2014), available at http://www.law360.com/articles/586190/ipr-and-cbm-you-may-be-in-for-a-trip-to-the-fed-circ- (“As the first wave of these new proceedings comes to completing within the statutorily prescribed period and the inevitable appeals ensue, what will this activity mean for the Federal Circuit and those who practice before it?”).
635 U.S.C. § 314(d) relates to IPRs and states as follows: “No Appeal. – The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.”
7Slip Op. at 6.
8St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373, 1375-76 (Fed. Cir. 2014) (holding that § 314(d) is a “broadly worded bar on appeal” and “certainly bars” interlocutory review of the PTO’s denial of an IPR petition); In re Dominion Dealer Solution, LLC, 749 F.3d 1379 (Fed. Cir. 2014) (denying Dominion’s writ of mandamus to vacate the PTAB’s refusal to institute IPR); In re the Procter and Gamble Company, 749 F.3d 1376 (Fed. Cir. 2014) (denying Procter & Gamble’s petition for writ of mandamus to direct the PTAB to withdraw the institution of certain IPR petitions relating to Procter & Gamble’s patents).
9Slip Op. at 6.
10Also relevant in the non-IPR context is 35 U.S.C. § 324(e), which relates to post-grant reviews in general, and states: “No Appeal. – The determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable.”
11150 F.3d 1362, 1367 (Fed. Cir. 1998).
12Slip Op. at 7, quoting Hiniker, 150 F.3d at 1366.
13Slip Op. at 10.
14See In re Yamamoto, 740 F.2d 1569, 1571 (Fed. Cir. 1984).
15See Riverbed Technology, Inc. v. Silver Peak Systems, Inc., No. IPR2013-00403, Paper 33; Riverbed Technology, Inc. v. Silver Peak Systems, Inc., No. IPR2013-00402, Paper 35; and International Flavors & Fragrances Inc. v. The United States of America, No. IPR2013-00124, Paper 12. However, in a “Boardside Chat” held on February 3, 2015, Chief Judge James Donald Smith indicated that new PTAB regulations on IPR claim amendments may be forthcoming.
16S.Ct. Case No. 13-854 (Jan. 20, 2015).
17In its January 20, 2015 ruling in Teva v. Sandoz, the Supreme Court had held that when reviewing a district court’s resolution of subsidiary factual matters made in the course of its construction of patent claim, the Federal Circuit must apply a “clear error,” not a de novo, standard of review.
18Dissent at 1.