June 2016
CIPA Journal
Authored by Cara R. Lasswell and Timothy P. McAnulty
On 25 April 2016, the Supreme Court of the United States, for the first time, turned its attention to the process of inter partes review (IPR), which was introduced in the U.S. as part of the America Invents Act (AIA). In the much-anticipated oral arguments1 for Cuozzo v. Lee, the Court considered two questions:
Though the Court’s eventual decision remains difficult to predict, the Court’s questioning provides some insight into the competing legal and policy questions that it will likely consider in this case.
Cuozzo began as the first-filed IPR challenging U.S. Patent No. 6,778,074 (the ’074 patent)2 owned by Cuozzo Speed Technologies LLC.3 Garmin International Inc. and Garmin USA, Inc. filed an IPR petition challenging certain claims of the ’074 patent.4 The PTAB instituted review based on two obviousness grounds,5 in view of the grounds Garmin proposed but not in the same manner.6
The IPR proceeded through oral argument and, in its final decision, the PTAB determined that the broadest reasonable interpretation standard was applicable for construing claims in an IPR consistent with its long-standing practice, interpreted the claims, and determined that the they were unpatentable as obvious.7 Cuozzo appealed the PTAB’s decision to the Federal Circuit. While on appeal, Cuozzo and Garmin settled, and Garmin, bound by the settlement agreement, did not participate in the appeal.8 By statute, the Director of the United States Patent and Trademark Office (USPTO) is entitled to intervene in IPR appeals,9 and did so to defend the PTAB’s decision, including the PTAB’s use of the BRI standard in construing claim terms.10
On appeal, Cuozzo argued that the PTAB erred in instituting review because the PTAB instituted grounds against all of the claims, even though Garmin proposed those specific grounds against only some of the claims. Further, Cuozzo argued, the broadest reasonable interpretation standard was not appropriate for post-grant proceedings brought under the AIA.11
At the Federal Circuit, the majority, over a vigorous dissent by Judge Newman,12 determined that it could not review the PTAB’s decisions to institute IPR based on the statutory language of the AIA.13 And the majority deferred to the PTAB’s decision to continue historic USPTO practice and apply the broadest reasonable interpretation standard.14 We presented a full analysis of the Federal Circuit’s decision and the rationale of the majority and Judge Newman’s dissent in the March 2015 edition.15 Since that time, Cuozzo requested the Federal Circuit review the panel decision en banc review,16 which the Federal Circuit declined, and Cuozzo petitioned the Supreme Court for a writ of certiorari.17 The Supreme Court granted certiorari on 15 January 2016, and heard oral arguments on 25 April 2016. The Supreme Court is expected to issue its decision by 27 June 2016, the close of its current term.
Opening the arguments, Cuozzo argued that PTAB should not apply the BRI standard for IPRs and should, instead, apply the Phillips standard18 that the district courts apply during infringement and invalidity litigation. Under Phillips, courts interpret claims based on the "ordinary meaning of claim language as understood by a person of skill in the art."19 Overall, Cuozzo advanced four reasons why this standard, and not the (generally broader) BRI standard,20 should apply to IPRs. First, Cuozzo emphasized that the BRI standard is inappropriate unless there is a "broad ability" to amend claims.21 In support, Cuozzo noted that although patent owners can seek to amend challenged claims, the amendment procedure is onerous and the PTAB has granted very few motions to amend. Second, Cuozzo pointed to Congressional intent that IPR should serve to "adjudicate property rights."22 Thus, Cuozzo argued, there is no need to evaluate the hypothetical breadth of claims; rather, the claims’ actual meaning should be addressed as is the case in district courts when determining infringement.23 Third, Cuozzo noted that the divide between the district court and PTAB standards creates "anomalies" that result in different outcomes regarding claims that are at issue in parallel litigation and post-grant proceedings.24 Fourth, Cuozzo argued that the USPTO advanced no reason why the Phillips standard would not be appropriate for IPR, and had not adequately defended BRI.25
The USPTO has applied the BRI standard during prosecution as well as reexamination, reissue, and interference practice for over 150 years, justifying the departure from district court practice in large part because applicants and patent owners can freely amend the claims to clarify their scope and avoid unnecessary ambiguities during subsequent litigation when amendment is no longer possible. Early in Cuozzo’s arguments, Justice Sotomayor raised a question regarding amendments in IPRs under the AIA.26 Referring to the potential (or lack thereof) for motions to amend, Justice Sotomayor interjected, emphasizing that "basically Congress here said you can amend once. I’m not sure that supports your point [that the BRI is not appropriate]."27 Cuozzo responded that there was a significant difference between the ability to amend as a right (seemingly like applicants can do during prosecution) and the ability to seek a motion to amend, particularly when the PTAB has granted just four motions to amend among hundreds of attempts.28 Justice Alito also queried why multiple attempts to amend, instead of just one as Congress explicitly permits by statute in IPRs, might be needed to warrant the USPTO’s use of the BRI.29 Cuozzo answered that the interpretation of claim terms in an IPR is not fixed until the PTAB issues its final written decision, after the patent owner’s opportunity to amend has passed,30 arguing that this adds ambiguity and difficulty for patent owners. Following these specific questions, however, the Court’s focus quickly shifted from the amendment process onto other areas.
Justice Ginsburg took a different approach and questioned whether the change Cuozzo sought would "determine who’s going to win or lose this case."31 Justices Kennedy and Breyer, in contrast, seemed concerned that changing the claim construction standard would necessarily change the results. Both Justice Kennedy and Justice Breyer seemed to view post-grant proceedings as a do-over for a USPTO that now recognized it had issued an invalid patent. Justice Kennedy asked a series of questions based on the premise that "if the patent is invalid under its broadest, reasonable interpretation, does not. . . that mean the [US]PTO should never have issued the patent in the first place?"32 This suggests that the BRI standard might be appropriate for the USPTO’s reconsideration of patents that it should not have issued originally. Similarly, Justice Breyer noted that, "[i]f at the end of the day, on the broadest reasonable interpretation, it is not patentable, then no patent should have issued."33 Justice Breyer also advanced a policy concern that could warrant a broader interpretation by raising the possibility that "patent trolls" or so-called non-practising entities are armed with "billions of patents that shouldn’t have been issued."34 This alleged abuse on the patent system, which many practitioners debate, was a consideration the AIA sought to, at least in part, address.35
Chief Justice Roberts appeared more concerned about the effect that IPRs could have on the district courts rather than directly focusing on the USPTO procedures, noting that mid-proceeding transfers of validity determinations from the district court to the PTAB seemed "a little burdensome to the district court."36 Throughout the argument, and particularly during his questioning of the USPTO, the Chief Justice appeared to view it as unfair that district court judges, many of whom do not regularly undertake patent cases,37 are put through the time and trouble of reviewing and construing a patent only to have the USPTO invalidate the patent in a parallel proceeding using a more lenient, i.e., broader, standard.
Justice Kagan seemed to focus more on the question of Congressional intent, pointing out that the statute is silent regarding claim interpretation and that Cuozzo’s arguments required the Court to discern Congress’s intent and "read[] tea leaves."38 Justice Kagan seemed skeptical that Congress would not have articulated a claim construction standard if it wished to depart from the USPTO’s historical practice,39 a point that had been key to the Federal Circuit’s analysis.40 Cuozzo answered by assuring the Court that claim-construction issues had "always been a matter left to the judiciary"41 suggesting, at least partially, that the Court does not need to defer to the USPTO’s interpretation or "read" into Congress’s intent. Moreover, Cuozzo argued, IPR was a new process "unlike the USPTO has ever confronted in the past"42 that warranted a new perspective.
Justice Ginsburg seemed to concur that the new IPR proceedings were a "hybrid" animal43 but appeared less convinced by Cuozzo’s argument on the second question submitted to the Court: whether the PTAB’s institution decision was reviewable. Indeed, Cuozzo only briefly addressed its second issue, dedicating the majority of its time on the BRI standard. And, unlike the issue of claim interpretation, the statute specifically states that the USPTO’s decision regarding whether to institute cannot be appealed.44 The Federal Circuit found that this precise statutory language prevented review of the PTAB institution decisions except in extremely rare instances where there was the likelihood of irreparable harm. During its augment, Cuozzo pointed to the general presumption in the U.S. of judicial review of administrative actions.45 But Justice Ginsburg questioned the importance of the statutory provision specifically barring review of institution decisions, pointing out that if Cuozzo was correct, "this statute is doing no work,"46 and suggesting that the Federal Circuit’s reasoning was correct.
During its time addressing the Court, the USPTO emphasized that BRI was a reasonable standard and that its use in IPR "promotes the improvement of patent quality,"47 an often touted goal of the AIA. But, based on the questions from the justices, it is unclear whether the Court fully agreed with the USPTO.
Beginning again with the issue of amendment, Justice Sotomayor probed the underlying basis for the different standard asking how a process with free amendments, such as examination or reexamination, might result in an "ordinary meaning [that is different] from a continuing broad meaning."48 She suggested that if the USPTO had clarified the terms enough that it "thinks that whatever you have is clear enough to get a patent,"49 the resulting claim language should be clear, and the construction should be the same under either the Phillips or the BRI standard. The USPTO seemed to agree that ideally the interpretation of the terms would end up "in the same place,"50 under both standards. Nevertheless, the USPTO sought the option to require clarity through amendment in circumstances where an issued patent remained unclear.51 Conceding that, as Cuozzo had argued, few motions to amend are granted, the USPTO explained that it "is denying motions because even with the amendment, they would read on prior and be unpatentable."52
Chief Justice Roberts again focused on the interplay between the USPTO and the district courts and questioning whether the amendment process offered a viable option for patent owners that could be equated to the traditional district court presumption of validity.53 Justice Roberts seemed unconvinced that an amendment option that had been permitted "six times ever,"54 provided meaningful recourse for patent owners facing challenges against issued claims. By statute, granted U.S. patents are presumed valid during litigation in the district courts. However, there is no presumption of validity before the USPTO, whether during prosecution or during other post-grant proceedings like reexamination or reissue.55 Continuing along the same line of questioning as with Cuozzo, the Chief Justice asked the USPTO to explain why the "hybrid" IPR proceeding should not be considered more like district court litigation and less like prosecution when "it seems perfectly clear… that Congress meant for this entity to substitute for the judicial action."56 Chief Justice Roberts seemed particularly concerned with the potential for inconsistent results and judicial inefficiencies resulting from related district court and PTAB proceedings,57 stating "it’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results"58 and that "[i]t just seems to me like that’s a bizarre way to. . . decide a legal question."59 The Chief Justice also acknowledged that neither the PTAB nor the district court was bound by the other’s determinations,60 and noted somewhat incredulously that this discontinuity arose "under a statute designed to make the patent system more reasonable and more expeditious in reaching judgments?"61
Justices Kennedy and Breyer seemed more sympathetic to the USPTO’s view that IPR is more like a traditional USPTO proceeding than district court litigation. Justice Kennedy suggested that the lack of any requirement for a case or controversy between the parties to an IPR might permit the tone of an IPR proceeding to be "more speculative" than that of a district court proceeding, where such a case or controversy is mandatory.62 Justice Breyer also returned to the idea that the IPR process presents an opportunity to the USPTO for "a partial-Groundhog-Day" do-over allowing the USPTO to "do it again until you get it right,"63 and invited the USPTO to articulate why that view was correct. In response, the USPTO focused on Congressional intent to "improve patent quality," pointing to structural differences between IPR and district court proceedings,64 including the fact that IPR is limited to art-based challenges to patentability. The USPTO also argued that IPR is "a narrower universe than could be used in a district court proceeding," and also pointed out that the burden of proof applicable in IPRs to show unpatentability is different (lower) than the burden in district court.65
Towards the end of the USPTO’s time, the Court turned briefly to the question of appealability. Justice Sotomayor challenged the USPTO to explain why Congress would limit the circumstances under which the PTAB may institute IPR if "nobody’s going to ever watch you to make sure that’s what you’re doing?"66 The USPTO acknowledged that there are multiple rulings related to the institution decision, but maintained that the "entire decision whether to institute an inter partes review" is "non-appealable."67 Following up, Justice Ginsburg sought an answer to the question of whether rulings related to the decision to institute were subject to any sort of review.68 The USPTO took the position that statute made clear that all decisions related to institution, including the question of whether a petitioner was barred from pursing IPR based on a parallel civil action, "would not be subject to an appeal."69
The Court seemed split regarding whether IPR should be viewed as a judicial substitute, as Chief Justice Roberts appeared to do, or a traditional USPTO proceeding, as Justices Breyer and Kennedy seemed to do. Whether this division will affect the Court’s view of the proper claim construction procedure is difficult to predict. The majority of the justices did not necessarily show a clear preference for either view. Nevertheless, despite the concern about the potential for inconsistent results, the lack of a clear Congressional intent to substitute the Phillips standard for the USPTO’s traditional BRI review may make a difference in the Supreme Court’s analysis. Both that point and the general reasonableness of the USPTO’s position in the face of Congressional silence were aired during argument, and both points helped to shape the Federal Circuit’s conclusions.70 The Supreme Court may be prepared to agree.
Predicting the Court’s response to the appealability issue is even more difficult. Only Justice Ginsburg and Justice Sotomayor asked any questions on the issue, and in both portions of the argument, the question was discussed only towards the end of the speaking party’s time. Though the statutory language of the AIS may be more of a hurdle for Cuozzo to overcome on the question of appealability, Justices Ginsburg and Sotomayor seemed prepared to examine whether Congress truly intended to leave so much of the IPR process unreviewable.
Though no clear perspective is apparent following oral argument, the arguments did highlight a number of contested issues regarding the statutory scheme of the AIA and how the USPTO is handling the new post-grant proceedings. Indeed, the Supreme Court heard arguments on the very first AIA case appealed from the Federal Circuit. This may indicate, as with the Supreme Court’s recent flurry of cases addressing patent-eligible subject-matter, an increasing role for the Supreme Court in the patent law. We can expect the Supreme Court to address at least some of these questions with its decision expected by the end of the summer. Stay tuned as we continue to follow this continually changing area of U.S. patent law.
1 A copy of the transcript is accessible at: http://www.supremecourt.gov/oral_arguments/argument_transcripts/15-446_2dp3.pdf.
2 The ’074 patent relates to a speed limit indicator that can be used for "displaying the current speed of a vehicle and how it relates to the legal speed limit for the current location in which the vehicle is traveling." ’074 patent col. 2 ll. 18-23 (filed Mar. 18, 2002) (issued Aug. 17, 2004).
3 Garmin Int’l, Inc. v Cuozzo Speed Techs. LLC, IPR2012-00001, Final Written Decision, Paper 59 at 2 (P.T.A.B. Nov. 13, 2013).
4 See Garmin Int’l, Inc. v Cuozzo Speed Techs. LLC, IPR2012-00001, Petition for Inter Partes Review, Paper 1 (P.T.A.B. Sep. 16, 2012).
5 See Garmin Int’l, Inc. v Cuozzo Speed Techs. LLC, IPR2012-00001, Decision to Initiate Trial for Inter Partes Review, Paper 15 at 26 (P.T.A.B. Jan. 9, 2013).
6 Compare Petition for Inter partes Review, Paper 1 at 5-6 (arguing obviousness based on Aumayer, Evans, and Wendt for claim 17 but not claim 10 or 14 and arguing obviousness based on Tegethoff , Awada, Evans, and Wendt for claim 14 but not claim 10 or 17) and Decision to Initiate Trial for Inter Pares Review, Paper 15 at 26 (instituting review of claims 10, 14, and 17 based on Aumayer, Evans, and Wendt and on Tegethoff , Awada, Evans, and Wendt).
7 See Final Written Decision, Paper 59 at 49.
8 See Motion of Appellees Garmin International, Inc. and Garmin USA, Inc. to withdraw party, Garmin International, Inc.; Garmin USA, Inc., as a party to this appeal, In re Cuozzo Speed Techs., LLC, No. 14-1301 (Fed. Cir. Feb. 4, 2015) (No. 17).
9 Se 35 U.S.C. § 143.
10 Motion of Intervenor-Michelle K. Lee, Director, United States Patent and Trademark Office, In re Cuozzo Speed Techs., LLC, No. 14-1301 (Fed. Cir. Feb. 4, 2015) (No. 7).
11 See Brief of Appellant, In re Cuozzo Speed Techs., LLC, No. 14-1301 (Fed. Cir. Feb. 4, 2015)(No. 12).
12 See In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1284-91 (Fed. Cir. 2015) (Newman, J., dissenting).
13 Id. at 1273 ("We conclude that § 314(d) prohibits review of the decision to institute IPR even after a final decision.").
14 Id. at 1277 ("There is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.").
15 In re Cuozzo: Thumbs Up for the PTAB, March [2015] CIPA 134.
16 See In re Cuozzo Speed Techs., LLC, 793 F.3d 1297, 1298 (Fed. Cir. 2015) (denying Petition for Rehearing En Banc over the dissent of five members of the Federal Circuit).
17 See Petition for Writ of Certiorari, Cuozzo Speed Techs., LLC v. Lee, No. 15-446 (US 2016), cert. granted, 577 U.S.___ (Jan. 15, 2016).
18 Phillips v AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005).
19 Id. at 1314.
20 See, e.g., Facebook, Inc. v. Pragmatus AV, LLC, 582 F. App’x 864, 869 (Fed. Cir. 2014) ("The broadest reasonable interpretation of a claim term may be the same as or broader than the construction of a term under the Phillips standard. But it cannot be narrower.").
21 Transcript of Oral Argument at 4:1-4, Cuozzo, No. 15-446 (U.S. 2016) [hereinafter "Tr."].
22 Tr. at 5:12-13.
23 Tr. at 5:13-17
24 Tr. at 5:18-6:7.
25 Tr. at 5:8-22.
26 Tr. at 3:8-9.
27 Tr. at 4:14-6.
28 Tr. at 4:17-5:6.
29 Tr. at 8:22-9:3.
30 Tr. at 9:4-21.
31 Tr. at 10:5-8. Similarly, Justice Sotomayor asked questions regarding how the BRI and Phillips standards differ. Tr. at 17:9-15.
32 Tr. at 11:6-11.
33 Tr. at 13:19-22.
34 Tr. at 14:1-15:9.
35 See, e.g., America Invents Act Hearing Before the H. S. Comm. on Intellectual Property, Competition, and the Internet, 112th Cong.78 2011) (statement of the Honorable Steve Bartlett, President and Chief Executive Officer, The Financial Services Roundtable) (discussing "this problem of non-practicing entities that we believe exploit flaws in the current patent system").
36 Tr. at 19:24-25.
37 Tr. at 34:10-17.
38 Tr. at 21:23-25.
39 Tr. at 22:19-25.
40 See In re Cuozzo, 793 F.3d at 1276-77.
41 Tr. at 23:1-4.
42 Tr. at 23:5-12.
43 Tr. at 23:21 (noting the proceeding is "[k]ind of a hybrid").
44 35 U.S.C. § 314(d).
45 Tr. at 25:1-14.
46 Tr. at 25:17-23.
47 Tr. at 26:15-27:3.
48 Tr. at 27:17-22.
49 Tr. at 27:11-14.
50 Tr. at 27:23-28:3.
51 Tr. at 29:11-20.
52 Tr. at 30:23-25.
53 Tr. at 32:15-33:2 (responding to PTO assertion that PTAB need not adopt a saving construction of the patents because "the patent owner can come in and say, look, I can fix this problem" by stating "[w]ell, that’s happened six times ever").
54 Id.
55 In re Cuozzo Speed Tech. LLC, 778 F.3d. 1271, 1280 (Fed. Cir. 2015).
56 Tr. at 31:1-11.
57 Tr. at 33:23-25 (asking "you’ve had contrary results with respect to the same patent, right?"), 34:10-17 ("You put the district Court to all the trouble . . . and then the . . . defendant comes in and says, well, guess what? I won before the IP review, and so sorry, but all that was wasted energy."), 40:21-41:2 (establishing that the district court’s determinations are not binding on the PTO, and that the PTO’s determinations are not binding on the district court), 43:9-16 (noting possibility of inconsistent result at district court following PTAB decision), 55:4-18 (noting potential for inconsistent results in parallel district court and PTO proceedings such as reexamination).
58 Tr. at 32:1-5.
59 Tr. at 41:7-10.
60 Tr. at 40:21-41:2, 43:9-16.
61 Tr. at 44:3-5.
62 Tr. at 35:14-25. On rebuttal, Cuozzo took particular issue with this point, arguing that whatever the controversy, real property rights were being adjudicated and speculation was inappropriate. Tr. at 56:23-57:1.
63 Tr. at 37:7-15.
64 Tr. at 38:7-39:12.
65 Tr. at 38:24-39:2.
66 Tr. at 50:9-13.
67 Tr. at 52:1-2.
68 Tr. at 52:3-12.
69 Tr. at 52:13-14.
70 See generally In re Cuozzo, 778 F.3d. 1271.
Originally printed in CIPA Journal in June 2016. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
Cuozzo Speed Technologies LLC v. Lee, America Invents Act (AIA), Patent Trial and Appeal Board (PTAB)
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