Wait, There's a Second Issue in Cuozzo?

Authored by Erika H. Arner and James D. Stein

The Supreme Court surprised many patent practitioners by granting certiorari in the first case involving review of a final decision in a post-grant patent trials before the Patent Trial and Appeal Board, Cuozzo Speed Technologies v. Lee.¹ While the first issue in the case—whether claims should be given their broadest reasonable interpretation at the board—is getting all the attention, the lesser known second issue could be equally impactful. The second question asks whether the board’s decision to institute a trial in the first place can be reviewed on appeal.

Statutory Framework for a PTAB Trial

A PTAB trial under the America Invents Act of 2011— whether an inter partes review (IPR), post grant review (PGR) or covered business method (CBM) review— begins with the filing of a petition challenging the patentability of one or more claims in a patent (35 U.S.C. § § 311, 321). Based on the petition (§ § 312, 322), and potentially on an optional patent owner preliminary response (§ § 313, 323), the board makes an institution decision—whether to institute a trial to review the merits of the petitioner’s patentability challenge (§ § 314, 324).

In the institution decision, the board determines whether a number of statutory requirements are met, including whether the petitioner’s challenge is reasonably likely to prevail (IPR threshold under Section 314(a)) or more likely than not to prevail (CBM-PGR threshold under Section 324(a)) on the merits. If the board decides to institute trial, it has one year to render a "final written decision" on the merits of the patentability challenge (§ § 318, 328). Statutes specify that the final written decision is appealable to the U.S. Court of Appeals for the Federal Circuit (§ § 319, 329), but that "The determination by the Director whether to institute . . . review under this section shall be final and nonappealable" (§ § 314(d), 324(e)).

Federal Circuit’s Developing Jurisprudence on Sections 314 and 324

To date, a party dissatisfied with an institution decision has had almost no recourse. The Federal Circuit has denied all attempts at interlocutory relief, i.e., relief before the PTAB’s final written decision on patentability at the end of trial. The vehicle for seeking early review does not seem to matter.²

The Federal Circuit has also ruled that the institution decision remains unreviewable during an appeal from the board’s final written decision, with one exception— the board’s decision in Versata Development Group v. SAP America that a patent in a CBM review qualifies as a "covered business method patent" may be reviewed on appeal.³ According to the majority, whether a patent is a CBM is reviewable because it is "a limit on [the board’s] invalidation of authority under [AIA] § 18."⁴ "If a particular patent is not a CBM patent, there is no proper pleading that could be filed to bring it within the PTAB’s [AIA] § 18 authority" to invalidate the patent.⁵

Following Versata, the Federal Circuit found two other aspects of the institution decision immune from review on appeal: the decision whether an IPR petitioner is time-barred under Section 315(b), in Achates v. Apple,⁶ and a decision to institute review on obviousness grounds where the petition only proposed review on anticipation, under Section 312(a)(3), in Sightsound v. Apple.⁷

In re Cuozzo Speed Technologies

Cuozzo reaches the Supreme Court on appeal from the first-ever IPR, filed by Garmin International on Sept. 16, 2012. In the IPR, the PTAB applied one ground, which Garmin proposed to challenge one set of claims, to another set of claims for which Garmin’s proposed challenge was defective, and instituted a trial. On appeal from the final written decision, Cuozzo argued that the board’s decision to institute Garmin’s defective petition violated Sections 312(a)(3) and 314(a), providing that review can only be instituted on grounds proposed in the petition and not on grounds devised by the board.⁸ The Federal Circuit panel majority disagreed, "conclud[ing] that § 314(d) prohibits review of the decision to institute IPR even after a final decision" and that it "exclude[s] all review of the decision whether to institute review."⁹ According to the court, "The fact that the petition was defective is irrelevant because a proper petition could have been drafted."¹⁰

Positions of the Parties in the Supreme Court

In its petition for certiorari, Cuozzo’s primary argument is that all aspects of the PTAB’s institution decision should be reviewable on appeal of the final written decision, after the trial is complete.¹¹ Cuozzo argues that the "no appeal" provision of Section 314(d) bars interlocutory review of an institution decision but not ultimate review, because ‘‘[t]he AIA separately provides for appellate review of the Board’s final written decision, see 35 U.S.C. 141(c), 319, and those are the provisions Cuozzo invoked when it appealed at the end of the IPR proceeding."¹²

As a fallback position, Cuozzo argues that, even if Congress intended to bar review of institution decisions entirely, review should not be barred where the decision violates "clear statutory limits,"¹³ like the board’s decision to institute review on a ground that Garmin’s petition did not propose. According to Cuozzo, "Section 314(d) may not bar appeals that the Board ignored its own statutory authority, including the requirement that the Board base its institution decision on the parties’ submissions rather than its own research or theories." ¹⁴

On the other hand, the Patent and Trademark Office argues that "35 U.S.C. 314(d) means what it says: the PTO’s decision 'whether to institute an inter partes review . . . shall be final and nonappealable.' "¹⁵ The PTO advocates an absolute bar on the reviewability of an institution decision—or any aspect of an institution decision—regardless of timing: "By its plain terms . . . Section 314(d) does not merely defer appeals of institution decisions until the end of the administrative proceedings; it bars such challenges entirely."¹⁶

Potential Impact of the Supreme Court's Decision

If the Supreme Court rules in favor of Cuozzo—that institution decisions are reviewable on appeal from a final written decision—Achates (one-year time bar) and Sightsound (instituting on different statutory grounds) would likely be overruled.

Even if the Court only agrees with Cuozzo’s fallback position, many other types of institution-related decisions would also more clearly become reviewable, such as the board’s decision that the petition identified all real parties in interest (see § § 312, 322). Other things that would more clearly be reviewable include the board’s determination whether the petitioner or real party in interest filed a civil action challenging the validity of patent, is time-barred from filing an IPR or is estopped following a final written decision in another review of the patent (§ § 315, 325), and whether a particular ground or a particular type of prior art challenge is permissible in the proceeding being requested (§ § 311(b), 321(b)).

This result would likely shift the balance of outcomes at the board toward patent owners. As of Dec. 1, 2015, in IPRs that are instituted, over 75 percent of the claims reviewed are canceled by the PTAB.¹⁷ A ruling in favor of Cuozzo would give patent owners additional tools to defend patent claims. By the same token, this outcome would reduce the autonomy of the board in deciding when IPR/PGR is warranted. Some contend that the board, with its technically skilled patent law judges, is in the best position to determine whether a patent should be reviewed.

In contrast, if the Supreme Court rules for the PTO, no aspect of an institution decision would be reviewable, regardless of timing of seeking review. If the Supreme Court rules in favor of the PTO, the board’s power to institute AIA review of patents will essentially go unchecked (a concern discussed at oral argument in Cuozzo). Some worry that there would be nothing stopping the PTAB from instituting a CBM review on a patent to a mechanical device or from instituting a PGR review (where Sections 101 and 112 grounds are available) on a patent that filed under the first-to-invent regime.

Unless the Federal Circuit were to grant mandamus relief, patent owners may have little to no recourse if review is improperly instituted.

Cuozzo’s Schedule

Under Supreme Court rules, Cuozzo’s merits brief is due within 45 days of the grant of certiorari—by Feb 29, 2016. Amicus briefs supporting the Petitioner or neither party are due seven days later, on March 7. The PTO’s respondent merits brief will be due 30 days from the filing of the petitioner’s brief, likely March 30, with supportive amicus briefs due seven days later, on April 6. While the petitioner can file a reply brief after that, the exact timing will depend on the Court’s to-be-released argument schedule.

It is possible that the Court will schedule oral argument during its final sitting of this term—April 25, 26 and 27—and render a decision by the end of June 2016. If not, argument and the Court’s decision will occur in the Court’s next term, opening on Monday, Oct. 3, 2016.

Endnotes
¹ Cuozzo Speed Techs., LLC v. Lee, No. 15-446 (U.S., cert. granted Jan. 19, 2016) (91 PTCJ 788, 1/22/16).

² See, e.g., St. Jude Medical v. Volcano Corp., 749 F.3d 1373, 110 U.S.P.Q.2d 1777 (Fed. Cir. 2014) (denying direct appeal from institution decision) (88 PTCJ 18, 5/2/14); In re Procter & Gamble Co., 749 F.3d 1376, 110 U.S.P.Q.2d 1782 (Fed Cir. 2014) (denying mandamus relief from institution decision) (88 PTCJ 18, 5/2/14); Versata Dev. Grp., Inc. v. Lee, 793 F.3d 1352, 115 U.S.P.Q.2d 1708 (Fed. Cir. 2015) (affirming dismissal of district court challenge to institution decision) (90 PTCJ 2628, 7/17/15).

³ Versata Dev. Grp., Inc. v. SAP Am., Inc., 793 F.3d 1306, 115 U.S.P.Q.2d 1681 (Fed. Cir. 2015) (90 PTCJ 2626, 7/17/15).

⁴ Id. at 1322.

⁵ Id. at 1320.

⁶ Achates Reference Publishing Inc. v. Apple, Inc., 803 F.3d 652, 116 U.S.P.Q.2d 1783 (Fed Cir. 2015) (90 PTCJ 3340, 10/2/15).

⁷ Sightsound Techs., LLC v. Apple, Inc., No. 2015-1159, 117 U.S.P.Q.2d 1341 (Fed. Cir. Dec. 15, 2015) (91 PTCJ 445, 12/18/15).

⁸ In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 115 U.S.P.Q.2d 1425 (Fed. Cir. 2015) (90 PTCJ 2542, 7/10/15).

⁹ Id. at 1273.

¹⁰ Id. at 1274.

¹¹ Petition for Writ of Certiorari, filed Oct. 6, 2015, available at http://src.bna.com/vi (90 PTCJ 3484, 10/16/15).

¹² Id. at 30.

¹³ Id. at 28.

¹⁴ Id. at 31.

¹⁵ Brief for the Respondent in Opposition, filed Dec. 11, 2015, at 17, available at http://src.bna.com/bz6 (91 PTCJ 459, 12/18/15).

¹⁶ Id. at 18.

¹⁷ See Finnegan’s AIA review statistics, available at http://www.aiablog.com/claim-and-case-disposition/.