Divided Federal Circuit Panel Upholds Broadest Reasonable Interpretation Standard, Nonappealable Nature of PTAB Institution Decisions (Part I)

On February 4, 2015, a divided Federal Circuit panel in In Re Cuozzo Speed Technologies, LLC. affirmed the Board’s first final written decision in inter partes review, 2–1, holding:

• the Federal Circuit lacks jurisdiction to review the PTO’s decision to institute IPR on direct appeal;
• the claim construction standard in inter partes review should be the broadest reasonable interpretation standard for unexpired patents; and
• factual claim construction Board determinations will be reviewed for substantial evidence, and legal determinations de novo, following the Supreme Court’s recent decision in Teva Pharms. USA, Inc. v. Sandoz, Inc.

In its final written decision, the Board had held three claims unpatentable as obvious under 35 U.S.C. § 103. The Board had instituted on three claims—10, 14, and 17—on grounds expressly raised only on claim 17. The Federal Circuit ultimately affirmed their holdings in full.

On whether an institution decision is directly appealable to the Federal Circuit, the majority concluded that 35 U.S.C. § 314(d) prohibits review of the institution decision even after a final decision. The majority further cited In re Hiniker Co., a 1998 opinion holding that the Federal Circuit would not set aside a flawed decision to institute reexamination—even absent a comparable “No Appeal” provision. The majority left open the possibility, however, of the institution decision being “reviewable by mandamus after the Board issues a final decision.”

Regarding the Board’s use of the BRI standard for claim construction, the majority found that “[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.” On the argument that IPR and PGR effectively foreclose amendment and so the standard is inappropriate, the majority found “IPR proceedings are not materially different in that respect” from other PTO proceedings and that, “[a]lthough the opportunity to amend is cabined in the IPR setting, it is thus nonetheless available.”

The majority applied the Chevron framework to consideration of the PTO’s rulemaking authority in promulgating the BRI standard, asking “if the statute is ambiguous,” then is “the agency’s interpretation [] based on a permissible construction of the statutory language”? The majority held BRI was a reasonable application of their statutory authority.

On the merits, the majority held that the Board had properly construed the claims under the BRI standard. Since there was no usage of extrinsic evidence, the majority reviewed de novo and affirmed the Board’s claim construction and obviousness determination. The majority also affirmed the denial of Cuozzo’s motion for leave to amend.

Judge Newman issued a vigorous dissent, asserting that the majority’s rulings are contrary to the legislative purpose of the AIA.