Reading the Tea Leaves: In re Cuozzo and the Federal Circuit’s Consideration of PTAB Institution Decisions and Claim Construction

Authored by Erika Harmon Arner, Daniel C. Cooley, J. Derek McCorquindale, and Jason L. Romrell

The U.S. Court of Appeals for the Federal Circuit recently heard arguments in the first appeal from a final written decision in an inter partes review (IPR), In re Cuozzo Speed Technologies LLC.¹This case raises two issues central to America Invents Act²(AIA) post-grant proceedings: whether Patent Trial and Appeal Board (PTAB) decisions to institute are reviewable after the PTAB issues its final written decision, and whether the broadest reasonable interpretation (BRI) standard properly applies to PTAB trial proceedings. While not necessarily reflective of their opinions, questioning at oral argument by Judges Newman, Clevenger and Dyk provides insight into a range of possible outcomes in resolving the competing legal and policy objectives involved in these issues.

I. Procedural History and Background of In re Cuozzo

In re Cuozzo arose from a petition for IPR filed by Garmin International Inc. and Garmin USA Inc. challenging the patentability of U.S. Patent No. 6,778,074³owned by Cuozzo Speed Technologies LLC.⁴In its institution decision, the PTAB concluded that Garmin had, on the basis of two different grounds, established a reasonable likelihood that dependent claim 17 of the '074 patent was unpatentable under 35 U.S.C. § 103.⁵The PTAB then "exercise[d] [its] discretion" and applied these same two grounds of unpatentability to claims 10 and 14.⁶

After the IPR trial, the PTAB issued its final written decision construing the claims according to the BRI standard and concluding that the claims were unpatentable as obvious in view of the prior art.⁷Cuozzo's appeal to the Federal Circuit followed. Garmin did not participate in the appeal, but the Director of the U.S. Patent and Trademark Office (PTO) intervened in support of the PTAB's final written decision.⁸

II. Reviewability of PTAB Decisions to Institute after Final Written Decision

In its briefs, Cuozzo argued that the PTAB instituted the IPR contrary to 35 U.S.C. § 314(a) by applying grounds not identified in the petition.⁹According to Cuozzo, the PTAB "act[ed] like a patent examiner rather than an adjudicator,"¹⁰which Cuozzo argued was contrary to the AIA's legislative history.¹¹Distinguishing St. Jude, where the Federal Circuit found that it lacked jurisdiction to review a decision not to institute at the time of the institution decision,¹²Cuozzo argued that certain statutory and nondiscretionary requirements addressed at institution, including 35 U.S.C. § 314(a), are subsumed in the PTAB's final written decision and are reviewable through an appeal of that final decision under 35 U.S.C. §§ 141 and 319.¹³

The PTO responded that 35 U.S.C. § 314(d) and St. Jude confirm that the Federal Circuit lacks jurisdiction to review the PTO's decision to institute IPR.¹⁴Section 314(d) states: "The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." According to the PTO, interpreting Section 314(d) to permit review of the PTO's institution decision as part of an appeal of the final written decision would render Section 314(d)'s "final and nonappealable" language superfluous because the Administrative Procedure Act (APA) only permits challenges of agency actions that are "final,"¹⁵and to be "final" within the meaning of the APA, an agency action: (1) "must mark the 'consummation’ of the agency's decision-making process" and "not be of a merely tentative or interlocutory nature"; and (2) "must be one by which rights or obligations have been determined, or from which legal consequences will flow."¹⁶

At oral argument, the panel focused much of its questioning on Section 314(d).¹⁷The panel asked Cuozzo, if finality was already required for any appeal, then when the statute says "nonappealable," wouldn’t that mean the decision was not appealable at any point? Cuozzo answered that Congress wanted to prevent interlocutory appeals. The panel then queried, since interlocutory appeals are not normally permitted, why would Section 314(d) be needed to prevent them?¹⁸To the PTO, the panel questioned why, if Congress desired to prevent all review, it had used the term "nonappealable" in Section 314(d) and not the term "unreviewable" as it had in other statutes.¹⁹

The panel’s questioning foreshadowed future issues yet to arrive at the Federal Circuit. The panel posed hypothetical questions about whether PTO actions would be "unreviewable" even when they clearly violated the statutory framework for institution. To each hypothetical, the PTO responded that the decision to institute is indeed unreviewable and the Federal Circuit’s jurisdiction only allows review of the merits of the patentability decision, not the existence of the proceeding itself.²⁰Judge Dyk pressed the PTO further, asking, "No matter how far the PTO departs from the statute initiating the proceeding, there is no way that can ever be reviewed?"²¹The Director responded that the courts cannot review an institution decision, barring a constitutional question.²²

The PTO’s caveated response suggests that the PTO is contemplating constitutional challenges sure to arrive at the Federal Circuit. Indeed, plaintiffs have already argued in Cooper v. Lee²³that an instituted IPR proceeding violates the Seventh Amendment’s right to a jury²⁴and that IPR proceedings violate "Separation of Powers" principles by giving Article I tribunals matters reserved for Article III courts.²⁵The government has filed a motion for summary judgment in the Cooper action, yet to be ruled on, arguing that the plaintiffs must first exhaust their administrative remedies at the PTO,²⁶and if they do not prevail, "they can attempt to raise their constitutional challenge with the Federal Circuit in their statutorily-guaranteed direct appeal from the USPTO's 'final written decision.'"²⁷Time will tell how the Federal Circuit resolves AIA-based constitutional questions, especially now that it is has confirmed its jurisdiction to do so.²⁸

III. Claim Construction Standard Applicable to Post-Grant Proceedings

In re Cuozzo also involves the issue of whether the BRI standard should apply to claim construction in PTAB trial proceedings. Cuozzo argued that the PTAB erred by using the BRI standard instead of the Phillips district court claim construction standard, and that the PTO lacked authority under 2 U.S.C. § 2(b)(2) to set a substantive rule, such as a BRI standard for claim construction.²⁹Although the PTO has used BRI in examination and reexamination, Cuozzo argued that "[e]xamination and reexamination bear no substantive similarity to IPR," noting a limited ability to amend the claims during an IPR.³⁰Cuozzo argued that BRI is not justified because in two years of AIA post-grant proceedings, the PTAB has granted no opposed motions to amend.³¹

The PTO responded that the PTAB properly used the BRI standard as it has done for nearly a century.³²According to the PTO, Congress granted it broad authority to "prescribe regulations . . . establishing and governing inter partes review under this chapter, [35 U.S.C. § 316(a)(4)]" and pursuant to that express delegation of rulemaking power, the PTO promulgated its regulation specifying that BRI should be used for IPRs.³³The Director further noted that the rules allow the PTO to consolidate IPRs with reissue and reexamination proceedings, and "[i]t would be anomalous for the Board to have to apply two different standards in the merged proceeding."³⁴

In view of the parties’ arguments, the Federal Circuit may resolve the question of claim construction through interpretation of the underlying statutes that grant the PTO rulemaking authority,³⁵but even so, the panel showed interest in the policy reasons for applying BRI in IPRs. The panel questioned the PTO’s justification for using BRI in IPRs due to the possibility of claim amendment, noting that it is not easy to amend claims in an IPR. The Director conceded this point, but argued that amendment should not be easy since any amended claims will become part of a U.S. patent without further examination.³⁶

At bottom, resolving the appropriate claim construction standard for PTAB proceedings may only be half the battle. Judge Plager of the Federal Circuit has observed that even in cases where BRI applies, the court has reviewed the BRI claim construction inconsistently, employing both a "deferential 'reasonable' (arbitrary/ capricious-type) review," and a "no-deference 'pure' law type review."³⁷Thus, the Federal Circuit may ultimately have to address whether the PTO should be granted deference for the determination of the claim construction itself, not just the selection of the claim construction standard. And as post-grant procedures continue to develop, further questions are sure to arise regarding the appropriate deference that the judiciary owes PTO decision making.

Endnotes

¹In re Cuozzo Speed Techs. LLC, No. 2014-1301.

²Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011).

³The '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).

⁴Garmin Int'l, Inc. v. Cuozzo Speed Techs. LLC, IPR2012-00001, Final Written Decision, Paper 59 at 2 (P.T.A.B. Nov. 13, 2013) (87 PTCJ 112, 11/15/13).

⁵Garmin Int'l, IPR2012-00001, Decision to Initiate Trial for Inter Partes Review, Paper 15 at 25 (P.T.A.B. Jan. 9, 2013).

⁶Id. at 18-19, 22.

⁷Garmin Int'l, IPR2012-00001, Paper 59 at 8, 49.

⁸Brief for Intervenor at 4, In re Cuozzo Speed Techs., LLC, No. 2014-1301 (Fed. Cir. June 5, 2014) [hereinafter Brief for Intervenor].

⁹Brief of Appellant at 25-26, Cuozzo Speed Techs. LLC v. Garmin Int'l, Inc., No. 2014-1301 (Fed. Cir. Apr. 22, 2014) [hereinafter Brief of Appellant].

¹⁰Id. at 2.

¹¹Id. at 19 (stating that Congress intended to "convert[] inter partes reexamination from an examinational to an adjudicative proceeding and rename[] the proceeding 'inter partes review' " (alterations in original) (quoting H.R. Rep. No. 112-98, pt. 1, at 46-48 (2011))).

¹²St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749F.3d 1373, 110 U.S.P.Q.2d 1777 (Fed. Cir. 2014) (88 PTCJ 18, 5/2/14).

¹³Reply Brief of Appellant at 2-4, 6, In re Cuozzo, No. 2014-1301 (Fed. Cir. June 23, 2014) (citing 35 U.S.C. §§ 311(a), (b) and 315(a), (b), amongst others).

¹⁴Brief for Intervenor at 29, 31-32.

¹⁵Brief for Intervenor at 33 (citing 5 U.S.C. § 704).

¹⁶Id. (quoting Bennett v. Spear, 520 U.S. 154, 177-78 (1997)).

¹⁷Judge Clevenger asked whether the jurisdictional issue could be skipped, because the PTO had argued in its briefs that Garmin implicitly asserted that claims 10 and 14 were unpatentable when it argued that claim 17 was unpatentable (since claim 17, by its dependency from claims 10 and 14, includes each and every feature of those claims). The PTO, however, requested that the court address the jurisdictional question, given its importance to many IPR proceedings. Oral Argument at 22:28-24:27, In re Cuozzo Speed Techs. LLC, No. 2014-1301 (Fed. Cir. Nov. 3, 2014) (89 PTCJ 9, 11/7/14) [hereinafter Oral Argument], available at http://www.cafc.uscourts.gov/oralargument-recordings/all/cuozzo.html.

¹⁸Id. at 3:00-4:13, 7:18-8:15.

¹⁹Id. at 16:00-16:50.

²⁰Id. at 16:50-18:18, 21:09-21:57.

²¹Id. at 18:18-18:45.

²²Id.

²³Complaint for Declaratory Judgment of Unconstitutionality of 35 U.S.C. §§ 311-19, Cooper v. Lee, No. 1:14-cv-00672 (E.D. Va. June 5, 2014), Dkt. No. 1.

²⁴Id. at 7-8.

²⁵Id. at 8.

²⁶Memorandum of Law in Support of Defendants' Motion for Summary Judgment & in Opposition to Plaintiffs' Motion for Summary Judgment at 1, Cooper v. Lee, No. 1:14-cv-00672 (E.D. Va. July 23, 2014), Dkt. No. 15.

²⁷Id. at 1-2.

²⁸The Federal Circuit has recently confirmed its jurisdiction to review constitutional challenges to the AIA. See Mad-Stad Eng'g, Inc. v. Lee, 756 F.3d 1366, 1369-71, 111 U.S.P.Q.2d 1569, 1571-73 (Fed. Cir. July 1, 2014) (88 PTCJ 657, 7/11/14) (finding expressly that "this appeal 'arise[s] under' an Act of Congress relating to patents within the meaning of both 28 U.S.C. §§ 1338 and 1295(a)(1) and that we, thus, may properly exercise jurisdiction over this appeal" challenging the constitutionality of certain provisions of the AIA); cf. Patlex Corp. v. Mossinghoff, 758 F.2d 594, 225 U.S.P.Q. 243 (Fed. Cir. 1985) (deciding the constitutionality of the patent reexamination statute, but without express analysis of the jurisdiction question).

²⁹Brief of Appellant at 30-31.

³⁰Id. at 32.

³¹Id. at 35:04-35:38.

³²Brief for Intervenor at 41.

³³Brief for Intervenor at 7 (citing 37 C.F.R. § 42.100(b)).

³⁴Id. at 43-44 (quoting Changes to Implement Inter Partes Review Proceedings, Post-Grant Review Proceedings, and Transitional Program for Covered Business Method Patents, 77 Fed. Reg. 48,680, 48,698 (Aug. 14, 2012) (84 PTCJ 653, 8/17/12)).

³⁵See Oral Argument at 11:00-15:41.

³⁶Id. at 29:03-30:00.

³⁷Flo Healthcare Solutions, LLC v. Kappos, 697 F.3d 1367, 1378, 104 U.S.P.Q.2d 1834, 1842 (Fed. Cir. 2012) (84 PTCJ 1063, 10/26/12).

Reproduced with permission from BNA's Patent, Trademark & Copyright Journal, Vol. 89, No. 251, 11/28/2014. Copyright © 2014 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. 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.