In re Cuozzo Speed Technologies, LLC is a split precedential opinion by the Court of Appeals for the Federal Circuit (CAFC) issued in the first appeal from a final written decision in an inter partes review (IPR). In re Cuozzo Speed Techs., LLC, 778 F.3d 1271 (Fed. Cir. 2015). Cuozzo provides the first appellate rulings on two issues related to major procedural aspects of the post-grant review process at the U.S. Patent and Trademark Office (USPTO) created under the Leahy-Smith America Invents Act (AIA). First, the majority held that it lacks jurisdiction to review the decision to institute trial in an IPR even after the Patent Trial and Appeals Board (PTAB) issues its final written decision in that trial. The opinion, however, left open the possibility that in limited circumstances mandamus relief may be available to challenge the decision to institute trial. Second, the CAFC upheld the use of the “broadest reasonable interpretation” (BRI) claim construction standard in IPR proceedings. The majority justified its holding on the grounds that Congress impliedly adopted the existing rule of using BRI in USPTO proceedings, and that the PTAB’s adoption of BRI is a proper exercise of its new rulemaking authority under the AIA.
Considering the importance of these holdings, it is not surprising that significant efforts are under way to change them or to limit their effect. A petition for en banc review is currently pending at the CAFC. And two bills introduced in Congress would require that post-grant review proceedings, including IPRs, be conducted under the narrower “ordinary and customary meaning” claim construction standard used in district court litigation.
The Cuozzo appeal arose from a successful IPR challenge by Garmin USA, Inc. (Garmin) to the validity of U.S. Patent No. 6,778,074 to Cuozzo Speed Technologies (Cuozzo), entitled “Speed Limit Indicator and Method for Displaying Speed and the Relevant Speed Limit.” IPRs proceed in two phases: first, the PTAB determines whether to institute trial of the validity of the challenged claims; and second, it conducts the trial and issues a final written opinion on validity. Garmin petitioned the PTAB for IPR of claims 10, 14, and 17 of the ‘074 patent. The PTAB instituted trial after finding that there is a reasonable likelihood that all three claims are obvious. However, the trial for claims 10 and 14 was not instituted based on the grounds asserted in Garmin’s original petition against these claims. Rather, it was instituted based on a different ground that Garmin’s petition asserted only against claim 17, which depends indirectly and directly from claims 10 and 14, respectively. Relying on the BRI claim construction standard, the PTAB’s subsequent final decision found claims 10, 14, and 17 obvious. Cuozzo timely appealed from the final decision, the USPTO intervened in the appeal, and Garmin withdrew as appellee pursuant to its settlement with Cuozzo.
The CAFC lacks jurisdiction to review the decision to institute trial in an IPR
Cuozzo argued, inter alia, that the USPTO may only institute an IPR based on grounds identified in the petition, relying on 35 U.S.C. § 314(a). Therefore, according to Cuozzo, the PTAB improperly instituted trial on claims 10 and 14 because the PTAB relied on prior art that Garmin did not identify in its petition as grounds for invalidating those two claims.
The majority rejected Cuozzo’s argument and held that the decision to institute trial is final and non-appealable. The majority’s analysis focused on the statutory language, in particular on § 314(d), which is entitled “No appeal” and provides that the “determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 35 U.S.C. § 314(d). It first discussed the Court’s previous holding that § 314(d) bars interlocutory appeal from a decision to institute trial before final decision is issued. St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373, (Fed. Cir. 2014). Then the majority concluded that § 314(d) also “prohibits review of the decision to institute IPR even after a final decision. On its face, the provision is not directed to precluding review only before a final decision. It is written to exclude all review of the decision whether to institute review.” Cuozzo, 1276. The majority further observed that a contrary reading of § 314(d) would render it superfluous “given that § 319 and § 141(c) already limit appeals to appeals from final decisions.” Id.
While finding the decision to institute trial final and non-appealable, the Court nevertheless addressed the question of whether the PTAB could find claims 10 and 14 obvious based on grounds that were not raised against these claims in Garmin’s IPR petition. The majority held that “[n]or does the IPR statute expressly limit the Board’s authority at the final decision stage to the grounds alleged in the IPR petition. It simply authorizes the Board to issue a final written decision with respect to the patentability of any patent claim challenged by the petitioner.” Id. at 1276-1277. Thus, the PTAB acted within its statutory authority when it found challenged claims 10 and 14 obvious based on an invalidity ground asserted against claim 17 in Garmin’s petition for IPR. Id. The majority pointed to In re Hiniker Co., 150 F.3d 1362 (Fed. Cir. 1998) to support its decision. In Hiniker, the Court found that an error in instituting reexamination based on defective art is “washed clean during the reexamination proceeding” when the final decision is based on art that could have supported institution. Hiniker, 1367. In Cuozzo, the majority concluded that “[t]he same is even clearer here, where § 314(d) explicitly provides that there is no appeal available of a decision to institute [trial]. …. The failure to cite those references in the petition provides no ground for setting aside the final decision.” Cuozzo, 1277.
The Court has previously held that mandamus is not available for immediate review of the PTAB’s decision to institute trial. In re Procter & Gamble Co., 749 F.3d 1376, 1378-79 (Fed. Cir. 2014). In Cuozzo, the Court expressly declined to decide whether the decision to institute trial is reviewable by mandamus after the PTAB issues a final decision. The Court nevertheless observed that “mandamus may be available to challenge the PTO’s decision to grant a petition to institute IPR after the Board’s final decision in situations where the PTO has clearly and indisputably exceeded its authority.” Cuozzo, 1277. However, it declined to provide mandamus relief based on the current facts because there was no clear and indisputable right that precluded institution of the IPR proceeding. Id. at 1278.
BRI is the correct claim construction standard for PTAB proceedings
Cuozzo also appealed the PTAB’s finding of obviousness based on the broadest reasonable interpretation claim construction standard, arguing that application of the standard was in error.
The majority affirmed the PTAB’s use of the BRI claim construction standard in IPR proceedings on two separate grounds. First, the Court held that “Congress implicitly adopted the broadest reasonable interpretation standard in enacting the AIA” when it did not explicitly provide for a different standard. Id. at 1281. The Court observed that “the broadest reasonable interpretation standard has been applied by the PTO and its predecessor for more than 100 years in various types of PTO proceedings” and that “this court has approved of the broadest reasonable interpretation standard in a variety of proceedings, including initial examinations, interferences, and post-grant proceedings such as reissues and reexaminations.” Id. at 1287. The Court further observed that “Congress in enacting the AIA was well aware that the broadest reasonable interpretation standard was the prevailing rule …. [i]t can therefore be inferred that Congress impliedly adopted the existing rule of adopting the broadest reasonable construction.” Id. at 1280. The Court rejected Cuozzo’s argument that “judicial or congressional approval of the broadest reasonable interpretation standard for other [USPTO] proceedings is irrelevant here because the earlier judicial decisions relied on the availability of amendment, and the AIA limits amendments in IPR proceedings.” Id.
Second, the Court approved the BRI standard for IPRs because “[e]ven if the broadest reasonable interpretation standard were not incorporated into the IPR provisions of the statute, the standard was properly adopted by PTO regulation.” Id. at 1282. The Court noted that §316 “expressly provide[s] the PTO with authority to establish regulations setting the ‘standards’ for instituting review and regulating IPR proceedings.” Id. (internal citation omitted). And the Court found that the adoption of BRI was a proper exercise of the USPTO’s new rule making authority under the familiar framework set forth in Chevron, U.S.A. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984).
The impact of Cuozzo
The long term impact of Cuozzo depends on the outcome of ongoing judicial and legislative activity related to this case specifically, and to post-grant USPTO review, including IPRs generally. A petition for en banc review of Cuozzo is currently pending. Regardless of the final outcome at the CAFC, a petition for review by the Supreme Court is likely given the importance of the issues. Additionally, two appeals asking for review of the USPTO’s decision to institute trial in a covered business method (CBM) review under the Administrative Procedures Act are pending at the CAFC. Versata Development Group v. SAP America, Inc., Appeal No. 14-1194; Versata Development Group v. Lee, Appeal No. 14-1145. The outcome of these appeals will likely have an impact on the appellate review of other post grant review processes, including IPRs. Finally, the Innovation Act introduced in the House, and the STRONG Patents Act of 2015 introduced in the Senate both seek to remove the BRI standard at the PTAB in favor of the “ordinary and customary meaning” standard used in district court litigation.
Procedural rules for post-grant review under the AIA are highly contentious because they can affect the balance of power between patent owner and challenger. While Cuozzo provides some initial guidance, considerable litigation will have to occur before we have clarity on these important issues.
Peter A. Jackman (www.skgf.com/peterjackman) is a Director and Miklos Gaszner is an Associate in the Biotechnology Industry Group at the Washington, DC-based intellectual property law firm Sterne, Kessler, Goldstein & Fox P.L.L.C. The views expressed herein are those of the authors and should not be attributed to former, present, or future clients or any employees of Sterne, Kessler, Goldstein & Fox P.L.L.C.