Supreme Court: 1) Upholds Use of Broadest Reasonable Interpretation during Inter Partes Review; and 2) Affirms that Inter Partes Review Institution Decisions are Not Appealable

On June 20, 2016, the Supreme Court issued a long awaited opinion in Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. ____ (2016). In its opinion, the Supreme Court squarely sided with the United States Patent and Trademark Office, approving of the Patent Trial and Appeal Board’s (“PTAB”) use of the broadest reasonable interpretation to interpret patent claims during inter partes reviews (“IPR”) The Supreme Court also affirmed that the PTAB’s decision to institute an IPR is not appealable, even where the PTAB considers prior art or arguments outside of the original IPR petition in deciding to institute an IPR. The Supreme Court unanimously decided the broadest reasonable interpretation issue, while a 6-2 vote supported the appealability issue.

IPR is a powerful alternative or supplement to patent litigation which permits a party to challenge a patent’s validity before the PTAB. In deciding the question of validity, the PTAB has consistently given patent claims their broadest reasonable interpretation—a standard of claim construction that differs somewhat from the “plain and ordinary meaning” analysis used during patent litigation in federal district courts. Further, the Director’s decision to institute an inter partes review (delegated to the PTAB) “shall be final and nonappealable.” 35 U.S.C. § 314(d).

The patent at issue, U.S. Patent No. 6,778,074 (“the ‘074 Patent”), was directed to the use of a GPS-based speedometer, in which an indicator on the speedometer provides information to the driver regarding local speed limits and “will show a driver when he is driving above the speed limit.” Garmin challenged the ‘074 Patent in a petition for IPR. Garmin argued that a specific combination of prior art rendered claim 17 of the ‘074 Patent invalid. The PTAB agreed with Garmin, instituting an IPR for claim 17 as well as for claims 10 and 14 on the same specific combination of prior art. In particular, the PTAB found that Garmin had “implicitly” challenged claims 10 and 14, as claim 17 depends from claim 14 which depends from claim 10. The PTAB ultimately found all three claims unpatentable, and the Court of Appeals for the Federal Circuit affirmed this finding.

On appeal, Cuozzo challenged both the use of the broadest reasonable interpretation during IPR as well as the PTAB’s consideration of prior art and arguments not expressly set forth in the petition. Cuozzo contended that IPRs, like federal district court litigation, should employ an “ordinary meaning” analysis rather than the broadest reasonable interpretation standard used during patent prosecution. Cuozzo also argued that the PTAB unlawfully instituted the IPR, and that the strong presumption of judicial review warranted the Court’s consideration of this alleged procedural misstep.

Turning first to the broadest reasonable interpretation standard, the Court rejected Cuozzo’s argument that the USPTO lacked the authority to use this standard of claim construction. Instead, the Court found that this standard was a “reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office.” Cuozzo’s procedural argument aside, the Court turned to the substance of Cuozzo’s argument that an “ordinary meaning” analysis should be used because IPR is adjudicatory in nature, i.e., more akin to federal district court litigation than patent prosecution. The Court rejected this perspective, noting that IPR is “less like a judicial proceeding and more like a specialized agency proceeding.”

The Court also rejected Cuozzo’s attempts to distinguish between IPRs and patent prosecution (which also employs a broadest reasonable interpretation standard of claim construction). According to the Court, the patentee can amend “at least once in the process” during an IPR “just as he would do in the examination process ….” Nor was the Court persuaded by the low number of amendments permitted to date in IPRs (5 out of 86) as “these numbers may reflect the fact that no amendment could save the inventions at issue, i.e., that the patent should never have issued at all.”

Brushing aside Cuozzo’s concerns that applying different claim construction standards between federal district courts and the PTAB could have potential inconsistent results, the Court found the potential for such results to be “inherent to Congress’ regulatory design.” In particular, there is already a different evidentiary burden between the two forums which, in of itself, could result in inconsistent rulings.

The Cuozzo decision confirms that the PTAB may continue with its congressional mandate to review the validity of patent claims in a forum that is faster and less expensive than federal district court litigation. It also provides valuable clarity to patentees and challengers alike that the broadest reasonable interpretation standard is here to stay, and that institution decisions are not appealable, at least with respect to issues within the purview of regulations concerning IPR. It remains to be seen whether the PTAB relaxes the amendment procedures so as to make that process viable. However, with the Supreme Court’s comment that the low number of permitted amendments may indicate that “the patent should never have issued at all,” it would seem that the PTAB has little motivation to adjust this process (unless Congress forces the issue in response to patent-owning stakeholders).