22 June 2016
On Monday, June 20, 2016, the United States Supreme Court issued a decision in Cuozzo Speed Technologies, LLC v. Lee, No. 15-446 addressing two issues specific to administrative trial proceedings before the US Patent and Trademark Office (USPTO): (1) the reviewability of decisions whether to institute inter partes review (IPR) proceedings and (2) the claim construction standard applied in IPR proceedings. The Court affirmed the US Court of Appeals for the Federal Circuit on both issues. First, the Court affirmed that Cuozzo’s attack of the decision whether to institute an IPR was not judicially reviewable, even after a final written decision. Second, the Court agreed with the Federal Circuit that the USPTO had authority to establish the “broadest reasonable interpretation” as the claim construction standard in its regulations governing inter partes review proceedings.
The appeal arises from the first-filed inter partes review petition. As relevant to the Court’s decision, the petition expressly argued that certain prior art references rendered claim 17 obvious. The petition did not expressly state that the same art rendered claims 10 and 14 obvious, which claim 17 incorporated by dependency. The USPTO’s Patent Trial and Appeal Board (PTAB) instituted trial on claims 10 and 14 based on the prior art cited against claim 17 and, in a final written decision issued at the conclusion of the proceeding, cancelled all three claims. In doing so, the PTAB applied the “broadest reasonable interpretation” of the claims, consistent with the relevant regulations promulgated by the USPTO. See 37 C.F.R. § 42.100(b).
Patent owner Cuozzo Speed Technologies, LLC appealed to the Federal Circuit, which affirmed the PTAB. Cuozzo then petitioned for and was granted certiorari on the reviewability of institution decisions and the propriety of the USPTO’s adoption of the broadest reasonable interpretation in inter partes review.
Judicial Reviewability of USPTO Decisions Whether to Institute an IPR
The Court held that the words of 35 U.S.C. § 314(d)—“The determination by the [USPTO] whether to institute an inter partes review under this section shall be final and nonappealable”—prohibited the appeal in this case. While recognizing a strong presumption that agency action is subject to judicial review, the Court found that presumption overcome. In particular, the text and purpose of the “No Appeal” provision, as well as construction of similar provisions governing reexamination, supported the conclusion that §314(d) foreclosed appellate review in this case.
The Court emphasized, however, “that [its] interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the [USPTO’s] decision to initiate inter partes review.” The Court explained that it “need not, and [did] not decide the precise effect of §314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond ‘this section,’” as that term is used in §314(d). The Court used examples of appeals it viewed as distinct from and not resolved by this case: failure to give “sufficient notice” resulting in a due process problem and cancellation of claims under §112 for indefiniteness, which is beyond the scope of inter partes review. Such appeals “may be properly reviewable” under either §319 or the Administrative Procedures Act (APA) as “contrary to constitutional right,” “in excess of statutory discretion” or “arbitrary and capricious.”
The Broadest Reasonable Interpretation Standard for Claim Construction
Turning to the issue of the proper claim construction standard, the Court deferred to the USPTO’s regulations. Congress, the Court said, gave the USPTO authority to issue rules “governing inter partes review” in 35 U.S.C. § 316(a)(4). According to the Court, the rule adopting the “broadest reasonable interpretation” standard of claim construction is such a rule. Because the Court found the rule to be reasonable, particularly in light of its long history of use before the USPTO, the rule was entitled to Chevron deference.
Cuozzo, several amici and Federal Circuit judges who dissented from the appellate court’s decision all believed that Congress intended inter partes review proceedings to be a replacement for district court litigation and, consistent with that intent, claims should be construed as they would be in district court. The Court disposed of this argument noting that inter partes review, while having some similarities to a district court proceeding, also had significant similarities to reexamination. The Court found no evidence that Congress intended the USPTO to apply any particular claim construction standard in IPRs. Accordingly, the Court considered whether the rule adopting the broadest reasonable interpretation as the claim construction standard was a reasonable exercise of agency authority. Finding it was, the Court affirmed.
The Dissenting Opinion
While the Court was unanimous in its affirmance on the issue of claim construction, Justice Alito dissented from the majority on the issue of reviewability in a separate opinion joined by Justice Sotomayor. In the dissent’s opinion, the “No Appeal” provision of §314(d) was meant to clarify that any appeal must be taken from the final written decision and that no appeal may be taken from a decision not to institute inter partes review. The majority’s interpretation of the statute (and its counterpart, §324(e), for post-grant reviews), said the dissent, could shield blatant violations of the statutory limits on the PTAB’s authority. Justice Alito said he would “take the Court at its word that today’s opinion will not permit the [USPTO] ‘to act outside its statutory limits’” in blatant ways but wondered “how to get there from the Court’s reasoning.”
Considerations for the Future in America Invents Act (AIA) Trial Proceedings
While the Court held that judicial review of the decision on institution was not available in the Cuozzo case, the Court did not foreclose judicial review in all circumstances. Future litigants in appeals from final written decisions in IPR proceedings may look to explore the limits of the bar on reviewability.