United States Supreme Court
United States Supreme Court (Diego M. Radzinschi / National Law Journal)

Last week in Cuozzo Speed Technologies v. Lee, the U.S. Supreme Court largely refused to limit the power of the Patent Office to institute and regulate inter partes review proceedings. First, the Supreme Court held that parties generally may not appeal the decisions of the Patent Trial and Appeal Board (PTAB) regarding whether to institute inter partes review, at least barring a clear constitutional question or abuse of statutory authority. The court also affirmed the PTAB’s use in inter partes review of the “broadest reasonable construction” (BRC) standard, which compared to the standard used in district court litigation makes it easier for parties to challenge patent validity.

The Cuozzo case is typical of the many patent infringement disputes that have arisen since inter partes review was introduced nearly four years ago. Cuozzo Speed Technologies owns a patent covering a speedometer that indicates when the driver exceeds the speed limit, and in 2012 filed several patent infringement lawsuits against automakers and their suppliers. One of those defendants, Garmin, filed an inter partes review petition requesting, among other grounds, that claim 17 of Cuozzo’s patent be invalidated as obvious. The PTAB instituted review not only of claim 17, but also of claims 10 and 14, from which claim 17 depended. After construing the term “integrally attached” under the BRC standard, the PTAB found all three claims unpatentable.

Cuozzo appealed to the U.S. Court of Appeals for the Federal Circuit. Cuozzo first argued that the institution decision was unlawful because Garmin’s petition failed to challenge claims 10 and 14 “with particularity” as required by 35 U.S.C. Section 312. The Federal Circuit rejected this challenge because 35 U.S.C. Section 314(d) provides that the PTAB’s decision “whether to institute an inter partes review … shall be final and non-appealable.” Cuozzo also challenged the PTAB’s use of the BRC standard in inter partes review, arguing that the Phillips standard used by federal courts—i.e., “ordinary meaning … as understood by a person of skill in the art”—should apply instead. The Federal Circuit rejected that argument, too, holding that 35 U.S.C. Section 316(a) grants the Patent Office authority to issue “regulations … establishing and governing inter partes review,” and the Patent Office reasonably exercised that authority in selecting the BRC standard.

The Supreme Court granted certiorari on both issues, resulting in a flurry of “friend of the court” briefings. Cuozzo’s supporters included organizations representing intellectual property owners as well as pharmaceutical and biotechnology companies, who expressed general concerns regarding the lack of checks on the Patent Office and its ability to cancel patents. Supporters of the Patent Office included a collection of computer industry players such as Apple, Dell Computer, eBay, Netflix and Cisco Systems, as well as generic drug makers. As frequent targets of patent infringement suits, they stressed Congress’ objective of improving patent quality.

At oral argument, the justices focused most of their attention on the BRC standard, and how its use by the PTAB might result in inconsistent claim construction and invalidity outcomes for the same patent as between inter partes review and civil litigation. Chief Justice John Roberts, for example, noted that “it’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results.”

The court’s opinion, authored by Justice Stephen Breyer, affirmed the Federal Circuit’s judgment. The court first addressed the question of whether institution decisions are appealable, with two justices dissenting from this portion of the opinion. The court held that institution decisions are generally not appealable, but indicated that judicial review may be available if the institution decision implicates constitutional rights such as due process or is contrary to statute. The court observed that Cuozzo’s challenge to the underlying institution decision, even if framed as being extra-statutory, ultimately centered on the merits of the Patent Office’s decision, and thus could not be reviewed. In dissent, Justice Samuel Alito, joined by Justice Sonia Sotomayor, argued that the court’s holding ran against the strong presumption favoring judicial review, and that Section 314(d) should instead be found to prohibit merely interlocutory appeals.

The court next held unanimously that Section 316(a) provides the Patent Office sufficient authority to use the BRC standard in inter partes review. Seven of the justices reached that conclusion after following the court’s Chevron agency deference standard, while Justice Clarence Thomas relied simply on the statutory grant of authority. The court noted that inter partes proceedings differ from judicial proceedings in many ways, and that Congress did not clearly intend for any particular claim construction standard to be used by the PTAB. The court also found use of the BRC standard in inter partes review reasonable in light of the public interest in avoiding overly broad claims that “[tie] up too much knowledge,” the use of the BRC standard in various Patent Office proceedings for over a century, and the likely desire of the Patent Office to ensure consistency among its own proceedings. Nor is application of the BRC standard in inter partes review unfair, observed the court, as patent owners may seek to amend claims. To the extent the standard produces outcomes that are inconsistent with those in district court proceedings, “this possibility … has long been present in our patent system.”

The Supreme Court’s Cuozzo opinion is one in a series of recent decisions—including Bilski, Mayo and Alice—that make it easier to successfully challenge patent validity. The court appears concerned with the dangers to the public interest posed by “bad patents,” emphasizing that broad claims discourage the public’s use of patented inventions. Of course, much of the impact of the court’s decision now rests in the hands of the Federal Circuit, which reviews the PTAB’s application of the BRC standard, and can choose to accept the court’s apparent invitation to review institution decisions where challenged as being beyond the PTAB’s statutory authority.

Jeffrey Ware and Ewa M. Davison are litigation associates at Fenwick & West. David Tellekson is a litigation partner at the firm.