Supreme Court Will Address Two Key Patent “Inter Partes” Review Standards in “Cuozzo Speed Technologies” Case

Kaminski_Jeffri_LRFeatured Expert Contributor – Intellectual Property (Patents)

By Jeffri A. Kaminski, Partner, Venable LLP, with Leslie A. Lee, Associate, Venable LLP

In Cuozzo Speed Technologies v. Lee, the US Supreme Court will be deciding two important issues with respect to patent claim constructions in Inter Partes review (IPR) proceedings.  An IPR is a procedure instituted in the America Invents Act of 2012 (AIA) for challenging the validity of a United States patent before the United States Patent and Trademark Office (USPTO).  In Cuozzo the Court will resolve 1) what claim-construction standard should be used by the Patent Trial and Appeal Board (PTAB) in determining patent validity, and 2) whether the PTAB’s decisions are judicially reviewable.  PTAB is the entity within the USPTO that oversees IPR proceedings.  The case is set for oral argument on Monday, April 25.

Patent law has long accommodated two different standards for claim construction.  At the U.S. Patent and Trademark Office (USPTO), the claims are construed under the “broadest reasonable interpretation” standard.  The claims of an asserted patent are construed in district courts under the narrower Phillips standard, which interprets the words in a patent claim based on the “ordinary meaning of claim language as understood by a person of skill in the art.”

The rationale for the different standard at the USPTO is that the claims of a patent application or an unexpired patent may easily be amended while undergoing examination at the patent office.  As the U.S. Court of Appeals for the Federal Circuit recently explained in PPC Broadband, Inc. v. Corning Optical Communications RF, LLC, “[w]hile broadly construing claim language increases the likelihood that otherwise distinguishable prior art will render the claimed invention anticipated or obvious, the patentee can amend the claim language during prosecution—and narrow it if necessary—to clarify the scope of the invention.”  The court further explained that in dealing with patents that have already been granted, “[d]istrict courts, by contrast … seek out the correct construction—the construction that most accurately delineates the scope of the claimed invention.”

In the Cuozzo case, which was the first IPR challenge filed since the AIA put such proceedings in place, the PTAB applied the “broadest reasonable interpretation” standard.  The patent owner appealed institution of the IPR, based on the fact that the PTAB applied the incorrect standard.  Upon review at the Federal Circuit, the majority relied on 35 U.S.C. § 314(d) in finding that the decision to institute an IPR is not appealable, even after the conclusion of an IPR proceeding.  Writing for the majority, Judge Dyk further concluded that “[t]here is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years.”

Judge Newman dissented, arguing that the legislative intent for IPR proceedings was to substitute for invalidity review at the district courts, and argued that it cannot “serve as a surrogate for district court litigation if the PTAB does not apply the same law to the same evidence.” This view is further bolstered by the fact that amending claims in an IPR is rather difficult, and is not a matter of right. In fact, only a handful of motions to amend have been granted by the PTAB in an IPR.

The Supreme Court’s decision will have a significant impact on proceedings going forward.  While in many cases, the prior art will invalidate the claims of a challenged patent under either claim-construction standard, in the case of PPC Broadband, the Federal Circuit noted that the application of the proper claim-construction standard “is outcome determinative” because under the broadest reasonable interpretation, the PTAB’s conclusions were correct, but under the Phillips standard the prior art potentially did not invalidate the claims.  Further, in finding that the PTAB’s construction of some terms under the “broadest reasonable interpretation” were in fact too broad, the Federal Circuit refused to make any fact determinations as to the prior art under the proper construction. Instead, the Federal Circuit vacated the decision as to those claim terms.  Thus, if courts continue to use the “broadest reasonable interpretation” standard in IPRs, parties will need to conduct an in-depth analysis to propose the proper claim construction, and also provide detailed arguments as to why the prior art teaches the claim limitation under that construction.

But if the Supreme Court accepts Judge Newman’s comments regarding the IPR “surrogate,” matters would be greatly simplified for Petitioners.  Petitioners would no longer be concerned with proposing a claim construction in an IPR that may contradict one intended for district court.  Additionally, the application of the “broadest reasonable standard” at the PTAB has created an unusual practice involving patents that are about to expire. The PTAB has reasoned that since the claims of an expired patent cannot be amended, the appropriate standard is the narrower Phillips standard.  .  But for patents that will expire after a decision is made to institute IPR proceedings but before a final IPR trial decision, the PTAB has determined that it should first use the broadest “reasonable interpretation standard” in determining whether to institute IPR proceedings, and then the Phillips standard to make its final trial decision.  This situation has forced many patent challengers to define both standards in their petitions, and argue that the claims are invalid under either, or to argue that the claims are invalid under any reasonable interpretation.

This dual claim-construction standard has survived many changes in patent law, but the hybrid nature of IPR proceedings has certainly complicated its application. The Supreme Court’s decision will clarify for IPR petitioners and patent owners alike how they should move forward, but it may be up to Congress to ultimately solidify IPR’s true purpose.  For instance, a recently proposed amendment in Congress suggests an “off-ramp” for amending claims that takes the patent out of IPR proceedings and into regular examination process.  Such an amendment would certainly justify the “broadest reasonable interpretation” standard and place IPRs more heavily in the patent prosecution realm. But this proposal, along with others that would make claim amendments more of a matter of right, has not gained much traction in Congress. Until then, the dual goals of having the USPTO serve as a district court “surrogate” as well as a patent examining body will continue to be at odds.

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