U.S. Federal Circuit Announces IPR Time Bar is Reviewable on Appeal

By: Tammy Dunn

Approximately one year ago, Osha Liang reported in its newsletter that the United States Court of Appeals for the Federal Circuit in Wi-Fi One LLC v. Broadcom Corp., Case No. 2015-1944, agreed to review the issue of whether patent owners in inter partes review proceedings (IPRs) can appeal decisions by the United States Patent & Trademark Office’s Patent Trial and Appeal Board (PTAB or “the Board”) regarding the timeliness of IPR petitions.  In the same decision, the Federal Circuit also agreed to review whether its prior ruling in Achates Reference Publishing Inc. v. Apple Inc., Case No. 14-1767, should be overruled.  The results are in, and a majority of the Federal Circuit judges has now held that PTAB time-bar determinations are judicially reviewable and has overruled Achates’s contrary conclusion.

Before diving into the decision, we begin with a little background refresher.  IPRs, which were created through the America Invents Act, offer a streamlined and relatively cost-effective way to invalidate patents than historically has been available in United States district court proceedings.  Unlike district court, where judges and juries make decisions regarding invalidity, panels of technically trained patent judges of the United States Patent & Trademark Office’s Patent Trial and Appeal Board (PTAB or “the Board”) decide patentability in IPRs.  Because IPRs most often result in at least some challenged patent claims being invalidated by the PTAB and invalid patent claims cannot be enforced, litigants facing potential liability for patent infringement have great incentive to avail themselves of these proceedings.  Likewise, litigants seeking to enforce their patents have significant incentive to avoid the institution of an IPR.

One way to avoid IPR institution is to show that the IPR petition was not timely filed.  According to 35 U.S.C. 315(b),

An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

The mark of the end of this one year time period is referred to as the IPR “time bar.”  After the time bar has passed a petitioner cannot challenge a patent in an IPR.  Most often, litigants decide to file an IPR request soon after being served with a complaint in district court, in which case the time bar does not become a significant issue of dispute.  The time bar becomes increasingly important, however, in situations where petitioners either have a history of working with other companies who already were sued, or where petitioners wait until much closer to the one-year deadline to make a decision to file an IPR petition.  In these closer situations, one day can make the difference between being able to and not being able to challenge a patent in an IPR; or, for a patent owner, the difference between a valid and an invalid patent.

The PTAB decides in its institution decision whether or not a petition is timely under 35 U.S.C. § 315(b).  The PTAB may institute IPR trial if a petition meets all other statutory requirements and is timely.  If a petition is not timely, however, the PTAB may not institute an IPR, even if all other requirements are met.

Given the risks at play, a natural question for litigants became what could be done if the PTAB incorrectly applied or failed to apply the IPR time bar?  The Federal Circuit answered this question, at least for the time being, in Achates, holding that PTAB decisions on the time bar are part of the institution decision and, therefore, are not appealable.  After Achates was decided, however, the Supreme Court decided Cuozzo Speed Technologies LLC v. Lee, 136 S. Ct. 2131 (2016).  Though the majority of the Supreme Court justices agreed that institution decisions are largely not reviewable on appeal, the majority also cautioned that its ruling did not “categorically preclude review of a final decision” or “enable the agency to act outside its statutory limits.”  The Court further warned if PTAB exceeds its statutory authority or violates due process, “such ‘shenanigans’ may be properly reviewable.”

As reported last year, the patent owner in Wi-Fi One v. Broadcom argued  that Cuozzo called into question the Achates holding and persuaded the Federal Circuit to review en banc its own decision denying judicial review of a PTAB institution decision that found the time-bar did not apply.

In a split decision, the Federal Circuit in Wi-Fi One concluded that time-bar determinations under 35 U.S.C. 315(b) have nothing to do with the types of non-reviewable determinations that Cuozzo was concerned with.

The majority opinion was written by Judge Reyna, and joined by Chief Judge Prost, and Judges Newman, Moore, O’Malley, Wallach, Taranto, Chen, and Stoll.  The majority began its analysis by emphasizing the “strong presumption” favoring judicial review of administrative actions and announcing that it would abdicate judicial review “only when Congress provides a ‘clear and convincing’ indication that it intends to prohibit review.  Op. at 14-15.  The court then analyzed the Cuozzo decision and concluded that the Supreme Court’s holding in that case “strongly points toward unreviewability being limited to the Director’s determinations closely related to the preliminary patentability determination or the exercise of discretion not to institute [under 35 U.S.C. 314(a)].”  Op. at 18.  Compliance with the timeliness requirement of 315(b), according to the majority, “has nothing to do with the patentability merits or discretion not to institute;” therefore, the rationale in Cuozzo that justified the non-reviewability of such decisions does not apply to time-bar decisions.  Op. at 19.

The court also emphasized that the applicability of the IPR time bar is also “not ‘some minor statutory technicality.’”  Op. at 19, citing Cuozzo, 136 S.Ct. at 2140.  “The time bar is not merely about preliminary procedural requirements that may be corrected if they fail to reflect real-world facts, but about real-world facts that limit the agency’s authority to act under the IPR scheme.”  Op. at 19.  Rather, the Federal Circuit recognized the timely filing of a petition under § 315(b) as a condition precedent to the PTAB’s authority to act, which sets limits on the PTAB’s statutory authority.  The court concluded that because the statutory scheme as a whole demonstrates that §315 is not “closely related” to the institution decision as addressed in §314(a), then §315 is therefore not subject to § 314(d)’s bar on judicial review. Op. at 20.  As such, the court found no clear and convincing indication that Congress intended to bar judicial review of § 315(b) time-bar determinations.  Because the time bar determination is a statutory limit on the PTAB’s authority, and enforcing statutory limits on an agency’s authority to act is “precisely the type of issue” courts have historically reviewed, the court held that time-bar determinations under 315(b) are reviewable.

In a concurring opinion, Judge O’Malley agreed with much of the reasoning of the majority as well as its conclusion that time-bar determinations are not exempt from judicial review; however, wrote separately because in her view, the question presented on appeal was much simpler than the majority’s analysis implies.

Judges Hughes, Lourie, Bryson, and Dyk filed a dissenting opinion, strongly disagreeing with the majority’s analysis that, in their views, improperly limited the prohibition of judicial review as well as contradicted the Supreme Court’s construction of applicable statutory language in Cuozzo.

Now that we have this decision from the Federal Circuit, time will tell whether Broadcom, the original petitioner in the underlying IPR, tries to seek Supreme Court review and if the Supreme Court agrees to review this decision.  Meanwhile, we can anticipate more and more appeals filed questioning PTAB time-bar determinations, as the consequences of an improper determination can be significant.

Osha Liang will continue to monitor this case and will report on significant future developments, if any.