U.S. Supreme Court Weighs in on Claim Construction and on Appeals of USPTO Decisions to Institute Inter Partes Reviews

By: Jonathan P. Osha







On Monday, June 20, 2016, the U.S. Supreme Court issued its decision in Cuozzo Speed Technologies v. Michelle Lee (“Cuozzo”).  In this important decision, the Court considered two aspects of the recently enacted law (the Leahy-Smith America Invents Act, or “AIA”) that created the “inter partes review” and “post grant review” processes at the U.S. Patent and Trademark Office (USPTO).  The first aspect was whether the AIA insulates a decision by the USPTO to institute an inter partes review from review by a court of appeal.  The second aspect was whether the rule-making authority given to the USPTO by Congress permits the USPTO to apply the broader “broadest reasonable interpretation” (“BRI”) claim construction standard rather than the narrower “ordinary meaning as would be understood by a person skilled in the art” (“ordinary meaning”) standard that is applied by the courts.  On the facts of this case, the Supreme Court answered both of these questions in the affirmative, thus maintaining the status quo and reaffirming the USPTO’s authority to regulate the new post-grant processes.

Review of the institution decision

The Leahy-Smith America Invents Act (“AIA”) created the inter partes review (“IPR”) process to provide a new means by which a third party can request the USPTO to reconsider the validity of claims of an issued patent over prior art.  The AIA provides that an IPR may be commenced (“instituted”) only if, after consideration of a petition filed by the third party and any response thereto filed by the patent owner, the Director of the USPTO determines that there is a reasonable likelihood the petitioner would prevail with respect to at least one of the claims challenged in the petition.  35 U.S.C. §314(a).  If an IPR is instituted and not otherwise dismissed, the USPTO is required to issue a Final Written Decision that determines the validity of any claim challenged by the petitioner.  The Final Written Decision may then be appealed to the courts by any party to the IPR.  35 U.S.C. §319.

While the ability to appeal the Final Written Decision is clear, at issue in Cuozzo was whether the initial decision by the USPTO to institute the IPR is itself subject to appeal.  On the surface the answer to this question would seem to be a clear “no,” because appeal of the institution decision is explicitly forbidden by the AIA:

35 U.S.C. §314(d) No Appeal. The determination by the Director whether to institute an inter partes review under this section shall be final and not appealable.

However, in Cuozzo, the Director determined to institute an IPR on grounds not specifically mentioned in the petition.  Hence a question was raised as to whether, by instituting an IPR on grounds not specifically mentioned in the petition, the USPTO had exceeded the authority granted to it under the AIA. This question was appealed first to the Court of Appeals for the Federal Circuit, which found that the appeal of the institution decision was barred by §314(d).  The Supreme Court agreed, but was careful to limit its decision to the facts of this case and cases like it:

We conclude that [Section 314(d)], though it may not bar consideration of a constitutional question, for example, does bar judicial review of the kind of mine-run[1] claim at issue here, involving the Patent Office’s decision to institute inter partes review.

Clarifying further, the Supreme Court explained,

We emphasize that our 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 Patent Office’s decision to initiate inter partes review. See §314(d) (barring appeals of “determinations . . . to initiate an inter partes review under this section” (emphasis added)). This means that we need not, and do 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.”

The narrowness of this aspect of the decision was underscored by the Supreme Court’s decision on June 27, 2016, to vacate and remand an earlier decision by the Federal Circuit which had found that judicial review of a decision to institute an IPR is barred even when the petition was filed more than one year after one of the petitioners had been sued.[2]  Thus, the Federal Circuit will now have to determine, applying the logic of the Cuozzo decision, the breadth of the appeal bar under §314(d) on a different set of facts.

The standard for claim construction during post-grant proceedings

The USPTO, during examination of a patent application, interprets claims under the “broadest reasonable interpretation” (“BRI”) standard.  One commonly-cited reason for using this relatively broad interpretation is that, during examination, the applicant for patent has the opportunity to make narrowing amendments to the claims if the interpretation taken by the USPTO is too broad to obtain allowance.  Hence, the BRI standard, when applied during examination, purports to encourage clarity and specificity of claim language which, in turn, benefits the public by helping to ensure that the scope of the patent right is clear.   Courts, on the other hand, when evaluating patent claims in litigation (where claims cannot be amended) traditionally apply the “ordinary meaning” standard, meaning that claims are interpreted as they would be understood by a person of skill in the art.  Most practitioners would agree that claims typically are construed more narrowly under the “ordinary meaning” standard than under the BRI standard.

As noted above, the AIA created new processes for challenging the validity of patents after grant.  The AIA itself did not specify which claim construction standard should be used.  The USPTO, in its implementing regulations, chose the BRI standard.  37 CFR §42.100(b) (A claim should be given “its broadest reasonable construction in light of the specification of the patent in which it appears.”)  Cuozzo, on appeal, argued that the USPTO lacked the legal authority to issue this regulation.  Both the Federal Circuit and the Supreme Court disagreed, finding that issuance of this regulation was within the scope of authority granted to the USPTO under the AIA.

The primary argument against use of the BRI standard during post-grant processes is that these processes were intended to be alternatives to litigation, are adjudicatory in nature, and thus should use the same standard as is used by the courts.  Indeed, there is legislative history associated with the AIA that supports the argument that IPR was intended to be a quicker and cheaper alternative to litigation.  In response to this argument, the Supreme Court noted that IPR is not litigation but rather is a “hybrid” proceeding created by Congress.  Congress could have defined the proper claim construction to be used in this proceeding if it had wished to do so.  It did not.  To the contrary, Congress expressly delegated rule-making authority to the USPTO.  Thus, the Supreme Court found the regulation applying the BRI standard to be a reasonable exercise of that rule-making authority.  The Court reached this finding despite the fact that the patent holder has no ability to amend claims as a matter of right during IPR (and very few motions to amend have been granted).

With regard to the various policy arguments presented by both the parties and amici, the Court noted that by finding the use of the BRI standard to be within the rulemaking authority of the USPTO, the Court does not and need not reach the question of what standard would in fact be best:

Cuozzo and its supporting amici offer various policy arguments in favor of the ordinary meaning standard. The Patent Office is legally free to accept or reject such policy arguments on the basis of its own reasoned analysis. Having concluded that the Patent Office’s regulation, selecting the broadest reasonable construction standard, is reasonable in light of the rationales described above, we do not decide whether there is a better alternative as a policy matter. That is a question that Congress left to the particular expertise of the Patent Office.

[1] “Mine-run” is an expression meaning unexceptional or not special.

[2] The AIA precludes institution of an IPR when the petition is filed more than a year after the petitioner was sued.