By Andrew Williams --
On March 4, the Supreme Court announced that the Cuozzo Speed Technologies, LLC v. Lee appeal would be argued on April 25, 2016 (the last week of oral hearings for the October Term 2015). As we reported previously, the Supreme Court granted certiorari in this case to address two questions:
1. Whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.
2. Whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board's decision whether to institute an IPR proceeding is judicially unreviewable.
Petitioner Cuozzo filed its merits brief on February 22, 2016, followed by fifteen amicus/amici briefs filed by February 29, 2016 in support of petitioner or neither party. At least three amicus/amici briefs were subsequently filed on Monday, March 7 (including by the IPO and the AIPLA). Respondent's merits brief is due later this month, with the possibility of amicus briefs in support of respondent to follow. Interestingly, of the first fifteen filed amicus/amici briefs, only five addressed the second question (and only two solely addressed the second question). This post will examine the second question, and the positions expressed in these five amicus briefs.
As a review, Congress established the new post-grant review proceedings in the Leahy-Smith America Invents Act ("AIA), at least partially in response to the concerns that the Patent Office was issuing too many invalid patents. The AIA conferred authority on the Director to institute IPR proceedings at 35 U.S.C. § 314(a):
Threshold. – The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.
The Director has delegated this responsibility to the Patent Trial and Appeal Board (PTAB or Board). Once instituted, the proceedings progress, culminating in a final written decision in which either some or all of the claims are cancelled or the patent emerges unscathed. Congress provided that any party dissatisfied with the final result could appeal the decision directly to the Federal Circuit. 35 U.S.C. § 319. At the same time, the AIA explicitly precluded review of decisions to institute: "No appeal. – The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." 35 U.S.C. § 314(d). It is the scope of this unreviewability provision that is at issue in Question 2.
In the Federal Circuit Cuozzo case, the Court held that the statute barred any review related to institution, even when it is contrary to the requirements outlined by the statute. Specifically, in this case, the Board instituted review of a patent on grounds not specifically identified in the petition. Instead of adopting the grounds presented in the petition, the Board recombined art found therein to craft its own obviousness ground of unpatentability. The Federal Circuit held that § 314(d) prevented its review of this action by the PTAB. However, the Court did not stop there, indicating that even if the Board went beyond its statutory authority in its institution decision, such action would not be appealable. This has been borne out by subsequent cases, in which issue such as whether a petition is time barred or whether all real parties in interest have been identified have been deemed unreviewable by the Federal Circuit. In fact, the only situation in which the Court has reviewed decisions outside of the merits of the case has been in the CBM context. In Versata Dev. Group, Inc. v. SAP Am., Inc., 793 F.3d 1306 (Fed. Cir. 2015), the Federal Circuit reviewed the decision whether a patent is properly a covered business method patent, or whether it claims a "technological invention," because (according to the Court) these issues go to the Board's ultimate authority to invalidate.
The Biotechnology Innovation Organization (BIO) and the Association of University Technology Managers (AUTM) Brief
The BIO and AUTM brief alleged that the Federal Circuit had "abdicated its judicial-review responsibilities" in the Cuozzo decision and its progeny. They referred to these ancillary questions as the "who," "what," and "when" of IPRs. A decision on any of these issues, the argument goes, is not a determination whether to institute, and therefore review should not be barred by § 314(d). Instead, the amici asserted that there is a reading of the provision that fulfills the statutory purpose while preserving meaningful judicial review -- that the only bar on challenges should be on the question whether there is or is not a reasonable likelihood that the petitioner would prevail with respect to at least one claim challenged in the petition. As support, they point to the language "under this section" in the statutory provision -- and if looking "under" § 314, the only issue that cannot be reviewed is the threshold determination as found in § 314(a). The other questions are found outside this section.
The ultimate problem with this abdication by the Federal Circuit, according to BIO and AUTM, is that "[t]he absence of review has left PTAB decision-making arbitrary, ad hoc, panel-dependent, and unpredictable." This is exacerbated by the fact that there are very few precedential decisions, and the informative papers from the Board are not considered to be binding authority. The ultimate problem is that "because of the PTAB's erratic, unpredictable, and unreviewed application of that provision, innovators lack any reasonable certainty about whether their valuable intellectual property remains exposed to PTAB proceedings."
The New York Intellectual Property Law Association Brief
One of the themes that flowed through almost all of the briefs on this issue was that the Supreme Court "applies a 'strong presumption' favoring judicial review of administrative action," citing a Supreme Court case from last year, Mach Mining, LLC v. E.E.O.C., 135 S.Ct. 1645 (2015). That case continued, stating that an "agency bears a 'heavy burden' in attempting to show that Congress 'prohibited all judicial review' of the agency's compliance with the legislative mandate." The New York Intellectual Property Law Association's brief also cited Lindahl v. OPM, 470 U.S. 768 (1985), for the proposition that "[e]ven statutory language that 'plausibly can be read as imposing an absolute bar to judicial review' does not overcome the 'usual presumption favoring judicial review of administrative action' if there is another natural reading of the statute that permits some level of review." Therefore, according to the argument, the only issue that should be unreviewable is the decision to institute itself, not the ancillary issues that might need to be decided at the institution stage.
The Intellectual Ventures Management LLC Brief
The section of the Intellectual Ventures amicus brief dealing with Question 2 framed the issue as the Federal Circuit rule foreclosing judicial review undermines Congress's careful and balanced design. This rule, according to amicus, "undermines the integrity of the statutory scheme and threatens to distort the IPR process into an inefficient, unpredictable free-for-all." The brief identifies a laundry list of statutory requirements that this rule allows the PTAB to ignore: (1) earliest possible timing (because IPRs can only be filed nine months after grant of a post-AIA patent), (2) petition requirements, (3) time bar for earlier-filed civil action, (4) time bar for infringement defendants, (5) joinder limitation, and (6) estoppel. In other words, "[t]hey become guidelines for the agency to follow only when it feels like it." The end result is the encouragement of gamesmanship, "turning IPRs into a kind of Wild West system of patent invalidation where no patent or district court victory is ever truly safe."
The Sightsound Technologies, LLC Brief and the Medtronic, Inc. Brief
Finally, the two briefs that deal solely with Question 2 have something else in common. They both have cases pending at different stages that have been impacted by the outcome in the Cuozzo case. Therefore, these briefs serve to highlight the real-world implications of the Federal Circuit's decision.
The case involving Sightsound is very similar to the Cuozzo case itself. The petitioner, in this case Apple, filed a CBM patent review against one of Sightsound's important patents. The PTAB rejected all but one anticipation ground found in the petition, but devised its own obviousness rejection, combining the main reference with "twelve disparate references relating to CompuSonics." According to the brief, "the Board claimed 'discretion' to posit, initiate, and conduct this review sua sponte -- a discretion that the Board has explicitly claimed not to have in other proceedings." The ultimate problem, according to Sightsound, was that in the limited time for the CMB to proceed, they never fully understood the position of the Board until the Final Written Decision. And, to add insult to injury, the Board rejected the anticipation challenge. Therefore, all of the grounds found in the original petition were rejected, but the ground put together by the Board sua sponte invalidated the patent. The Federal Circuit relied on Cuozzo to refuse to hear the appeal.
In the Medtronic case, amicus requests that the Supreme Court not include broad language in its decision (regardless of which way it decides) that would suggest that the Federal Circuit lacks jurisdiction to review post-institution decisions related to the termination of IPR proceedings. In this case, Medtronic had acquired another party (Cardiocom) as a wholly-owned subsidiary, which itself had been sued by Bosch. Medtronic was also independently concerned about Bosch's patents, so it filed IPR petitions against the patents, but also identified Cardiocom and their relationship. However, based on previous guidance from the Board, Medtronic did not list Cardiocom as a real-party-in-interest. The Board instituted over Bosch's objections on this issue, but on the eve of the oral hearing, that decision was reversed. The PTAB decided that Cardiocom was a real-party-in-interest, and since it wasn't classified as such in the petition, it terminated the proceedings. And, because Cardiocom was not time-barred, Medtronic could not refile. Medtonic is currently seeking relief from the Federal Circuit and a district court, but so far has been unsuccessful, in part because the Federal Circuit views this issue as tied to institution (even though it occurred after institution).
We will continue to preview the Supreme Court Cuozzo case leading up to its April 25 oral hearing date.
It seems strange not to simply distinguish between a normal refusal of interlocutory appeal of the institution of a proceeding [especially one with a time limit] versus an entire bar of any challenge to the legality of the proceeding even after a final decision in the proceeding. No doubt it was the former that is intended by both Congress and the Fed. Cir. even if not clearly expressed. The latter is demonstrated by the Fed. Cir. twice accepting legal challenges to the institution validity of CBM proceedings from their final decisions even though the same appeal denial statute applied.
Posted by: Paul F. Morgan | March 13, 2016 at 02:02 PM
P.S. Does not Cuozzo, to even have valid standing here, need to present an effective argument as to what specific statute or regulation was clearly violated by the institution of his IPR? I.e., not just argue the interpretation of a PTO regulation implementing it's IPR statute, since for that should not the PTO get Chevron deference?
Posted by: Paul F. Morgan | March 13, 2016 at 04:01 PM