Of Patent Trolls and Hot Dog Stands -- The Supreme Court Oral Argument in Cuozzo Speed Technologies, LLC v. Lee

By Andrew Williams --

Earlier today, the Supreme Court heard oral arguments in the Cuozzo Speed Technologies, LLC v. Lee appeal (Supreme Court docket number 15-466).  The Court was considering two issues related to the recently implemented IPR proceedings from the Patent Trial and Appeal Board ("PTAB" or "Board").  The two questions presented were:

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.

This is, or course, the first opportunity the Supreme Court has had to consider these new proceedings, as well the Board's implementation of them.  And, as Justice Breyer pointed out near the outset, it is how you view these proceedings that will likely influence your answer to these questions:

[Y]ou could look at this new law as you [Cuozzo] were looking at it, as trying to build a little court proceeding.  If I thought it was just doing that, I would say you were right.  But there is another way to look at it.  And the other way to look at it . . . is that there are these things, for better words, let's call them patent trolls, and that the -- the Patent Office has been issuing billions of patents that shouldn't have been issued -- I overstate -- but only some. . . .  And so what we're trying to do with this process is to tell the office, you've been doing too much too fast.  Go back and let people who are hurt by this come in and get rid of those patents that shouldn't have issued. . . .  If it's that second purpose, then I would think, well, maybe this is right, what they [the PTAB] are doing.

And, not surprisingly, during the oral argument, the Justices appeared to be struggling with just what these proceedings are, and what the intent of Congress was in creating them.

The overwhelming majority of the time spent during oral argument was dedicated to the question of whether the Broadest Reasonable Interpretation ("BRI") standard for claim construction was the proper one for the Board to be applying in IPR proceedings.  And, even though the questions asked by the Justices during oral argument do not necessarily broadcast which direction they are leaning, it would appear that Chief Justice Roberts and Justice Breyer have diametrically opposed views on this question.  Justice Breyer gave away his bias when he suggested that the Patent Office has been issuing "billions" of bad patents.  This was further exemplified in a series of questions related to appeals from the Patent Office -- whether from initial prosecution or from a Final Written Decision in an IPR proceeding.  The example that Justice Breyer used superficially mirrored the Cuozzo patent.  Simply put, the Cuozzo patent claims technology directed to indicating speed limits at particular locations on a GPS unit.  A GPS receiver is used to track the location of a vehicle, and the speed limit indicator correlates the vehicle's position with a database containing the speed limit for that location.  As the database is accessed, the colored filter adjusts so that speeds above the legal speed are displayed in red, while legal speeds are displayed in white.  Justice Breyer got a laugh when he created his own hypothetical patent:

I apply for a patent because I have this thing that instead of putting red cellophane on the speedometer, I put purple cellophane on the speedometer.  It signals the presence of a hot dog stand.  All right. [Laughter] I -- I then try to patent it.  And they look at this patent and, no, absolutely not.

Of course, Justice Breyer was not accurately portraying Cuozzo's patent with this example, because it was not as simplistic as simply selecting a particular color for the indicator.  Instead, this example more betrays Justice Breyer's distrust of the Patent Office and the patents they have issued.  This, unfortunately, may also be a signal how he would decide the issue.

On the other end of the spectrum, Chief Justice Roberts seemed persuaded that IPR proceedings are an alternative to district court litigation, and as such, the rules should be as similar as possible in both forums.  For example, he questioned the Assistant to the Solicitor General regarding the Patent Office's position that the BRI standard is proper because it is the standard used in its other proceedings.  Picking up on a comment made earlier by Justice Ginsburg, Chief Justice Roberts noted that IPR proceedings are "a hybrid entity with characteristics of the PTO and the district court."  He continued: "So why -- why should we be so wedded to the way they do business in the PTO with respect to the broadest possible construction when the -- the point is not to replicate PTO procedures.  It's supposed to take the place of district court procedures."  More importantly, he observed that "it's a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results." And, finally, after discovering that the district court's interpretation of a claim is not binding on the Patent Office, and vice versa, Chief Justice Roberts complained: "It just seems to me that that's a bizarre way to conduct legal -- decide a legal question."

The remaining Justices that asked questions appeared to be struggling with how these IPR proceedings operated, and how they fit into the context of the Patent Office overall (not surprising, Justice Thomas did not ask any questions).  Again, the resolution of this struggle will likely impact the outcome of the case.  But at least Justice Sotomayor seemed to pick up on the fact that regardless of which particular standard is used, it will not be outcome determinative in the large majority of cases.  For example, after Cuozzo's counsel explained how a district court determines the plain and ordinary meaning of a claim term, Justice Sotomayor asked:

Aren't those tools used in determining the broadest -- the broadest reasonable reading, meaning how can the PTO decide what a broad reasonable reading is unless it looks at all those factors and decides that the specifications and all the other things don't cure, continue to provide ambiguity in the patent?

Justice Sotomayor appeared to point to the prosecution history as the potential source of this confusion.  Cuozzo's counsel noted that the Patent Office does not look to the prosecution history during initial examination -- because it obviously does not exist yet.  The implication appeared to be that the PTAB also does not look to the initial prosecution history.  However, the Assistant to the Solicitor General disabused the Justices of this impression.  He stated: "It's true in the initial examination context that the PTO does not use prosecution history, but it has expressly noted that it will use prosecution history in a proceeding like this the IPR -- because it's already in existence."  It will be interesting to see how the resolution of this question will influence Justice Sotomayor's thinking (and possibly the thinking of the Justices) on the outcome of the case.

A decision in this case is expected by the end of June.  At that time, we will report on the conclusion of the Court and any potential implications the decision will have on IPR and other post-grant proceedings before the PTAB.

Comments

[GrzeszDeL]

Justice Sotomayor's Mach Mining question was the high point of the hearing. I am indifferent about BRI, but I really hope that the SCotUS uses this opportunity to restore flexibility to the CAFC's too-rigid reading of § 314(d).

[Paul F. Morgan]

Best summary of the oral argument posted to date.

[skeptical]

GrzeszDeL,

Flexibility for the sake of itself is not a desired trait for statutory (not common) law domains.

Regarding "restore flexibility to the CAFC's too-rigid reading of § 314(d)" - the rigidity is NOT with the CAFC, but instead is in the blunt and direct writing itself (you seek to blame the wrong entity and then invite the wrong solution).

The rule of law is not (or should not) be a nose of wax... (to borrow a phrase)

[The Memory Motel]

"Justice Breyer was not accurately portraying Cuozzo's patent with this example, because it was not as simplistic as simply selecting a particular color for the indicator. "

Selecting a color is actually more complicated that Cuozzo's "innovation" (<-LOL), and might even be remotely "technical" if there was some teaching away from using the particular color or if the color was unexpectedly useful.

Cuozzo's claim has none of that. Kudos for Breyer for recognizing these claims as junk.

[Simon Elliott]

The proper standard in PTAB trials should stand alone and not depend on whether the PTO sometimes issues bad patents, any more than you change the proper standards for criminal conviction because a bad guy got off.

If the current procedure cannot properly distinguish good patents from bad, the solution doesnt have to lie in the standard, but the procedure. The rest of the world conduct oppositions with the right to amend, and it has worked well. Why does the PTO insist on BRI without a realistic right to amend the claims?