Cuozzo Speed Technologies LLC v. Lee (2016)

By Kevin E. Noonan --

In its first pronouncement regarding the post-grant reviewing proceedings established by the America Invents Act ("AIA"), the Supreme Court ruled that the Patent and Trademark Office's positions on two of the law's provisions regarding inter partes review ("IPR") were correct.  First, the Court held unanimously that the USPTO properly applied the "broadest reasonable interpretation" standard for claim construction for IPRs.  Second, six members of the Court also agreed that the statute mandated that the decision to institute an IPR was not subject to judicial review.  Justice Breyer authored the decision of the Court, with Justice Thomas authoring a concurring opinion to voice his continued displeasure with judicial deference to administrative agencies under Chevron USA Inc. v. Nat'l Defense Council, Inc.  On the second question Justice Alito penned a dissent, which was joined by Justice Sotomayor.  This post will discuss the Court's first holding regarding the standard of review for claim construction; a related post will discuss the unreviewability of the Office's decision to institute an IPR in the first place (found in Section II of the opinion).

Section I of Justice Breyer's opinion provides a detailed review of patent examination and reexamination procedures, up to an including IPRs under the AIA.  This synopsis contains a highly simplified description of the invention (bordering on trivializing it) but then references an Appendix, which "offer[s] a less simplified (and more technical) description" of the invention.

Section III is directed to the claim construction standard used by the PTAB in deciding IPRs.  Cuozzo argued that the Office did not have the legal authority to issue its regulations using the "broadest reasonable interpretation" (BRI) claim construction standard.  But the Court found otherwise, that Congress gave the Office this authority is 35 U. S. C. §316(a)(4):  "a provision that grants the Patent Office authority to issue 'regulations . . . establishing and governing inter partes review under this chapter'" -- just like the Federal Circuit.  This conclusion was expressly based on the following rubrics from Chevron:  where a statute is clear, the agency must follow the statute, but where a statute leaves a "gap" or is "ambigu[ous]," the Court will "typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute."  Such a "gap" is found here, because "[n]o statutory provision unambiguously directs the agency to use one standard or the other."  In addition, "the statute 'express[ly] . . . authoriz[es] [the Patent Office] to engage in the process of rulemaking' to address that gap" in the Court's opinion, citing United States v. Mead Corp., 533 U. S. 218, 229 (2001).

The opinion addresses the dissent at the Federal Circuit:  that the Office has authority only to issue procedural rules under §2(b)(2)(A), citing Cooper Technologies Co. v. Dudas, 536 F. 3d 1330, 1335 (Fed. Cir. 2008).  But the Court believes § 316 expressly gives the Office rulemaking authority that authorizes using the BRI standard.  In interpreting these two parts of the Patent Act, the opinion distinguishes the language of § 2(b)(2)(A), which gives "the Patent Office authority to issue 'regulations' 'which . . . shall govern . . . proceedings in the Office'" (emphasis in opinion) with the statutory language of §316(a)(4), which gives the Office the authority to promulgate regulations "establishing and governing inter partes review."  According to the Court, "[t]he Circuit's prior interpretation of §2(b)(2)(A) cannot magically render unambiguous the different language in the different statute before us."

The opinion also addresses, and rejects, Cuozzo's argument (supported by certain amici) that Congress intended the IPR procedure to be adjudicatory in nature.  Instead, the Court states that "inter partes review is less like a judicial proceeding and more like a specialized agency proceeding," on the basis that petitioners need not have standing, citing Consumer Watchdog v. Wisconsin Alumni Research Foundation, 753 F. 3d 1258, 1261–1262 (Fed. Cir. 2014); the parties may settle yet the PTAB may continue to a decision; and the Office's capacity to intervene, as it did in this case, in later judicial review of the PTAB's decisions.  The opinion also notes the difference in the burden of proof in IPR (preponderance) versus at trial (clear and convincing evidence) as an indication that Congress did not intend an IPR to be a substitute for district court litigation.

The Court also was not persuaded that Congress changed the fundamental nature of the proceedings when it changed the name from "reexamination" to "review"; in the Court's view the essence of all these proceedings is to provide "a second look at an earlier administrative grant of a patent."  "Thus, in addition to helping resolve concrete patent-related disputes among parties, inter partes review helps protect the public's 'paramount interest in seeing that patent monopolies . . . are kept within their legitimate scope," said the Court, citing Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U. S. 806, 816 (1945).

Finally, the Court found nothing in "the statutory language, its purpose, or its history" that suggested Congress had contemplated the claim construction standard the PTAB should apply.  In reaching this conclusion, the Court rejected Cuozzo's contention that intent could be found in § 301(d), in mandating that the Office should "determine the proper meaning of a patent claim," in view of "a background of language and practices indicating that Congress designed a hybrid proceeding the Court found ambiguous statutory language regarding the "proper standard" of claim construction.  Accordingly:

The upshot is, whether we look at statutory language alone, or that language in context of the statute's purpose, we find an express delegation of rulemaking authority, a "gap" that rules might fill, and "ambiguity" in respect to the boundaries of that gap.  Mead Corp., 533 U. S., at 229; see Chevron U. S. A. Inc., 467 U. S., at 843.

This conclusion led the Court to consider whether, and conclude that, the regulation the Office has adopted is reasonable.  Given primacy of place is the effect that using the BRI standard protects the public from "[a] reasonable, yet unlawfully broad claim [that] might discourage the use of the invention by a member of the public."  The Court recognizes that "an examiner's (or reexaminer's) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it)" but that "use of that standard encourages the applicant to draft narrowly" (an outcome the Court, or at least Justice Breyer, clearly believes is desirable).  The opinion is equally clear regarding its basis for believing this outcome is desirable:  "[t]his helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim."  Moreover, the Court finds ample evidence of "past practice" before the Office applying the BRI standard, including in earlier reexamination proceedings and interferences (a position advocated by the Generic Pharmaceutical Association and friends as amici).  And the Court rejected Cuozzo's arguments that Congress intended IPRs to be different in kind from inter partes reexaminations (for many of the same reasons enunciated by the Court earlier in the opinion).  Importantly the Court also rejects the principal complaint by many commentators regarding the lack of the ability to amend claims that during ex parte examination provides the justification for using the BRI standard.  According to the Court, "[t]he process [] is not as unfair as Cuozzo suggests" because "[t]he patent holder may, at least once in the process, make a motion to do just what he would do in the examination process, namely, amend or narrow the claim" (and the opinion "counts" in favor of this "fairness" the opportunity to amend present during ex parte examination, seemingly content to ignore the basis for instituting IPRs, that the art presented was not considered during initial examination of the application that granted, improvidently or not, into the patent challenged in the IPR).  The opinion also elides the statistical evidence regarding the chimera that is the ability to amend claims in an IPR proceeding, saying "that question is not before us" (but "if not you, who?  And if not now, when?" is a fair question in response).  And finally, the Court is not disturbed by the issue of inconsistent outcomes between the PTAB and district court, saying "[t]his possibility [] has long been present in our patent system."

Lead PTAB Judge Michael Tierney remarked, at this year's BIO International Convention, that he believed cases where the standard of review would make a difference in the outcome of an IPR would be exceedingly rare.*  It has certainly been the experience of most patent practitioners that in certain cases before certain examiners the reach of the "broadest" reasonable interpretation can seem strained.  See, for example, In re Suitco Surface, Inc.  Perhaps the PTAB will be more inclined to grant motions to amend as it (and practitioners) become more experienced in IPR proceedings, and as the likelihood increases that such amendments may in fact recite patentable claims.  But what is clear is that the Court believes that the Office has properly exercised the authority it was given by Congress.  Left untested is the question of whether this particular exercise of authority contravenes the separation of powers between Article I courts (such as the PTAB) and Article III courts that has been raised in other cases, but this is a question most decidedly not before the Court in this case.

*"Will the PTAB be a Road Block for Biotech? Lessons Learned from the First Three Years of Inter-Partes Review and Future Prospects."

Cuozzo Speed Technologies LLC v. Lee (2016)
Opinion by Justice Breyer, joined as to Part II by Chief Justice Roberts and Justices Kennedy, Thomas, Ginsburg, and Kagan; concurring opinion by Justice Thomas; opinion concurring in part and dissenting in part by Justice Alito, joined by Justice Sotomayor

Comments

[Paul Cole]

During prosecution all too often "broadest reasonable interpretation" becomes "broad unreasonable interpretation". Hopefully in IPR a reasonably realistic standard is adopted. The gold standard, in all cases, is of course "correct interpretation".

[skeptical]

It is "known" that IPR does not equal "correct interpretation" because the Office DURING prosecution does not take the time to find that exact line and instead pushes to include more so that any "smudging" during litigation will still fall within the "correct" wherever that may actually be.

We are instituting a standard that guarantees that some patent rights will be sacrificed. By design.