In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 (Fed. Cir. 2015)

By Samantha Leiner

Facts:  In 2002, Giuseppe A. Cuozzo applied for a patent covering a speedometer that shows a driver when he is driving above the speed limit.  Essentially, the invention encompasses a white speedometer needle that turns red when it passes under a translucent piece of red glass (or equivalent, say red cellophane).  If you attach the piece of red material to a speedometer beginning at 65 mph, then the white needle will look red when it passes that speed.  The invention includes attaching the red glass to a rotating plate, attaching the plate to the speedometer, connecting the plate to a GPS receiver, and entering onto a chip or a disk all the speed limits on all the US roads.  Thus, the GPS receiver can signal where the car is, the chip or disk can signal the speed limit at that location, and the plate can rotate to the right number turning the white needle to red, signaling to the driver that he or she is going over the speed limit.  The PTO granted the patent in 2004.  Giuseppe assigned the patent to the current petitioner, Cuozzo Speed Technologies, LLC.

In 2012, Garmin filed a petition seeking inter partes review (IPR) of the Cuozzo Patent’s 20 claims.  Garmin alleged claim 17 was obvious in light of 3 major patents (the Aumayer patent, Patent No. 6,633,811; the Evans patent, Patent No. 3,980,041; and Wendt patent, Patent No. 2,711,153).  The Board agreed to reexamine claim 17, as well as claims 10 and 14 because, even though Garmin did not expressly challenge claims 10 and 14 on the same obviousness ground as claim 17, the Board believed “claim 17 depends on claim 14 which depends on claim 10,” and therefore, Garmin had “implicitly” challenged claims 10 and 14 on the same prior art. The Board reasoned that anyone with more than an “ordinary skill” and “ordinary creativity” – could have taken the approach in the Aumayer patent and applied it to the Evans and Wendt patents.  The Board denied Cuozzo’s proposed amendments to the claims because it believed the amendments would not cure the obviousness issue.  The Board canceled claims 10, 14, and 17.

Cuozzo appealed to the Fed. Cir. and argued the PTO improperly instituted the IPR because Garmin had not challenged claims 10 and 14 “with particularity” as the statute requires for petitions. § 312(a)(3).  Cuozzo further argued the Board improperly used the “broadest reasonable construction” standard set forth in the PTO’s regulations (37 C.F.R. § 42.100(b)), when it should have applied the standard courts normally use when judging a patent’s validity (the “ordinary meaning [of the claims] . . . as understood by a person of skill in the art”). Phillips v. AWH Corp., 415 F.3d 1303, 1314 (Fed. Cir. 2005).  A divided panel of the Fed. Cir. rejected both arguments.  First, the majority pointed out that § 314(d) made the decision to institute an IPR “nonappealable.”  Second, the majority affirmed the application of the “broadest reasonable construction” standard because the regulation is reasonable, and a lawful, exercise of the PTO’s statutorily granted rulemaking authority.

Issues:  The Court looked at two of the issues presented the Fed. Cir.: (1) Whether § 314(d) precludes a court from reviewing if the PTO wrongly decided to institute IPR, when it did so on grounds not mentioned by the third party’s request for review; and (2) Whether § 316(a)(4) authorizes the PTO to issue a regulation that states the Board, in an IPR, must use a “broadest reasonable construction” standard to determine the validity of the reviewed patent’s claims.

Holding: The Court affirmed the Fed. Cir.’s opinion that the PTO’s decision to institute IPR is nonappealable based on § 314(d), and that § 316(a)(4) authorizes the PTO to use the regulation declaring the Board must use a “broadest reasonable construction” standard when determining validity of patents in IPR.

Analysis:  The Supreme Court majority rejected Cuozzo’s argument that the PTO’s decision to institute the IPR is appealable because the PTO unlawfully reviewed claims that were not stated “with particularity.”  First, the Court rejected the above argument because the statute states “determination by the [PTO] whether to institute [IPR] under this section shall be final and nonappealable.” § 314(d).  Second, the Court rejected Cuozzo’s above argument because, even though § 312 states a petition must be plead with particularity, § 314(d)’s language “must, at the least, forbid an appeal that attacks a ‘determination . . . whether to institute’ review by raising [the] kind of legal question” if the PTO should have only heard the claims that were plead with particularity or can hear any claims that “rise and fall” with a pleaded claim.   Third, the Court rejected the above argument because holding otherwise would be contrary to congressional intent of passing § 314(d).  The Court stated Congress specifically gave the PTO power to revisit earlier patent grants.  The Court doubted Congress intended to grant the PTO this power if it thought the PTO’s final decision could be undone by a minor statutory technicality related to the decision to institute IPR.   Further, the Court determined the existence of similar provisions in this, and related patent statutes reinforces its conclusion.  See §319 (limiting appellate review to the “final written decision”); §312(c) (2006 ed.) (repealed) (the “determination” that a petition for IPR “raise[s]” a “substantial new question of patentability” is “final and non-appealable”); see also §303(c) (2012 ed.); In re Hiniker Co., 150 F. 3d 1362, 1367 (Fed. Cir. 1998).

The Court majority then looked at and rebutted Alito’s dissent, as well as the Fed. Cir. dissent.  The dissent would limit the “No Appeal” provision to interlocutory appeals, making the court free to review the decision to institute an IPR in the context of the PTO’s final decision.  Post, at 1, 5 (ALITO, J., concurring in part and dissenting in part); In re Cuozzo Speed Tech., LLC, 793 F. 3d, at 1291 (Newman, J., dissenting).  The majority rejected this interpretation of § 314(d) because the Administrative Procedure Act already limits review to final agency decisions (5 U.S.C. § 704) and the decision to institute an IPR is a “preliminary” decision, not a final one.  Additionally, the PTO’s decision to deny a petition to institute IPR is discretionary.  See § 701(a)(2); §314(a) (no mandate to institute review).  The dissent argued it’s approach is “familiar practice,” and is consistent with other areas of law.  However, the majority reasoned the kind of initial determination here – “that there is a ‘reasonable likelihood’ that the claims are unpatentable on the grounds asserted” – are similar to decisions in other contexts where the Court has held to be unreviewable.    The Court majority then argued even though there is a strong presumption in favor of judicial review, the presumption may be overcome by “‘‘clear and convincing’’ indications, drawn from ‘specific language,’ ‘specific legislative history,’ and ‘inferences of intent drawn from the statutory scheme as a whole,’ that Congress intended to bar review.” Block v. Community Nutrition Institute, 467 U. S. 340, 349–350 (1984).  The majority believes the standard from Block is met here.  The dissent disagreed and pointed to Lindahl v. Office of Personnel Management, 470 U. S. 768 (1985) to support its view that, in light of this presumption, § 314(d) should be read to permit judicial review of any issue bearing on the PTO’s preliminary decision to institute IPR.  The Supreme Court in Lindhal held that a statute that makes decisions from an agency “final,” “conclusive,” and “not subject to review,” barred a court from revisiting the factual underlay of the determinations but allowed review when the agency “substantially depart[ed] from important procedural rights.”  The majority rejected the argument saying their interpretation is in accords with Lindhal because the statute states the decision is final and nonappealable.

The Court limited its interpretation of § 314(d) so it applies “where the grounds for attacking the decision to institute [IPR] consist of questions that are closely tied to the application and interpretation of statutes related to the [PTO’s] decision to initiate [IPR].” See §314(d).  The Court emphasized it is not, and does 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.’” Cf. Johnson v. Robison, 415 U. S. 361, 367 (1974); Traynor v. Turnage, 485 U. S. 535, 544–545 (1988).

The Court majority rejected Cuozzo’s argument that the PTO lacked the “legal authority” to issue a regulation requiring the PTO, when conducting an IPR, to give a patent claim “its broadest reasonable construction in light of the specification of the patent in which it appears,” for many reasons. 37 CFR §42.100(b).  Section 316(a)(2) grants the PTO authority to issue “regulations . . . establishing and governing [IPR] under this chapter.” §316(a)(4).

First, the Court majority interpreted Congress’ grant of rulemaking authority to the PTO in light of Chevron U.S.A., Inc. v. natural Resources Defense Council, Inc., 467 U.S. 837 (1984).  The Court in Chevron U.S.A. held when a statute is clear, the agency must follow the statute.  Id. at 842-843.  However, where a statute leaves “gaps” or is “ambiguous,” the court typically interprets it as granting the agency leeway in enacting rules and regulations that are reasonable in light of the text, nature, and purpose of the statute.  United States v. Mead Corp., 533 U.S. 218, 229 (2001); Chevron U.S.A., Inc., 467 U.S. at 843.  Here, the statue creates such a gap because the statute does not contain a rule regarding what standard the PTO must use.  Additionally, the statute even expressly grants the PTO the authority to issue rules and regulations “governing [IPR].” § 316(a)(2).  The dissent in the Fed. Cir. and Cuozzo both believed other “tools of statutory interpretation,” such as INS v. Cardoza-Fonesca, 480 U.S. 421, 432, and n. 12 (1987), lead to a conclusion Congress did not intend to impart rulemaking authority to the PTO.  The Court majority held § 2(b)(2)(A) does not contain the Circuit’s claimed limitation to proceedings, nor is its language the same at § 316(a)(2).  Section 2(b)(2)(A) grants the PTO the authority to issue regulations, “which . . . shall govern . . . proceedings in the Office,” but the statute before us, §316(a)(4), does not refer to “proceedings” but more broadly to regulations “establishing and governing [IPR].” 

Next, Cuozzo argued the Court must review the purpose of IPR, which, in Cuozzo’s view, is to modify the previous reexamination procedures and to replace them with a “’trial, adjudicatory in nature.’”  Cuozzo pointed out a decision to cancel a patent normally has the same effect as a district court’s determination of a patent’s invalidity.   Therefore, according to Cuozzo, Congress’ intended that IPR was designed as a “surrogate for court proceedings,” therefore it would also be Congress’ intent that the agency use the same claim construction standard as the district courts.   The Court majority reasoned the problem with Cuozzo’s argument is that an IPR is more like a specialized agency proceeding, and less like judicial proceedings because parties who initiate the IPR need not have a concrete stake in the outcome nor constitutional standing to bring a petition.  Additionally, challengers do not need to remain in the proceedings.  Further, the PTO may intervene in judicial proceedings regarding its final IPR decision to defend it position.  The burden of proof is different in an IPR than in district courts: in an IPR, the challenger (or the PTO) must establish unpatentability “by a preponderance of the evidence”; in district court, a challenger must prove invalidity by “clear and convincing evidence.”  These features combined, as well as the predecessors to IPR, show the purpose of an IPR is not the same as the purpose of district court litigation.  The purpose behind an IPR is reexamination, even though the phrase reexamination was changed to review.  The Court further considered that no statutory language, purpose, or history shows Congress intended to consider what standard the PTO must use during the reexamination of a patent.

The majority concluded the PTO’s regulation, 37 C.F.R. § 42.100(b), is a reasonable exercise of the PTO’s rulemaking authority granted by Congress.   The Court held using the “broadest reasonable construction” standard is reasonable because it helps to ensure the PTO is not granting patent exclusive rights to overly broad claims and the use of the standard encourages an applicant to draft the patent narrowly.    Additionally, past practice shows the “broadest reasonable construction” standard has been used by the PTO for more than 100 years.

Cuozzo made two arguments in response to the Court’s view that the standard is reasonable.  First, Cuozzo contended there is a difference between the PTO’s initial examination of an application to determine if a patent should issue, and an IPR, where the agency reviews an already issues patent.  In the initial examination of the application, the patent examiner uses the broadest reasonable construction standard and may reject the claims for being overly broad, then the applicant may present amendments to narrow the claims.  Cuozzo pointed out that examination both protects the public from overly broad claims and gives the applicant a fair chance to draft an amendment to the claims so the application will qualify for protection.  In an IPR, the broadest reasonable construction standard may help protect public interests, but there is no absolute right to amend any of the challenged claims.  Cuozzo stated an IPR is unfair to the patent holder.  The Court rejected Cuozzo’s argument that an IPR is unfair to patent holders because in an IPR, the patent holder may make a motion to amend the claims at least once in the process, just like he or she would in the original examination process.  Cuozzo then argued only 5 out of 86 motions to amend have been granted.  However, the Court rejected the argument stating the low numbers “may reflect the fact that no amendment could save the inventions at issue.”  The PTO rejected Cuozzo’s motion to amend because the proposed amendments “enlarge[d],” rather than narrowed the challenged claims.

Second, Cuozzo argued the use of the broadest reasonable construction standard in an IPR and the use of the ordinary meaning standard in the district court may cause inconsistent results and added confusion because a district court may find a patent valid, and then the PTO can later find the patent invalid under a different standard.  The Court rejected the argument because, even if it is correct that a district court can find the patent valid and the PTO find it invalid later on, this possibility has been present for a long time in the patent system, which provides different tracks for the review and adjudication of patent claims – one in the PTO and one in the courts.

Finally, Cuozzo presented various policy arguments in favor of an ordinary meaning standard.  However, the PTO is legally free to accept or reject policy arguments based on its own analysis.  Because the PTO clearly decided the best policy was to adopt the broadest reasonable construction standard, the issue of a better alternative standard is one Congress left to the PTO to decide.

Dissent:  Justice Alito wrote the dissenting opinion, in which Justice Sotomayor joins.  Alito and Sotomayor concur with the majority’s position on the “broadest reasonable construction” standard, but disagreed on the appealability of the PTO’s decision to institute IPR. The dissent does not think Congress intended to shield the PTO from compliance or noncompliance with the limits of strict scrutiny.  Because there is a strong presumption favoring judicial review, the dissent believed Congress required that judicial review, including of issues bearing on the institution of patent review proceedings, be channeled through an appeal from the agency’s final decision.

The dissent disagreed that the decision is nonappealable because the statute says so.  The dissent argued “Congress rarely intends to prevent courts from enforcing its directives to federal agencies. For that reason, this Court applies a ‘strong presumption’ favoring judicial review of administrative action.” Mach Mining, LLC v. EEOC, 575 U. S. ___, ___ (2015) (slip op., at 4) (quoting Bowen v. Michigan Academy of Family Physicians, 476 U. S. 667, 670 (1986)).  The dissent claimed that, even though the strong presumption of judicial review is rebuttable, “the agency bears a ‘heavy burden’ in attempting to show that Congress ‘prohibit[ed] all judicial review’ of the agency’s compliance with a legislative mandate.” Mach Mining, supra, at ___ (slip op., at 4–5) (quoting Dunlop v. Bachowski, 421 U. S. 560, 567 (1975)).  Essentially, the dissent believed if a provision can be reasonably read to permit judicial review, it should be.  The dissent took the view that the courts cannot stop the proceeding (IPR) from going forward, the issue of whether it was lawful to institute review will not escape judicial scrutiny.

The dissent further disagreed that allowing judicial review “would undercut one important congressional objective, namely, giving the [PTO] significant power to revisit and revise earlier patent grants.” The reasoning is that this would give the government cause to do away with judicial review whenever the government thinks review makes it harder for an agency to carry out important work.  The dissent believed § 319 is not limited to the PTO’s final written decision because the statute does not restrict what issues may be raised on appeal.  The dissent argued a party may be dissatisfied with the final written decision because the PTO lacked authority to institute an IPR in the first place.

The dissent explained that because the decision to institute an IPR is appealable (by their beliefs), that does not mean that courts must (or should) throw out an IPR decision whenever there is some technical deficiency in the challenger’s petition or in the PTO’s institution decision.  Additionally, normal limits on judicial review still apply such as prejudicial error.  The dissent then revealed doubts on whether Cuozzo would even prevail at the Court of Appeals because claim 17 rises and falls with claims 10 and 14, but this does not mean that his arguments are not worthy

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s