Federal Circuit issues first-ever ruling in inter partes review appeal

The Federal Circuit recently issued its first-ever ruling in an appeal from an inter partes review in In Re Cuozzo Speed Technologies, LLC (Fed Cir February 4 2015). The court made two notable holdings:

• The Federal Circuit lacks jurisdiction to review decisions of the Patent Trial and Appeal Board (PTAB) to institute inter partes reviews even in connection with the appeal of a final decision; and
• The PTAB's use of the broadest reasonable interpretation standard for claim construction in inter partes reviews is proper.

In addition, the court upheld the PTAB's decision that the challenged claims were obvious.

Facts
Garmin filed an inter partes review petition challenging three claims of Cuozzo's patent as obvious over different sets of prior art. Garmin's obviousness challenge to one claim included references not cited against the other two challenged claims. The PTAB did not institute review of those two claims on the specific references cited in the petition. Instead, of its own accord it instituted review on those claims based on the references cited against the other challenged claim. At the conclusion of the inter partes review, the PTAB issued a final decision finding all challenged claims obvious under the broadest reasonable interpretation standard. Cuozzo appealed; Garmin withdrew; and the US Patent and Trademark Office (USPTO) intervened.

Decision
35 USC § 314(d) is entitled "No appeal" and states that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable". In an earlier case, the court held that Section 314(d) precludes interlocutory review of decisions to institute (St Jude Med, Cardiology Div, Inc v Volcano Corp, 749 F 3d 1373, 1375-76 (Fed Cir 2014)). However, in this case the court went further to hold that Section 314(d) prohibits review of the decision to institute even after a final decision.

The court reasoned that Section 314(d) "must be read to bar review all institution decisions, even after the Board issues a final decision" because Section 314(d) on its face is not limited to precluding interlocutory review and would be superfluous if so read because Sections 319 and 141(c) already limit appeals to appeals from final decisions. The court also noted that the PTAB, by statute, is not limited to the grounds in the inter partes review petition when issuing a final decision with respect to patentability of any challenged claim. Thus, the fact that the PTAB altered the grounds advanced in the opening petition when it instituted the inter partes review provides no ground for setting aside the final decision.

However, the court indicated that the PTAB's authority may not be limitless. In situations where the PTAB "clearly and indisputably" exceeds its statutory authority, mandamus may be available to challenge the PTAB's decisions to institute after the PTAB's final decision.

With respect to the claim construction standard, the court concluded that Congress implicitly adopted the broadest reasonable interpretation standard in the America Invents Act. The court reasoned that Congress was aware that the broadest reasonable interpretation standard is the prevailing standard applied by the USPTO and yet did not expressly mandate the application of a different standard for inter partes reviews. The court noted that the USPTO has been using the broadest reasonable interpretation standard for more than 100 years. The court also observed that inter partes reviews are similar to other USPTO proceedings that use the same standard.

Alternatively, the court held that even if Congress did not implicitly adopt the broadest reasonable interpretation standard, the USPTO was within its rulemaking authority to do so. The court found that the America Invents Act conveys rulemaking authority to the USPTO, and pursuant to this authority the USPTO promulgated 37 CFR § 42.100(b), which sets forth the use of the broadest reasonable interpretation standard for unexpired patents in inter partes reviews. The court then analysed this rule under the Chevron framework and concluded that it passed muster.

With respect to the case at hand, the court held that the PTAB, using the broadest reasonable interpretation standard, properly construed the term 'integrally attached' and properly found the challenged claims as obvious.

Dissent
The dissent argued that Congress intended inter partes reviews to be surrogates for district court litigation, and therefore inter partes reviews should apply the same legal and evidentiary standards as district court proceedings. This includes using the claim construction standard set forth in Phillips, instead of the broadest reasonable interpretation standard. The dissent further argued that the use of the broadest reasonable interpretation standard is a helpful tool in the examination (including re-examination) of patents because there is unfettered opportunity to amend the claims. However, in inter partes reviews there is limited opportunity to amend (only two motions to amend have been granted to date in inter partes reviews), and as such they are distinguishable from other USPTO proceedings.

The dissent also questioned the majority's decision that decisions to institute are never appealable. The dissent argued that the purpose of Section 314(d) is to bar interlocutory appeals and is not a "heavy-handed foreclosure of all review of anything related the petition".

Comment
The Federal Circuit will review pnly the inter partes review final decision on appeal; it will not review the decision to institute. However, the court left open the possibility that in extreme cases, a writ of mandamus may be available to challenge the decision to institute after the final decision is issued.  

Claim construction will remain a hotly contested issue in inter partes reviews since the PTAB will continue to use the broadest reasonable interpretation standard.