After Cuozzo, Congress Must Take Back the Ball

My initial reaction to Cuozzo Speed Technologies v. Lee, 579 U.S. ___ (2016), in which the Supreme Court permitted the Patent Office to continue to construe patent claims according to their broadest reasonable construction (BRC) in inter partes review (IPR) proceedings, was to conclude that the decision maintains the status quo, largely putting to rest two issues that have frequently been raised by IPR litigants. (By a 6-2 majority, the Court also affirmed that the Leahy-Smith America Invents Act (AIA) ordinarily bars judicial review of preliminary decisions by the Patent Office whether to institute IPR proceedings, leaving open only a narrow path for appellate review to prevent “shenanigans.”) Upon reflection, however, I conclude the issue must be revisited. While the Supreme Court spoke clearly and unanimously on the issue in Cuozzo, this hardly means the standard to be applied to claim construction in IPRs has been settled. Rather, it means only that the solution to the problem lies outside the courts. Because the Patent Office has adopted, by regulation, an unsatisfactory standard, Congress should step in. In the context of IPR proceedings, the Patent Trial and Appeal Board (PTAB) should be instructed to give claim terms their plain and ordinary meaning to one of skill in the art, just as the courts are instructed to do.

Some Background: Standard Stuff

As the Federal Circuit Court of Appeals and later the Supreme Court recognized in Cuozzo, the Patent Office has applied the BRC standard (also described as the “broadest reasonable interpretation” standard and abbreviated BRI) to the construction of claim terms for over 100 years. Under this standard, patent claims are generally given their broadest reasonable interpretation consistent with the specification. Judge Pauline Newman has described the “‘broadest’ protocol [as one that] aids the applicant and the examiner in defining claim scope during prosecution. It is not a claim construction on which substantive legal rights of validity and infringement are based, or are intended to be based.” In re Cuozzo Speed Techs., LLC, 793 F.3d 1268, 1287 (Fed. Cir. 2015) (Newman, J., dissenting), aff’d sub nom., Cuozzo Speed Technologies v. Lee, 579 U.S. ___ (2016).

BRC stands in contrast to the standard applied in district court proceedings. During infringement litigation, courts are required to give claim terms their “ordinary” meaning as they would be understood by one of skill in the art. See generally Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), cert. denied, 546 U.S. 1170 (2006). Using the latter standard, judges consider not only the language of the claims and the specification, but also the prosecution history, and may consider various forms of extrinsic evidence, including dictionary definitions and expert opinions. See id.

While the BRC and ordinary-meaning standards ought often to yield the same results, the difference between the standards is not merely philosophical nor merely procedural, and in at least some cases is outcome determinative. Perhaps most infamously, in In re Swanson, 540 F.3d 1368 (Fed. Cir. 2008), having previously affirmed a district court’s conclusion that certain patent claims were valid, the Federal Circuit subsequently affirmed the Patent Office’s determination during reexamination proceedings that the same claims were invalid, the claim construction standard having been at least one key factor in the different outcome. Similarly, in Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330 (Fed. Cir. 2013), having first affirmed a district court judgment of validity, and then having affirmed a Patent Office determination of invalidity using the BRC standard while the court case was on remand, the Federal Circuit finally vacated the district court judgment in view of the intervening Patent Office decision. As Swanson and Fresenius amply demonstrate, the difference in approach severely limits the precedential value that decisions made in one venue may have in another.

[Supreme-Court]

More Background: The PTO Adopts BRC for IPR Under AIA

When enacted in 2011, the AIA was the most significant overhaul of U.S. patent laws in over 50 years. Among its many changes, the AIA replaced inter partes reexamination with inter partes review. Judge Newman explained:

The [AIA] established new post-issuance patent review systems, for the purpose of “providing quick and cost effective alternatives to litigation.” H.R. Rep. No. 112-98, pt. 1, at 48 (2011). This purpose is achieved by new forms of proceedings in the Patent and Trademark Office, whereby a new adjudicatory body, called the [PTAB], serves as a surrogate for district court litigation of patent validity. These adjudicative proceedings in the PTO are designed “to review the validity of a patent . . . in a court-like proceeding.” H.R. Rep. No. 112-98, pt. 1, at 8.

In re Cuozzo, 793 F.3d at 1284 (Newman, J., dissenting). Unfortunately, in enacting the AIA, Congress neglected to specify the claim construction standard that the PTAB should apply in these new proceedings. Congress did, however, provide authority to the Patent Office to prescribe regulations “establishing and governing [IPR] under this chapter and the relationship of such review to other proceedings under this title.” 35 U.S.C. § 316(a)(4). And, acting under that grant of authority (as the Supreme Court has now affirmed), the Patent Office promulgated a regulation establishing the BRC standard of construction. 37 C.F.R. § 42.100(b) (“A claim in an unexpired patent that will not expire before a final written decision is issued shall be given its broadest reasonable construction in light of the specification of the patent in which it appears.”) In doing so, while candidly acknowledging that an IPR “is a trial,” id. § 42.100(a), the Patent Office purposefully adopted a claim construction standard that it knew to be different in material respects from the standard applied in district court litigation. Id. § 42.100(b) (“A party may request a district court-type claim construction approach to be applied if a party certifies that the involved patent will expire within 18 months from the entry of the Notice of Filing Date Accorded to Petition.”).

The Cuozzo Decision

Cuozzo arose from an IPR in which petitioner Garmin International Inc. had challenged claim 17 of Cuozzo Speed Technologies’ patent as obvious in light of three references. The Patent Office decided also to review claims 10 and 14 based on the same references, concluding that, because claim 17 depended from these claims, Garmin had implicitly challenged them as well. The Patent Office denied Cuozzo’s motion to amend its claims in an effort to avoid the prior art, concluding that, under the relevant claim construction, Cuozzo had improperly proposed a broadening amendment. Cuozzo’s argument that its amendment was not broadening under a different claim construction was rejected, as was its contention that the Patent Office should not apply BRC. After the Patent Office invalidated all three claims in its final decision, Cuozzo challenged both the Patent Office’s preliminary decision to review claims 10 and 14 on the grounds that Garmin’s petition had not challenged these claims “with particularity,” as required, 35 U.S.C. 312(a)(3), and, more pertinent here, also the Patent Office’s authority to use BRC in IPR proceedings. The Solicitor General defended the Patent Office on appeal, and Garmin did not participate.

After the Federal Circuit affirmed in a 2-1 decision, the Supreme Court granted certiorari. The Court unanimously concluded that 35 U.S.C. 316 expressly granted the Patent Office sufficient rule-making authority to fill a “gap” in the AIA concerning the claim-construction standard applicable to IPR. The Patent Office’s policy decision to construe a claim in accordance with the “broadest reasonable construction in light of the specification of the patent in which it appears,” 37 CFR 42.100(b), was therefore permissible, notwithstanding departure from the ordinary meaning standard used by courts. Writing for the Court, Justice Breyer responded to Cuozzo’s argument that IPR replaced inter partes reexamination with “a trial adjudicatory in nature” by noting that, in “significant respects, [IPR] is less like a judicial proceeding and more like a specialized agency proceeding.” Slip op. at 15 (observing, for example, that unlike court litigants, IPR participants do not require legal standing and the Patent Office had defended Cuozzo’s appeal without Garmin participating). Accepting the Patent Office’s position that BRC is consistent with the right of patent owners to seek leave to amend patent claims during an IPR, the Court dismissed Cuozzo’s statistical argument that this right is rarely borne out in practice with the bromide that “the manner in which the Patent Office has exercised its authority … is not before us.” Slip op. at 19. Rather, in light of plausible rationales for employing the BRC standard, including protecting the public from unduly broad patent claims and maintaining consistency with the construction standard used by the Patent Office in other proceedings (including proceedings that may be consolidated with an IPR proceeding), the Court concluded that §42.100(b) “represents a reasonable exercise of the rulemaking authority that Congress delegated to the Patent Office.” Slip op. at 17. (As noted above, the Court also concluded that the AIA ordinarily will preclude review of institution decisions, though Cuozzo does not “categorically preclude review of a final decision” where something egregious has occurred. Slip op. at 11-12.)

The Court closed its analysis with the following discussion:

Finally, Cuozzo and its supporting amici offer various policy arguments in favor of the ordinary meaning standard. The Patent Office is legally free to accept or reject such policy arguments on the basis of its own reasoned analysis. Having concluded that the Patent Office’s regulation, selecting the broadest reasonable construction standard, is reasonable in light of the rationales described above, we do not decide whether there is a better alternative as a policy matter. That is a question that Congress left to the particular expertise of the Patent Office.

Slip op. at 20. Though the Court was surely correct to leave policy decisions to policymakers, its decision to punt on the question whether there is a better alternative to BRC in IPRs requires policymakers to pick up the ball.

Congress Must Take Back the Ball

In fact, there is a better alternative to BRC in the context of IPR proceedings: the ordinary-meaning test that is applied in court litigation. There are many reasons why this is so.

Particularly because IPRs frequently spring up in parallel to actual or threatened court action, it is anomalous and even unfair to allow an accused infringer to seek to have different standards applied to the determinations of validity and infringement.

Patent claims are construed as a matter of law, as limited by the specification, the prosecution history, and the prior art. … Because exclusive rights are determined thereby, claims are construed the same way for validity as for infringement. No statute, no precedent, authorizes or even tolerates broader construction for validity than for infringement.

In re Cuozzo, 793 F.3d at 1286 (Newman, J., dissenting). Additionally, when IPR and court proceedings arise together, the court action will frequently be stayed to await the outcome of the IPR. This naturally proves efficient when the asserted claims are canceled, but a chief basis for staying litigation before the outcome of the IPR can be known is that the review proceeding is alternatively thought to inform the subsequent litigation if the claims survive. This basis for staying the litigation becomes questionable when the claim constructions are substantively different. Worse, when litigation is not stayed, parties may proceed simultaneously in two fora using different constructions.

As the American Intellectual Property Law Association decried in its amicus brief supporting certiorari in Cuozzo, the Patent Office’s “adoption of its [BRC] standard effectively negates the presumption of validity otherwise afforded issued patents under 35 U.S.C. § 282(a).” This is because, in determining the ordinary meaning of claims, district courts are permitted to infer, from the very fact a claim has issued, that a person of ordinary skill in the art, confronted with that claim, would construe it, where reasonable to do so, in a way that preserves its validity. The BRC standard serves a different end and takes no such care to preserve otherwise vested property rights.

Some say, of course, that application of the BRC is consistent with the goals of the AIA; specifically, Congress intended for IPR (and other post-grant review proceedings) to help prune bad patents. While it is certainly the case that Congress intended IPR to be a more expedient vehicle for doing so than litigation, there is no reason to think Congress intended IPR to remove patents that would otherwise have survived district court scrutiny. As Judge Newman again explained, “It cannot have been contemplated in the [AIA] that instead of applying the correct claim construction for adjudication of validity, the PTAB would seek an undefined broadest interpretation to the claims, and then decide the validity of broadest claims that were never granted to the applicant.” In re Cuozzo, 793 F.3d at 1286 (Newman, J., dissenting).

The systemic implications of using BRC in IPRs are dire, particularly given the enormous and unanticipated popularity of IPRs, as the Intellectual Property Owners Association explained in its amicus brief in support of certiorari in Cuozzo:

[IPRs] have made the [PTAB] a fast growing forum for adjudicating patent validity. The PTAB’s use of the [BRI] standard in place of the judiciary’s long-standing plain and ordinary meaning standard means that the same patent can have two different sets of boundaries in parallel proceedings adjudicating validity, namely proceedings before the PTAB and a district court. This result is illogical and casts a shadow of uncertainty over the value of research and development and patent portfolios resulting from that research and development, because investors cannot reliably predict the extent of their property rights.

Nor is it any answer to this concern that BRC is used without difficulty in reexamination proceedings, where claim amendments are common. Though boosters of BRC assert amendments are permitted in IPR as well, the chasm between theory and practice in IPR is so enormous that one amicus described the opportunity to amend as illusory. (Congress might consider fixing this problem too!) The Supreme Court brushed this concern aside, simply as “not before us.” Cuozzo, slip op. at 19. Unlike the Court, however, policymakers need not wait until presented with a justiciable controversy. The problem is real and well-defined. Because the Patent Office will not fix its own rule, Congress must act.