CAFC Affirms PTAB in First Inter Partes Review Appeal

By Gene Quinn
February 4, 2015

cafc-federal-circuit-building-spring-b1Earlier today the United States Court of Appeals for the Federal Circuit issued its much anticipated decision in In re Cuozzo Speed Technologies, which is the first appeal of a final decision of the Patent Trial and Appeal Board (PTAB) in an Inter Partes Review (IPR) proceeding. For discussion of the oral argument see Patent Office Asks to Have Its Cake and Eat It Too.

Cuozzo Speed Technologies (“Cuozzo”) is the owner of U.S. Patent No. 6,778,074, which relates to a speed limit indicator and method for displaying speed and the relevant speed limit. On September 16, 2012, Garmin International, Inc. and Garmin USA, Inc. (collectively, “Garmin”) petitioned the United States Patent and Trademark Office (USPTO), requesting institution of an IPR with respect to claims 10, 14, and 17 of the ’074 patent. The IPR petition filed by Garmin was filed on the first day possible. Post grant procedures, such as IPRs, were created as part of the America Invents Act (AIA), but not available for use until the first anniversary of the law becoming effective.

Garmin contended that claim 10 was invalid as anticipated under 35 U.S.C. § 102(e) or as obvious under 35 U.S.C. § 103(a) and that claims 14 and 17 were obvious under § 103(a). The USPTO instituted IPR, determining that there was a reasonable likelihood that claims 10, 14, and 17 were obvious under § 103 over (1) U.S. Patent Nos. 6,633,811 (“Aumayer”), 3,980,041 (“Evans”), and 2,711,153 (“Wendt”); and/or (2) German Patent No. 197 55 470 (“Tegethoff”), U.S. Patent No. 6,515,596 (“Awada”), Evans, and Wendt. Although Garmin’s petition with respect to claim 17 included the grounds on which the PTO instituted review, the petition did not list Evans or Wendt as grounds for finding either claim 10 or claim 14 invalid.

Ultimately, the PTAB issued a final decision finding claims 10, 14, and 17 obvious. The Board additionally denied Cuozzo’s motion to amend the ’074 patent by substituting new claims 21, 22, and 23 for claims 10, 14, and 17.  The Board rejected the amendment because (1) substitute claim 21 lacked written description support as required by 35 U.S.C. § 112, and (2) the substitute claims would improperly enlarge the scope of the claims as construed by the Board.

On appeal to the Federal Circuit Cuozzo primarily raised several issues. First, Cuozzo argued that the IPR was improperly instituted by the USPTO because with respect to claims 10 and 14 the basis for granting the petition to institute the IPR was certain prior art not raised by the petitioner. Second, Cuozzo argued that the PTAB applied the incorrect standard when evaluating the scope of the claim.

Whether the USPTO properly instituted the IPR relative to claims 10 and 14 is a matter of great importance for several reasons: (1) pursuant to 35 U.S.C. 312(a)(3), a complete IPR petition requires that petitioner identify with particularity “the grounds on which the challenge to each claim is based,” and (2) 35 U.S.C. 314(d) provides that a USPTO decision to institute an IPR is not appealable. Previously, in St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., the Federal Circuit ruled that 314(d) made it impossible for the Federal Circuit review a USPTO denial to institute an IPR proceeding. The decision in this case, however, extended that ruling and holds that the Federal Circuit is without authority to review the propriety of the institution of an IPR even after the conclusion of an IPR proceeding. Thus, the USPTO has unreviewable discretion to do whatever they want with respect to instituting IPRs, even in situations where petitions are clearly defective on their face.

Writing for the panel majority, Judge Dyk, who was joined by Judge Clevenger, explained that regardless of whether the USPTO properly should have instituted an IPR, the decision of the USPTO could not be reviewed or challenged even after a completed IPR proceeding. Dye wrote:

Contrary to Cuozzo’s contention, we hold that we lack jurisdiction to review the PTO’s decision to institute IPR… We conclude that § 314(d) prohibits review of the decision to institute IPR even after a final decision. On its face, the provision is not directed to precluding review only before a final decision. It is written to exclude all review of the decision whether to institute review.

Another issue raised by Cuozzo related to whether the PTAB should, when construing a claim in IPR, rely on the traditionally applied standard applied to review of applications, namely the “broadest reasonable interpretation” standard, or whether the more narrow standard applied by the district courts should be utilized. Not surprisingly, Judge Dyk found that the broadest reasonable interpretation standard is appropriate. He wrote:

There is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years… Congress in enacting the AIA was well aware that the broadest reasonable interpretation standard was the prevailing rule. It can therefore be inferred that Congress impliedly adopted the existing rule of adopting the broadest reasonable construction.

Judge Newman participated in the decision and filed a dissent. The dissent is not a scathing indictment of the majority, but Newman does in a matter of fact manner explain that the majority is wrong. Newman makes a compelling argument with respect to the broadest reasonable interpretation standard, saying that by applying that standard to IPRs the Court if fundamentally dishonoring the intent of the statute in creating post grant review procedures.

Newman explains that the AIA created IPRs in order to provide a lower cost, quicker alternative for defendants to challenge the validity of patent claims. In order for IPR to operate as a surrogate to the more time consuming and costly patent litigation that occurs in district courts the PTAB must apply the same standard as used in the district courts. She explained:

This purpose was achieved by providing a new adjudicatory proceeding in the administrative agency, the Patent and Trademark Office in the Department of Commerce, whereby a newly formed Patent Trial and Appeal Board (PTAB) serves as a surrogate for district court litigation of patent validity…

[T]he panel majority authorizes and requires treating the claims of an issued patent in the same way as pending claims in the patent application stage, where claims are subject to the “broadest reasonable interpretation” examination protocol. The panel majority thus precludes achieving review of patent validity in Inter Partes Review comparable to that of the district courts, where validity is determined based on the correct claim construction, not an artificially “broadest” construction…

Ultimately, Judge Newman concluded that it is impossible for the USPTO to “serve as a surrogate for district court litigation if the PTAB does not apply the same law to the same evidence.”

Judge Newman was equally troubled by the fact that the panel majority has rendered the Federal Circuit incapable of reviewing USPTO decisions to institute IPR proceedings, which would effectively insulate the Office from any review and thereby allow the Office to disregard the statute, which they seem to have clearly done here with respect to claims 10 and 14. Newman asked: “Does this mean that such decisions can never be judicially reviewed, even if contrary to law, even if material to the final appealed judgment?” In answering her own question she wrote: “This ruling appears to impede full judicial review of the PTAB’s final decision…”

Newman would have interpreted 314(d) as preventing interlocutory appeals, not final reviews of a completed proceeding. She pointed out that preventing appellate review of an interlocutory appeal is routine, while preventing all judicial review is extraordinary and improper.

Not surprisingly, I find Judge Newman’s dissent to be better reasoned and more legally accurate. While 314(d) does clearly say that the decision to institute a review is not appealable, interpreting that to mean that the Federal Circuit cannot review the decision as part of its review of a final decision effectively means that an agency decision to institute a process to strip away vested property rights is immune from review by an Article III court. Even if that is what Congress intended it would seem to clearly violate at least the spirit of the bedrock Constitutional principles that ensure checks and balances between and among co-equal branches of government. If Congress could do this here with patent rights, which are also specifically mentioned in the Constitution then why couldn’t Congress prevent judicial review of decisions relating to real property? The interpretation of Judges Dyk and Clevenger is unprincipled, not bounded and fundamentally dangerous.

Similarly, it is impossible to ignore the fact that Congress wanted to provide an alternative to district court patent litigation with respect to reviewing validity of issued patents. If the post grant procedures of the AIA are an alternative to litigation logic demands that the same rules of interpreting claims that apply at the district court level apply to these alternative administrative proceedings.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 6 Comments comments.

  1. EG February 4, 2015 5:11 pm

    Hey Gene,

    It figures that Dyk would write an opinion against the patentee. But what is startling is that Dyk’s opinion, in essence, would condone and render unreviewable by any court an egregious violation of the IPR statutes that deprives the patentee of its statutorily recognized “property” right. How Dyk can possibly believe that comports with “due process” or that Congress intended the IPR to cause such a clear violation of “due process” is beyond the pale. We can only hope that this panel decision gets kicked to the en banc Federal Circuit and that a majority of the Federal Circuit judges side with Newman’s correct construction of the IPR statutes to avoid this serious breach of “due process.”

  2. Toby February 4, 2015 9:47 pm

    The majority’s decision is clearly flawed, and Judge Newman (again) demonstrates her superior intellect. This should be reversed en Banc.

  3. Clown around town February 5, 2015 10:52 am

    I think the camps are going to have to disagree to disagree – I think both sides interpretations are reasonable, and neither are clearly wrong.

    Yes, save claim cancelations, virtually no amendments have been permitted during IPR. But, to me (and dare I say “our side” of the issue), because amendments are permitted (and presumably practitioners will get better at determining how to meet the requirements for amending), it makes sense to use BRI.

    With respect to the the claim 10 and 14 issue, be very careful to realize this was a situation similar to the following hypo: the ‘000 patent has 2 claims – 1. a fork comprising a handle and a tine, 2. the fork of claim 1 further comprising a second bent tine. Gene files an IPR saying that claim 2 is obvious over Smith and Jones. The board institutes on claim 2 based on Smith and Jones AND decides sua sponte to institute on claim 1. Why? Because if claim 2 is obvious based on S&J, Gene implicitly established that claim 1 was also obvious over S&J. There’s no new art. There’s no findings with respect to claim 1 that Gene has not already made. In fact, Gene’s IPR description, claim charts, etc., show how claim 1’s limitations are obvious over S&J.

    As far as issue 3, I guess I don’t understand the disagreement. Is it just implicit disagreement that no matter how much the law wants to make it clear that decisions to IPR are unreviewable, they should nonetheless be reviewable?

  4. Clown February 5, 2015 10:54 am

    It doesn’t add much, but I’d change one sentence above to clarify:

    “In fact, Gene’s IPR description, claim charts, etc., ***that he did file for claim 2 necessarily*** show how claim 1’s limitations are obvious over S&J.”

  5. Daniel Cole February 13, 2015 4:14 pm

    Yes Clown the disagreement on issue 3 is that it is unconstitutional for a court not to have jurisdiction to review an administrative courts decision to institute a case. This does seem rather unprecidented, as most decisions by an administrative court to hear a case are appleable I believe.

    As for the broadest reasonable interpretation, it was the expectation of many that the IPR would use this standard and that would be one of the reasons people might go to it than a district court. I also think you can make an argument that part of the reason the IPR is less expensive is because you do not have the expensive claim definition arguments. How could it be less expensive than district court litigation if it was just like district court litigation? If this is a good thing or not is of course up for debate.

  6. Daniel Cole February 13, 2015 4:37 pm

    Yup as I thought, given the administrative procedure act and general accepted aspects of administrative law the Federal Circuit has Jurisdiction over decisions to institute appeals. http://patentlyo.com/patent/2015/02/administrative-attorneys-technologies.html

    The relevant portion “the administrative law requires a court to exercise jurisdiction to review agency compliance with the agency’s own regulations and guidance, and to set aside agency action issued “without observance of procedure required by law.”[1] The Supreme Court has addressed the following fact pattern on about a dozen occasions. An agency acts outside its procedures. The aggrieved party sues. The agency points to a statute that precludes review, and asks the court to deny jurisdiction on that basis. In every such case, the Supreme Court holds that even if a statute purports to preclude review, jurisdiction remains to review the agency’s procedures, to assess whether the agency action was “without observance of procedure required by law.” “Only in the rare—some say non-existent—case … may review for ‘abuse’ be precluded.”[2] The Court holds that preclusion statutes must be read narrowly, to preclude review only of the ultimate decision on the merits, leaving intact jurisdiction to review whether the agency departed from procedural requirements. The Supreme Court has applied this principle to statutes even broader and clearer than § 314(b), and to government interests far more fundamental. It is a very strong principle.”

    Glad I took administrative law last semester! Thought with the AIA it would be even more important seems my instinct was correct.