Earlier today the United States Supreme Court heard oral arguments in Cuozzo Speed Technologies v. Lee, the first case in which the Supreme Court will have the opportunity to opine on the controversial post grant administrative proceedings for challenging issued patents created by the America Invents Act (AIA). See Oral Hearing Transcript. The Supreme Court will address two critically important questions associated with inter partes review (IPR) proceedings in this case. The first question asks whether it is appropriate for the United States Patent and Trademark Office to use a different claim constructions standard than is used in federal district court. The second question, on which very little time was spent during oral arguments, relates to whether institution decisions are insulated from judicial review.
Starting with a bang, Garrard Beeney, the attorney for the Petitioner, began his argument explaining “why the use of the broadest reasonable interpretation expedient in no way comports with the Congressional purpose of inter partes review.”
Beeney would go on to say that there are four reasons why the broadest reasonable interpretation standard, or “expedient” as he kept calling it, should be reversed. The first of the reasons was that the broadest reasonable interpretation standard “demands a broad ability to amend claims.” Justice Sotomayor interrupted Beeney to say that she doesn’t think this helps him since Congress did provide for a right to amend.
Beeney correctly pointed out that the right has only been interpreted as a right to file a motion to amend, not an absolute right to amend, with virtually all motions to amend being refused. Obviously prepared for the question, Beeney explained that the PTAB has denied motions to amend 95% of the time. Further, Beeney explained that while the PTAB has canceled 10,000 claims over the last 42 months during inter partes review proceedings fewer than 30 claims were allowed to be amended.
Chief Justice Roberts pushed Beeney away from this to address the other reasons why broadest reasonable interpretation is not the proper standard. Beeney explained that it makes no sense for the PTAB to give patent rights “a hypothetical interpretation of their metes and bounds rather than doing what district courts do, which is to give claims their actual plain and ordinary meaning.” Beeney’s third reason was that application of broadest reasonable interpretation leads to claims meaning different things at the PTAB than in the district courts, which he characterized as untenable. Finally, Beeney took exception with the USPTO’s offered reasoning that they have always used the broadest reasonable interpretation standard, which means they did not take into consideration the fact that post grant proceedings are a district court substitute.
After getting his four reasons out Beeney began to be peppered with questions. Justice Alito asked several general questions, Justice Ginsburg asked whether the standard chosen was outcome determinative, and then Justice Kennedy asked why broadest reasonable interpretation isn’t the proper standard, asking: “if the patent is invalid under its broadest, reasonable interpretation, doesn’t that mean the PTO should never have issued the patent in the first place, and doesn’t that give very significant meaning and structure to this process?”
Unfortunately, Beeney fumbled the answer here, at least in my opinion. The answer should have been a resounding NO! Property rights should not be stripped without proper process and treating an issued patent claim, which is by statute and Supreme Court precedent a property right, the same as an unissued claim is simply inappropriate under our laws. It is also inappropriate under a property rights regime. Once a patent has been issued as a property right applying a lower standard cheapens the examination process and ignores the property right mantle bestowed by the federal government.
Justice Breyer picked up on the Kennedy line of questioning and it did not take long for him to bring up the issue of patent trolls, which is a disconcerting trend in Supreme Court patent cases. Rather than confine themselves to the case before them the Supreme Court simply cannot help but interject the patent troll issue. It is becoming so cliché for the Supreme Court to talk about patent trolls in a hypothetical and largely irrelevant manner. But today Justice Breyer went further, showing both his complete ignorance of the issue and utter disdain for patents. Breyer said:
But there is another way to look at it. And the other way to look at it — and that’s what I would like your comment about — is that there are these things, for better words, let’s call them patent trolls, and that the Patent Office has been issuing billions of patents that shouldn’t have been issued – I overstate — but only some. And what happens is some person in business gets this piece of paper and – and looks at it and says, oh, my God, I can’t go ahead with my invention.
Breyer would go on to defend the broadest reasonable interpretation standard as a means for saving “those who were suffer from too many patents that shouldn’t have been issued in the first place.”
I suppose they teach you to ridiculously exaggerate to the point of absurdity at Supreme Court Justice finishing school.
For those who actually care about facts, since 1836 the United States Patent Office has issued just over 9,320,000 patents in total. So, for Justice Breyer to say that the Patent Office is issuing “billions” of bad patents to patent trolls is not only false, it is asinine. That Justice Breyer actually has a vote on issues of such great importance to the patent system is a travesty. This kind of exaggeration of the so-called patent troll problem is done for two very specific purposes – to vilify patent owners and to denigrate the Patent Office. This utterly absurd, breathtakingly dishonest statement should have right thinking people questioning Breyer’s intellectual integrity. Chicken Little scare tactics have no place in this debate and Justice Breyer should be ashamed. Given these statements and Breyer’s well-documented and unmistakable anti-patent philosophy he has clearly already made up his mind.
Later on during his argument Beeney mentioned that 85% of the time patents challenged in inter partes review are subject to district court litigation and that district courts stay the litigation about 70% of the time, which means “the Judiciary is deferring to the Board in making decisions about the patentability of the claims that are at issue.” Chief Justice Roberts referred to this as “a little burdensome to the district court” because the district court will get “into the patent case and then take whatever the Board says is the proper – whether it’s valid or not.” Beeney argued this is yet another example of why inter partes review was conceived as a substitute for district court litigation and requires the use of the district court standards. Roberts would again bring this issue up at length with the Repsondent.
Justice Kagan brought up the fact that looking at the statute there is no mention of whether broadest reasonable interpretation or the district court standard should apply, and with the PTO doing everything using broadest reasonable interpretation she seemed inclined to think that if Congress wanted the district court standard they would have, or should have, stated that in the statute. Justice Ginsburg, however, correctly pointed out that the proceedings created by Congress are a little bit like an administrative proceeding, and a little bit like a district court proceeding.
With almost all of his time gone on the issue of broadest reasonable interpretation, Beeney pivoted to very briefly bring up the appealability issue. Beeney explained: “our position is that under the heavy presumption of judicial review of administrative actions, there’s nothing in the statutory scheme that meets the heavy burden to overcome that presumption.” Justice Ginsburg asked the only questions, and she was skeptical because if the reviewing court can only review final judgments she said that would mean that the “statute is doing no work, because there would be a bar on interlocutory review under the final judgment rule.”
Next up was Curtis Gannon, Assistant to the Solicitor General, arguing on behalf of the Department of Justice. Gannon began his argument as follows:
The PTO has reasonably decided to use its longstanding broadest reasonable construction approach in inter partes review proceedings because, as Justice Ginsburg just noted, that they are a hybrid between – they’re not exactly like anything that has gone before. But the PTO reasonably concluded that they are materially more like all of the other proceedings that the PTO, and before that, the Patent Office, has had in which it has repeatedly used precisely this approach. And it has expressly used it when it is possible for claim amendments to be made because it promotes the improvement of patent quality that Congress was interested in promoting in the America Invents Act by eliminating overly broad questions.
Interrupted quickly, and nearly simultaneously, by Chief Justice Roberts and Justice Sotomayor, Gannon was asked by Justice Sotomayor how different the broadest reasonable interpretation standard is from the district court standard. Gannon replied that he did not think they were different in most circumstances, saying “these two different forms of construction are going to end up in the same place.” Pushing harder, Justice Sotomayor asked, “So when doesn’t it end up in the same place?”
Gannon admitted that the Patent Office does not use prosecution history to interpret claims, while district courts do use prosecution history to interpret claims. Gannon then finally admitted, in a rather disjoined way, that district courts are supposed to adopt a construction that saves the claims where the Patent Office does not similarly apply a saving construction for claims.
One of the more disingenuous moments of the oral argument came when Gannon explained: “Only about 13 percent of patentholders in IPRs have actually filed motions to amend. And there have now been six motions to amend that are granted. There was one new one last week. It’s a small number.”
Of course only a small percentage of patent owners are wasting their time filing motions to amend that are summarily rejected in virtually all cases. The message was received by the patent community; loud and clear. The PTAB says patent owners have a right to file a motion to amend but absolutely no right to amend. They Federal Circuit has agreed with this absurd interpretation of the statute. So should you expect a large number of attempts to file a motion that has virtually no chance to succeed?
Perhaps the best question of the entire oral argument was asked by Chief Justice Roberts: “So why should we be so wedded to the way they do business in the PTO with respect to the broadest possible construction when the point is not to replicate PTO procedures? It’s supposed to take the place of district court procedures.” Gannon’s response pointed to the difference in the burden of proof between the district court (i.e., clear and convincing) and the PTAB (i.e., preponderance). Chief Justice Roberts responded, “it’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results.” Gannon replied that there are “multiple reasons” why different results could be achieved, to which Roberts said: “there’s a problem here, and so we should accept another problem that’s presented where we don’t have to do it.”
Gannon would go on to push the ability to make amendments to claims as a reason to keep the broadest reasonable interpretation standard, but Chief Justice Roberts was not in a mood for that argument. “Well, that’s happened six times ever,” Roberts replied.
After questions from Justice Kennedy about standing and Justice Breyer about why business people needed IPR to stop Ground Hog Day like lawsuits from patent trolls, Chief Justice Roberts returned to the critical question of interplay between the PTAB and the district court. Roberts asked Gannon whether the district court could disagree with the Board, to which Gannon replied: “Yes. As long as the patent still exists.” Troubled by the answer, Roberts pushed, pointing out that it is the district court has a responsibility to interpret the patent using a different standard and may reach a different result. Unsatisfied with what he was hearing, Roberts asked: “So if the district court interprets the patent, is that binding on the PTO?” Gannon replied: “No.” So we are left with decisions by the PTAB that are not binding on the district court and decisions by the district court not binding on the PTAB, which lead the Chief Justice to say: “I’m sorry. It just seems to me that that’s a bizarre way to conduct legal – decide a legal question.”
Page after page in the transcript Chief Justice Roberts peppered Gannon with question after question about the very bizarre nature of inter partes review procedure. Showing his disgust, and a fair amount of comprehension I’d say, Roberts said in an exasperated way: “And this is under a statute designed to make the patent system more reasonable and more expeditious in reaching judgments?”
After broadest reasonable interpretation dominated Gannon’s argument, as it did with Beeney’s argument, eventually questions turned to the issue of appealability. While Justice Ginsburg previously seemed skeptical on the Petitioner’s position on appealability, she seemed very concerned with what the inability to appeal would mean. Ginsburg asked Gannon to turn to the reply brief at page 19 where a series of rulings the Board might make are listed, all of which would be immune from any judicial review. Gannon’s reply was that the proper recourse in those scenarios would not be an appeal, but would be to file a petition for mandamus.
After a very hot Supreme Court panel went to town asking questions, Beeney managed to escape his very brief rebuttal without any questions.
Without having had time to really reflect (like I will) on this oral argument, my instant reaction was that things did not go very well for the Petitioner. But then, things seemed to go even worse for the Respondent. Chief Justice Roberts seems extremely unhappy with the inter partes review procedure conjured up by Congress, implemented by the Patent Office and tolerated by the Federal Circuit. Robert’s objections are on an administration of justice level, which bodes very well for the Petitioner. Of course, his is but one vote, and Justice Breyer is far more interested in the patent trolls not in the room than the specific issues before the Court, or so it seems.
All in all, I’d say that the argument titled in favor of the Petitioner, but there will be time enough for second-guessing and analysis over the coming days and weeks. A decision here is expected before the Supreme Court takes its summer recess, but given we are already at the end of April, I’m not expecting a decision to be issued before the end of June 2016.