On Monday, April 25, 2016, the United States Supreme Court heard oral arguments in Cuozzo Speed Technologies v. Lee, the first case in which the Supreme Court will decide issues relating to inter partes review (IPR) proceedings conducted by the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO).
Immediately before the Supreme Court oral arguments we published predictions from a panel of industry experts watching the case. I posed a simple question at the time: What do you expect the Supreme Court to do in Cuozzo? See Predicting Cuozzo in Advance of SCOTUS Oral Arguments.
With the oral arguments now behind us, I once again reached out to a panel of experts who are closely watching the case to ask for their reactions. Once again, I posed the question: What do you expect the Supreme Court to do in Cuozzo? This time, with the benefit of having listened to the oral arguments, the reactions and predictions of our panel of experts follows.
The most disturbing aspect of the fact pattern in Cuozzo Speed Technologies v. Lee is the apparent lack of due process and fundamental fairness. The concept that an administrative agency, in this case the Patent Trial and Appeals Board, could perform an ultra vires act (i.e., instituting and then invalidating a patent beyond its statutory authority) and yet not be subject to appellate review is so contrary to notions of due process and fundamental fairness, that it is not surprising that the Supreme Court granted certiorari to hear this case.
NYIPLA advocated that, consistent with the statutory structure of the American Invents Act and notions of due process and fundamental fairness, the Supreme Court should confirm that, the appellate courts may still review after the final written decision whether the PTAB’s decision to invalidate (or not invalidate) a particular challenged claim was consistent with the statute even if an interlocutory appeal of a decision to institute or not to institute is not available. This procedure matches the manner in which an interlocutory decision to deny a motion for summary judgment in litigation would be handled. Although this issue was not discussed much during oral argument, I believe the Supreme Court will recognize that any interpretation of the AIA that falls short of this result violates due process and notions of fairness.
With respect to the claim construction issue, I anticipate that the Supreme Court will treat this like any other APA-type issue. It should examine whether the PTAB acted within its statutory authority by adopting a standard typically used in the context of a proceeding where the patent owner is allowed to freely adopt and modify the claims in ongoing proceedings for a proceeding that is substantially more rigid in nature. At oral arguments, the Justices appear to be split on whether the PTAB is more like any other Patent Office proceeding, litigation, or something else. It would not be surprising if the Supreme Court were to find that the adoption of a BRI standard in this context is an abuse of the PTAB’s discretionary authority.
* Mr. Macedo is one of the counsel for the New York Intellectual Property Law Association (NYIPLA). The opinions offered here are his personal opinions and not of the Association, the firm, or its clients. For more on the NYIPLA amicus brief in Cuozzo please see Will SCOTUS Provide Guidance?
Whenever the patent system “needs” a result from SCOTUS, the system, in recent times, is invariably let down. See Bilski, Mayo, et al. Either they write a baffling “cover every base” decision (KSR), which means all things to all readers, or it is just plain wrong (Myriad). Gone are the days of Chakrabarty; 1. admit their own technical competence limitations, and 2) crisply decide the legal issue before them. SCOTUS out.
In Cuozzo, you have Breyer as a factional wing nut, in favor of any decision to bolster an outcome that reduces the “burden” of patents on society. No one on this Court is a “patent person” by any stretch. Sad, really. How about trashing the 1st Amendment from the bench Breyer? Why not? Google not in favor of it yet is my guess.
As for how this case turns out: 1) in terms of the “broadest” interpretation issue, the votes probably go with an elimination of that standard in Post Grant proceedings. The application of this standard presently results in inconsistent outcomes depending on venue. This is exactly what SCOTUS is supposed to resolve; inconsistency below. 2) this Court would never limit its own job of reviewing Executive branch decision making. Never. A decision not to institute an IPR may be immune from review, but a decision to institute has to be reviewable. Period.
Cuozzo’s key BRI attacks did not appear to resonate with the majority of the Court. Namely, that since IPR was designed as a surrogate for litigation, Congress must have intended the same rules for claim construction (i.e., it is adjudicative and not examinational); and, that BRI is only justified by the USPTO when accompanied by an “unfettered” right to amend. As such, Cuozzo is left with a bare policy argument assailing what he deems to be different claim construction standards. Even assuming there were meaningful differences in the BRI and Philipps frameworks, and despite the interest of at least Justice Roberts on this issue, a reversal based on a pure policy alone would be an unexpected, legislative pronouncement. I see a 6-2 affirmance on the issue of BRI.
As to the second issue, given the seeming lack of interest by the Court, reversal would seem unlikely. In this case I don’t believe Congress envisioned blocking all institution decision issues from appeal that are currently blocked by 35 U.S.C. § 314(d). But, given straight forward language of the statute, here too, Congress would need to recalibrate.
The oral argument in Cuozzo v. Lee was interesting and suggested perhaps that Cuozzo may lose. But I think it ultimately provided little insight into how the Supreme Court ultimately may decide the case. As a general rule, it is virtually impossible to guess how the Court might decide a case based on the oral argument. One prominent example of this point in recent memory was NFIB v. Sebelius (2012); after the oral argument, most people predicted that the Supreme Court was going to strike down ObamaCare, but it did not. Sometimes, when all of the Justices are saying the exact same things in oral argument, predictions may seem a bit easier, such as in Bowman v. Monsanto (2013). But these are rare cases. In most cases, like Cuozzo, some Justices ask critical questions, some Justices ask favorable questions, and it’s anyone’s guess as to how it’s going to come out.
With that said, the recent loss of Justice Scalia may have played a role in the lop-sided oral argument in Cuozzo. Justice Scalia likely would have been more receptive to the separation of powers concerns raised by the question concerning the PTAB’s adoption of the broadest reasonable interpretation (BRI) standard. These concerns were voiced almost solely by Chief Justice Roberts during the oral argument. Justice Scalia’s absence might even play a role in the final opinion. Of course, these concerns about a violation of the separation of powers might have been expressed in the Court’s majority opinion, or they just as easily could have been expressed in one of Justice Scalia’s colorful dissents, in which he would have rejected the majority’s “jiggery pockery” in approving the PTAB’s decision to adopt the BRI standard in its adjudication of patents.
In light of the questions presented during oral argument in Cuozzo Speed Techs. v. Lee on April 25, I expect the Court to uphold the broadest reasonable interpretation (BRI) standard for Inter Partes Review (IPR) proceedings. Right out of the gate, Justice Sotomayor suggested that she disagreed with Cuozzo’s position that the Phillips plain and ordinary meaning standard used in district court should be controlling, stating that she might be moved by Cuozzo’s arguments “if Congress had not given any right for the Board to amend.” Justice Kennedy was similarly accepting of the BRI standard since it is the same standard used during prosecution and could be used to determine whether the patent should have issued in the first place. Rather than looking at IPR proceedings as “a little court proceeding,” as suggested by Cuozzo, Justice Breyer countered that there was another way of looking at it—that, in fact, Congress desired for the PTO to give the patentee the same chance they had during prosecution with the possibility of amending, but only if the patent should have been issued in the first place under the BRI standard. Justice Breyer also indicated that if the statute could be read both ways, perhaps it was up to the PTO on how to interpret the statute. Justice Kagan pointed out that since the PTO has a history of using the BRI in patent office proceedings, it seemed logical that Congress would have articulated a different standard if that had been the legislative intent—but it did not.
Chief Justice Roberts appeared to be the lone supporter of the plain and ordinary meaning standard for IPR proceedings, indicating that it was “perfectly clear” to him that Congress meant for IPR’s to substitute for judicial action and pointing out that it was a “very extraordinary animal” in law for two different proceedings addressing the same issue to lead to different results.
Notwithstanding the ultimate decision of the Court, as a patent practitioner, I am concerned by the apparent position taken by the Patent Office during oral argument that there should be three distinct claim construction standards: (1) BRI during prosecution, which does not consider the prosecution history, (2) BRI in IPR’s, which does consider the prosecution history, at least to the extent briefed, and (3) the Phillips standard, which considers the prosecution history as well as the presumption of validity. Although I do not expect the Court to address this position, the proposed sliding scale for claim construction would likely lead to even more uncertainty and confusion in determining patentability.
It seems difficult to reconcile the Respondent’s principal argument that two standards should still apply: that is, that the PTAB should be permitted to continue applying its policy-derived broad BRI standard for construing patent claim scope in Congressionally mandated “adjudicative” IPR proceedings while still using the lower preponderance of the evidence standard provided under 35 U.S.C. § 316(e). The notion that the USPTO may “infer” such intent to also apply the BRI in the absence of any express guidance from Congress was weak, at best. Especially because having two such claim construction standards applied by Article III courts and the ITC on the one hand, and the USPTO’s unilateral application of an “examination” claim construction standard in an intended “adjudication” setting on the other hand, has already led to inequitable and presumably non-appealable results.
The extirpative effect of the broadest reasonable interpretation in IPR proceedings can be discerned from the USPTO’s own data: from September 2012 to January 2016, more than 4,000 petitions for institution of IPR proceedings were filed. From reviewing the USPTO’s own data, a total of 792 IPRs reached a final decision and in 685 of those IPRs (or a whopping 86%), the PTAB invalidated some or all of the challenged claims. See PTAB Statistics, January 31, 2016, at pp. 2, 7, 9, U.S. Patent and Trademark Office (last accessed May 2, 2016).
Fortunately, a glimpse of how the Supreme Court may rule in Cuozzo gives some hope that the Court will correct the inequities being wrought by the PTAB’s application of the BRI. This theme was revealed during questioning of the government’s attorney by Chief Justice Roberts, who stated at one point that “it’s a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results.” Cuozzo; Tr. at 32. If that statement sheds some light on Chief Justice Roberts’ mindset as to how he would draft the majority opinion, the decision may depend on how many associate justices can be convinced to join that same line of thinking.
EDITORIAL NOTE: The above quote from Mr. Olson is an excerpt from his article Practitioner Strategies for Living in a Post-Cuozzo World, published on IPWatchdog.com on May 4, 2016.
Even though there were two independent issues, most of the questions from the justices focused on the first issue of whether IPRs should be based on the use of the broadest reasonable claim interpretation (BRI) or the plain and ordinary meaning standard set forth in Phillips v. AWH Corp., 415 F. 3d 1303 (Fed. Cir. 2005) (en banc).
What did we learn from the oral argument? As a threshold matter, the questions from the justices betrayed a general unfamiliarity with the procedures and substance of patent law. To those who have followed previous Supreme Court arguments in patent cases, this difficulty in formulating relevant questions comes as no surprise. After all, none of the justices arrived at the Supreme Court with any significant background or experience in patents.
That said, the questions posed by the justices did shed some light on what we can expect from the Supreme Court’s eventual decision in Cuozzo, at least with this respect to the question of BRI versus plain and ordinary meaning. Although it is always risky to predict outcomes based on the questions posed at oral argument, it looks like the Supreme Court will maintain the USPTO’s reliance on the broadest reasonable interpretation in IPRs.
EDITORIAL NOTE: The above quote from Mr. Berghoff is an excerpt from his forthcoming article “To BRI or Not to BRI, That is the Question,” which will publish on IPWatchdog.com on Monday, May 9, 2016.
UPDATED Wednesday, May 4, 2016, at 6:23pm ET.