Posts Tagged: "Cuozzo Speed Technologies v. Lee"

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.

The battle of Cuozzo, and patent reform in general, is not between the tech industry and the pharmaceutical industry. The battle was started by wealthy multinational tech companies led by Google who, by using their huge market and deep pockets, massively commercialize technology they did not invent to take control of emerging multi-billion dollar markets. Once a tech market is taken, it is nearly impossible to unseat the incumbent, unless, of course, you have a patent and that patent can be defended. So these huge companies bought Congress to create law that destroyed hundreds of years of patent law repositioning it against the very people who invent most of the new technologies we all use, small tech startups and inventors. Congress and the Supreme Court have now ensured that the big stay big and the small do not disrupt their highly profitable cabal with the nuisance of patent rights.

The Supreme Court’s ruling will disappoint those who had hoped to change the standard by which the PTAB conducts inter partes reviews through the courts, rather than through Congress or the PTO itself. The manner in which the majority framed the case also offers hints about the Court’s views of today’s patent landscape and the deference that may be granted to the PTAB in future decisions, should the Court decide to grant more petitions for certiorari in this area.

AIA trials have been sought over 5,000 times to challenge patents and are widely used to resolve patent disputes. Many patent owners complained that these proceedings were unfairly tilted in favor of those challenging patents. Cuozzo sought Supreme Court review of two such practices that it felt went too far and were inappropriate given the language and intent of the AIA. However, the Court sided with the PTAB on both issues, leaving the AIA trial process, as practitioners have come to know it over the last four years, intact.

“This is obviously a victory for some who challenge a patent’s validity in IPR proceedings since broadly construed claims are more vulnerable to attack than narrowly construed claims” remarked Scott Daniels, partner at Westerman Hattori Daniels & Adrian, LLP. “Still, the great majority of IPR decisions do not turn on claim construction and for those cases Cuozzo simply makes no difference.”… Levy, who was similarly dead on accurate with his predictions, raises an important point that so many in the patent community who were rooting for Cuozzo failed to keep in mind. Those challenging the action of an agency face a substantial uphill battle when they seek a judicial determination overriding agency rulemaking and statutory implementation.

In a unanimous decision delivered by Justice Breyer in Cuozzo Speed Technologies, LLC v. Lee, the United States Supreme Court upheld the United States Patent Office’s regulation requiring the Patent Trial and Appeal Board to apply the broadest reasonable interpretation (BRI) standard in Inter Partes Review (IPR) proceedings. The Supreme Court also held that the Patent Office’s decision to institute an IPR proceeding is not appealable to the Federal courts.

A good argument can be made that a given panel of PTAB judges will construe claims in the manner that makes most sense to them, regardless of the legal rubric they are assigned. Indeed, we can draw a direct analogy from the experience following the Supreme Court’s decision in Teva v. Sandoz on the degree of appellate deference to be accorded to a district court’s claim construction. Notwithstanding decades of anticipation surrounding that issue, there has been little practical effect on the outcomes of litigations or appeals as a result of Teva. District court judges and Federal Circuit panels still approach claim construction issues in essentially the same way they did before. It seems likely that the use of BRI versus plain and ordinary meaning in inter partes review proceedings will also turn out to be much ado about nothing.

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.

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). 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.

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.”

While I would never go into business handicapping the outcome of SCOTUS deliberations, I do have an opinion about what they should do in this case, at least on the claim construction issue. Judge Newman had it exactly right in her panel dissent and her concise dissent from the denial of rehearing en banc. The “broadest reasonable interpretation” standard is useful during the examination phase, ensuring that no conceivably relevant art is overlooked and that the applicant’s opportunity to amend is well informed. But it’s silly, and ultimately damaging to the system, to apply the same standard in a post-issuance process that is directed at determining exactly what issued claims mean and where amendments are seriously restricted. Just as in district court, IPRs benefit from contested advocacy about the meaning of claim terms. In that adjudicative phase there is no place for the artificial construct of “broadest reasonable interpretation” in place of “most reasonable interpretation.”

If the Supreme Court’s recent track record in patent cases is a guide to the potential outcome in this case, it seems quite likely that the Court will not simply affirm the Federal Circuit’s decision. While the Government has set out some reasonably compelling points in support of its position, I believe the Court will agree in large part with Cuozzo and the overwhelming support of the many amici in the case that have set out significant problems and negative long term consequences to the patent system if the PTO’s current approach of using BRI in IPRs is not altered. I also believe the Court will reign in the PTO with regard to its position on reviewability of the PTAB’s institution decisions. A prohibition on judicial review in this context arguably would allow a U.S. government agency to exceed its explicit statutory authority granted by Congress.

On one hand, logic dictates that the broader the interpretation of the claim, the more extensive the array of relevant prior art—and in turn the more likely that the claim will be held invalid in light of that prior art. On the other hand, evaluating whether the Board’s use of the BRI protocol in an IPR claim construction will lead to “different results” than the plain and ordinary meaning construction used by federal courts in claim construction is complicated by the relatively scant evidence on the subject, and the inevitable fact that this evidence is naturally dependent on particular prior art and invalidity and obviousness arguments specific to a particular patent. Even putting aside the question of what impact a different claim construction standard may have in an IPR, In re Cuozzo Speed Technologies will not address several powerful differences between an IPR and district court litigation that impact whether a particular patent claim survives.

Unified Patents Inc. explained in its amicus brief in Cuozzo Speed v. Lee that “[t]he phrase ‘broadest reasonable interpretation’ describes the same procedure applied in both the PTO and by the courts.” An inconvenient truth for Cuozzo — but a truth nonetheless. Gene attacked Unified Patent’s position here last Sunday as “false on its face” and “unequivocally incorrect.” Those pejoratives miss the point of Unified’s brief. Unified did not argue that the courts and PTO both apply BRI in name; indeed, Cuozzo would lose his semantic gripe if that were the case. Rather, Unified argued that peeling away the Phillips and BRI labels reveals that both standards employ the same procedure. On this point, Unified’s position is hardly controversial, and Unified is hardly alone.

In the Introduction to the Unified Patents’ brief the following statement is made: “The phrase ‘broadest reasonable interpretation’ describes the same procedure applied in both the PTO and by the courts.” That statement is unequivocally incorrect. Federal district courts do not apply the broadest reasonable interpretation of an issued claim when performing a claim construction in patent litigation. Quite the opposite, district courts narrowly interpret claims in an attempt to find a true and correct construction of the claims. The law is unequivocally clear: district courts do not apply the broadest reasonable interpretation standard. It is so axiomatic that district courts use a different standard than does the USPTO when interpreting claims it is almost difficult to figure out where to begin to unravel this falsehood.