Federal Circuit Decides First Inter Partes Review Appeal and Upholds "Broadest Reasonable" Claim Construction Approach

Executive Summary

Today the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) decided the first appeal of a final decision from the Patent Trial and Appeal Board (Board) concerning an inter partes review (IPR) or other post-grant proceeding created by the 2012 America Invents Act (AIA). In re Cuozzo Speed Technologies, LLC endorses the Board's practice of construing claims in IPRs and other AIA proceedings under their "broadest reasonable interpretation." With over 2,500 such cases pending, this case had the potential to undermine many post-grant proceedings. Instead, it affirmed the Board's claim construction approach, removing lingering doubts.

The Board's claim construction standard, now approved by the Federal Circuit, generally favors challengers because it exposes a patent to more potential prior art, and - in the case of post-grant reviews based on enablement or written description grounds - sets a higher bar for the patent specification to meet on those issues as well.

Cuozzo also raises the bar for patent owners to challenge the Board's decision to institute an IPR in the first place.

Lastly, the Federal Circuit clarified its own standard of review of Board decisions, holding that questions of fact are reviewed for "substantial evidence," which makes appellate reversal difficult.

Background

Cuozzo Speed Technologies (Cuozzo) owns a U.S. patent that covers the monitoring and display of speed limit information on a GPS device. Garmin International, Inc. filed a petition with the U.S. Patent and Trademark Office (USPTO) to institute inter partes review of Cuozzo's patent. In the first ever IPR decision on the merits, the Board found the challenged claims invalid as obvious. The Board also denied Cuozzo's motion to amend the patent. Cuozzo appealed to the Federal Circuit on four grounds.

First, Cuozzo argued that the Board should not have applied the "broadest reasonable interpretation" standard in claim construction. This is the standard that the USPTO uses during prosecution and various pre-AIA post-grant procedures. Cuozzo maintained that this standard is inappropriate for IPRs given how hard it is to amend claims during IPRs. It asserted that the Board should have instead interpreted the challenged claims as they would be construed by courts in an infringement case. Courts use an "ordinary and customary meaning" standard, in light of the specification, that can often result in claims being interpreted more narrowly, which tends to favor patent owners.

Second, Cuozzo made a procedural argument that the Board never should have instituted the IPR as to certain claims because the petitioning party (Garmin) had not advanced the particular obviousness combination that formed the basis for the Board's institution decision.

Third, on the merits, Cuozzo argued that the Board had erred in rejecting the challenged claims even under the "broadest reasonable interpretation" standard.

Finally, Cuozzo challenged the Board's refusal to allow Cuozzo to amend the challenged claims.

Federal Circuit Decision

The Federal Circuit upheld every aspect of the Board's decision.

Most significantly, the appellate court held that it was appropriate for the Board to decide IPRs based on the broadest reasonable interpretation of the challenged claims. The Federal Circuit noted that the USPTO had been using this standard in both examination and adversarial proceedings for more than 100 years, and that doing so was within its statutory authority.

Although the Federal Circuit acknowledged that it is harder to amend a claim during an IPR than in other proceedings, it found this difference not "material." Nor was it material that IPRs are "adjudicatory" proceedings because the Board had been using that standard in interference proceedings which were also "adjudicatory." Congress was aware of this standard but did not expressly change it when passing the AIA, thus implicitly adopting it.

The Federal Circuit also declined to consider Cuozzo's procedural argument that the Board should not have instituted the IPR at all, holding (as argued by the USPTO) that the AIA prohibits appellate review of the Board's institution decision. Expanding on an earlier case which held that the Federal Circuit could not review the Board's institution decision while the IPR was pending, it held in Cuozzo that it can neither do so after the proceeding is over.

The Federal Circuit did, however, leave open the possibility that, in exceptional cases (such as where the Board acts beyond its authority by instituting an IPR on grounds not permitted by the AIA), patent owners might obtain relief by a mandamus petition (which asks a higher court to correct an abuse of power).

On the merits, the Federal Circuit rejected Cuozzo's challenge to the Board's decision that the claims were invalid, emphasizing that "the differences between the claimed invention and the prior art are questions of fact which we review [only] for substantial evidence."

Finally, the Federal Circuit upheld the Board's denial of Cuozzo's motion to amend the claims, agreeing with the Board that the proposed amendments would have broadened the claims, and the AIA prohibits the use of IPRs to broaden claims.

Judge Newman dissented from certain aspects of the majority opinion. Most notably, she maintained that "broadest reasonable interpretation" is an inappropriate standard for IPRs and that the Board instead should interpret claims as they would be treated in district court.

Takeaways

AIA post-grant proceedings were created by Congress to bring quick and final resolution to patent disputes. By removing doubts about the process, this case furthers that goal. Moreover, by resolving those doubts in a way favorable to challengers, the Board will continue to be a forum of choice for many patent challenges.

Separately, the Federal Circuit's jurisdictional analysis suggests that challenging the Board's procedural decisions will be an uphill battle, although mandamus petitions may still be an option in extreme cases. Litigants should, in short, be familiar with the Board's rules and practices, and focus on winning in that forum rather than relying on the Federal Circuit. Also, given the implicit endorsement of the Board's strict requirements for authorizing amendments, patent owners should consider other vehicles for amendments. To date, the Board has granted only two of over 100 motions to amend claims in IPRs.

Cuozzo brings some clarity that, for now, existing procedures will continue. That said, calls for change to claim interpretation or amendment standards will continue, and the Board already has two rulemaking packages before it that could change these standards. Moreover, the panel's decision in Cuozzo may not be the final word. Given Judge Newman's dissent and the importance of this issue, Cuozzo may seek en banc review.