Federal Circuit Holding Regarding Barring of IPR Appeals and IPR’s Broadest Reasonable Interpretation Standard

The Federal Circuit held on February 4, 2015 that the Inter Parties Review (“IPR”) proceedings instituted by the Patent Trial and Appeal Board  (“PTAB”) of the United State Patent and Trademark Office (“USPTO”)  is not only nonappealable as an interim ruling, but also nonappealable as part of a final decision. In re Cuozzo Speed Technologies, LLC, Fed. Cir., No. 2014-1301, 2/4/2015. The Federal Circuit also held that in an IPR proceeding, patent claims are to be construed under the “broadest reasonable interpretation” standard rather than a narrower standard as applied in district courts, because a party in an IPR is able to amend claims.

Appeals for IPR Barred

Garmin petitioned for an IPR proceeding, contending that a speed limit indicator patent (U.S. Patent No. 6,778,074) assigned to Cuozzo was invalid as anticipated and obvious. The petition was granted and PTAB found that the claims in suit were invalid for obviousness based on its “broadest reasonable interpretation” of the claim terms. Cuozzo appealed the final judgment, arguing that the IPR proceeding should not have been granted in the first place. The issue at hand lied in the interpretation of 35 U.S. C. § 314(d), which stated that “[t]he determination by the Director (of the UPSTO) whether to institute an inter parties review under this section shall be final and nonappealable.”

On appeal, the Federal Circuit explained that the IPR proceeding has two phrases: a first phase in which the PTAB determines whether to institute an IPR proceeding and a second phase to conduct the IPR proceeding and issue a final decision. Judge Dyk explained that a “declaration that the decision to institute is ‘final’ cannot reasonably be interpreted as postponing review until after issuance of a final decision on patentability and … must be read to bar review of all institution decision, even after the Board issues a final decision.” Thus, the Federal Circuit held that once the Board issues the final IPR decision, the Federal Circuit is prohibited by 35 U.S. C. § 314(d) from reviewing the Board’s decision.

Judge Newman dissented and stated that the majority opinion’s position is contrary to the legislative purpose of the American Invents Act (“AIA”) that established the IPR proceedings, which was to provide a new forum in the PTO that was a proxy for mainstream litigation. Judge Newman further reasoned that the ruling appears to impede full judicial review of the PTAB’s final decision, further departing from the purpose of the AIA to achieve correct adjudication of validity in the USPTO.

Broadest Reasonable Interpretation Standard for IPR

On appeal, Cuozzo also challenged the Board’s “broadest reasonable interpretation” standard. The AIA did not set a standard for claim construction in the IPR proceedings, but Judge Dyk pointed to broad authority from the USPTO to issue regulations “setting forth the standards for the showing sufficient grounds to institute … review.”  One such USPTO standard was delineated in 37 CFR 42.100(b), which stated that the claim “shall be given its broadest reasonable construction in light of the specification of the patent.”

Judge Dyk further explained that even though a patent owner is limited in the scope of what could be amended, such as being limited to only a single amendment or may not broaden claims, Congress implicitly adopted the broadest reasonably interpretation standard when it enacted the AIA and even if it did not, the IPR proceedings are within the USTPO’s authority to create such a standard.

Again, Judge Newman dissented noting that the Court previously approved such a standard, but it was premised on “the unfettered opportunity to amend,” contrary to the limited scope of amendment for IPR proceedings.

To read the full case click here.