Federal Circuit Affirms PTAB in First Appeal After Final AIA Decision

Authored by Brian S. Mudge, T. Cy Walker, Robert L. Hails, Jr. and Adeel Haroon

In its first ruling on an appeal of a final IPR decision, the Federal Circuit has affirmed the Board’s decision in all respects. The case, In re Cuozzo Speed Techs., LLC, No. 2014-1301 (Fed. Cir. Feb. 4, 2015), involved two key issues on appeal which have been hotly debated since the PTAB began hearing IPRs and other post-grant proceedings under the AIA, and which sparked a lengthy dissent. A divided Federal circuit panel ruled (a) that the court lacked jurisdiction to review the PTAB’s decision to institute the IPR even in connection with the appeal of a final decision; and (b) that the broadest reasonable interpretation (“BRI”) standard applies to construction of claims in an IPR proceeding. In addition, the court upheld the PTAB’s decision that the tried claims were obvious and that Cuozzo’s motion to amend improperly attempted to broaden the claims.

Case Facts: Garmin filed an IPR petition challenging claims of Cuozzo’s patent as obvious over different sets of prior art. Garmin’s obviousness challenge to one claim (claim 17) included references not cited against two other challenged claims (claims 10 and 14). The PTAB instituted review of claim 17 as challenged in the petition, but did not institute review of claims 10 and 14 on the specific references cited in the petition. Instead, the PTAB sua sponte instituted review on those claims based on the references cited against claim 17. At the conclusion of the IPR, the PTAB issued a final decision finding each of these claims obvious. In doing so, the Board construed the claim terms under the BRI standard, and denied Cuozzo’s motion to amend the claims. Garmin Int’l v. Cuozzo Speed Techs. LLC, IPR2012-00001, paper 59 (PTAB Nov. 13, 2013).

Cuozzo appealed; Garmin withdrew (based on a settlement agreement); and the PTO intervened

Appellate review of IPR institution decisions: On appeal, Cuozzo contended that the Board improperly instituted trial on grounds not identified in the petition filed by Garmin. Cuozzo argued that the PTAB may institute trial only on those grounds specifically identified in the petition, under 35 U.S.C. §312(a)(3) and §314(a). Since the petition failed to identify all of the applied references in the challenge to claims 10 and 14, the PTAB, according to Cuozzo, should not have instituted trial of those claims. Further, in Cuozzo’s view, it was permitted to appeal the decision because the statutory bar under §314(d) merely acts to postpone review of institution decisions until after a final decision.

In the majority opinion, the Federal Circuit rejected Cuozzo’s position, holding that §314(d) precludes any review of the decision to institute, even after a final decision. Having previously held in St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373, 1375-76 (Fed. Cir. 2014), that § 314(d) precludes interlocutory review of decisions to institute, the court reasoned that nothing in the statute limited the ban on appeals to interlocutory review. Indeed, the court pointed out that because other statutory provisions precluded interlocutory appeals, § 314(d) would have been unnecessary if it was limited to a ban on interlocutory appeals. Since the statute provides that an institution decision is both “final” and “nonappealable,” the court ruled that there can be no statutory interpretation permitting an appeal after a final trial determination. The majority also ruled that the IPR statutory provisions do not limit the PTAB’s authority in rendering a final decision to those grounds alleged in the petition.1

The court indicated that the PTAB’s authority may not be limitless, however. In situations where the PTAB “clearly and indisputably” exceeds its statutory authority, the majority suggested that mandamus may be available to challenge the PTAB’s decisions to institute after the PTAB’s final decision. However, the opinion took no final position on the question, leaving the possibility of mandamus for another day. Of note, the PTO took the position that mandamus would not be available to challenge an institution decision.

The dissent questioned the majority’s opinion that decisions to institute are never appealable. The dissent argued that the purpose of § 314(d) is to bar interlocutory appeals and is not a “heavy-handed foreclosure of all review of anything related the petition.” Rather than depart from the “fundamental rule” that final agency actions should be subject to judicial review unless clearly precluded by Congress, the dissent suggests that the court should be able to review for compliance with the IPR statutory provisions, such as the provisions identified by Cuozzo.

Claim construction standard in IPRs: Cuozzo also contended that the Board improperly applied the BRI standard to construing claims in IPRs, arguing that the PTAB should apply the Phillips standard used in district court litigation. The majority opinion again rejected Cuozzo’s position, concluding that Congress implicitly adopted the BRI standard in the AIA. The court reasoned that Congress was well aware that the BRI standard was the prevailing standard applied by the PTO and yet did not expressly mandate the application of a different standard for IPRs. The court noted that the PTO has been using the BRI standard for more than 100 years.

The court also observed that IPRs are similar to other PTO proceedings that use the same standard, such as reexamination and reissue proceedings. Cuozzo argued that application of BRI in other PTO proceedings has been justified by the ability to amend claims, but the ability to amend claims in IPRs is limited. In response, the court opined that IPRs are “not materially different” as the statute and regulations permit the patent owner to seek claim amendments – even if the ability to amend is more limited in IPRs than other PTO proceedings.

The court alternatively held that even if Congress did not implicitly adopt the BRI standard, the PTO was within its rulemaking authority to do so. The court found that the AIA conveys rulemaking authority to the PTO and, pursuant to this authority, the PTO promulgated 37 C.F.R. § 42.100(b), which sets forth the use of the BRI standard for unexpired patents in IPRs. The court then analyzed this rule under the Chevron framework and concluded that it passed muster.

The dissent argued that Congress intended IPRs to be surrogates for district court litigation and, therefore, that IPRs should apply the same legal and evidentiary standards as district courts. Thus, according to the dissent, the PTAB should apply the claim construction standard set forth in Phillips, instead of the BRI standard. Responding to the majority’s comparison of IPRs to reexaminations, the dissent argued that in adopting the AIA, Congress recognized substantial differences between these types of proceedings and intended to replace reexaminations with adjudicative proceedings – differences recognized by the PTAB itself in other decisions.

The dissent further argued that the use of the BRI standard is a helpful tool in the examination (including reexamination) of patents because there is unfettered opportunity to amend the claims. In contrast, IPRs provide only a very limited opportunity to amend (pointing out that, to date, only two motions to amend have been granted in IPRs). As such, IPRs are distinguishable from other PTO proceedings, and more akin to district court litigation.

Implications of the Federal Circuit’s Cuozzo decision: First, the PTAB has nearly unfettered authority to institute review under the AIA provisions, since no appeal of institution is available even after a final decision. The PTAB is not limited to grounds specifically identified in a petition, but may sua sponte decide to institute trial on alternate grounds, and may issue final determinations based on such grounds – all without being subject to judicial review. While the possibility that a writ of mandamus may be available, ordinarily the standard for mandamus is very high and, thus, such a remedy is difficult to obtain.

Second, the decision vindicates (at least for now) the PTO’s decision to apply the BRI standard for claim construction in AIA post-grant proceedings. However, controversy over use of BRI will likely remain, because of substantial differences in a patent owner’s practical ability to amend claims in IPRs compared to reexamination or reissue proceedings. Further, differences between BRI as applied by the PTAB and the Phillips standard applied by district courts weakens the justification for staying court litigation pending resolution of IPRs. Since courts must apply a different standard, they arguably cannot rely on claim interpretation decisions made by the PTAB to simplify the issues in litigation.

Finally, the decision continues a trend in opinions upholding the statutory scheme established by the AIA. Here, the Federal Circuit confirms the authority of the PTAB to render final determinations of patentability in IPR proceedings. In previous decisions, the court has rejected interlocutory challenges to the PTAB’s authority to institute review and confirmed the strong Congressional intent in favor of granting stays of district court litigation for pending CBM reviews. Of course, we will all need to await future decisions to see whether and how this trend continues.


1 Interestingly, the PTO attempted to justify the PTAB’s application of the claim 17 references to claims 10 and 14, noting that claim 17 depended from both claim 10 and claim 14, and therefore the petition’s challenge to claim 17 implicitly asserted that the broader claims 10 and 14 were also unpatentable on the same grounds. The majority did not decide whether such an argument could justify institution on grounds not explicitly cited in the petition.