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Federal Circuit Decides Appeal from First Final PTAB Decision in Inter Partes Review

February 4, 2015

On February 4, 2015, the Federal Circuit issued its first opinion in an appeal from a final written decision of the Patent Trial and Appeal Board (PTAB) in a proceeding under the America Invents Act (AIA). In In re Cuozzo Speed Technologies, LLC (Case No. 2014-1301), the Federal Circuit affirmed the PTAB's finding that three challenged patent claims were invalid as obvious. The Federal Circuit's decision is one of the first to address the substance of inter partes review under the AIA and includes numerous holdings that will guide AIA proceedings going forward.

In the underlying inter partes review proceeding that was on appeal, the PTAB invalidated three challenged claims of U.S. Patent No. 6,778,074 (the '074 patent) as obvious under 35 U.S.C. § 103.1 In doing so, the PTAB applied the "broadest reasonable interpretation" claim construction standard, consistent with long-standing precedent and as required by Patent Office rules governing AIA proceedings.2 The PTAB found claims 10, 14, and 17 of the '074 patent obvious in view of a combination of three prior art references. The PTAB also denied Cuozzo's motion to amend the challenged claims to avoid the prior art.3

On appeal, Cuozzo argued that the PTAB erred in instituting inter partes review for claims 10 and 14 based on the combination of three prior art references relied upon to invalidate the claims, because Garmin's petition for inter partes review only asserted that particular combination against claim 17. Cuozzo further argued that the broadest reasonable interpretation claim construction standard is improper and AIA proceedings should be decided under the same claim construction standard applicable in district court proceedings. Cuozzo also appealed the PTAB's determination that the three challenged patent claims were obvious and the denial of its motion to amend the claims.

In addressing Cuozzo's argument that institution of a ground not presented in the petition was improper, the Federal Circuit held that the AIA prohibits appeal of PTAB decisions regarding whether to institute review.4 This remains true even after the PTAB issues a final written decision in the proceeding.

Despite this holding, the majority did suggest that mandamus might be available to appeal institution decisions in situations where the Patent Office has "clearly and indisputably exceeded its authority."5 The court noted that the Cuozzo case did not satisfy the requirements for mandamus because the PTAB was not clearly acting outside its authority when it instituted review and ultimately invalidated claims based on a ground of invalidity not presented in Garmin's petition.6

The Federal Circuit went on to hold that the broadest reasonable interpretation standard is the appropriate claim construction standard for AIA proceedings.7 In reaching this decision, the court noted that the Patent Office has given claims their broadest reasonable construction in a variety of proceedings for over 100 years.8 Further, the court found that Congress intended the broadest reasonable interpretation standard to apply when enacting the AIA, despite the lack of express language to that effect in the statute.9 Finally, the Federal Circuit analyzed the propriety of the Patent Office's regulation setting the claim construction standard under the framework provided by the Supreme Court in Chevron, U.S.A. v. Natural Res. Def. Council, Inc.10 Under that framework, and in view of the AIA's silence on a particular claim construction standard to be applied, as well as the Patent Office's long-standing use of the broadest reasonable interpretation, the Patent Office's regulation adopting that standard for AIA proceedings was permissible.11 It remains to be seen whether the Federal Circuit's application of the Chevron framework may signal increased deference to the Patent Office's rulemaking authority.

The Federal Circuit went on to find no error in the PTAB's factual and legal determinations regarding the obviousness of the patent claims at issue.12 The Federal Circuit also affirmed the denial of Cuozzo's motion to amend its claims, finding that Cuozzo's argument turned on a proposed claim construction that was properly rejected under the broadest reasonable interpretation standard.13

As the first Federal Circuit decision following a final written decision in an AIA proceeding, Cuozzo is significant for providing a signpost as to the legal standards applicable to such proceedings and the deference that may be given to PTAB decisions in future cases. The holdings that institution decisions are non-appealable and that claims should be given their broadest reasonable interpretations confirm the applicability of the standards in use in current AIA proceedings and should reinforce the PTAB as a popular alternative to district courts when challenging the validity of a patent.

Moreover, the Federal Circuit's discussion of the possibility of a mandamus challenge to PTAB decisions may increase the likelihood of such challenges in the future. The likely venue for such challenges, the Eastern District of Virginia, previously indicated a disinclination to hear them.14 Cuozzo may signal an opening for such arguments in the future, giving participants in an AIA proceeding an option to challenge PTAB decisions issued before a final written decision, at least when the PTAB error is clear and indisputable.

For more information about the Cuozzo decision or any related matter, please contact Michael Rosato, Richard Torczon, or your regular Wilson Sonsini Goodrich & Rosati contact.