The Supreme Court Rules the PTAB and District Courts Can Continue to Apply Different Standards for Interpreting Patent Claims
June 21 2016
Patent litigators and prosecutors have been waiting to hear whether the U.S. Supreme Court would require the United States Patent and Trademark Office (“USPTO”) to apply the same claim construction standard as the district courts. The answer is “No.”
For over 100 years, the USPTO has used the “broadest reasonable construction” standard to interpret patent claims. But the district courts apply a different standard, which gives claims their ordinary meaning as understood by a person of skill in the art. Questions have arisen as to whether it makes sense for these standards to be different. In its ruling on June 20, 2016, the U.S. Supreme Court addressed this question as it relates to an inter partes review (“IPR”), which is a procedure created by the America Invents Act, 35 U.S.C. §100 et seq. The IPR procedure allows someone other than the patent owner to petition the USPTO to review claims of an issued patent and cancel claims that are found to be unpatentable in light of prior art. The Patent Trial and Appeal Board (“PTAB”) handles IPR petitions and reviews at the USPTO.
In 2012, Garmin International, Inc., and Garmin USA, Inc., filed an IPR petition seeking to invalidate the claims of Cuozzo Speed Technologies, LLC’s patent relating to speedometers that alert drivers when they exceed the speed limit. Among other requests, Garmin asked the USPTO to review claim 17 in light of three prior art patents. Claim 17 depended from claims 10 and 14. While Garmin had not expressly challenged claims 10 and 14, the USPTO granted the petition as to all three claims explaining that claims 10 and 14 were implicitly challenged. The PTAB concluded that these claims were obvious in light of the prior art, denied Cuozzo’s motion to amend the claims as futile, and cancelled the claims. Cuozzo appealed to the Court of Appeals for the Federal Circuit arguing 1) the PTAB improperly applied the “broadest reasonable construction” standard instead of the district courts’ standard, and 2) the USPTO improperly instituted review of claims 10 and 14 because Garmin had not challenged those claims “with particularity.” The Federal Circuit rejected both arguments. The Supreme Court granted certiorari and affirmed. The Court found that the USPTO has the authority to issue a reasonable rule specifying the standard for claim construction and that the broadest reasonable construction standard is a reasonable rule. Further, the Court found that 35 U.S.C. §314(d) precludes appeal of the USPTO’s decision to institute review of claims 10 and 14.
In considering the claim construction standard, the Court considered Cuozzo’s argument that the USPTO did not have the authority to issue a regulation instructing that in inter partes review, the PTAB “shall [construe a patent claim according to] its broadest reasonable construction in light of the specification of the patent in which it appears” 37 CFR §42.100(b)(2015). Cuozzo argued that the PTAB should be required to apply the same claim construction standard used by the district courts. The Supreme Court, however, disagreed citing §316(a)(4) of the statute, which grants the USPTO authority to issue “regulations … establishing and governing inter partes review.” The Court explained that the statute contains a gap because it does not unambiguously tell the USPTO what claim construction standard to use. Where a statute is ambiguous or leaves a gap, the Court pointed out that it typically interprets the statute “as giving the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute.”
The Court was not persuaded by Cuozzo’s argument that Congress must have designed IPR proceedings as a “surrogate for court proceedings,” and thus must have intended the USPTO to use the same standard as the district courts. The Court reasoned that in other ways IPR proceedings are more like a specialized agency proceeding than a judicial proceeding. For example, parties initiating the proceedings do not have to have a stake in the outcome, petitioners may lack constitutional standing and need not remain in the proceeding, and the Patent Office may intervene in a later judicial proceeding to defend its decision. In addition, the burden of proof to cancel claims in an IPR is preponderance of the evidence, whereas in district court, a challenger must prove invalidity by clear and convincing evidence, which is a higher standard. Further, “neither the statutory language, its purpose, or its history suggest that Congress considered what standard the [USPTO] should apply … in inter partes review.” Therefore, the Court found that the USPTO has the authority to enact reasonable rules specifying the claim construction standard to fill this gap in the statute.
The Court then turned to the question of whether the rule is a reasonable exercise of that authority. The Court noted that “the broadest reasonable construction helps to protect the public.” It encourages patent applicants to draft claims narrowly, which promotes “precision while avoiding overly broad claims” and “helps prevent a patent from tying up too much knowledge” while helping the public “draw useful information from the disclosed invention and better understand the lawful limits of the claim.” The Court also noted that past practice at the USPTO supports use of the broadest reasonable construction.
Cuozzo argued that there is a critical difference between the initial examination of a patent and the examination during an IPR that supports use of the district courts’ standard. In an initial examination, the examiner applies the broadest reasonable construction, and if claims are rejected, the applicant can amend them as a matter of right. In contrast, there is no absolute right to amend claims during an IPR. Instead, amendment requires a motion, which has rarely been granted. But the Court did not find this argument persuasive. Instead, the Court found that use of the broadest reasonable construction was not unfair in any obvious way because there is an opportunity to amend during an IPR, albeit rarely granted, and the “original application process may have presented several additional opportunities to amend” the patent claims.
Cuozzo also argued that the use of one standard in IPR proceedings before the PTAB and a different standard in district courts “may produce inconsistent results and cause added confusion.” A district court could find a patent claim valid, and then the USPTO could later cancel the claim in its review. The Court noted that that possibility “has long been present in our patent system, which provides different tracks … for the review and adjudication of patent claims.” Given that inter partes review imposes a different burden of proof than that of the district courts, “the possibility of inconsistent results is inherent to Congress’ regulatory design.” Further, the USPTO uses the broadest reasonable construction in other proceedings, which may be consolidated with inter partes review. Thus, the Court could not find it unreasonable that the patent office prefers “a degree of inconsistency between the courts and the [USPTO] rather than among [USPTO] proceedings.”
Therefore, according to the Supreme Court, the PTAB and district courts can continue to apply different standards for interpreting patent claims. Thus, when seeking to invalidate claims, patent challengers will likely continue to favor IPRs because of the broadest reasonable construction standard and the lower burden of proof.