IPR Patent Challenges to be Considered by Supreme Court

On January 15, 2016, the Supreme Court decided to consider whether Inter Partes Review (IPR) proceedings will continue to function under the rules that have resulted in an unprecedentedly high rate of patent invalidations. The case to be heard is Cuozzo Speed Technologies v. Lee, which raises several issues with IPR proceedings that have been criticized by patent owners since its inception. IPR proceedings have become a significant piece of patent litigation strategy, and in turn the Supreme Court’s ruling in Cuozzo could have a large impact on patent enforcement costs and portfolio management strategies.

In 2011, IPR proceedings were introduced by the American Invents Act as a new procedure to challenge the validity of an issued patent at the United States Patent and Trademark Office (USPTO) by allowing the challenging party to submit prior patents and publications that dispute the patent’s novelty or inventiveness. The challenging party is also permitted to participate in the proceeding, such as by providing arguments and witness testimony. Since its introduction, the IPR procedure has been widely adopted by defendants as an alternative or supplement to challenging a patent in federal court, its popularity largely due to the high cancellation rate of challenged patent claims. To date, there have been over 3,400 IPR petitions filed at the USPTO, and nearly 85% of IPR proceedings have resulted in the cancellation of some or all patent claims reviewed.

In Cuozzo Speed Technologies v. Lee, the patent owner was brought into the IPR line of fire, which resulted in three claims of the patent being found obvious, and thereby invalid. The holding in the IPR was appealed to the Federal Circuit, and became the first decision on an IPR appeal rendered by the Federal Circuit. Now, the issues raised on appeal will be heard by the Supreme Court. Specifically, the issues before the Court relate to (i) whether the claims in an IPR proceeding should be construed according to their broadest reasonable interpretation, as presently done in all USPTO proceedings, rather than their plain and ordinary meaning, as presently done in federal courts, and (ii) whether an appeals court should have the authority to review the initial decision made in an IPR proceeding as to whether to institute an IPR proceeding.

The broadest reasonable interpretation standard used in an IPR proceeding is the same standard that is used when examining the claims of a patent application, which, during examination, is justified by an applicant’s ability to freely amend the claims around the cited prior art. However, the patent owner in an IPR proceeding is rarely, if ever, allowed to amend to the claims, which can heavily favor a challenger. In Cuozzo, the patent owner’s attempt to amend the claims was rejected and the USPTO ultimately found that the prior patents and publications rendered the previously issued claims obvious and invalid. Should the Court narrow the standard of review in IPR proceedings to something that more closely resembles federal court review, it could improve a patent owner’s ability to retain existing patent protection, even without the availability of claim amendments. On the other hand, the Court could impose a lower standard to amend claims, which would allow a patent owner to more easily maintain protection on its inventive concepts.

Also under consideration by the Court, is the prohibition against appellate review of IPR institution decisions made by the USPTO, as the America Invents Act requires they “shall be final and unappealable.” Institution decisions are the first decisions made in an IPR proceeding before moving on to the substantive review of the patent. The institution decision is made by the USPTO in view of the prior art and assertions of invalidity provided in the challenger’s petition, as well as the responsive arguments provided by the patent owner. In Cuozzo, three of the four claims that were challenged were instituted. However, when instituting the proceeding in Cuozzo, the USPTO unilaterally supplemented the evidence raised by the challenging party with two additional prior patents. The patent owner was unable to appeal the institution decision, despite the USPTO’s consideration of evidence outside of that provided by the challenger.

Critics have suggested that this prohibition against appellate review of IPR institution decisions is largely against commonly held rules of agency law. If the Supreme Court in Cuozzo decides to allow parties that disagree with an institution decision to appeal, some errors may be corrected on both sides. However, these appeals could also prolong IPR procedures and further stall enforcement of the underlying patents.

Should the Supreme Court affirm the Federal Circuit’s decision in Cuozzo, keeping the existing IPR rules intact, the IPR procedure will be firmly cemented as a pro-defendant procedure to dismantle a patent owner’s portfolio by invalidating claims of issued patents. Alternatively, a course correction by the Supreme Court on either issue at hand will likely curb the high cancellation rate, or at least the number of IPRs filed, and as a result, may allow the market to have more confidence in the validity of an issued patent. Ultimately, the Supreme Court in Couzzo has an opportunity to reshape the IPR process in a way that could greatly impact patent strategies across all technology sectors.

BY: Peter A. Cummings

Gardner, Linn, Burkhart & Flory, LLP specializes in the protection, enforcement, and defense of intellectual property including patents, trademarks, copyrights, and trade secrets, as well as unfair competition and related agreements. Our attorneys are highly skilled at complex litigation, including IPR and other post-grant proceedings, which enhances our ability to provide customized and effective intellectual property protection strategies.  Gardner, Linn, Burkhart & Flory LLP has been attorneys of record in over 70 IPR proceedings, making it one of the preeminent law firms in the country in terms of IPR experience.

If you have any related questions, please contact our patent attorneys at (616) 975-5500.