In Cuozzo Speed Technologies, LLC, v. Michelle K. Lee, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office, No. 15-446, I argued on behalf of the Intellectual Property Law Association of Chicago on petition for writ of certiorari that claims in patent cases arising from the Patent Trial and Appeal Board (PTAB) should be construed in the same manner as claims in cases arising from the district courts.  That would, I argued, promote economic efficiency, provide a clear single standard of judicial review, and be consistent with the adjudicatory nature of the PTAB’s new inter partes review (IPR) procedure under the America Invents Act.

On June 20, 2016, the Supreme Court decided otherwise, as well as a second issue that I did not brief:  that as a matter of horizontal separation of powers, PTAB decisions to institute IPRs are judicially unreviewable even if the PTAB exceeds its statutory authority in instituting such proceedings.  By doing so, the high court has shown remarkable deference to both the executive and legislative branches of government, but has left patent law askew.  Because different standards of review will apply, appeals from decisions regarding the validity of patents may be decided differently just based on the challenger’s choice of forum.  As Justices Alito and Sotomayor pointed out in their partial concurrence and dissent, this need not have been the case.  

Facts of the Case

In brief, Cuozzo Speed Technologies, LLC (Cuozzo) owns a patent on an invention that integrates a GPS device with a vehicle display system to alert drivers when they exceed the posted speed limit.  Garmin, which makes many in-vehicle GPS systems, challenged certain claims of Cuozzo’s patent in a relatively recent “America Invents Act” (AIA) proceeding called an inter partes review, or IPR.  In an IPR, a third party such as Garmin may ask the Patent and Trademark Office (PTO) to re-examine the claims in a patent that the PTO has already issued and to cancel any claim that the PTO now finds unpatentable under prior art.  (For patent specialists, that means whether the claims are “novel” under 35 U.S.C. § 102 or “obvious” under 35 U.S.C. § 103.)  In deciding whether a given claim is valid, the PTAB applies the “broadest reasonable construction” of the claim language under scrutiny, rather than the Federal Circuit standard of “ordinary meaning … as understood by a person of skill in the art.”  See Phillips v. AWH Corp., 415 F. 3d 1303, 1314 Fed. Cir. 2005).

The Court’s Decision

On a petition for certiorari to the U. S. Court of Appeals for the Federal Circuit, which hears all appeals in patent cases, the Supreme Court reached two questions.  

The first was whether the “No Appeal” provision of the AIA, 35 U.S.C. § 314(d), bars a court from considering whether the PTO wrongfully determined to institute an IPR when it did so on grounds not specifically mentioned in the third party’s request for review.  The Court held 7-2, Justices Alito and Sotomayor dissenting in part, that the AIA does not.

Second, the Court considered whether 35 U.S.C. § 316(a)(4), which authorizes the PTO to issue regulations establishing and governing IPRs, authorized the PTO to construe, via regulation, patent claims more broadly than do district courts.  Here the Court was unanimous:  the PTO has such authority, even though it may lead to different results depending on whether an initial challenge to patentability is brought before the PTAB or a district court.  Justice Thomas specially concurred, however, to invite the court to reconsider its tradition of “Chevron deference” at an appropriate future occasion.

Question One

Concerning the first question, citing Justice Breyer noted first for a seven-justice majority that “that is what [35 U.S.C.] § 314(d) says”:  the PTO’s decision to initiate an IPR is nonreviewable.  579 U.S. ___ (2016) (slip op. at 7).  Second, he wrote, the decision under review is simply “an ordinary dispute about the application of certain relevant patent statutes,” not a constitutional question of any kind.  Id.  Moreover, he wrote, citing the legislative history of a House report, a contrary holding would undercut an “important congressional objective, namely, giving the Patent Office significant power to revisit and revise earlier patent grants.”  Id., slip op. at 8.   

Finally, Justice Breyer wrote, despite “the ‘strong presumption’ in favor of judicial review that we apply when we interpret statutes,” id., slip op. at 9, the Administrative Procedure Act already limits judicial review to final agency decisions.  And contrary to what the partial dissent claimed was the “familiar practice” in other areas of the law – that on appeal of final decisions of district courts appellants may challenge earlier rulings as part of those appeals – Justice Breyer asserted that the PTAB’s decision was more comparable to that of a grand jury’s finding of probable cause, and thus nonreviewable at any stage.  Id.  

The majority’s biggest disagreement was reserved for Justice Alito’s recognition in a well-worded but respectful dissent, in which Justice Sotomayor joined, that the Court “applies a ‘strong presumption’ favoring judicial review of administrative action” because “‘Congress rarely intends to prevent courts from enforcing its directives to federal agencies.’”  Id. (Alito, J., dissenting, at 3, internal citations omitted).  In stark contrast to the dissent, Justice Breyer’s majority saw Lindahl v. Office of Personnel Management, 470 U. S. 768 (1985), as little more than “a case about the judicial review of disability determinations for federal employees.”  579 U.S. ___ (slip op. at 10).  In Lindahl, said Justice Breyer, the Court could disregard a statute’s plain language making disability decisions of the Office of Personnel Management “final,” “conclusive,” and “not subject to review” based on the Court’s interpretation of the statute’s “core statutory function in accord with Congress’ intent.”  Id.  

In other words, like Chief Justice Roberts in King v. Burwell, Justice Breyer determined that the Court may substitute its interpretation of the overarching intent of Congress in passing a statute for what the statute actually says.  “Our interpretation of the ‘No Appeal’ provision here has the same effect” Justice Breyer continued, unconvincingly.  “Congress has told the Patent Office to determine whether inter partes review should proceed, and it has made the agency’s decision ‘final’ and ‘nonappealable.’   § 314(d). Our conclusion that courts may not revisit this initial determination gives effect to this statutory command.”  Id. (emphasis in original.)  That may be true in this case, I might add, but hardly in Lindahl, where Justices Alito and Sotomayor seem to have the upper hand.

Question Two

Concerning the second question, Justice Breyer jumped straight to Chevron U.S.A. Inc. v. Natural Resource Defense Council, Inc., 467 U.S. 837 (1984), and belittled Cuozzo’s and his amici’s argument that IPRs are by their very nature adjudicative and not merely administrative.  “Where a statute is clear,” Justice Breyer said, “the agency must follow the statute.  [Chevron, 467 U. S.] at 842-843.  But where a statute leaves a ‘gap’ or is ‘ambigu[ous],’ we typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute.”  (Id. at 13, additional citations omitted.)  This, Justice Breyer said, was just such a case of ambiguity because “[n]o statutory provision unambiguously directs the agency to use one standard or the other.  Accordingly, in the majority’s view, the PTO can engage in the process of rulemaking to address the gap.  Whether that statue is consistent with the Federal Circuit’s established standard for construing patent claims is irrelevant.  Id.

On this question the Court was unanimous in its lack of concern that the Federal Circuit could conceivably apply different standards of patent claim depending on whether a validity challenge arose in an IPR before the PTAB or in a district court.  Only Justice Thomas, in a special concurrence, noted that the Court’s decision did not “rest on [the fiction of Chevron] that ambiguity in a statutory term is best construed as an implicit delegation of power to an administrative agency to determine the bounds of the law” and invited the Court, in an appropriate case, to reconsider the issue of Chevron deference. 579 U.S. ____ 2016 (Thomas, J., concurring, at 1.)

Once again, the Supreme Court has put its mark on patent law and left many patent practitioners mystified.

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David Applegate is Chair of the Intellectual Property Practice Group at Williams Montgomery & John Ltd., a Firm of Trial Lawyers, headquartered in Chicago, Illinois, an Executive Committee Member of the Federalist Society’s Intellectual Property Practice Group, and a member of the Amicus Brief Committee of the Intellectual Property Law Association of Chicago, the nation’s oldest intellectual property bar association. The views expressed here are his own.