Fed. Circuit Backs Broad Patent Construction Standard

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By Tony Dutra

July 8 — The full Federal Circuit July 8 let stand a panel decision that patents challenged in post-grant proceedings established under the America Invents Act will be reviewed under a standard more likely to invalidate claims than the standard used in a district court.

The court's decision—a request for en banc rehearing failed to get the necessary six votes—confirms a significant win for the Patent Trial and Appeal Board from the panel's February decision, in what was the first review of its procedures.

It also throws a spotlight on Congress, which is weighing legislation that would that would force the PTAB to use the district court claim construction standard.

Cuozzo Challenges Proceedings Themselves

Garmin International Inc.'s challenge against Cuozzo Speed Technologies' U.S. Patent No. 6,778,074, “Speed limit indicator and method for displaying speed and the relevant speed limit,” succeeded in a PTAB inter partes review proceeding.

Cuozzo appealed to the Federal Circuit, challenging the merits of the board's unpatentability decision and several of the board's standards and procedures. A 2-1 panel decision on Feb. 4 left each of those standards and procedures untouched. In re Cuozzo Speed Technologies, 778 F.3d 1271, 113 U.S.P.Q.2d 1613 (Fed. Cir. 2015).

Cuozzo filed a petition for rehearing en banc only, but the court's procedures require that the panel treat the petition as a panel rehearing request first.

Different Views of Congressional Intent

The panel scrapped the February opinion and reissued both the majority and dissenting views, with revisions in the two sections related to how the PTAB should handle claim construction.

The PTAB chose to use the “broadest reasonable interpretation” (BRI) standard that governs any new patent application and, in general, pre-AIA post-grant proceedings where the patentee can amend claims. Its option was to use the Phillips standard for issued claims—under the presumption of patent claim validity—used when courts are considering a patent infringement litigation.

Though it is difficult to distinguish the effect of BRI vs. Phillips, compared to the presumption of validity alone, it is generally acknowledged that the Phillips standard allows the challenger fewer options to argue invalidity for anticipation or obviousness.

The IPR and other challenges can be viewed as hybrid proceedings, where patent claims could be assessed for patentability as an alternative to more expensive and longer district court proceedings, but which allow for claim amendment, which is not possible in court. The PTAB has repeatedly defended its BRI choice because the America Invents Act allowed for patent owner amendment.

The panel majority and dissent ultimately disagreed on Congress's intent in providing this hybrid solution.

Writing for the majority, Judge Timothy B. Dyk quoted from the House record in passing the AIA: “The intent of the post-grant review process is to enable early challenges to patents … . The Committee believes that this new, early-stage process for challenging patent validity … will make the patent system more efficient and improve the quality of patents and the patent system.”

In dissent, Judge Pauline Newman cited excerpts from the Senate record on the same legislation and said, “The post-grant proceedings established by the America Invents Act were intended as a far-reaching surrogate for district court validity determinations.”

Close En Banc Denial

Newman wrote a dissent to the Federal Circuit's en banc rehearing denial that focused on three amicus briefs filed supporting the full court's review.

She joined Chief Judge Sharon Prost's dissent as well, as did Judges Kimberly A. Moore, Kathleen M. O'Malley and Jimmie V. Reyna. The dissenters fell just one vote short of the court majority needed to grant an en banc rehearing request.

Prost repeatedly echoed Newman's interpretation of Congress's AIA intent and concluded: “The panel majority fails to explain why Congress (or anyone else) would have thought it desirable or necessary for the Board to construe the claims during IPRs under a different legal framework than the one used by district courts,” she said.

Congress's Turn?

“If the standard is to be changed, that is a matter for Congress,” Dyk said in a concurrence to the en banc denial, joined by Judges Alan D. Lourie, Raymond T. Chen and Todd M. Hughes (Judges Evan J. Wallach and Richard G. Taranto did not join any of the three opinions). “There are pending bills which would do just that,” Dyk said, referring to H.R. 9 and S. 1137.

In fact, both bills would require the PTAB to use the Phillips claim construction standard that district courts use.

In a footnote of her dissent, Newman said that the legislation “has stalled because of unrelated areas of controversy,” possibly referring to litigation-related reforms, such as a loser-pays provision. “Prompt resolution is reported to be unlikely,” she said.

Newman did not otherwise provide a source for that view.

House Republican leaders are aiming for floor action on H.R. 9 this month. But there are several differences between the House and Senate bills—in addition to loser pays—that will be difficult to bridge.

John R. Kasha of Kasha Law LLC, North Potomac, Md., and Timothy M. Salmon of Basking Ridge, N.J., represented Cuozzo. PTO Solicitor Nathan K. Kelley argued on behalf of the board.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

Full text of en banc rehearing denial at http://www.bloomberglaw.com/public/document/In_re_Cuozzo_Speed_Technologies_LLC_Docket_No_1401301_Fed_Cir_Feb/2 and reissued panel decision at http://www.bloomberglaw.com/public/document/In_re_Cuozzo_Speed_Technologies_LLC_Docket_No_1401301_Fed_Cir_Feb/1.