Court Carves Exception to Patent Challenge Review Bar

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By Peter Leung

The Patent and Trademark Office’s decisions to accept patent validity challenges can be judicially reviewed when they turn on broader legal issues, a federal appeals court said June 9 ( Credit Acceptance Corp. v. Westlake Servs. , Fed. Cir., No. 16-2001, 6/9/17 ).

The U.S. Court of Appeals for the Federal Circuit ruled that the question of whether Westlake Services was barred from bringing the same challenge to the Patent Trial and Appeal Board—the PTO’s body for hearing patent validity challenges—more than once, wasn’t limited to the decision to accept the challenge and could be reviewed. The Federal Circuit—which is the main appeals court for patent cases—usually cannot review the board’s decision to accept a patent challenge in covered business method (CBM) reviews or the more common inter partes reviews.

The decision may not be enough to satisfy patent owners that have criticized the administrative patent challenges created by the America Invents Act and argue that it is unfair that an administrative decision to accept a challenge generally can’t be judicially appealed. The decision to institute a trial at the administrative stage is critical. Once the board accepts a validity challenge, the likelihood of at least one claim being invalidated is very high, about 80 percent of the time, according to PTO statistics.

The appeals court upheld the outcome at the PTO, ruling Westlake wasn’t blocked from bringing the challenge, and that the patent is invalid because it covers ineligible subject matter.

Change in Law

Westlake filed a CBM review of Credit Acceptance Corp.’s (CAC) patent, which covers systems and methods for providing financing to customers, before the U.S. Supreme Court issued its decision in Alice Corp. v. CLS Bank International. The board rejected several parts of the challenge under pre- Alice law, but after the Supreme Court decision changed the analysis as to what types of invention are patentable, Westlake filed another CBM review.

The board instituted trial in the second challenge, in light of the changes brought about by Alice, and eventually invalidated the patent’s claims. CAC appealed, arguing that the board shouldn’t have instituted trial, because Westlake was blocked from making the same arguments twice.

The Federal Circuit compared Westlake’s situation with Cuozzo Speed Technologies, LLC v. Lee, where the Supreme Court rejected a request to review the board’s decision to institute trial in an inter partes review. In Cuozzo, the patent owner argued trial shouldn’t be instituted because the challenger’s arguments weren’t specific enough.

The Federal Circuit said that the decision in Cuozzo was not reviewable because it turned on a statute that is “closely tied” to the board’s authority to choose to accept a challenge, falling squarely within the language of the review ban. The review bar comes from 35 U.S.C. § 324(e), which says decisions on “whether to institute” a review is not appealable. By contrast, CAC’s argument turns on estoppel, a concept that isn’t directly related to the institution decision, the court said. Instead, estoppel is a concept that can apply at any stage of the proceeding, and is applicable to generally all PTO proceedings, the court added.

Judge Timothy B. Dyk wrote the decision, which Judge Jimmie V. Reyna joined. Judge Haldane R. Mayer agreed that the patent covered ineligible subject matter, but dissented to argue that the court is barred from reviewing the decision to institute trial.

To contact the reporter on this story: Peter Leung in Washington at pleung@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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