IPR Proceedings have sparked controversies that have now made their way to the Supreme Court

Alyssa Hertel | 1/30/16

The Inter Partes Review (“IPR”) system was implemented as a result of the America Invents Act of 2011 in conjunction with the post grant review to replace the inter partes reexamination system.  IPR proceedings are used to allow third parties to challenge the patentability of one or more claims in a patent only on a ground that could be raised under U.S.C. §§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications.

The new IPR proceeding was anticipated to be a faster, more efficient and money saving post-grant challenge of the validity of a patent before the United States Patent and Trademark Office (“USPTO”). IPR proceedings are faster than its predecessor; the proceedings are decided within 18 months as opposed to 32 months with the inter partes reexaminations.  Also, IPR proceedings are “highly efficient at invalidating weak patents that do not claim truly innovative subject matter.” Cooley LLP, Inter Partes Review < https://www.cooley.com/interpartesreview> (accessed January 15, 2016). IPR proceedings have significantly fewer costs accompanying the process than a patent litigation would have.

IPR proceedings have quickly become the new means of challenging a patent’s validity, causing the venue of deciding a patents validity to shift from the district courts to the USPTO’s Patent and Trial and Appeal Board (“PTAB”).  While there seems to be some benefits to the implementation of IPR proceedings, there have been some downfalls to its application as there has been some controversy concerning IPR proceedings.  First, there is the issue of whether IPR proceedings violate Article III of the Constitution and/or the Seventh Amendment.  Second, the Supreme Court has decided to address two important questions accompanying IPR proceedings.

Regarding the issue of whether IPR proceedings violate either Article III of the Constitution or the Seventh Amendment, the United State Court of Appeals ruled on these matters in MCM Portfolio LLC v. Hewlett-Packard Co.  MCM Portfolio LLC (“MCM”) sued Hewlett-Packard (“HP”) for infringement of MCMs flash memory patent after the patent had been invalidated in an IPR proceeding.  MCM argued IPR proceedings are unconstitutional because they deprive patent owners of their right to a jury trial in federal court given to patent owners by Article III of the U.S. Constitution and the Seventh Amendment.

The Court of Appeals ruled that Supreme Court precedent established that IPR proceedings do not violate Article III of the Constitution.  The Supreme Court had affirmed “the constitutionality of…administrative agencies created by Congress to adjudicate cases involving ‘public rights’” and that the validity of a patent (more specifically whether the USPTO properly granted the patent) to be a public concern.  Therefore, Congress could grant the USPTO the power to review the validity of a patent through IPR proceedings without violating Article III of the U.S. constitution. The Court of Appeals also ruled IPR proceedings do not violate the Seventh Amendment right to a trial by jury when Congress has assigned the adjudication to an administrative agency such as the USPTO.  The court once again looked to Supreme Court precedent, which had established that the Seventh Amendment is not applicable to administrative proceedings.

Again, the adjudication of a public right, such as the validity of a patent, can be assigned to an administrative agency without violating the Seventh Amendment.  The court in MCM resolved the controversy of whether IPR proceedings violate Article III of the U.S. Constitution and/or the Seventh Amendment.  Now, the Supreme Court will have the chance to resolve the issue of two other important questions IPR proceedings raise.

Next, the Supreme Court decided on January 15^th, 2016 that it would hear its first review of the new IPR proceeding in the case Cuozzo Speed Technologies, LLC v. Lee later this year.  Cuozzo is the owner of the ‘074 patent related to a speed limit indicator and the method for displaying speed and the relevant speed limit. Garmin petitioned the USPTO PTAB panel for an IPR proceeding of the claims of the ‘074 patent.  The USPTO PTAB granted the IPR proceeding and found the claims to be obvious and invalidated the ‘074 patent.

Cuozzo appealed to the Federal Circuit and argued that the USPTO PTAB applied the incorrect standard when construing the claims of the ‘074 patent during the IPR proceeding.  Cuozzo also argued the IPR proceeding was improperly instituted by the USPTO, which is important because 35 U.S.C. 314(d) provides that a USPTO decision to institute an IPR is not appealable. The Federal Circuit ruled in favor of Lee, determining that the IPR proceedings was properly instituted.

Therefore, the IPR decision by the USPTO PTAB was not reviewable by the courts because 314(d) was “written to exclude all review of the decision whether to institute review.”  In re Cuozzo Speed Technologies, LLC, 793 F.3d 1268, 1273 (Fed. Cir. 2015).  The Federal Circuit also determined that the broadest reasonable interpretation standard used by the USPTO PTAB was appropriate because Congress was aware that the broadest reasonable standard was the USPTOs claim construction standard and had no intent to change it when Congress enacted the AIA.

The Supreme Court will hear and rule on two important questions accompanying IPR proceedings that were raised in the appeal to the Federal Circuit.  First, is it appropriate for the USPTO to use different claim construction standards than the standard used in federal court? The Court will decide whether the court of appeals erred in holding that, in IPR proceedings, the Board may construe the claims in an issued patent according to their broadest reasonable interpretation rather than their plain and ordinary meaning.

Second, are administrative decisions protected from judicial review?  The Court will determine if whether the court of appeals erred in holding that, even if the Board exceeds its statutory authority in instituting an IPR proceeding, the Board’s decision whether to institute an IPR proceeding is judicially reviewable. The unpredictability of the outcome of patent cases in the Supreme Court makes it hard to determine if the Supreme Court will affirm the Federal Circuits decisions.