The “hybrid” procedure of inter partes review has been considered since its inception by some to be litigation at occurs at the patent office, rather than in district court. The designation of IPRs and other procedures as “patent office trials” by the America Invents Act (AIA), as well as adherence to the Federal Rules of Evidence (FRE) in many instances helped contribute to this sentiment. However, in Cuozzo Speed Technologies, LLC v. Lee, No. 15-446 (June 20, 2016), the Supreme Court put this notion to rest, concluding that, “in  significant respects, inter parties review is less like a judicial proceeding and more like a specialized agency proceeding.”
In Cuozzo, the Court upheld the prior Federal Circuit decision, in which Cuozzo had challenged – and lost – on two procedural aspects of inter partes review: (1) the reviewability of the Board’s institution decisions and (2) the use of a “broadest reasonable construction” (BRC) standard in claim construction.
On the issue of reviewability, the Court split 7-2 in favor of the statutory provision that IPR institution decisions “shall be final and nonappealable.” 35 U.S.C. §314(d). The only caveat seemed to be for possible constitutional questions or extra-statutory “shenanigans,” although the scope of such shenanigans was left unclear. The Court seemed to imply discretion of the PTAB, with rare federal court oversight to ensure compliance with statutory institution requirements. In short, the Court seemed focused on Congress’s creation of inter partes review as a Patent Office proceeding that replaced inter partes reexamination, but maintained the considerable discretion the USPTO had over reexamination, interferences, and other USPTO procedure, including authority to issue “regulations … establishing and governing inter partes review.” 35 U.S.C. §316(a)(4).
Cuozzo also argued that the district court’s narrower claim construction standard set forth in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005), construing claims to have the ordinary and customary meaning as understood by one of skill in the art at the time of the invention, should be applied to IPRs, because the AIA rules creating IPRs made the procedure resemble litigation. The Court disagreed.
The Court’s decision regarding upholding the BRC standard in IPR seemed to hinge on two factors, both of which essentially defer to the PTO’s discretion in rule making for their own agency proceedings.
First, the Court appeared to put much weight on the fact that the issued patent claims already had struck the proper balance between the patentee’s desire for broad claims and the USPTO’s rejections that tend to narrow the claims during the examination process. Several times the Court noted that the patent holder “has had several opportunities to amend in the original application process,” and emphasized “the applicant has a right to amend and resubmit the claim. And the examiner and the applicant may repeat this process at least once more.” From this, the Court concluded that “[b]ecause an examiner’s (or reexaminer’s) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim to broad (and deny it), use of that standard encourages the applicant to draft narrowly.” In other words, during the original examination of the application is the best time to ensure that the scope of the patent is correct, but if the patent is brought up for review again by the same agency (the USPTO), then the same standard will apply to that review.
Second, the Court recognized that the Patent Office sought to keep the claim construction standard uniform across agency decisions of various types, and that it was within its discretion to do so. The Court noted “we cannot find unreasonable the Patent Office’s decision to prefer a degree of inconsistency in the standard used between courts and the agency, rather than among agency proceedings.”
What one can conclude from the Cuozzo holding is that IPRs are USPTO proceedings, and as a result the USPTO and the PTAB will be given the broadest discretion available under the relevant statutes, including setting their own claim construction standard. This result should put an end to speculation over whether the procedure is “litigation light,” or a more-litigious USPTO procedure. According to the Court, it is the latter.