Reactions and predictions from Cuozzo arguments at the Supreme Court

Patent Trial and Appeal Board (PTAB) observers are split on whether the Supreme Court will allow the broadest reasonable interpretation (BRI) claim construction standard used by the Board in inter partes review (IPR) to survive, following oral arguments in Cuozzo v Lee on April 25.

The Supreme Court was considering two questions: whether the PTAB can construe claims according to their BRI rather than their plain and ordinary meaning and whether the Board’s decision to institute an IPR proceeding is judicially unreviewable by the Federal Circuit.

The justices asked a wide range of questions – with the usual exception of Justice Thomas, who remained silent. IP practitioners have been assessing the comments to determine whether the Supreme Court will replace BRI with the Philipps standard used in district courts. 

Scott McKeown, chair of the post-grant patent practice group at Oblon McClelland Maier & Neustadt, believes the court will not change the BRI standard based on the oral arguments.

“My view is that … a majority of the Court was not buying Cuozzo's key BRI arguments,” said McKeown in a post on the Patents Post-Grant blog. “Namely, his iterative amendment argument, and his adjudicative distinction. Most of the questions for the government seemed informational (on parallel tracks a patent dispute may take (Roberts)), as opposed to the disputed issues. While issues of policy are always part of a SCOTUS appeal, I don't see them moving the needle here absent something more. It was the ‘more’ that will be the problem for Cuozzo.” Thomas Duston, partner at Marshall Gerstein Borun, agrees. With eight justices now sitting on the court, four would be needed to sustain the BRI standard.

“Based upon their comments, it would appear that Justices Sotomayor, Ginsburg, Kagan and Breyer lean towards maintaining the application of the broadest reasonable construction,” Duston wrote on the PTABWatch blog. “Justices Kennedy and Alito also appear, based on their comments, to be possible votes in favour of maintaining application of the broadest reasonable construction. Justice Roberts appears opposed. Justice Thomas has offered no indication. Based on this presumed headcount, the broadest reasonable construction may be here to stay (at least for now).”

Others were less sure. Herb Hart, shareholder at IP boutique law firm McAndrews Held & Malloy attended the oral arguments. 

“Predicting the outcome on the first issue would be difficult based on the wide range of questions and comments from the Justices,” he told Managing IP. “They understood the impact of having a lower bar for proving invalidity at the Board than in court, and they appeared focused on determining the intent of Congress in creating inter partes review trials.”

During the arguments, Cuozzo’s counsel, Gerrard Beeney of Sullivan & Cromwell, received pushback from justices on his argument that Congress by establishing IPR sought to substitute and provide a court-like litigation but did not provide “the wide liberty to amend”.

Justice Sotomayor responded: “I might be moved by your argument if Congress had not given any right for the Board to amend, because that would be consistent with practices in the district court, where district court can't amend under any circumstance. But basically, Congress here said you can amend once. I'm not sure that that supports your proposition.”

Sotomayor later wondered whether the Philipps tools are used to determine BRI anyway – “how can the PTO decide what a broad reasonable reading is unless it looks at all of those factors and decides that the specifications and all the other things don't cure, continue to provide ambiguity in the patent?” she asked.

Others seemed supportive of BRI. Justice Kennedy commented: “[I]f the patent is invalid under its broadest, reasonable interpretation … doesn't that mean the PTO should never have issued the patent in the first place, and doesn't that give very significant meaning and structure to this process?”

Justice Breyer said there is a different way of looking at PTAB trials than just "trying to build a little court proceeding". “[I]f I thought it was just doing that, I would say you were right,” he said.  But he continued: "There are these things, for better words, let's call them patent trolls, and … the Patent Office has been issuing billions of patents that shouldn't have been issued –­­ I overstate –­­ but only some," Justice Breyer said. He added if a patent should not have been issued under the BRI standard and the USPTO cancels it for "the benefit of those people who were suffering from too many patents that shouldn't have been issued in the first place … then I would think, well, maybe this is right, what they’re doing.” He later referred to the legislation a “partial Groundhog Day statute” that tells the USPTO “to do it again until you get it right”.  

Brad Olson, partner at Barnes & Thornburg in Washington DC, attended the arguments. Despite Justice Breyer’s comments, Olson notes that the number of patents granted since the US has existed is about nine million, far from billions.

“The general perception of the justices that are not that patent savvy is that Congress figured out a procedure, the AIA, and there is the IPR protocol of patent validity challenges and pretty much the USPTO should have its own ability to set its standards,” Olson told Managing IP.

Those who want the PTAB’s claim construction standard to be changed to the Philipps standard will have taken most heart from Chief Justice Roberts’ comments. He questioned why the court should be wedded to BRI when the point is not to replicate USPTO procedures but rather to take the place of district court procedures.

“It's a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results,” he said. Chief Justice Roberts was troubled by the notion that a single patent claim could have one meaning in district court and another at the PTAB. “It just seems to me that that's a bizarre way to … decide a legal question. I mean, who ­–­ how does it work?” Eley Thompsona and Stephen Maebius on Foley & Lardner’s PTAB Trial Insights blog commented: “While it was unclear how the court will ultimately rule, it was rather clear that the biggest proponent for consistency with the district court proceedings was Chief Justice Roberts and the biggest proponent of the USPTO being able to recall patents under their own BRI standard was debatable because several Justices seemed to support the notion.”

Jonas Anderson, associate professor of law at the American University Washington College of Law, believes the arguments made it clear that Roberts dislikes IPR at the PTAB. “I mean REALLY dislikes it,” he said on Twitter. But Anderson sees at least four votes to sustain the BRI standard – Ginsburg, Sotomayor, Breyer and “probably Kagan”. “So, ultimately the law will remain unchanged,” said Anderson.

Howover, Olson at Barnes & Thornburg believes there is a chance that BRI is replaced if Chief Justice Roberts can persuade his fellow justices. Olson says he would not let go of the question of whether it is true you can have two different results as a result of the two systems.

“The respondent for the government had to concede that, yes, in some circumstances you can have different results,” says Olson. “The bright line here is that Chief Justice Roberts really got it and – putting aside any policy concerns about the need to destroy these billions and billions of patents – he understood there are two systems here that are creating a tension between two pathways to adjudicate an issued patent. It is hard to make the argument that that is something that should be desired."

Olson adds: “So my personal feeling is that, if he can convince other justices to follow, it is likely that the Supreme Court at least will correct the BRI standard.”

This would be a big help for district courts, believes Jim Myers, partner at Ropes & Gray. Courts cannot rely on the PTAB’s claim construction now because it is a different standard.

“If it were identical on the standard, then the courts could move faster with greater assurance in district court litigation because they could rely on the PTAB’s claim construction,” Myers told Managing IP. “District court judges get overturned more for bad claim construction than for anything else. So imagine if they could take the PTAB’s claim construction and say, ’Somebody else did that work, I can handle the rest. So I won’t be reversed on that, I’ll feel like I’ve had a bunch of experts construe the claims and now it is up to me to apply it for invalidity and infringement and give the other stuff to the jury.’”

The second question before the court received far less attention during the oral argument.

“It seemed clear from the questioning, however, that the Justices were not inclined to accept a statutory interpretation that the Board’s decision to institute a trial is immune from appellate review,” says Hart at McAndrews Held & Malloy.

He continues: “The Justices appear likely to reverse the judgment of the Court of Appeals, instructing it to review the Board’s institution decision to ensure that it met the requirements of the America Invents Act.”

Cuozzo’s attorney Beeney said his client’s position is that there is nothing in the statutory scheme that meets the burden to overcome the under the heavy presumption of judicial review of administrative actions. He added the statute only prevents interim interlocutory review of the institution decision at the time.

Ginsburg was sceptical about the unreviewability of the decision to implement an IPR. “Then this statute is doing no work, because there would be a bar on interlocutory review under the final judgment rule, in any event,” she said. “You don't need a statute to preclude interlocutory review when the reviewing court can review only final judgments.”

Justice Sotomayor returned to the question with the government’s counsel Gannon. She asked whether Cuozzo’s arguments that it precludes mandamus and precludes reviews of the denial to grant such a hearing is not enough to say there should be some review. “Why would Congress tell the PTO don't do it except in these limited circumstances, but nobody's going to ever watch you to make sure that's what you're doing?” she asked.

Olson at Barnes & Thornburg thinks the Supreme Court will probably defer to the statute on the question of the non-appealability of the institution of an IPR. “But the court certainly is not going to say the statute intended that there be no review of any of the outcomes from an IPR standard,” he says.

Jeffrey Wall, special counsel at Cuozzo’s counsel Sullivan & Cromwell, said it was hard to predict an outcome based on arguments. “The court was extremely quiet today. In all the hundreds of cases I’ve seen, I’ve never seen the court quieter than today,” he said on a panel held by the American University Program on Information Justice and Intellectual Property after the hearing. But he later added: "I came away optimistic on both questions”

On the same panel, Greg Rapawy of Kellogg Huber Hansen Todd Evans & Figel, counsel for Dell et al, which filed a brief in Support of the respondent, said: “On question one, there was a decent indication of where it's going to go; on question two, we have to draw inferences from silence.”