CAFC Invigorates the Already Popular Inter Partes Review Proceedings

CAFC

By Vijay Kumar

The United States Court of Appeals for the Federal Circuit (“CAFC”) recently handed down its first decision regarding an appeal from an inter partes review (“IPR”) at the Patent Trial and Appeal Board (“PTAB”). The majority decision resulted in a win on all fronts for the Patent and Trademark Office (“PTO”), as well as those parties challenging patents.

The case, Garmin International v. Cuozzo Speed Technologies, concerned an IPR that was requested the first day that IPRs were made available under the America Invents Act (“AIA”). In its petition, the patent’s challenger, Garmin, sought to invalidate four claims from Cuozzo’s patent no. 6,778,074 (“the ‘074 patent”) based on the obviousness of combining the prior art. The PTAB took up arguments on three of the claims and, following a trial, ruled in Garmin’s favor, deeming the claims obvious and thus unpatentable. The PTAB also denied Cuozzo’s motion to amend its claims. Cuozzo appealed both decisions to the CAFC.

The CAFC majority opinion affirmed the PTAB’s decision and, in addition to its substantive holding, established three important procedural holdings for those parties looking to challenge patents. Procedurally, the CAFC majority held that: (1) Instead of pursuing the ordinary course of appeal, a challenger wishing to appeal an institution decision by the PTAB must meet the more stringent standard of mandamus review; (2) the PTAB may continue to apply the broadest reasonable interpretation (“BRI”) in construing the patent claims; and (3) the CAFC must grant deference to the PTO for its standard-setting aspects of PTAB proceedings, as the PTO was delegated by Congress to make such rules. These decisions each fall in favor of the PTO and those parties challenging patents, who often are also alleged patent infringers. More importantly, these procedural holdings each promote the already popular IPR proceedings, and thus support the argument that IPRs provide the best opportunity for third parties to invalidate a patent.

As background, the IPR proceeding, as well as the PTAB itself, were established by the AIA of 2011, as an alternative means separate from the federal court system, for challenging the patentability of issued patent claims at the PTO. IPRs and the PTAB replaced the previous inter partes reexamination proceedings and Board of Patent Appeals and Interferences, both of which had significant differences and were generally less beneficial to patent challengers than the current system. An IPR proceeding is essentially a mini-trial that is heard by a panel of three PTAB judges, most of whom have a technical background and more specific knowledge about patent law.

IPR proceedings have multiple advantages over a typical district court proceeding and, since their inception they have continued to gain popularity for those parties wishing to challenge a patent’s validity and for alleged patent infringers. One advantage of IPRs is the fact that district courts have been liberal in granting stays in district court litigation until a patent’s validity is decided by the PTAB. District courts are usually motivated to grant a stay because a decision of invalidity by the PTAB can make moot the infringement litigation that would likely follow validity proceedings. Additionally, decisions of patent validity at the PTAB can be significantly quicker than those at the district court for parties instituting the IPR. Once an IPR is filed, the PTAB has three months to decide whether to institute an IPR and then one year to actually complete the proceeding. This decreased timeframe, relative to a district court proceeding, is possible because discovery is less robust, and thus less expensive. Another significant advantage is the lower burden that a patent challenger must meet in order to invalidate a patent’s claim. An IPR proceeding requires only a “preponderance of the evidence” standard, while the district court requires the higher “clear and convincing” standard. These advantages have made IPRs a quicker, cheaper, and more practical option for parties looking to challenge a patent’s validity.

The CAFC’s In re Cuozzo decision, combined with the general appeal of IPRs, will only make post-grant proceedings at the PTAB more popular in years to come. With all the advantages that IPRs offer, the district courts and its jury system are being used more solely for infringement reasons, while the PTAB is being used more for invalidity. In many ways, the U.S. system is largely starting to resemble other countries’ patent systems, such as Germany, in which infringement and invalidity decisions are bifurcated into two completely separate systems. The amount of instituted IPRs over the next few years will help indicate whether the U.S. is indeed heading in this direction.

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