The Federal Circuit Reviews Patent Trial and Appeal Board Decisions on Inter Partes Review

There are now three decisions of the Federal Circuit on appeals from the Patent Trial and Appeal Board (PTAB) on inter partes reviews:

• In re Cuozzo Speed Technologies LLC
• Belden Inc. v. Berk-Tek LLC and
• Microsoft Corporation v. Proxyconn Inc.

Between them they shed some light on two of the most controversial issies relating to inter partes review:

• the use of the broadest reasonable interpretation of the claims in these proceedings; and
• the circumstances in which claim amendments are permitted.

The first of these Federal Circuit decisions elicited groans from many practitioners for apparently upholding what many regarded as undesirable features of the PTAB’s procedures, the third evoked cheers from the same group of practitioners because it reversed the decision of the PTAB that many of the claims under consideration were unpatentable.

Rational reflection on the three decisions is probably the more appropriate response.

Many had hoped that the court would find that it was improper for the PTAB to construe claims using the broadest reasonable interpretation consistent with the specification and that it should try to find the “true” meaning of the claims as is done in district court proceedings. It was argued that use of the standard being applied by the PTAB made it too easy to find prior art that anticipated or rendered obvious something falling within the scope of the claims thereby rendering them invalid. In re Cuozzo disappointed them. In its decision on this case, the Federal Circuit upheld the use of the broadest reasonable interpretation in inter partes review proceedings. The court reached this conclusion on two bases: 1) the normal practice in the Patent Office has always been to use the broadest reasonable interpretation and since Congress knew this when passing the America Invents Act creating the new inter partes review proceedings it should be presumed to have expected such standard would apply and 2) the America Invents Act gave the Director of the Patent and Trademark Office authority to promulgate rules for implementation of the law relating to inter partes review and the rules he had made included use of the broadest reasonable interpretation of the claims. The court noted that the traditional Patent Office interpretation was based on the fact that the patent owner has the right to amend claims in proceedings before the Patent Office which does not exist in district court proceedings and that although “cabined” in inter partes review, such an ability to amend still existed. As to challenges that the Director had exceeded his authority in making rules providing for use of the broadest reasonable interpretation standard, because such a rule was in effect substantive law-making rather than setting out procedure and so went beyond the Patent Office’s rule-making authority, the Federal Circuit held the adoption of the broadest reasonable interpretation standard was a reasonable interpretation of the language of the America Invents Act and this was all that was required.

Based on this conclusion the Court agreed with the PTAB that the claim in question was obvious and agreed with the PTAB that a proposed amendment to avoid this conclusion was in fact broadening and so impermissible.

In Belden v. Berk-Tek Inc., the Court again upheld broad interpretations of claim terms to agree with the PTAB’s conclusions that the claims were obvious.

The scene was set for Microsoft v. Proxyconn. Again the argument was that the claims had been construed too broadly. In this case, the Federal Circuit agreed. Claims had to be given their broadest reasonable interpretation, but that interpretation had to be reasonable. not just broad. In this case, the Federal Circuit held that the PTAB had erred in interpreting two claim terms. The first was a requirement for the claimed system for data access to contain a gateway that sent packets of information to “at least two other computers”. The second was a requirement that the system contains a “sender/computer” and a “receiver” computer. The PTAB had construed the first of these terms as meaning that computers already specified in the claim could be the “other computers”. The PTAB construed the second of these limitations to mean that the sending and receiving could be effected through intermediaries. As a consequence of such broad interpretations, the PTAB held the claims to be invalid as encompassing that which was obvious over the prior art. The Court held both of these interpretations to be inconsistent with the specification and so vacated the PTAB’s finding of obviousness based on its incorrect overly-broad interpretation of the claim terms and remanded the case for further consideration with a proper construction of the claims.¹

In this case, the court also considered the approach taken by the PTAB to amendment of claims in inter partes review proceedings. The rules lay down some fairly strict procedural requirements, but the decisions of the PTAB have gone beyond these. in deciding the case of Idle Free Systems Inc. v. Bergstrom Inc. There, the PTAB held that in order to be allowed to amend, the patent owner has to demonstrate patentability not only over the art cited by the challenger in the inter partes proceedings but that the patent owner had a broader obligation to establish patentability. This requirement has been followed in other cases. In Proxyconn, the patent owner challenged the legitimacy of this requirement, arguing that this was in effect rule-making and that public notice and an opportunity for public comment should have preceded adoption of such a rule. The Patent Office argued that it required experience with real life situations before it was in a position to make rules on this subject. The Federal Circuit concluded that the issue was a close one but “because there is merit in both arguments, we cannot say that the PTO has abused its discretion in choosing adjudication (by developing case law) over rulemaking”.

In the case before it, a piece of prior art had been cited in the proceedings, but not initially against the claims in question. The Court noted:

The legal framework provides that a patentee must “move to amend the patent,” § 316(a)(9), that the Director should incorporate only those amended claims that are “determined to be patentable,” § 318(b), and that the patentee has the burden to “establish that it is entitled to the requested relief,” § 42.20(c).

The Board has reasonably interpreted these provisions as requiring the patentee to show that its substitute claims are patentable over the prior art of record, at least in the circumstances in this case. First, nothing in the statute or regulations precludes the Board from rejecting a substitute claim on the basis of prior art that is of record, but was not cited against the original claim in the institution decision. Second, the very nature of IPRs makes the Board’s interpretation appropriate. During IPRs, once the PTO grants a patentee’s motion to amend, the substituted claims are not subject to further examination. Moreover, the petitioner may choose not to challenge the patentability of substitute claims if, for example, the amendments narrowed the claims such that the petitioner no longer faces a risk of infringement. If the patentee were not required to establish patentability of substitute claims over the prior art of record, an amended patent could issue despite the PTO having before it prior art that undermines patentability. Such a result would defeat Congress’s purpose in creating IPRs.

Interestingly the Court specifically declined to comment on a more controversial requirement of the Idle Free decision, namley that the patent owner bears an obligation to show that the amended claim is patentable over all of the prior art known to the patent owner. That issue is left to be decided on another day.