Precedential Patent Cases From the Federal Circuit in the Past Week
Papst – In the first claim construction case since Teva, the Circuit determines that the district court decided construction based entirely upon the intrinsic evidence despite expert tutorials being presented on the technology at issue. Therefore, pursuant to Teva, the panel accords no deference to the construction below and decides de novo that the construction of five different terms were all improper. The Circuit therefore vacates summary judgment of noninfringement based on the faulty construction and remands the case.
Cuozzo – The majority holds that it lacks jurisdiction to review the PTO's decision to institute Inter Partes Review. Holding for the first time that the "broadest reasonable interpretation" (BRI) standard of claim construction applies to Inter Partes Reviews, the majority affirms the Board's claim construction under the BRI standard, its obviousness determination, and its denial of the patentee's motion to amend. Judge Newman dissents, arguing that these rulings are contrary to the intent of the AIA.
In re Papst Licensing Digital Camera Patent Litigation, Fed. Cir. Case 2014-1110
(February 2, 2015)
The patents in suit disclose a device designed to facilitate the transfer of data between a host computer and another device on which data can be placed or from which data can be acquired. The interface device of the invention uses a host's own familiar driver, which often will have been designed to work fast and reliably. The result, says the written description, is to allow data transfer at high speed without needing a new set of instructions for every host—to provide an interface device for communication between a host device and a data transmit/receive device whose use is host device independent and which delivers a high data transfer rate.
Papst filed infringement suits against camera manufacturers in multiple district courts across the country. A multi-district litigation panel then consolidated all cases and transferred them to the D.C. district court.
Expert Tutorials Were Presented to the District Court, but Expert Testimony Regarding the Terms at Issue was not Admitted.
In preparation for claim construction, the district court received a "tutorial" from the parties' experts, whom the court asked to be "neutral" and who addressed the background of the technology, how the claimed inventions work, and other technical understandings, but not whether any particular term in the patent or the prior art has a particular meaning in the relevant field. The district court did, however, rely on an IEEE dictionary definition of "virtual record," one of the terms at issue. The court heard extensive argument from counsel, but declined to admit expert testimony or to rely on an expert declaration from Papst, stating that "the intrinsic evidence—the claims, the specification, and the prosecution history—provide the full record necessary for claims construction." Based upon its narrow claim construction, the district court granted summary judgment of noninfringement.
The Panel's Review is De Novo
The panel first notes that it is "reviewing the district court's claim constructions de novo, because intrinsic evidence fully determines the proper constructions. See Teva Pharm. U.S.A. Inc. v. Sandoz, Inc., 135 S. Ct. 831, 840-42 (2015). As we have noted, the district court relied only on the intrinsic record, not on any testimony about skilled artisans' understandings of claim terms in the relevant field, and neither party challenges that approach."
Letters from Counsel Regarding Teva
While the panel noted that "neither party challenges that approach," quickly after Teva was decided, counsel for Nikon, one of the defendants, wrote the panel pursuant to Rule 28(j), which permits the parties to bring recent decisions to the panel's attention. Counsel urged the panel to apply the "clear error" standard of review since the district court's construction was based on expert witness testimony: "The District Court heard from and questioned the parties' experts under oath, at an all-day presentation held prior to its three-day Markman hearing; appointed a technical advisor to assist it in understanding the patents' technology and terminology; and resolved numerous subsidiary factual disputes based on extrinsic evidence." Counsel then compared this case to Teva, "where the Supreme Court held that the district court's crediting of one expert's reading of a figure in the patent over another expert's reading should be given clear-error deference."
Counsel for Papst responded, quoting from the district court's opinion that it was not relying on any extrinsic evidence: "Because the intrinsic evidence – the claims, the specification, and the prosecution history – provide the full record necessary for claims construction, the [District] Court did not admit expert testimony at the Markman hearing."
The Panel Rejects the District Court's Narrow Construction and Reverses the Summary Judgment of No Infringement
The panel rejects the district court's construction of all five terms at issue. We do so following our familiar approach to claim construction. We generally give words of a claim their ordinary meaning in the context of the claim and the whole patent document; the specification particularly, but also the prosecution history, informs the determination of claim meaning in context, including by resolving ambiguities; and even if the meaning is plain on the face of the claim language, the patentee can, by acting with sufficient clarity, disclaim such a plain meaning or prescribe a special definition."We apply, in particular, the principle that the construction that stays true to the claim language and most naturally aligns with the patent's description of the invention will be, in the end, the correct construction. On remand, this case will proceed in light of our claim-construction reversals. For that reason, it is worth reiterating that a district court may (and sometimes must) revisit, alter, or supplement its claim constructions (subject to controlling appellate mandates) to the extent necessary to ensure that final constructions serve their purpose of genuinely clarifying the scope of claims for the finder of fact. That determination is to be made as the case moves forward.
Comment: This case demonstrates that use of expert testimony for background tutorials on the technology in general is not going to mean that extrinsic evidence has been considered and deference is to be accorded. According to the panel, to be considered, the testimony must be as to the construction of the specific terms at issue. Here, the district court did a good job of making clear in its construction opinion that it was not relying on extrinsic evidence, even though it did reference the IEEE dictionary.
Hopefully all such rulings will be accompanied by a similar clear statement. As long as this is the case, the path forward set by Teva should be a smooth one. The problematic cases will be the ones where the district court is not so clear in its ruling. In these cases, especially where a ruling has been contrary to your client's position, counsel should ask the district court to supplement its written claim construction opinion to state that it is not relying on extrinsic evidence so that, like the present case, the de novo standard will be applied on appeal. By the same token, if a ruling is consistent with your client's position and you think the district court relied on extrinsic evidence, you want the court to say so, in order for the "clear error" standard of review to be applied.
Another issue might be raised where the district court explicitly considers extrinsic evidence in order to assure a deferential review. It is conceivable in such cases that if the Circuit feels the construction could have been decided on the intrinsic evidence, it will examine only the intrinsic evidence on a de novo basis and rule that there is no need to refer to extrinsic evidence.
There are many other claim construction cases in the queue so we'll undoubtedly hear more from the Circuit on this issue in the coming weeks.
In re Cuozzo Speed Technologies, LLC., Fed. Cir. Case 2014-1301 (February 4, 2015)
The PTO's Decision to Institute IPR is Not Appealable
Cuozzo argues that the PTO improperly instituted IPR because it relied on prior art that Garmin did not identify in its petition as grounds for IPR as to those two claims (though the prior art in question was identified with respect to another claim). Under the statute, any petition for IPR must identify with particularity the grounds on which the challenge to each claim is based. 35 U.S.C. § 312(a)(3). Cuozzo argues that the PTO may only institute IPR based on grounds identified in the petition because "[t]he Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition . . . and any response . . . shows that there is a reasonable likelihood that the petitioner would prevail . . . ." Id. § 314(a).
This threshold issue here is whether a decision to institute IPR is appealable. Section 314(d) is entitled "No appeal" and provides that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." Cuozzo argues that § 314(d) does not completely preclude review of the decision to institute IPR, but instead merely postpones review of the PTO's authority until after the issuance of a final decision by the Board.
The majority disagrees, concluding that § 314(d) prohibits review of the decision to institute IPR even after a final decision. On its face, the provision is not directed to precluding review only before a final decision. Moreover, given that § 319 and § 141(c) already limit appeals to appeals from final decisions, § 314(d) would have been unnecessary to preclude non-final review of institution decisions.
The BRI Standard Should Be Applied in IPR's.
The AIA created IPR, but the statute on its face does not resolve the issue of whether the broadest reasonable interpretation (BRI) standard is appropriate in IPR's; it is silent on that issue. However, the statute provides that "[t]he Director shall prescribe regulations," inter alia, "setting forth the standards for the showing of sufficient grounds to institute . . . review," and "establishing and governing inter partes review. . . . and the relationship of such review to other proceedings . . ." 35 U.S.C. § 316(a)(2), (a)(4). Pursuant to this authority, the PTO has promulgated 37 C.F.R. § 42.100(b), which provides that "[a] claim in an unexpired patent shall be given its broadest reasonable construction in light of the specification of the patent in which it appears." 37 C.F.R. § 42.100(b). Cuozzo argues that the PTO lacked authority to promulgate § 42.100(b) and that the BRI standard is inappropriate in an adjudicatory IPR proceeding.
Before addressing the scope of the PTO's rulemaking authority, the majority considers the history of the BRI standard and the bearing of that history on the interpretation of the IPR statute. The BRI standard has been applied by the PTO and its predecessor for more than 100 years in various types of PTO proceedings. This court has approved of the BRI standard in a variety of proceedings, including initial examinations, interferences, and post-grant proceedings such as reissues and reexaminations. Indeed, that standard has been applied in every PTO proceeding involving unexpired patents. Applying the BRI standard reduces the possibility that, after the patent is granted, the claims may be interpreted as giving broader coverage than is justified.
There is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years. Here, Congress in enacting the AIA was well aware that the BRI standard was the prevailing rule. It can therefore be inferred that Congress impliedly adopted the existing rule of adopting the BRI.
Cuozzo argues that judicial or congressional approval of the BRI standard for other proceedings is irrelevant here because the earlier judicial decisions relied on the availability of amendment, and the AIA limits amendments in IPR proceedings. But IPR proceedings are not materially different in that respect. Section 316(d)(1) provides that a patentee may file one motion to amend in order to "[c]ancel any challenged patent claim" or [f]or each challenged claim, propose a reasonable number of substitute claims," 35 U.S.C. § 316(d)(1), though "[a]n amendment . . . may not enlarge the scope of the claims of the patent or introduce new matter," id. § 316(d)(3). The PTO regulations provide that "[a] patent owner may file one motion to amend a patent, but only after conferring with the Board." 37 C.F.R. § 42.221(a). "The presumption is that only one substitute claim would be needed to replace each challenged claim, and it may be rebutted by a demonstration of need." Id. § 42.221(a)(3). The statute also provides that "[a]dditional motions to amend may be permitted upon the joint request of the petitioner and the patent owner. . . . ." 35 U.S.C. § 316(d)(2). "A motion to amend may be denied where" the amendment either "does not respond to a ground of unpatentability involved in the [IPR] trial" or "seeks to enlarge the scope of the claims of the patent or introduce new subject matter." 37 C.F.R. § 42.221(a)(2).
Although the opportunity to amend is limited in the IPR setting, it is nonetheless available. The fact that the patent owner may be limited to a single amendment, may not broaden the claims, and must address the ground of unpatentability, is not a material difference. Nor is the fact that IPR may be said to be adjudicatory rather than an examination. Interference proceedings are also in some sense adjudicatory. In any event, Congress in enacting the AIA was aware of these differences in terms of amendments and adjudication and did not provide for a different standard than the BRI standard. The majority concludes that Congress implicitly adopted the broadest reasonable interpretation standard in enacting the AIA.
Even if we were to conclude that Congress did not adopt the BRI standard in enacting the AIA, § 316 provides authority to the PTO to conduct rulemaking. The regulation here presents a reasonable interpretation of the statute. The PTO has long applied the BRI standard in other proceedings, suggesting that a BRI standard is appropriate in IPRs. Even if the BRI standard were not incorporated into the IPR provisions of the statute, the standard was properly adopted by PTO regulation.
The Panel Affirms Claim Construction Applying a De Novo Standard
The majority then turns to the issue of whether the Board here properly construed the claims under the BRI standard. According to Teva Pharmaceuticals U.S.A., Inc. v. Sandoz, Inc., 135 S. Ct. 831, 841 (2015), underlying factual determinations concerning extrinsic evidence are to be reviewed for substantial evidence, and the ultimate construction of the claim de novo. Because there is no issue here as to extrinsic evidence, the panel reviews the claim construction de novo but finds no error in the Board's construction.
The Determination of Obviousness is Affirmed
After determining that under the BRI, the Board properly interpreted the claim language, the panel turns to whether the claims at issue were obvious. The Board's factual findings are reviewed for substantial evidence and its legal conclusions are reviewed de novo.
Even under its own claim construction, Cuozzo agrees that the mechanical embodiment with a red colored filter is within the claim scope. It is a long-established rule that 'claims which are broad enough to read on obvious subject matter are unpatentable even though they also read on nonobvious subject matter. Thus if the mechanical embodiment is obvious, the claim is obvious. The Board determined that the mechanical embodiment was obvious over the prior art, and the majority sees no error in that determination.
The Board Properly Denied Cuozzo's Motion for Leave to Amend
Finally, the panel considers whether the Board properly denied Cuozzo's motion for leave to amend. The statute and PTO regulation bar amendments which would broaden the scope of the claims. 35 U.S.C. § 316(d)(3); 37 C.F.R. § 42.221(a)(2)(ii). In the past, we have construed this requirement in the context of reissues and reexaminations. In both contexts, we have applied the test that a claim is broader in scope than the original claims if it contains within its scope any conceivable apparatus or process which would not have infringed the original patent. The same test applies in the context of IPRs. Therefore, we inquire whether Cuozzo's proposed substitute claims would encompass any apparatus or process that would not have been covered by the original claims. The Board held that claim 21 was broadening because it would encompass a single-LCD embodiment wherein both the speedometer and the colored display are LCDs, which was not within the original claims. The panel agrees with that finding so the motion to amend was properly denied.
Judge Newman's Dissent
In her dissent, Judge Newman provides a discussion as to how the majority's rulings are contrary to the legislative purpose of the AIA. First, she notes that the AIA established the IPR system for the purpose of "providing quick and cost effective alternatives to litigation." This purpose was achieved by providing a new adjudicatory proceeding in the PTO, whereby a newly formed Patent Trial and Appeal Board (PTAB) serves as a surrogate for district court litigation of patent validity. The goal is improved service to technology-based innovation, and thus to the nation. According to Judge Newman, the majority thwarts the statutory plan in several ways.
First, the panel majority holds that the PTAB, in conducting its adversarial proceedings, need not and should not apply the same legal and evidentiary standards as would apply in the district court. Instead, the panel majority authorizes and requires treating the claims of an issued patent in the same way as pending claims in the patent application stage, where claims are subject to the "broadest reasonable interpretation" examination protocol. The panel majority thus precludes achieving review of patent validity in Inter Partes Review comparable to that of the district courts, where validity is determined based on the correct claim construction, not an artificially "broadest" construction.
The purpose of Inter Partes Review is to "convert" inter partes reexamination "from an examinational proceeding to an adjudicative proceeding." By refusing to apply to Inter Partes Review the procedural and substantive law of the district courts, the panel majority defeats the legislative purpose, for the PTO tribunal cannot serve as a surrogate for district court litigation if the PTAB does not apply the same law to the same evidence.
Second, and as a further departure from the legislative plan, the panel majority holds that the "final and nonappealable" statutory provision relating to whether to institute Inter Partes Review means that "§ 314(d) . . . must be read to bar review of all institution decisions, even after the Board issues a final decision." Does this mean that such decisions can never be judicially reviewed, even if contrary to law, even if material to the final appealed judgment? This ruling appears to impede full judicial review of the PTAB's final decision, further negating the purpose of the AIA to achieve correct adjudication of patent validity through Inter Partes Review in the administrative agency.
Comment: It is no surprise, but is still significant, that the majority affirms use of the broadest reasonable interpretation standard, even though IPR's involve issued patents. This will of course make it easier to invalidate claims in IPR's, which are showing phenomenal success on the part of petitioners. Presently, as many as 90% of the challenged claims have been found invalid, although amended claims have been allowed as to over half of those. Now that it is clear that the BRI standard will be applied to all such proceedings, we can expect even more IPR actions to be filed. The same will be true as to Post Grant Reviews once patents having filing dates of March 16, 2013 and later begin to issue.