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Supreme Court Wrestles With Inter Partes Review Standards

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By Casey C. Sullivan, Esq. on April 26, 2016 3:57 PM

Not sure how you feel about inter partes review, the relatively new administrative process for challenging patents? Neither is the Supreme Court, who struggled during oral arguments yesterday to determine what claims construction standards the Patent and Trademark Office should use in IPR proceedings. The case, Cuozzo Speed Technologies v. Lee, could have long-lasting implications, as the use of inter partes review continues to grow.

Let's take a look at how things went.

A Quick Intro to IPR

The new inter partes review procedure was created by 2011's America Invents Act. Through inter partes review, a party isn't limited to invalidating bad patents in court. It can simply take them back to the PTO, for an administrative trial over the patent's validity. That procedure, IPR, is conducted before the Patent Trial and Appeal Board, a new part of the PTO created by the American Invents Act.

And it could all work swimmingly, except for one thing. Congress never explained what standards should be used to assess the validity of a patent.

That's led to a split between how the PTO evaluates patents and how courts do. In IPR, the patent office looks at the "broadest reasonable interpretation." (That's the same standard the PTO applies when initially assessing patent applications.) If the applicant's claims, when read broadly, overlap with the previous art, then the patent is no good. Courts, however, use an "ordinary meaning" standard.

The effect: the PTO invalidates a much higher percentage of patents than the courts do.

The use of IPR has been growing slowly but surely. While the PTAB oversaw only a handful of disputes in its first year, it resolved nearly 2000 last year. Tech companies love the new procedures, according to the Wall Street Journal, viewing them as a more efficient, less costly way to get rid of bad patents. Pharmaceutical and other companies are largely opposed, saying that IPR is "too friendly to challengers and creates legal uncertainty that could chill investment in innovation."

Which Way Forward for IPR?

The current case arose after Cuozzo Speed Technologies lost its patent for technology that tells drivers when they're speeding. Cuozzo's competitor, the GPS company Garmin, challenged the patent in IPR and the PTO found the technology to be insufficiently innovative.

The case raises two important questions about the future of IPR. The first, and the one which dominated oral arguments, is whether looking at the broadest reasonable interpretation is a valid way to evaluate patent claims in IPR. The second, which the Court largely ignored, is whether PTAB's decision to institute an IPR proceeding is even judicially reviewable. (The Federal Circuit answered yes to the first question, no to the second.)

At oral arguments, Justice Kagan lamented that the Court had little guidance from Congress. "If I look at the statute," she said, "it just doesn't say one way or the other," which standards should apply to IPR. "So we're a little bit reading tea leaves, aren't we?"

"It's a very extraordinary animal in legal culture to have two different proceedings addressing the same question that lead to different results," Chief Justice Roberts said. "It just seems to me that that's a bizarre way to decide a legal question."

Your Guess Is as Good as Theirs

Justice Breyer appeared most amenable to the PTO's broad standard. Invoking the threat of patent trolls, the PTO's process makes sense if Congress sought to weed out bad patents and reduce litigation, he explained.

On the other side of the debate, the Chief Justice seemed the most concerned about the PTO's separate standard, envisioning instances when the PTO and court's evaluated the same patent under different standards and with different outcomes. "So if the district court interprets the patent, is that binding on the PTO? And if the PTO interprets the patent, that's not binding on the district court?"

The answer to that question is currently unknown -- as is much about the scope and future of IPR. With little guidance from the legislature and few decisions from the lower courts, the Supreme Court will really need to consult the tea leaves for this one. They might want to start rubbing a crystal ball, reading the stars, and casting bones for good measure.

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