United States: Review Of 2015 Federal Circuit Decisions Addressing IPR Claim Construction And Procedural Issues

2015 was a busy year for post-grant review appeals at the Federal Circuit and produced notable opinions in the areas of claim construction, IPR procedural issues, and the constitutionality of IPRs in general. In 2015, the Federal Circuit reversed the Board’s claim construction in an IPR for the first time, and found that IPRs do not violate Article III and the Seventh Amendment of the Constitution. Below is a summary of some of the most important Federal Circuit decisions of the year regarding post-grant proceedings.

Claim Construction

In 2015, the Federal Circuit reversed the Board’s claim construction in both Microsoft v. Proxyconn, 789 F.3d 1292 (Fed. Cir. 2015), and Straight Path IP Group, Inc. v. Sipnet EU S.R.O., No. 15-1212, Slip Op. (Fed. Cir. Nov. 25, 2015). These cases represent the first and second time that the Federal Circuit has reversed a Board decision cancelling claims of a patent in an America Invents Act proceeding. In Proxyconn, the Federal Circuit reversed in part, and Straight Path IP Group saw the Federal Circuit’s first full reversal.

In Proxyconn, the Federal Circuit held that “[b]ecause we are bound by the decision in Cuozzo, we must therefore reject Proxyconn’s argument that the Board legally erred in using the broadest reasonable interpretation standard during IPRs.” The court further explained that there are indeed limits to the broadest reasonable interpretation standard, by adding “[t]hat is not to say, however, that the Board may construe claims during IPR so broadly that its constructions are unreasonable under general claim construction principles.” Thus, “[t]he protocol of giving claims their broadest reasonable interpretation . . . does not include giving claims a legally incorrect interpretation.” Importantly, the court stated that in construing claims under the broadest reasonable interpretations, the Board should “consult the patent’s prosecution history,” which is contrary to the prevalent belief that prosecution history is unnecessary when giving claims their broadest reasonable interpretation.

In Straight Path IP Group, the Federal Circuit faulted the Board for turning to the patent specification to support a claim interpretation at odds with the plain meaning of the claim language itself. In making this determination, the Federal Circuit highlighted the clarity of the terms at issue, and then explained that the Board erred by not addressing the “facially clear meaning” of the claim language and instead relying on the specification. The court found that “it is [] difficult to conclude that the specification reasonably supports a different meaning” when claim language “has a meaning that can only be called plain.” The court recognized that the claim language is “not always decisive,” but emphasized the well-established rule where claim language is plain, that meaning must apply absent a clear redefinition or disavowal.

Procedural Issues

2015 also saw continued unwillingness of the Federal Circuit to review Board institution decisions, and a willingness to allow petitioners an opportunity to correct improper replies to the patent owner response.

The Federal Circuit continued its reticence to review the Board’s decision to institute an IPR in 2015. This reluctance has been generally grounded in 35 U.S.C. § 314(d), which reads “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” The 2015 decisions on this topic follow the Federal Circuit’s 2014 opinion in St. Jude Med., Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373, 1375-76 (Fed. Cir. 2014) finding that, under § 314, the Board’s decision to institute an IPR is not appealable. For example, in In re Cuozzo Speed Techs., LLC, 778 F.3d 1271, 1276 (Fed. Cir. 2015), the Federal Circuit concluded “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. It is written to exclude all review of the decision whether to institute review.”

The Federal Circuit did examine one institution related decision in a CBM in 2015 in Versata Dev. Grp., Inc. v. SAP America, Inc., 793 F.3d 1306 (Fed. Cir. 2015) (Versata II). In Versata II, the Patent Owner had opposed institution of a Covered Business Method Review, arguing that the challenged patent was not a CBM patent, and thus not eligible for CBM review. The Board disagreed, instituted the CBM review, and ultimately issued a decision cancelling the challenged claims. On appeal, the Federal Circuit determined that it had jurisdiction to review the Board’s determination of whether the challenged patent was a CBM patent, reasoning that the prohibition against reviewing an institution decision did not bar review of whether the Board exceeded the statutory limits on its authority to invalidate patents. But, in a later case, the Federal Circuit suggested that this decision is limited to CBM cases. See Achates Reference Publishing, Inc. v. Apple, Inc., No. 2014-1767, at 10 (Fed. Cir. Sept. 30, 2015) (“Versata II is limited to the unique circumstances of CBMR and that…the Board’s determination to initiate the IPRs in this case is not subject to review by this court under 35 U.S.C. § 314(d).”

In Belden Inc. v. Berk-Tek LLC, No. 2014-1575, Slip Op. at 11 (Fed. Cir. Nov. 5, 2015), the Federal Circuit clarified the degree of discretion given to the Board when determining how to address a reply that may raise new issues or contain other improper material. The petition initiating the underlying IPR did not include an expert declaration, but petitioner included a declaration with its reply to the patent owner response. Patent owner opposed the declaration, arguing that it improperly raised new matter, but the Board allowed the declaration, citing patent owner’s ability to cross-examine the declarant and move to file observations on cross-examination. Notably, the Board also “cautioned counsel for Petitioner that if its reply indeed is inappropriate and includes material it should have submitted together with its Petition, the Board may decline the entirety of the Reply and reply declaration without separating the appropriate from the inappropriate,” and gave petitioner the opportunity to file a revised reply. On appeal, the Federal Circuit approved of the Board’s decision: “Here, the Board warned Berk-Tek and gave it an opportunity to truncate its Reply and supporting submissions to eliminate any improper material. We see no error in that reasonable course of action.”

Constitutionality

The Federal Circuit also addressed the constitutionality of IPRs in 2015. In MCM Portfolio LLC v. Hewlett-Packard Co., No. 15-1091, Slip Op. at 2 (Fed. Cir. Dec. 2, 2015), the Federal Circuit rejected patent owner’s argument that inter partes review violates Article III and the Seventh Amendment. The court noted that “[t]here is notably no suggestion that Congress lacked authority to delegate to the PTO the power to issue patents in the first instance. It would be odd indeed if Congress could not authorize the PTO to reconsider its own decisions.” Further, the court found “the Seventh Amendment is generally inapplicable in administrative proceedings, where jury trials would be incompatible with the whole concept of administrative adjudication and would substantially interfere with [the agency’s] role in the statutory scheme.”

As IPRs continue to be a popular vehicle for challenging patent validity, we can expect to see more appeals, and thus more developed jurisprudence in this area in 2016.

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