Wednesday, February 3, 2016

Intellectual Property: Inter Partes Review - You Can Run But You Cannot Hide from Federal Court

By Kathy Wade

        Anyone petitioning for inter partes review (IPR) of patent claims by the U.S. Patent and Trademark Office (PTO) with the intention to bypass federal court should be forewarned: Such action does not circumvent scrutiny by the U.S. Court of Appeals for the Federal Circuit. Under 28 U.S.C. section 1295 (a)(4)(A), the federal circuit has exclusive jurisdiction over appeals from the PTO’s Patent Trial and Appeal Board (PTAB), including jurisdiction over appeals of the PTAB’s final written decisions on IPRs. Belden Inc. v. Berk-Tek LLC, 610 F. App'x 997, 1001 (Fed. Cir. 2015). 

        Although the federal circuit largely rubber-stamped the PTAB’s IPR decisions in 2015, the court did not affirm all. In two appeals, the federal circuit substantively challenged ― and rejected ― the PTAB’s findings. Such action by the federal circuit is noteworthy in light of the substantial deference the court gives to the PTAB’s factual findings.

        In Microsoft Corp. v. Proxyconn, Inc., the federal circuit reversed the PTAB, in part, for the first time in an appeal of an IPR. 789 F.3d 1292, 1308 (Fed. Cir. 2015). Specifically, the court remanded with regards to the PTAB’s claims construction findings. The court first rejected the patent owner’s argument that the broadest reasonable interpretation (BRI) standard of claims construction used by the PTAB should not apply in IPR proceedings. Id. at 1297. The federal circuit held, in a case decided after the parties had fully briefed their appeal, In re Cuozzo Speed Techs., LLC, 793 F.3d 1268 1275-79 (Fed. Cir. 2015), that the PTAB properly adopted the BRI standard. Although the court affirmed the PTAB’s use of the BRI standard, it found the PTAB’s construction of certain terms were unreasonably broad and vacated the board’s unpatentability findings on that ground. Microsoft, 789 F.3d at 1298-99.

        The federal circuit’s second reversal of the PTAB’s factual findings involved an obviousness determination. In Belden Inc. v. Berk-Tec LLC, 610 F. App'x 997, 1005 (Fed. Cir. 2015), the federal circuit rejected the PTAB’s conclusion that two patent claims were not obvious. The PTAB had determined that there was no motivation to combine two prior art references to teach the two claims. The federal circuit disagreed, finding the PTAB had made a series of incorrect factual conclusions and that the undisputed record evidence pointed clearly to a motivation to combine the references. The court did not, however, vacate and remand to the PTAB to make appropriate findings. Instead, the court found the record was sufficient to reverse the board.

        Although Microsoft and Belden teach key lessons on the federal circuit’s legal analyses, they are largely important for their results. They signal that the federal circuit still has the last word on patent claim validity. Practitioners in IPR proceedings would do well to bear in mind that they may still have to litigate in federal court.