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Holbrook | Cuozzo treats U.S. patent office like an agency

Timothy Holbrook |

Timothy HolbrookThe patent system has a unique structure. There is an expert agency—the U.S. Patent and Trademark Office—that manages the issuance of patents. There is also an expert court—the U.S. Court of Appeals for the federal circuit—that oversees not only the USPTO but also all patent law across the country. It is odd to have both an expert court and an expert agency.

Historically, most of the power over patent law was in the hands of the federal circuit. There has been a shift, however. In 2011, Congress passed the America Invents Act, which overhauled the U.S. patent system. Included within the AIA were new administrative procedures at the USPTO, called inter partes review (IPR), which allowed parties to challenge the validity of already-issued patents. The law regarding these proceedings continues to evolve, and the Supreme Court addressed these new proceedings—and the relationship between the federal circuit and the USPTO—in its decision in Cuozzo Speed Technologies, LLC v. Lee. The court addressed two seemingly narrow issues: whether a party could challenge the USPTO’s initial decision to institute the IPR at the federal circuit and what is the appropriate standard by which the USPTO should interpret the patent.

As to the former question, the federal circuit articulated a fairly sharp line, refusing to review any aspects of the decision to institute review. The federal circuit interpreted the statutory language stating that such a decision is “final and nonappealable” to preclude any review of the merits of that decision. As to the latter, the federal circuit agreed with the USPTO that the agency should give the claims of a patent their broadest reasonable interpretation. This standard is different from that used in patent litigation within the district courts, where the court is to interpret the claim as one of ordinary skill in the relevant technology would understand it.

The Supreme Court ultimately agreed with the federal circuit on both issues. So, the decision does not change the law—for now. The reasoning of the decision, though, portends some potential future changes in the law and offers some insights as to the Supreme Court’s views regarding the relationship between the federal circuit and the USPTO.

On the reviewability of institution decisions, the Supreme Court split 6-2. Although the court agreed with the federal circuit generally, it left the door open ever so slightly as to judicial review of these decisions. The court expressly noted it was not decided “the precise effect” of the statute “on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach” beyond this particular provision. The dissent shared similar concerns and viewed the “nonappealable” language as precluding an immediate review of the decision. Once the USPTO had issues a final decision, then a party could challenge the original decision to institute the IPR proceeding. There may be some overlap between the majority and dissent, however, on the ability to challenge the USPTO’s institution decision. Both suggest that parties may have more power to challenge that initial decision than the federal circuit’s reasoning suggested.

The Supreme Court was unanimous in affirming the use of the “broadest reasonable interpretation” standard. Importantly, the court undermined what had been viewed as sacrosanct in patent law, that the USPTO could only provide procedural rules and not substantive ones regarding patent law. The court, at least as to these proceedings, rejected that rule, concluding that the USPTO did have substantive rule-making authority in this area. The reasoning brings into question the federal circuit’s earlier rule denying the USPTO such authority, which could mark a sea change in patent law if Cuozzo is given a broader interpretation.

Most importantly, as to both holdings, the Supreme Court treated the USPTO like any other administrative agency. It generally deferred to the manner by which the agency decided to regulate proceedings before it. It curtailed most review of those decisions and embraced the agency’s discretion to adopt them. Thus, Cuozzo can be viewed as the Supreme Court confirming a shift in power away from the federal circuit and to the USPTO, particularly under the America Invents Act. What downstream consequences this may have for the relationship between the court and agency remain to be seen. 

Timothy Holbrook, professor of law