Patentee Loses First IPR Appeal on all Grounds

by Dennis Crouch

The America Invents Act (AIA) was a major rewriting of U.S. patent law, but the statute includes a number of new provisions that need some amount of court interpretation.  Although the law is now 3 1/2 years old, cases involving the new provisions are only now reaching the courts.

The Federal Circuit’s decision of In re Cuozzo Speed Tech (Fed. Cir. 2015), is important as the first appeal of a written decision stemming from the new inter partes review proceedings.  Over 2000 IPR/CBM/PGR petitions have been filed during this time and so we can expect this to be the first appeal of many.  Garmin filed the IPR challenging Cuozzo’s navigation patent claims as obvious. See IPR 2012-00001; U.S. Patent No. 6,778,074.  The basic idea behind the invention is to link GPS navigators with a database of legal speed limits and provide driver colored speedometer warnings.

In its review, the Patent Trial and Appeal Board (PTAB) held trial and ruled that the challenged claims (10, 14, and 17) were unpatentable as obvious as compared to a set of prior art references.

On appeal, the Federal Circuit has affirmed with the following primary holdings:

  1. Under 35 U.S.C. 314(d), the Federal Circuit has no jurisdiction to consider whether the IPR was properly instituted. However, the court suggested that a mandamus action could potentially be available if the PTAB “clearly and indisputably exceeded its authority” in instituting an IPR.
  2. When conducting an IPR, the USPTO properly determined that claims-at-issue should be construed according to their broadest-reasonable-interpretation.  The appellate panel found that BRI is likely the correct standard and that regardless, the USPTO had been given substantial rulemaking authority in this area.
  3. Teva v. Sandoz altered the court’s approach to reviewing a PTO claim construction. In particular, under the new rule, factual conclusions concerning extrinsic evidence considered by the USPTO are reviewed for substantial evidence. However, because was no extrinsic evidence considered, this statement could be seen as mere dicta.
  4. The obviousness determination was appropriate and, in particular, the combination of references made sense because  “[a]pplying modern electronics to older mechanical devices has been commonplace in recent years.” quoting Leapfrog Enters., Inc. v. Fisher-Price, Inc., 485 F.3d 1157, 1161 (Fed. Cir. 2007). Further, it was fine for the PTO to rely upon prior art not identified in teh petition.
  5. Finally, the PTAB did not err in denying Cuozzo leave to amend its claims in a way that enlarged the scope of the patent – since the statute bars broadening amendments in IPRs. 35 U.S.C. 316(d)(3).

Writing in dissent, Judge Newman argued (1) that the claim construction in IPRs should be the same as that in district court; and (2) that the patent owner should be allowed to appeal PTAB decisions, including the decision to institute an IPR.

46 thoughts on “Patentee Loses First IPR Appeal on all Grounds

  1. This case is very disturbing.

    As far as I can tell, the patent merely claims a way of displaying data and, in fact, a fairly common way since the appearance of computer games during the 70s.

    By analogous technology and combination independent claim 1 should probably never been allowed under 103.

    Independent claim 10 reminds me of Rubber-Tip Pencil Co. v. Howard.

    I am baffled that the patent was ever granted, and now I am confused.

    Prior technology can be sought outside of the PTO database, can it not?

    Important display prior art is unlikely to be found in this database because traditionally it has been protected by copyright and not by patents.

    1. This case exposes, lays bare, the root cause (and by root I mean the germinating seed) of low quality patents. The record shows that no one did a search. The applicant filed without providing any references and the examiner’s search (it’s in public PAIR) was so minimal that it fails as even a basic patentability search. The examiner found, very quickly, a reference to apply and rejected the claims in the first office action. The attorney overcame the rejection and the patent issued.

      Regarding claim 1, a second IPR was filed and subsequently cancelled by agreement between the inventor and Garmin. The second IPR was granted and the Board informed the parties that Garmin would likely prevail on claim 1.

      All of the new art cited in both the first and second IPR’s (six US patents and four foreign applications) is in and was in the PTO databases at the time the application was filed. The obvious rejection against independent claim 10 was reached through a combination of US patents only.

      Just to be clear, this patent issued despite the fact that no one actually did a competent search.

      My question is who’s fault is that?

      1. Your question Robert has already been asked and answered.

        Are you familiar with the Tafas case and the attempt to force applicants to do the part of the job of examiners? I would think that with your two decades of providing research services to the patent community that you would fully understand the patenting process – including the lack of any requirement for an applicant to conduct any search.

        I know that such surely is not ‘best practices’ just as surely that your business depends on applicants conducting searches, but we both know that only one entity can be held to be at fault here, only one entity has the legal requirement to examine (and yes, that means perform a competent search) the application.

        I think your emphasis on the applicant just might be a little biased…

        (and to be clear, I fully recommend a rigorous search during the application writing process – any such search is well worth the cost)

  2. This application was filed without the applicant citing any prior art. The patent has twelve citations all identified by the examiner. On the other hand, the Petitioner (Garmin) paid someone to find additional art. Six additional references were filed with the Petition. Three of these were used to reach the obviousness conclusion. Additional, the remaining claims were involved in a second IPR where four additional references were submitted. The second IPR was cancelled by agreement between the parties after the PTO affirmed the Petitioner’s likelihood of prevailing.

    It’s clear the ‘074 patent is of low quality. (Presumably the applicant had a search performed however the attorney did not disclose any these to the PTO.) The subject prior art references used by the Board contained the words “speed’ and “GPS” in either the title alone in the title and abstract. There is no way a competent searcher would miss such obviously relevant references. I draw attention to the prior art deficiency only to emphasize the direct nexus between prior art and patent quality. The PTO has appointed a Deputy Commissioner for Patent Quality. If patent quality is truly of concern then both sides, that is the PTO and the patent bar, will have to be serious about reform in this area.

    It is time that applicant bear some responsibility for the quality and therefore strength of their patent.

    1. Robert,

      Are you suggesting that the end justifies the means?

      Would you suggest that it is acceptable to trample a criminal defendant’s 5th and 6th Amendment rights if he is guilty?

      1. No I’m not suggesting anything like that at all. My ax is patent quality and ‘074 could not overcome easily findable prior art.

        The inventor’s representative, Invention Submission Corporation, did a search however the attorney or agent didn’t submit an IDS. Since there is duty to disclose, apparently not a single reference was judged pertinent to the invention. The examiner’s search strategy, viewable in PAIR, was extremely limited and lacked focus.

        6778074 was crappy patent because neither the applicant/the applicant’s representative or the examiner made a dedicated attempt to find prior art.

        Patent quality is directly connected to prior art. Is there a better way to address low quality patents? Allowing patents to stand that are undeserved, I don’t think is an option.

  3. Doe anyone else think it odd that there can never be a circumstance where the validity of a patent is reviewed on a correct claim construction under a preponderance of the evidence standard?

  4. Dear Professor Crouch,
    Judge Newman is correct in her conclusion although she does not cite to either of the directly applicable SC case law. There are two distinct lines of SC cases: one is where the Supreme Court invoked the presumption to enable judicial review where CONGRESS had arguably PRECLUDED it and the other is where the Supreme Court deployed the presumption to CONFIRM the availability of JUDICIAL REVIEW in the face of a STATUTE that ARGUABLY PRECLUDED it. The presumption of judicial reviewability of an agency action has its roots in a Chief Justice Marshall decision, United States v. Nourse, 34 U.S. 8 (1835). There the Court held:
    “It would excite some surprise if, in a government of laws and of principle, furnished with a department whose appropriate duty it is to decide questions of right, not only between individuals, but between the government and individuals; a ministerial officer might, at his discretion, issue this powerful process … leaving to the debtor no remedy, no appeal to the laws of his country, if he should believe the claim to be unjust. But this anomaly does not exist; this imputation cannot be cast on the legislature of the United States.”

    Jonathan

    1. Jonathan, would it not also be inconsistent with Marbury v. Madison? Consider a statute that forbad the courts from construing it by barring review direct review, or by creating an agency, but then barring review of its assertion of jurisdiction. Such an act, if deemed constitutional, would place Congress above the Courts.

      1. Ned,

        No, the presumption of judicial reviewability of an agency action and Art. III tribunal/agency relationship with an Art. I court are not the same, although they are somewhat interrelated. Today, the presumption of judicial reviewability of an agency action is “politically” grounded in the APA. However, from a bigger picture perspective, the presumption should be construed narrowly because if Congress precludes judicial review, the courts should no longer insist that their participation
        is required. But good thinking.
        Jonathan

        1. Jonathan: “The presumption should be construed narrowly.”

          Jonathan, Heckler v. Chaney, makes a distinction between assertions of jurisdiction, and matters, like not asserting jurisdiction, that are within the discretion of the agency. The scope of review, if any, of the later is narrow — abuse of discretion. With the former, however, there is a strong presumption — at least the way I read Heckler — of a more plenary review:

          “… [W]hen an agency refuses to act it generally does not exercise its coercive power over an individual’s liberty or property rights, and thus does not infringe upon areas that courts often are called upon to protect. Similarly, when an agency does act to enforce, that action itself provides a focus for judicial review, inasmuch as the agency must have exercised its power in some manner. The action at least can be reviewed to determine whether the agency exceeded its statutory powers. ”

          470 U.S. 821, 832.

          Has Heckler been overruled?

          Has there ever been any case, ever, where Congress barred review of assertions of jurisdiction where the Supreme Court upheld the statute? Your opening post seems to suggest that the Court has simply ignored such prohibitions on review so as to avoid the constitutional question that might result.

          I was under the impression that subject matter jurisdiction was always, always reviewable. Where did that principle come from if not from Marbury because assertions of jurisdiction amount to interpretation of statutes as much as findings of jurisdictional facts. The only limit on the scope of review of agency assertions of jurisdiction seems to be “Cheney” deference under appropriate circumstances.

          1. Ned,
            Again good points, but Heckler v. Chaney belongs to the line of SC cases which are generally grouped under the heading: “the no-law-to-apply exception” which are rooted in Overton Park, Inc. v. Volpe, 401 U.S. 402 (1971). The Overton Park Court held: “The legislative history of the Administrative Procedure Act indicates that [§ 701(a)(2)] is applicable in those rare instances where “statutes are drawn in such broad terms that in a given case there is no law to apply.” S. Rep. No. 752, 79th Cong., 1st Sess., 26 (1945).” Under this line of SC cases – “the so called “the no-law-to-apply exception” – an agency action is deemed unreviewable where there is no legal standard against which to judge the agency action. This main holding in Overton Park (1971) was affirmed in Heckler (1985). The SC elaborated on this exception later again. This presumption may be overcome by demonstrating that a challenged action was “committed to agency discretion by law.” Lincoln v. Vigil, 508 U.S. 182, 191 (1993) – the Court citing 5 U.S.C. § 701(a)(2). Section 701(a)(2) represents a “very narrow exception” to the presumption of reviewability and applies in those “rare instances where `statutes are drawn in such broad terms that in a given case there is no law to apply.'” Overton Park, Inc. v. Volpe, 401 U.S. 402, 410 (1971) quoting S. Rep. No. 752, 79th Cong., 1st Sess., 26 (1945). Heckler thus does not change the exception created, endorsed and based on Overton Park. To the contrary Heckler affirms this “loophole” when the Heckler Court states: “The agency is far better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities. Similar concerns animate the principles of administrative law that courts generally will defer to an agency’s construction of the statute it is charged with implementing, and to the procedures it adopts for implementing that statute.” citing Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U. S. 519, 543 (1978); Train v. Natural Resources Defense Council, Inc., 421 U. S. 60, 87 (1975). Also, Heckler v. Chaney, 470 US 821 (1985) is focused on an agency enforcement action and thus not directly on point. Generally, Heckler teaches that non-enforcement decisions by an agency are presumptively non-reviewable, but because Heckler deals with the denial of an enforcement action, it could be distinguished. And indeed several appellate courts have done exactly that. Jonathan

        2. Jonathan, from Bowen v. Academy of Family Physicians, 476 US 667 (1986), the Supreme Court does trace the doctrine of reviewability back to Marbury v. Madison:

          “In Marbury v. Madison, 1 Cranch 137, 5 U. S. 163 (1803), a case itself involving review of executive action, Chief Justice Marshall insisted that “[t]he very essence of civil liberty certainly consists in the right of every individual to claim the protection of the laws.” Later, in the lesser known but nonetheless important case of United States v. Nourse, 9 Pet. 8, 34 U. S. 28-29 (1835)….”

          Indeed the principle of review could be traced to the case of Proclamations [1610] EWHC KB J22 (Coke, Chief Justice of the Common Pleas) that decided that proclamations of the King could be reviewed to see if they were in accordance with the law.

          Judicial review is absolutely necessary for the rule of law.

  5. Newman has this right. No claim amendments and the substitute for dist. ct. litigation means this should not be BRI.

    1. Also the fact that you don’t need standing to file an IPR petition is further reason for BRI not to be used.

      1. Newman is right. Something has to change. The cards are stacked against the patent owner regardless if it is, for the sake of argument, an improvidently issued claim set. Now any patent owner will likely face one or more post grant challenges and face a multi year delay before any rights can begin to be enforced in court. All at the expense of at least hundreds of thousands of fees and costs, among other things. And all after the initial time and money sunk in prosecuting the patent in the first place. Either allow amendments in an IPR as a matter of course or use constructions consistent withe the courts. As it stands now, the system seems fundamentally unfair. To preemptive lay address MM, even if the claims at issue were cr@p information processing claims, it seems unlikely that allowing amendments would save the pure cr@p. But claims supported by a robust spec in all fields would get a fair shot.

        1. “The cards are stacked against the patent owner…a multi year delay…the expense of at least hundreds of thousands of fees and costs”

          How does that put a patent owner at a disadvantage? The accused infringer is subject to even higher costs and more disruptions and delays in his business and the defendant isn’t even the one who initiated the proceedings!

          Furthermore, patent plaintiffs are typically wealthy businesses and investor pools or entrepreneurial patent lawyers that can easily absorb the costs. Defendants are usually small businesses that can’t hope to recover the money they lose — and will almost never be reimbursed for — just defending themselves from accusations that are usually false or invalid. That looks like patent owners are still in possession of massive often insuperable and unjust advantages.

          1. Owen “How, why, blah ….”

            Because the patent has issued from the PTO and then before the owner can assert the patent they are going to have to go through an IPR.

            We have now a fancy registration system where it costs $500K to then assert a patent. The AIA weakened patent enormously.

            And yet the bizzarro world of Google propaganda tells us black is white and white is black.

          2. >>How does that put a patent owner at a disadvantage?

            Multi-year litigation and $500K to even begin to assert your patent. And you don’t see any change there that is negative towards the patent owner.

            OK. Owen you are ridiculous and deserve zero consideration.

          3. I don’t expect a lot of concern for accused infringers on these boards, but I am often surprised at the detailed expressions of empathy for patentees who are unfairly damaged and the dismissive lack of empathy for innocent accused infringers damaged in equal or greater ways.

        2. Now any patent owner will likely face one or more post grant challenges and face a multi year delay before any rights can begin to be enforced in court. All at the expense of at least hundreds of thousands of fees and costs, among other things.

          Or you can ask for a reasonable license that’s commensurate with what you actually “innovated.”

          But we all know that’s hard for the typical NPE. And we all know why.

    2. No claim amendments

      Not true. Every patent owner is permitted to amend their claims in an IPR.

      Just because the number of opportunities is “limited” relative to other proceedings doesn’t mean that the opportunities don’t exist. There are limitations placed on the timing and manner of amending claims in all PTO proceedings.

      Absent a completely new approach to claim construction and examination, the use of the broadest reasonable intepretation in PTO proceedings is essential to expunge the system of patents that should never have been granted in the first place.

    3. Night, when the validity of any patent or patent claim is at issue, BRI, a construction designed to read on the prior art, is beyond inappropriate. It is not sufficient, in my view, that the patent owner may amend and obtain a claim that is narrower. Amended claims by statute invoke intervening rights — the patent owner is harmed in a major league way.

      The overall effect of BRI is to deny the patent owner his statutory rights — his property — in such past damages. This is a denial of due process.

      The infringer bar knows the effects of BRI all too well. They flock to the PTO not so much because of its cheapness, but because of BRI and further because of use no presumption of validity. The combination is lethal to patent owners, and is fundamentally unfair, and as I said, a denial of due process.

      One wonders how all this happened — was this intended or accidental? Given the widespread concern finally being expressed by so many who rely on the patent system, it is finally sinking in that there is a fundamental problem here that has to be fixed.

  6. Crowell v. Benson requires that jurisdictional facts be subject to de novo review for constitutional purposes. A mandamus does not even come close to providing the necessary review demanded by the constitution.

  7. I do not think the above sentence that “Further, it was fine for the PTO to rely upon prior art not identified in teh petition” is accurate. Because the Fed. Cir. decision says that the prior art in question relied on by the Board for part of its claim rejections was cited in the petition [and thus of record ab initio], it was just not cited in the petition against all of the Board’s rejected claims. Thus, it was not prior art submitted for the first time in the trial or raised by the Board itself. [That should rarely occur in an IPR and if it does I would think the legality of it may remain to be decided?]
    BTW, how has the application of BRC here made a practical difference for the patent owner, whom I understand was arguing for a broader, not a narrower, claim construction for establishing infringement?

    1. BTW, even Judge Newman’s extensive policy arguments dissent does not provide the slightest hint of how not using BRI claim construction in this IPR would have actually made any difference to the outcome.

      1. I have the impression that she has been reading a lot of amicus briefs on the BRI issue, and simply wanted to comment somewhere.

        I have not looked closely at this issue to see whether the use of BRI was decisive. But it can be.

    2. Paul, IIRC, the art and argument was cited in the petition against a dependent claim, which is necessarily narrower than the independent. Thus the petition art used to show the limitations of the dependent claims was necessarily relevant to the parent claim to show its limitations for the very same reasons.

      This was not a case where the Board found new art not cited in the petition as you note; or where the art applied was not of record to show the limitations the board fished through it to find. Those both are horses of an entirely different color.

      Also, the statute 316(e) requires the petitioner to proof its case — to show all limitations in the claims with references and argument. The board cannot step in and do the petitioner’s work for them without violating 316(e). This is not supposed to be patent owner vs. PTAB. The PTAB must play judge, not prosecutor.

      1. Ned, I was with you until your last sentence. We are in agreement that this was not new prior art raised for the first time after the IPR was initiated. But 35 USC 316(e) you cite just says: “Evidentiary Standards- In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.”
        That is not an IPR requirement that every piece of cited prior art has to be asserted repeatedly against every listed claim in the petition itself, and that otherwise that prior art must be ignored throughout the IPR trial and decision. [Any more than it would be in a D.C.] There is no due process issue here, as the patent owner was on full notice of the assertion of the contents of that prior art against the patent from day one.

        1. Paul, Notice?

          This word is key.

          Under 35 USC 132, all the director has to do is give NOTICE. This is sufficient to provide a prima facie case and move the burden to the applicant. All the director has to do is provide the references, the statutory grounds and some basic reasoning.

          But 35 USC 132 does not govern IPRs as they do examinations. 35 USC 316(e) governs. That statute does not authorize the petitioner to establish a prima facie case by notice. That statute requires the petitioner to PROVE their case.

          What the PTAB has to decide is whether the petitioner proved their case. Otherwise, by statute, the patent owner must prevail.

          Under controlling law, from district court appeals, “proof” requires the proponent to demonstrate every claim element by EVIDENCE and by ARGUMENT.

          Now, in this case, I think the petitioner did just that. But, I disagree that IPRs are like examinations or reexaminations. They are not. In this regime, notice has no place. Proof is required.

    1. Thanks sister anon.

      While the chances are high that you are correct, such is not something that can be said without actually reviewing the matter.

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