US Supreme Court upholds rules used by patent-review board

June 20, 2016

The U.S. Supreme Court upheld a system that has helped companies like Google Inc. and Apple Inc. invalidate hundreds of disputed patents without having to go to court.

The nation’s highest court backed the rules used by an administrative board that critics have labeled a “death squad” because of its tendency to throw out patents.

The case divided the technology industry and the broader business community. Google, Apple, Samsung Electronics Co.and the generic-pharmaceutical and banking industries support the system as a way to weed out dubious patents. The biotechnology and brand-name drug industries, along with Exxon Mobil Corp. and Tessera Technologies Inc., said the rights of patent owners are being unfairly undercut.

Under the system, set up in 2011 by Congress, competitors can ask the Patent Trial and Appeal Board to take another look at patents after they have been issued.

The Supreme Court upheld the board’s practice of interpreting a patent in the broadest way reasonably possible. That’s the standard used during the U.S. Patent and Trademark Office’s initial review of applications, and it makes it easier to find information that could prove a patent doesn’t cover anything new.

The court was unanimous in backing that standard. Writing for the court, Justice Stephen Breyer said the board’s approach was a reasonable one.

"Construing a patent claim according to its broadest reasonable construction helps to protect the public," Breyer wrote. "A reasonable, yet unlawfully broad claim might discourage the use of the invention by a member of the public."

The court also backed the board on a second issue, ruling 6-2 that a patent owner can’t go to court to challenge the review board’s decision to scrutinize a patent. Justices Samuel Alito and Sonia Sotomayor dissented from that part of the ruling.

The Obama administration defended the board’s standards, saying Congress didn’t intend for the patent-review system to be identical to a court hearing.

The case before the Supreme Court involved a speed-limit indicator patent owned by Cuozzo Speed Technologies LLC, which had sued companies including Garmin Ltd., General Motors Co. and TomTom NV. Garmin filed a review petition and successfully argued the Cuozzo patent was invalid because it was an obvious variation of earlier inventions.

The numbers tell a mixed story about the board’s impact. Critics say the panel has invalidated at least part of a disputed patent in 87 percent of the cases it reviews. Supporters counter that the board declines even to consider about half the patent challenges filed.

The review board has become a popular forum for resolving patent disputes, with 1,897 review petitions filed with the agency in fiscal 2015. Technology companies in particular have embraced the proceedings because they are seen as faster and less expensive than traditional litigation in courts -- and one ruling against a patent owner can wipe out dozens of lawsuits.

The case is Cuozzo v. Lee, 15-446.


Recent Articles by Bloomberg News