Amicus Curiae Brief — Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 890 (2016) (No. 15-446)

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In the

Supreme Court of the United States

CU0ZZO SPEED TECHNOLOGIES, LLC,

Petitioner,

Vv.

MICHELLE K. LEE, UNDER SECRETARY OF

COMMERCE FOR INTELLECTUAL PROPERTY AND

DIRECTOR, PATENT AND TRADEMARK OFFICE,

Respondent.

On Writ of Certiorari to the United States

Court of Appeals for the Federal Circuit

BRIEF FOR AMICUS CURIAE

INTERNATIONAL BUSINESS MACHINES

CORPORATION IN SUPPORT

OF NEITHER PARTY

MARIAN UNDERWEISER PAUL D. CLEMENT

MANNY W_ SCHECTER Counsel of Record

ANDREW WOJNICKI D. ZACHARY HUDSON

MARC A. EHRLICH ANDREW N. FERGUSON

MARK J. RINGES BANCROFT PLLC

IBM CORPORATION 500 New Jersey Avenue, NW

One North Castle Dr. Seventh Floor

Armonk, NY 10504 Washington, DC 20001

(202) 234-0090

pclement@bancroftpllc.com

Counsel for Amicus Curiae

March 7, 2016

Senne eeseeESTSessmesinssisinssiGcsemmnssaentee

CORPORATE DISCLOSURE STATEMENT

Amicus curiae states that it has no parent

corporation and that no publicly held company owns

more than 10% of its stock.

TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT............. i

TA Ie BA FI viens cncssesceseniesesesovesacsivnsss iv

STATEMENT OF INTEREST ...............0...cccceeeeeeee 1

SUMMARY OF ARGUMENT ......0000.......cceeeeeeeeeeeeees 3

Se ists tcsiscstnclasapti.ndanncesnieajreacsnibinnsonaxaiposwassbens 6

I. Congress’ Endorsement Of The Ability To

Amend Patent Claims During Inter Partes

Review Provides Strong Support For Use Of

The Broadest Reasonable Interpretation

RNIN «51s caps caneisboneenescaintasicscapabinncin cmuneatineencocenis 6

A. The Ability to Amend Claims and

Application of the Broadest Reasonable

Interpretation Standard are Inextricably

Intertwined and, Working Together,

Further the Aims of the Patent System

I I cecal eeckccendaignditeebccitacadarncancetimmmceais 6

B. Given The Pivotal Role Amendment

Plays, it Is Critical That the Board and

PTO Give Amendment its

Congressionally-Intended Scope _ by

Providing a Meaningful Ability to

ERR a SEAT SiR ete ee eRe le VON eA 14

Il. The Board’s Decision To Initiate Inter Partes

Review Should Be Reviewable Under Limited

IR. cusilcapunatinubaniidesahaunmpcesnaodas 22

A. Congress Placed Important Limitations

on the Board’s Authority to Institute

Inter Partes Review, and the Federal

Circuit Must Have Authority to Enforce

Se aici vcincdacecccdes concaadsvanseceicone 22

ill

B. The Statute Does Not Require a

Complete Ban on Judicial Review. ............ 24

C. The Board’s Interpretation Would Work

a Serious Injury to the AIA’s Design. ......... 29

ae II ace vactad greenside nce aheaaoaanccievietaiuncietiel 34

TABLE OF AUTHORITIES

Cases

Abbott Labs. v. Gardner,

Be i I ooo icine Siiecdccoveocesvedseevnansionoses 24

In re Am. Acad. of Sci. Tech. Ctr.,

367 F.3d 1359 (Fed. Cir. 2004)..........0...000c eee 7

Bennett v. Spear,

Ss a ni stvweneessbeeete 26

Bowen v. Mich. Acad. of Family Physicians,

a a oo a pad sbiwsueonsndvakees 24

Burlington Indus., Inc. v. Quigg,

822 F.2d 1581 (Fed. Cir. 1987).............................. 11

Chi. Mercantile Exch., Inc. v. 5th Mkt., Inc.,

No. CBM2013-00027, 2014 WL 7273560

Ge eae MIs Bs MIE oc cscickéscceddeseesvcnnaveccecdewcesiveie 15

Citizens to Pres. Overton Park v. Volpe,

er ME IIR, «nic coc aenacecbusendses(arsbesdasevcdesene 28

Corning Optical Comms. RF, LLC

v. PPC Broadband, Inc.,

No. IPR2014-00441, Paper 19

er Oe at. I My PID cic ccndceccnsecceccccevesscecnseaceenkes 18

CTS Corp. v. Waldburger,

134 S. Ct. 2175 (2014)................ iy IDs iahdcatcndlsbde seen teins 1]

Dunlop v. Bachowski,

Ae Mee I CPR cs ccc cdicceesccscccdnsoceesssecesuseenssssaos 24

In re Etter,

756 F.2d 852 (Fed. Cir. 1985).............00....ccc eee 10

Etter v. Comm ’r of Patents & Trademarks,

ee I oon k caces cca cecscuncceichnadécecdconssesss 10

FedEx Corp. v. Ronald A. Katz Tech.

Licensing, L.P., CBM2015-00053, Paper 9

(PT 2e.de. SUD BB BOB vvcovcocvecsdstusscaeeeeee 32

Festo Corp. v. Shoketsu Kogyo Kinzoku

Kabushiki Co..,

SOB UG. THE COORD... ssnmensvccsedntecctcl case cee 8

FTC v. Standard Oil Co. of Cal.,

SED UB. BES CR ve everncvevcisticsicncdccenuseeeee 26

Gutierrez de Martinez v. Lamagno,

BRS UG. SEF Ce es vasekcesciucatciacsoisaemneaceaeeee 25

Heckler v. Chaney,

GST UB, GE CR on vessvecesesdeicciabodaaseeeentaee 28

Idle Free Sys., Inc. v. Bergstrom, Inc.,

No. IPR2012-00027, 2013 WL 5947697

CP TAB. PUD Dh, Bee acscscisckscccuceanceeoee 18, 19

Int'l Flavors & Fragrances, Inc.

v. U.S. Dep't of Agric.,

No. IPR2013-00124, 2014 WL 2120542

(P.T.A.B. May 20, 2014) ........ccccccccccccscesseeseeeeee 15, 18

Lincoln v. Vigil,

BOB UT. BEB CRIS). cccesvcccnessassnndscecincescelte cae 28

Mach Mining, LLC v. EEOC,

236 &. C26. BOG COORG. scscne sc Sdscccsceee eee 24

MasterImage 3D, Inc. v. RealD Inc.,

No. IPR2015-00040, Paper 42

(P 'T.A.S. duly 19. BPG oiicscinckc chee eee 18

McClain v. Ortmayer,

G2 UB. SED CHB DD oes en rsccovvcs cuccccteetesesseruaae 8

Microsoft Corp. v. 141 Ltd. P’ship,

GO4A U.S. OE CBR DD. .n ccicccsvceccccdcastscvsecstsuasasaaeneee 10

Nat'l Ass'n of Home Builders v. Defs. of

Wildlife, 551 U.S. 644 (2007)...................cccceeeseeeeess 14

Nike, Inc. v. Adidas AG,

No. 2014-1719, 2016 WL 537609

I I EN onc cocncovsesuseonesesnseeseceonseees 21

Phillips v. AWH Corp.,

415 F.3d 1303 (Fed. Cir. 2005).................... 9, 10, 13

In re Prater,

S56 FBS 19GB (C.C.PA. 19GB) ..2.200000000000000000000000000. 8

Reg Synthetic Fuels LLC v. Neste Oil OYd,

No. IPR2014-00192, 2015 WL 3609359

I coc dacsavesesesvesesvecenccecerss 15

In re Reuter,

I RS UD ccc ocaicessccesveccocevercoverse 7

Riverbed Tech., Inc. v. Silver Peak Sys., Inc.,

Nos. IPR2013-00402, IPR2013-00403, 2014

WL 7405745, 2014 WL 7405746

a ch ncsiesdcesesensccucevensons 15

SAP Am., Inc. v. Versata Dev. Grp., Inc.,

No. CBM2012-00001

EE TR I ss csccdsccséectacvvssnsvessseseses 14

Shalala v. Ill. Council on Long Term Care,

EE 24

St. Jude Med., Cardiology Div., Inc. v.

Volcano Corp.,

ue Ee 8) 0 | ee 27

Symphony Health Solutions Corp. v. IMS

Health, Inc., No. CBM2015-00085

I, ME BID oo ccccccsacessnsersvccsesessssevensoees 32

United States v. Nourse,

oaks cacenssevicccsavesconeecsecess 25

Versata Dev. Grp., Inc. v. SAP Am., Inc.,

793 F.3d 1306 (Ped. Cir. 3015).............................. 30

Warner-Jenkinson Co. v. Hilton Davis Chem.

ig A EE CED crcccegununtieGuisienianetalassapiinbianintéssn 9

In re Yamamoto,

740 F.2d 1569 (Fed. Cir. 1984)........................0.. 7,9

In re Zletz,

893 F.2d 319 (Fed. Cir. 1989).............cccccseseeess 11, 12

Statutes

BP ails TINIE Gcisdnseicsinicaicasecoleteacimmaniraccsenneutadaceaaaaieg 26

ee I, I eee ei en eae 25

SAME, MIE iacesiansinsic’a cciccanecqulaacneaisasindasacmectevadiaiees aiaie 10

Br Ns TIPPER crctisit neko crdsetiigtecuacanteclaniendemsaean 22, 23, 31

Se MD aiincccssnit india Sccnckgrnte tunes eeieaensommiensee 23

bo NRE REN ae eae ee Or 23

ee eee 22, 23, 26, 30

ee 13

i ee St eee 6, 17, 18, 20

at MUI acco ikinsatei cine Shipattaccacmodidsouasckesiameomdie cai 25

SOO Oe a Oe 31

Be Me MII vic socnovuiceatonnscs ordi ntginemanncoamastuarmmensian 30

Se tes TINIE sicecda th tckcicescscuccssaicntunieoscioeesbencsmcaatee 13

Leahy-Smith America Invents Act,

Pub. L. No. 112-29, 125 Stat. 284 (2011).... 2, 30, 31

Regulations

Be ee i te i aiccesies aire dksaccecarveduactarsisedentasamckincbeasenaite 8

37 C.F.R. §42.104........... UN Serta 23

gtk | Md Rape teaeeaisensicusicssuainnescuesnen 22

ee a 17

Ee A SO torent DBA: 30

re 31

Oe 31

nn ceoinrespensviess 19

Amendments to the Rules of Practice for

Trials Before the Patent Trial and Appeal

Board, 80 Fed. Reg. 50,720 (Aug. 20, 2015).... 18, 19

Transitional Program for Covered Business

Method Patents—Definitions of Covered

Business Method Patent and Technological

Invention, 77 Fed. Reg. 48,734 (Aug. 14,

nat ti eahhaeete einsteaupinnioligeniaten 32

Other Authorities

157 Cong. Rec. $1377 (Mar. 8, 2011)....................... 27

Am. Intell. Prop. L. Assn, Report of the

te a cciendimslapenndions 12

Daniel F Klodowski, Patent Owners

Proposing Fewer Substitute Claims During

IPR Proceedings, America Invents Act,

(May 19, 2015), http://bit.ly/1QEETLo ................. 16

H.R. Rep. No. 112-98 (2011) .........c.cccecceese0e000e-e- 11, 12

Jason E. Stach & Andrew G. Strickland,

Exploring the Expanding Scope of Covered

Business Method Reviews, 26 Intell. Prop.

yy RS Eee ee SSC 32

John F Duffy, On Improving the Legal

Process of Claim Interpretation:

Administrative Alternatives, 2 Wash. U.

ee ee Bi itetsiineccniceestinctoniereticntestunnrents 7

Justin Oliver et al., Js PTAB ‘death squad’

just a myth?, Intell. Prop. Mag. (June 2015) ........ 32

Press Release, IFI CLAIMS, IFI CLAIMS

Announces 2015 U.S. Patent Rankings

(Jan. 12, 2016), http://bit.ly/1ITCB7DF .. ................. l

U.S. Patent and Trademark Off., Patent

Trial and Appeal Board Statistics

(Dec. 31, 2015), http://1.usa.gov/lpttqYz.............. 15

U.S. Patent and Trademark Off., Patent

Trial and Appeal Board Statistics

(Jan. 31, 2016), http://1.usa.gov/24KQcLw ..... 16, 32

STATEMENT OF INTEREST:

International Business Machines Corporation

(IBM) is a globally recognized leader in the field of

information technology research, development,

design, manufacturing, and related services. During

IBM’s more than 100-year history, its employees have

included five Nobel laureates, five National Medal of

Science recipients, and ten winners of the National

Medal of Technology. The United States Patent and

Trademark Office (PTO) has granted IBM tens of

thousands of United States patents; more patents

each year than any other entity for the last 23 years.2

Accordingly, IBM has long served as a leading

advocate for sound patent policy

In light of its sizeable patent portfolio and broad

array of innovative products and services, IBM is a

frequent participant in patent litigation, both in

Article Il] tribunals and before the PTO, including in

inter partes review proceedings before the Patent Trial

and Appeal Board (Board). IBM therefore has a

significant interest in ensuring that the patent laws

are properly interpreted, and that inter partes review

procedures accord with the will of Congress.

‘ Pursuant to Supreme Court Rule 37.6, amicus curiae states

that no counsel for any party authored this brief in whole or in

part and that no entity or person, aside from amicus curiae and

its counsel, made any monetary contribution toward the

preparation or submission of this brief. Pursuant to Supreme

Court Rule 37.3, counsel of record for all parties have consented

to this filing in letters on file with the Clerk's office.

2 See, e.g., Press Release. IF] CLAIMS, IFI CLAIMS Announces

2015 U.S. Patent Rankings (Jan. 12, 2016), http://bit.ly/1TCB7bF

(noting that IBM, with 7,355 patent grants in 2015, is the

“perennial patent leader”).

Moreover, IBM participated in the discussions

surrounding enactment of the Leahy-Smith America

Invents Act (AIA), Pub. L. No. 112-29, 125 Stat. 284

(2011), and is involved in inter partes review both as a

patentee defending the validity of its patents and au a

petitioner seeking a declaration of invalidity of the

patents of others. It is therefore particularly well-

positioned to provide a balanced view of the

appropriate claim construction and amendment

standards in inter partes review proceedings, and the

proper role for the judiciary following the conclusion of

those proceedings.

As a major force in the information technology

industry, IBM has firsthand knowledge of the critical

role unter partes review—properly implemented—can

and should play in our intellectual property system.

IBM believes it is crucial that this Court announce

clear rules governing claim construction and

amendment in inter partes review proceedings, as well

as the judiciary’s power to review the Board's

decisions to institute review. This Court’s decision

will impact not only inter partes review proceedings,

but other AIA post-grant proceedings—such as those

involving covered business method patents—as well.

IBM submits this brief in support of neither party to

assist the Court in deciding these important issues.

SUMMARY OF ARGUMENT

The answer to the first question presented in this

case 1s both clear and clearly informed by Congress’

preservation of the ability to amend patent claims

during inter partes review While the AIA does not

expressly endorse application of any specific claim

interpretation standard during inter partes review, it

provides a robust ability for patentees to amend their

claims during that process. The’ broadest reasonable

interpretation standard and amendment have long

worked hand in hand to serve the aims of our Nation’s

patent system—the development of clear and exact

claim terms that limit the patent right to the

patentee’s inventive contribution, and provision of

notice to the public regarding the metes and bounds of

the claimed invention. And so long as patentees are

provided the opportunity to amend claims afforded by

Congress, applying the broadest reasonable

interpretation standard in inter partes review will

advance the goals of the AIA as well. The end result

will be an efficient and cost-effective process that

yields higher quality patents.

The ability to amend places inter partes review far

afield from Article III proceedings where amendment

is unavailable. Article II] proceedings balance the

interests of the patentee and alleged infringer by

employing a presumption of patent validity, a clear

and convincing evidentiary standard, and a plain

meaning interpretive standard. The plain meaning

standard results in a narrower construction of patent

claims, which protects alleged infringers by

minimizing the scope of a patentee’s exclusivity, and

patent holders by reducing the constellation of prior

art that could yield a finding of invalidity JIJnter partes

review balances the relevant § considerations

differently: there is no _ statutorily-mandated

presumption of validity, invalidity arguments are

subjected to a lower burden of proof, and the broadest

reasonable interpretation standard opens up the

universe of relevant prior art to the maximum extent

possible. There is, however, an ability to amend.

Amendment provides a counterweight to the lower

burden of establishing invalidity, lack of a statutory

pro-patent presumption, and the more demanding

broadest reasonable interpretation standard applied

in inter partes review Amendment is thus the critical

ingredient in a fair and balanced inter partes review

system.

In light of the ability to amend, IBM supports the

use of the broadest reasonable interpretation

standard in inter partes review. IBM nonetheless

agrees with petitioner and its amici that the current

inter partes review regime is not operating as

Congress intended. That is not, however, because of

the application of the broadest reasonable

interpretation standard; the high rate of claim

cancellation in inter partes review is a direct result of

the Board’s unnecessary and_ inappropriate

circumscription of the ability to amend claims. The

AIA places only a handful of procedural and

substantive limitations on the ability to amend. But

the Board has added additional substantial burdens

that have resulted in only five motions to amend being

granted out of the 81 filed in completed inter partes

reviews to date. Because it is the ability to amend that

makes the use of the broadest reasonable

interpretation standard appropriate, amendment

must be permitted to play its intended role in the inter

partes review process. The ability to make

amendments cannot be constrained beyond the

limitations set forth in the AIA, and patent owners

must have a meaningful opportunity to amend their

claims. Were the ability to amend eliminated as a

matter of law or Board practice, that would radically

alter inter partes review proceedings such that

application of the plain meaning standard would be

the more appropriate course.

On the second question presented, IBM agrees

that there are significant limits on the Federal

Circuit’s ability to review Board decisions to institute

inter partes review. But those limits are not as

absolute as the Director has argued. The Board's

decision to decline to institute inter partes review is

likely unreviewable. Courts are also likely without

power to evaluate the Board’s decision to institute

review when a challenger claims that the review was

based merely on an abuse of the discretion committed

to the Board. But, given the iongstanding

presumption in favor of judicial review and lack of a

clear signal from Congress that Board decisions to

institute review are insulated from judicial scrutiny

altogether, allegations that the Board exceeded the

scope of its authority in instituting inter partes review

should be judicially reviewable.

ARGUMENT

I. Congress’ Endorsement Of The Ability To

Amend Patent Claims During Inter Partes

Review Provides Strong Support For Use Of

The Broadest Reasonable Interpretation

Standard.

A. The Ability to Amend Claims and

Application of the Broadest Reasonable

Interpretation Standard are

Inextricably Intertwined and, Working

Together, Further the Aims of the Patent

System and the AIA.

The AIA does not expressly address the issue of

whether the broadest reasonable interpretation

standard should be utilized during inter partes review

Pet.App.12a. It does, however, expressly provide

patentees with the ability to amend their claims

during the inter partes review process. Section 316(d),

which is titled “[a]mendment of the patent,” provides

that “[d]juring an inter partes review.” “the patent

owner may file 1 motion to amend the patent’ to

“fcJancel any challenged patent claim” and “propose a

reasonable number of substitute claims.” 35 U.S.C.

§316(d)(1). Beyond these modest procedural

limitations, the only other limitations on the ability to

amend during inter partes review are that an

amendment “may not enlarge the scope of the claims

of the patent or introduce new matter.” Jd. §316(d)(3).

The ability to amend claims during inter partes

review underscores the propriety of applying the

broadest reasonable interpretation standard during

the inter partes review process. Indeed, given the

longstanding link between construing claims

pursuant to the broadest reasonable interpretation

and amendment, the Court would be justified in

holding that Congress’ preservation of a broad ability

to amend during inter partes review—without more—

constitutes an implicit blessing of applying the

broadest reasonable interpretation standard during

that review

Amendment and the broadest reasonable

interpretation standard have long worked in tandem

to ensure both clarity in patent claims and that

patents are limited in scope to the inventive

contribution of the party being afforded patent rights.

Applying the broadest reasonable interpretation

standard “reducfes] the possibility that claims” will

later “be given broader scope than is justified.” Jn re

Yamamoto, 740 F.2d 1569, 1571 (Fed. Cir. 1984). And

amendment ensures that the broadest construction

paradigm does not result in unfairness to the

applicant or patentee (depending on the proceeding)

because he or she “has the opportunity to amend the

claims to obtain more precise claim coverage.” In re

Am. Acad. of Sci. Tech. Ctr., 367 F.3d 1359, 1364 (Fed.

Cir. 2004). The “ability to amend the claims is key.”

and “the broadest possible interpretation methodology

is applied” only in circumstances “where claims are

also subject to amendment.” John F. Duffy, On

Improving the Legal Process of Claim Interpretation.

Administrative Alternatives, 2 Wash. U. J.L. & Pol'y

109, 127 n.66 (2000) (citing Yamamoto, 740 F.2d at

1572 (applying broadest reasonable interpretation

doctrine in reexamination proceedings because the

patentee had “an opportunity ... to amend his claims

to correspond with his contribution to the art”), and Jn

re Reuter, 651 F.2d 751 (C.C.P.A. 1981) (applying the

broadest reasonable interpretation doctrine to reissue

proceedings)); see also In re Prater, 415 F.2d 1393,

1404-05 (C.C.P.A. 1969) (holding that the broadest

reasonable interpretation standard is appropriate

when amendment is available).

Working together, the broadest reasonable

interpretation standard and amendment promote the

patent system’s foundational goals. They encourage

clarity and precision in claims and ensure that claims

are confined to a patentee’s actual inventive

contribution. They also encourage patentees to

remove ambiguities from their claims through

amendment, which eliminates disparities between

patent coverage and inventive contribution, and

ensures that the metes and bounds of the invention

are expressed in clear, precise, and unambiguous

terms. Clarity in claim scope is now, and long has

been, one of the defining aims of our Nation’s patent

system. See McClain v. Ortmayer, 141 U.S. 419, 424

(1891) (“When the terms of a claim in a patent are

clear and distinct, (as they always should be,) the

patentee, in a suit brought upon the patent, is bound

by it. He can claim nothing beyond it.”); Fesio Corp. v.

Shoketsu Kogyo Kinzoku Kabushiki Co., 535 U.S. 722,

730 (2002) (“The monopoly is a property right; and hike

any property right, its boundaries should be clear.”).

That clarity provides the public with notice regarding

3 The PTO has long recognized the connection between the

availability of amendment and the broadest reasonable

interpretation standard. As just one example, only claims in

“unexpired patents’—as opposed to expired patents not subject

to amendment—are to “be given [their] broadest reasonable

construction.” 37 C.F_R. §42.100(b).

the confines of the invention. Warner-Jenkinson Co.

v. Hilton Davis Chem. Co., 520 U.S. 17, 33-34 (1997)

(underscoring “the role of claims in defining an

invention and providing public notice”).

More than providing support for using the

broadest reasonable interpretation standard in inter

partes review, the availability of amendment critically

undermines petitioners favored alternative.

Petitioner asserts that the standard applied in Article

III proceedings—uviz. the “ordinary meaning” standard

articulated in Phillips v. AWH Corp., 415 F.3d 1303,

1314 (Fed. Cir. 2005) (en banc)—should be apphed

when interpreting claims during inter partes review

because that review is akin to an Article III

proceeding. Pet.Br.27-31. But the fact that

amendment is available in inter partes review and not

in patent litigation in federal district court is an

absolutely critical difference. “An applicant’s ability

to amend his claims to avoid cited prior art,” which “is

not available in an infringement action in district

court,” “distinguishes proceedings before the PTO

from proceedings in federal district courts on issued

patents.” Yamamoto, 740 F.2d at 1571 72. While inter

partes review undoubtedly possesses some of the

characteristics of Article I]I litigation—such as an

adversarial posture, limited discovery, and some

witness testimony—the ability to amend in inter

partes review proceedings makes them different in

kind from Article II] adjudications.

Moreover, the analytical underpinnings of Article

Ill adjudications and inter partes reviews are

fundamentally different. Article III proceedings

balance the interests of the patentee and alleged

infringer by employing a presumption of patent

validity, 35 U.S.C. §282, a clear and convincing

evidentiary standard, Microsoft Corp. v. i4 Lid.

P’ship, 564 U.S. 91, 91 (2011), and a plain and

ordinary meaning standard of interpretation, Phillips,

415 F.3d at 1314. The plain and ordinary meaning

standard results in a narrower construction of patent

claims, which protects both alleged infringers (by

minimizing the scope of a patentee’s exclusivity) and

patent holders (by reducing the size of the universe of

prior art that could yield a finding of invalidity). Inter

partes review balances the relevant considerations

differently There is a lower burden of proof for

establishing invalidity—preponderance of the

evidence, 35 U.S.C. §316(e)—and the _ broadest

reasonable interpretation standard opens up the

universe of relevant prior art to the maximum extent

possible. There .is no _ statutorily-mandated

presumption of validity in these proceedings. See, e.g.,

In re Etter, 756 F.2d 852, 858 (Fed. Cir.) (en banc)

(holding that “§282 has no application § in

reexamination proceedings”), cert. denied sub nom.,

Etter v. Comm ’r of Patents & Trademarks, 474 U.S.

828 (1985). There is, however, an ability to amend.

Amendment serves as a counterweight to the lower

burden of establishing invalidity, lack of a statutory

pro-patent presumption, and application of the more

demanding broadest reasonable interpretation

standard. Amendment is thus a significant and

dispositive reason for distinguishing Article III

proceedings from inter partes review and for applying

different interpretive standards in these settings;

amendment ts the lynchpin of a fair and balanced inter

partes review system.

Contrary to petitioner's arguments, the broadest

reasonable interpretation standard—so long as it is

accompanied by a meaningful ability to amend—is the

only standard that actually advances the goals of the

AIA. Pet.Br.32. Indeed, given the preservation of

amendment and nexus between amendment and the

broadest reasonable interpretation standard, the only

tenable conclusion is that Congress’ viewed

amendment and the broad construction standard as

part and parcel of achieving its aims. See, e.g., CTS

Corp. v. Waldburger, 134 S. Ct. 2175, 2185 (2014)

(“Congressional intent is discerned primarily from the

statutory text.”).

One of the primary objectives of the AIA was to

“provide a meaningful opportunity to improve patent

quality and restore confidence in the presumption of

validity that comes with issued patents in court.” H.R.

Rep. No. 112-98, at 48 (2011). Properly applied,

amendment and _ the broadest reasonable

interpretation standard do just that. The broadest

reasonable interpretation standard enables a

“complete exploration” of the patentee’s invention and

“its relation to the prior art.” In re Zletz, 893 F.2d 319,

321 (Fed. Cir. 1989). Amendment then ensures that

any ambiguities identified can be clarified. See id.

(“when claims can be amended, ambiguities should be

recognized, scope and breadth of language explored,

and clarification imposed”); see also Burlington Indus.,

Inc. v. Quigg, 822 F.2d 1581, 1583 (Fed. Cir. 1987).

In other words, applying the broadest reasonable

interpretation standard and allowing amendment can

yield only three possible outcomes, all of which serve

the AIA’s goal of increasing the quality of patents in

force: (1) the review confirms that the claims as

originally drafted are neither unduly ambiguous nor

obvious and that the patent is properly entitled to the

statutory presumption of validity; (2) weaknesses in

the claims not previously uncovered during the

examination process are identified and corrected,

resulting in a higher quality patent; or (3) the claims

are cancelled and a weak patent is eliminated. The

end result is that the patents that survive inter partes

review “are precise, clear, correct, and unambiguous.”

Zletz, 893 F.2d at 322.

Application of the broadest reasonable

interpretation standard and the ability to amend

further the AIA’s other goals as well. There can be

little doubt that the clarifying function served by the

broadest reasonable interpretation standard and

amendment is a “quick and cost effective alternative

[ } to litigation.” H.R. Rep. No. 112-98, at 48. Claims

that are cancelled as a result of inter partes review,

assuming that action is affirmed on appeal, will not be

litigated in district court. The same may be true of

claims that are clarified through the amendment

process. Once claims are amended to eliminate

ambiguity and narrowed to cover the patentee’s actual

inventive contribution, there may no longer be a need

to tigate validity claims with respect to that patent.’

4 Amendment itself is not a significant driver of cost. At least

in the application context, the costs associated with preparing

and filing an amendment are less than a third of the costs

associated with preparing the original application itself—

between $2,000 and $4,000. Am. Intell. Prop. L. Ass’n, Report of

the Economic Survey 1-90-91. 1-108-11 (2015).

The argument that the Phillips standard would

serve the AIA’s ends gets things exactly backwards. A

plain meaning regime would constrain the Board’s

inquiry such that it could not examine the full range

of arguably applicable prior art. This would reduce

the efficacy of inter partes review as a patent quality

assurance process. And combined with the

availability of amendment (properly construed), the

end result would be a less rigorous examination of a

patents claims than occurs during ordinary

examination. That is clearly not what Congress

intended.

Moreover, applying the Phillips standard during

inter partes review would also be less efficient and

more expensive. Plain meaning review would, among

other things, require an exploration into how a person

of ordinary skill in the art would construe the claims.

See Phillips, 415 F.3d at 1314 (ordinary meaning is

the meaning “as understood by a person of skill in the

art”). That principle flows from the fact that “patents

are addressed to and intended to be read by others of

skill in the pertinent art.” /d. at 1313. In most cases,

that means that experts will need to get involved in

order to provide the perspective of a skilled artisan.

Along the same lines, the AIA gives the PTO the

discretion to consolidate inter partes review

proceedings with other proceedings—where

amendment is also available, such as ex parte

reexamination. See 35 U.S.C. §§315(d), 325(d). Ex

parte reexamination has long employed the broadest

reasonable interpretation standard based on the

availability of amendment, and the propriety of that

longstanding use is not at issue here. It would be more

than passing strange to allow the consolidation of inter

partes and ex parte review, but then require the

application of different interpretive rubrics in

different portions of the consolidated matter. See Pet

App.20a (discussing consolidation issue). But that is

exactly what would happen if petitioner’s position

were endorsed. The Board has encountered exactly

this problem in various proceedings and cited the

unworkable nature of applying different interpretive

rules as yet another reason supporting the use of the

broadest construction methodology in Board

proceedings. See, e.g., SAP Am., Inc. v. Versata Dev.

Grp., Inc., No. CBM2012-00001 (P.T.A.B. June 11,

2013). It is unlikely that, through the AIA, Congress

intended to create a system that would require the

application of different outcome-determinative

standards within a single consolidated proceeding.

See, e.g., Nat'l Ass’n of Home Builders v. Defs. of

Wildlife, 551 U.S. 644, 666 (2007) (declining to

interpret a statute as imposing divergent mandates on

an agency).

B. Given The Pivotal Role Amendment

Plays, it Is Critical That the Board and

PTO Give Amendment its

Congressionally-Intended Scope _ by

Providing a Meaningful Ability to

Amend.

As petitioner emphasizes, inter partes review has

become more popular than expected and has resulted

in the cancellation of hundreds of patent claims. Of

the 732 inter partes reviews completed to date, 636—

or approximately 87%—have resulted “in cancellation

of some or all of the patent claims” at issue. Pet.Br.34

(citing U.S. Patent and Trademark Off., Patent Trial

and Appeal Board Statistics 9 (Dec. 31, 2015),

http://1.usa.gov/IpttqYz. In IBM’s view, however, that

result is not the product of an ill-founded application

of the broadest reasonable interpretation standard, as

petitioner suggests. Nor is it merely a reflection of the

lack of integrity of the patents reviewed thus far

through the inter partes process, or a commentary on

the quality of the underlying examinations for these

patents by the PTO. The rate of cancellation, which is

substantially higher than in analogous pre-AlA

proceedings, is largely the result of the Board’s

adoption of an unduly burdensome set of requirements

for allowing amendment.

Of the 81 motions to amend filed in inter partes

review proceedings of which IBM is presently aware,

only five have been granted. See Reg Synthetic Fuels

LLC v. Neste Oil OYJ. No. IPR2014-00192, 2015 WL

3609359 (P.T.A.B. June 5, 2015); Chi. Mercantile

Exch., Inc. v. 5th Mkt., Inc., No. CBM2013-00027, 2014

WL 7273560 (P.T.A.B. Dec.17, 2014); Riverbed Tech.,

Inc. v. Silver Peak Sys., Inc., Nos. IPR2013-00402,

IPR2013-00403, 2014 WL 7405745, 2014 WL 7405746

(P.T.A.B. Dec. 30, 2014); Int'l Flavors & Fragrances,

Inc. v. U.S. Dep’t of Agric., No. 1PR2013-00124, 2014

WL 2120542 (P T.A.B. May 20, 2014). The numbers

are even worse when viewed at the claim level. Of the

442 claims for which amendment was sought, the

Board allowed amendment for just 27 claims, and 19

of the 27 were amendments asserted by the

government and otherwise unopposed, leaving a mere

8 out of 423 (or just under 2%) where private party

amendment was allowed. See Int'l Flavors &

Fragrances, 2014 WL 2120542 (May 20, 2014).

What is more, these already troubling figures

likely fail to capture the full impact of the Board’s

current practices regarding amendment. As noted

supra, amendment is often not a costly undertaking as

compared to other aspects of patent prosecution and

litigation, but it is not free. It is thus entirely possible

that many patentees involved in inter partes review

have rationally declined to move to amend their claims

in light of the Board’s apparent hesitance to grant

such motions. The available data supports that

hypothesis. There were 299 proposed substitute

claims submitted to the Board between January 1,

2014, and December 31, 2014. See Daniel F

Klodowski, Patent Owners Proposing Fewer Substitute

Claims During IPR Proceedings, America Invents Act,

(May 19, 2015), http://bit.ly/1QEETLn. Only 55 such

claims were submitted between January 1, 2015, and

May 1, 2015—“a marked decrease in the rate at which

patent owners have sought substitute claims in” inter

partes review “proceedings compared to” 2014. /d.5

Given the miserly rate at which amendments

have been permitted in inter partes review, one would

expect to find substantial restrictions on a patentee’s

ability to amend in the AIA. As already discussed,

however, the opposite is true. So long as a patentee

files a motion to amend that cancels a “challenged

5 The Board’s lack of receptiveness to amendment may also be

forcing patentees into settlements. The number of post-inter

partes review institution settlements increased from 104 to 189

from 2014 to 2015. U.S. Patent and Trademark Off., Patent Trial

and Appeal Board Statistics 8 (Jan. 31, 2016),

http://1.usa.gov/24KQcLw (PTO Statistics). And the number of

pre-institution settlements increased from 106 to 275 over the

same time period. /d.

patent claim” and “propose[s] a reasonable number of

substitute claims,” 35 U.S.C. §316(d)(1), the only

constraints are that the patentee “may not enlarge the

scope of the claims of the patent or introduce new

matter,” id. §316(d)(3).

The regulations implementing these provisions

also do not establish a regime where amendment is the

exception rather than the rule. Nor could they given

the sparse limitations on amendment in the AIA itself.

The relevant regulations provide that a “patent owner

may file one motion to amend ... after conferring with

the Board.” 37 C.F.R. §42.221(a). That motion “must

be filed no later than the filing of a patent owner

response, and “may be denied” only when “the

amendment does not respond to a ground of

unpatentability involved in the” review, the

“amendment seeks to enlarge the scope of the claims

of the patent,” or seeks “to introduce new subject

matter.” Id. §42.221(a)(1)-(2). While there is a

“presumption” “that only one substitute claim would

be needed to replace each challenged claim,” that

presumption “may be rebutted by a demonstration of

need.” Id. §42.221(a)(3). A second motion to amend

may be filed with “Board authorization.” Id.

§42.221(c).

A straightforward application of the AIJA‘s

amendment provisions and the PTO’s implementing

regulations would be unproblematic and almost

certainly would have resulted in more than five out of

81 amendment motions being granted. But the Board

has imposed additional burdens in practice that have

made it difficult for patentees to amend claims

sucessfully during inter partes review. Current

Board practice requires patent owners, among other

things, “to show a patentable distinction of each

proposed substitute claim over the prior art,” and

“persuade the Board that the proposed substitute

claim is patentable over the prior art of record, and

over prior art not of record but known to the patent

owner.” Jdle Free Sys., Inc. v. Bergstrom, Inc., No.

IPR2012-00027, 2013 WL 5947697, at *4 (P.T.A.B.

June 11, 2013); see also MasterImage 3D, Inc. v. RealD

Inc., No. IPR2015-00040, Paper 42 at 2-3 (P.T.A.B.

July 15, 2015) (clarifying scope of “prior art of record”

and “prior art known to the patent owner” (quotation

marks omitted)); Amendments to the Rules of Practice

for Trials Before the Patent Trial and Appeal Board,

80 Fed. Reg. 50,720, 50,724 (Aug. 20, 2015) (Rules of

Practice Amendments) (pointing to Jdle Free,

MasterImage, Int'l Flavors & Fragrances, Corning

Optical Comms. RF, LLC v. PPC Broadband, Inc., No.

IPR2014-00441, Paper 19, (P T.A.B. Oct. 30, 2014),

Riverbed Tech., and Reg Synthetic Fuels as Board

decisions providing “further guidance” on motions to

amend).°

6 Timing and resource concerns may, at least in part, account

for the Board’s narrow construction of the amendment right as a

descriptive matter. All else being equal, amendment could cause

some delay and the AIA requires completion of the inter partes

review process within one year of institution absent good cause.

35 U.S.C. §316(a)(11). The limited number of proceedings where

amendment has been permitted demonstrate that any timing-

related concerns are manageable. In all events, honoring the

statutorily-mandated ability to amend would surely provide good

cause for exceeding the AIA’s aspirational one year time limit,

and it is far better for a functioning patent quality assurance

system to spend some additional time and resources on review

rather than preclude amendment.

Idle Free and its progeny have resulted in two

related problems, both of which unduly constrain the

ability to amend. The first is that what is necessary

to amend patent claims successfully is unclear; the

relevant “guidance” is scattered across five Board

decisions. Rules of Practice Amendments, 80 Fed.

Reg. at 50,724. A formal promulgation of the

governing rules in the Code of Federal Regulations

would better serve the purposes of all involved and put

both patentees and petitioners on clear notice

regarding inter partes review amendment

requirements.

The second problem is that what clear guidance

has emerged from Idle Free is inconsistent with the

AIA and controlling regulation, and has made it far

too difficult to amend claims during inter partes

review. Specifically. in Idle Free, the Board held that

the “patent owner bears the burden” “to show a

patentable distinction of each proposed substitute

claim over the prior art.” Idle Free, 2013 WL 5947697,

at *4: see id. (“The burden is not on the petitioner to

show unpatentability, but on the patent owner to show

patentable distinction over the prior art.”). There is

no basis for imposing such an extraordinary burden on

the patent owner in the AIA itself. Nor is that burden

justified by PTO regulations. In Idle Free, the Board

cited 47 C.F.R. §42.20, as mandating imposition of this

requirement. But that regulation merely provides

that, as a general matter, “[t]he moving party has the

burden of proof to establish that it is entitled to the

requested relief.” 47 C.F.R. §42.20(c). At most,

consistent with the AIA’s inter partes review

amendment provisions, that regulation requires a

patentee to establish that its motion does not seek to

“enlarge the scope of the claims of the patent or

introduce new matter.” 35 U.S.C. §316(d)(3). There is

no statutory basis for requiring anything more.

IBM respectfully submits that, should this Court

affirm the Federal Circuit and hold that application of

the broadest reasonable interpretation standard is

appropriate in inter partes review, it should make

clear that the availability of amendment is a necessary

predicate for its holding. In doing so, the Court should

underscore that the broadest reasonable

interpretation standard makes sense only when it is

accompanied by a meaningful ability to amend. If the

Board continues down the path of making it

inordinately difficult to amend claims during inter

partes review, then the broadest reasonable

interpretation construct would become unsustainable.

The result would be an unbalanced review process

that stacks the deck against finding the patent in

review valid.

IBM believes that the ability to amend and the

broadest reasonable interpretation standard go hand

in hand. Because the AIA expressly provides for

amendment, it implicitly embraces the broadest

construction standard. If, however, the ability to

amend were to be eliminated—or_ effectively

eliminated through Board _ policies making

amendment practically impossible—then IBM would

favor application of the Phillips ordinary meaning

standard. The broadest reasonable interpretation

standard serves the aims of our Nation’s patent

system generally, and the AIA specifically, only when

accompanied by a robust ability to amend. Removing

amendment from the inter partes review process

would radically alter the character of the procedure

and make it much more akin to an Article III]

adjudication. Without an ability to amend,

application of the broadest reasonable interpretation

standard places broad swaths of patents that would

survive scrutiny under a plain meaning standard at

risk of invalidation. A meaningful ability to amend is

fundamental.’

*& * *

IBM respectfully submits that this Court should

affirm the Federal Circuit with respect to its

sanctioning of application of the broadest reasonable

interpretation standard in inter partes review. In

doing so, the Court should make clear that the AIA’s

express preservation of the ability to amend is the

driving force behind its decision and send a clear

signal to the Federal Circuit, the PTO, and the Board

that amendment cannot be constrained beyond the

limitations set forth in the AIA.

7 IBM is of the view that, after an initial rebellion against

amendment during inter partes review, the law may be heading

in the right direction. The Federal Circuit’s recent decision in

Nike, Inc. v. Adidas AG, No. 2014-1719, 2016 WL 537609 (Fed.

Cir. Feb. 11. 2016), is illustrative. In that case, the Board had

held that Nike’s uncontested statement that its “proposed

substitute claims” were patentable “over prior art not of record

but known to the patent owner” was insufficient to support

amendment under the Board’s decision in Idle Free. On appeal,

the Federal Circuit held that “the heart” of this requirement was

simply an obligation to “submit[{} the necessary information to

comply with” a patent owner's “duty of candor to the office.” Jd.

at *20. Accordingly. a statement that substitute claims are

patentable “over prior art not of record but known to the patent

owner’ was sufficient to support amendment under /dle Free

“absent an allegation of conduct violating the duty of candor.” Jd.

Il. The Board’s Decision To Initiate Inter Partes

Review Should Be Reviewable Under

Limited Circumstances.

A. Congress Placed Important Limitations

on the Board’s Authority to Institute

Inter Partes Review, and the Federal

Circuit Must Have Authority to Enforce

Those Limitations.

There is no doubt that Congress left significant

aspects of the decision whether to institute inter partes

review to the Board’s discretion.’ But the confines of

that discretion were specifically defined by Congress.

As the Director explained in her brief in opposition,

“the statute establishes various prerequisites to the

PTO’s institution of inter partes reviews.” BIO 20 n.6.

First, inter partes review is limited to deciding

invalidity based on eithei novelty or obviousness over

the prior art, and only where the prior art “consist|[s]}

of patents or printed publications.” 35 U.S.C. §311¢b).

Second, the statute provides:

The Director may not authorize an inter

partes review to be instituted unless the

Director determines that the information

presented in the petition filed under section

311 and any response filed under section 313

shows that there is a reasonable likelihood

that the petitioner would prevail with respect

to at least 1 of the claims challenged in the

petition.

8 Congress in fact granted this authority to the Director of the

PTO, see 35 U.S.C. §314(d), but she has delegated that authority

to the Board, see 37 C.F.R. §42.108.

Id. §314(a). The AIA lays out the information which

must be included in the petition and response. As

relevant here, it requires that the petition “identifly],

in writing and with particularity, each claim

challenged, the grounds on which the challenge to

each claim is based, and the evidence that supports

the grounds for the challenge to each claim.” Id.

§312(a)(3); see also 37 C.F.R. §42.104(b) (laying out in

further detail the required contents of a petition). The

response, meanwhile, must set “forth reasons why no

inter partes review should be instituted based upon

the failure of the petition to meet any requirement of

this chapter.” 35 U.S.C. §313.

Taken together, these provisions establish that

the Board may institute inter partes review (1) only as

to claims specifically identified in the petition; (2) only

if the “grounds on which the challenge to each claim is

based, and the evidence that supports the grounds”

found in the petition, and nowhere else, establish “a

reasonable likelihood that the petitioner would prevail

with respect to at least 1 of the claims challenged in

the petition”; and (3) only so long as the grounds for

invalidity are novelty or obviousness in view of “prior

art consisting either of patents or _ printed

publications.” Jd. §§311(b), 312(a)(3), 314(a). If the

Board institutes inter partes review in the absence of

any of these requirements, its action is ultra vires and

beyond the authority granted by Congress.

The Director does not disagree with any of this.

See BIO 20 n.6. She argues, however, that Congress

made the Board the sole arbiter of whether it has

exceeded its authority The Federal Circuit agreed,

holding in essence that the Board alone decides

whether it has transgressed the limits of its authority

to place a patentee’s property into jeopardy.

This view is both extraordinary and unnecessary.

Although the AIA limits the scope of the judiciary’s

review of the Board’s decisionmaking—as do many

statutes governing review of agency action—it does

not wholly except the Board’s decision to place a

patent in inter partes review from judicial scrutiny.

B. The Statute Does Not Require a

Complete Ban on Judicial Review.

The review provisions of the AIA cannot be read

in vacuo. “Congress rarely intends to prevent courts

from enforcing its directives to federal agencies. For

that reason, this Court applies a ‘strong presumption’

favoring judicial review of administrative action.”

Mach Mining, LLC v. EEOC, 135 S. Ct. 1645, 1651

(2015) (quoting Bowen v. Mich. Acad. of Family

Physicians, 476 U.S. 667, 670 (1986)). It can be

overcome only if “there is persuasive reason to believe

that” Congress intended to depart from it. Abbott

Labs. v. Gardner, 387 U.S. 136, 140 (1967). “[T]he

agency bears a ‘heavy burden’ in attempting to show

that Congress ‘prohibit[ed] all judicial review’ of the

agency's compliance with a legislative mandate.”

Mach Mining, 135 S. Ct. at 1651 (quoting Dunlop v.

Bachowski, 421 U.S. 560, 567 (1975)).

“The rationale for this presumption is

straightforward enough: Our constitutional structure

contemplates judicial review as a check on

administrative action that is in disregard of legislative

mandates ....”. Shalala v. Ill. Council on Long Term

Care, Inc., 529 U.S. 1, 44 (2000) (Thomas, J.,

dissenting) (citation and quotation marks omitted).

Chief Justice Marshall long ago captured the

essential idea: “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

claimant] 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.”

Gutierrez de Martinez v. Lamagno, 515 U.S. 417, 424

(1995) (quoting United States v. Nourse, 34 U.S. (9

Pet.) 8, 28—29 (1835) (Marshall, C.J.)).

This presumption is not overcome by the AIA.

Section 319 provides: “A party dissatisfied with the

final written decision of the [Board] under section

318(a) may appeal the decision pursuant to sections

141 through 144. Any party to the inter partes review

shall have the right to be a party to the appeal.” 35

U.S.C. §319. Section 141(c) provides that “[a] party to

an unter partes review ... who is dissatisfied with the

final written decision of the [Board] under section

318(a) ... may appeal the Board's decision only to the”

Federal Circuit. Jd. §141(c). The plain text of the AIA

thus undoubtedly provides for comprehensive review

of Board decisions.

The Federal Circuit's decision, however, started

neither with the longstanding presumption of judicial

review of agency action, nor with the statute broadly

authorizing review of the Board’s final inter partes

review decisions. Instead, it began with section

314(d), which provides that “[t]he determination by

the [Board] whether to institute an inter partes review

under this section shall be final and nonappealable.”

35 U.S.C. §314(d). Based on this language, the

Federal Circuit concluded that Congress intended to

completely preclude judicial review of the Boaru’s

decision to institute inter partes _ review,

notwithstanding the clear constraints Congress has

placed on that decision. The Federal Circuit is simply

mistaken.

The better reading of section 314(d), in light of the

presumption in favor of judicial review and the AIA’s

specific grant of authority to the Federal Circuit to

conduct that review, is that it forbids review of the

decision to institute review until after the conclusion

of inter partes review proceedings. This interpretation

accords with background principles of administrative

law It is well-settled that judicial review of agency

action generally is limited to “final agency action.”

See, e.g., 5 U.S.C. §704 (only “final” agency action is

reviewable). The decision to institute proceedings is

not normally final. See, e.g., FTC v. Standard Oil Co.

of Cal., 449 U.S. 232, 239 (1980); see generally Bennett

v. Spear 520 U.S. 154, 177-78 (1997). Given the

difficulty that frequently attends the question

whether an agency action is final, Congress’

declaration of nonappealability simply makes clear

that the decision to institute proceedings does not

“mark the consummation of the agency's

decisionmaking process” on the question of patent

invalidity, and no court should intervene. See Bennett,

520 U.S. at 178 (quotation marks omitted). And by

forbidding interlocutory judicial review, Congress

ensured that inter partes review would provide a

speedy alternative to the ordinarily slow pace of

patent litigation. See Pet.App.32a-33a (Newman, J.,

dissenting).°

This view of the judicial role is entirely consistent

with entrusting the Board with broad discretion

regarding whether to institute inter partes review.

Specifically, nothing in the AIA suggests that the

Board's refusal to initiate inter partes review may be

considered by Article II] courts. As Senator Ky!

explained, the AIA “reflects a legislative judgment”

that the Board should have authority to “turn away

some petitions that otherwise satisfy the threshold for

instituting an inter partes review” 157 Cong. Rec.

S1377 (Mar. 8, 2011) (statement of Sen. Kyl). Put

differently, while whether an exercise of Board

authority to institute inter partes review may be

scrutinized for compliance with the r reconditions for

doing so, its decision to decline to institute inter partes

proceedings is unreviewable. See, e.g., St. Jude Med.,

Cardiology Div., Inc. v. Volcano Corp., 749 F.3d 1373,

1375 (Fed. Cir. 2014) (holding denial of tnter partes

review petition unreviewable).

Section 314(d) also fairly can be read to

circumscribe judicial review under section 319 when

the petitioner merely challenges how the Board has

affirmatively exercised the authority that is

* The appearance of the word “final” in section 314(d) should

not be read to make the action “final” for purposes of judicial

review. It is better read to declare that once the institution

decision is made, it need not be reconsidered by the Director or

Board.

committed to its discretion. Any appeal of a Board

decision to institute review proceedings when all of the

statutory prerequisites are satisfied would be barred

by section 314(d). This interpretation is consistent

with background principles of administrative law

Congress has long excepted from judicial review

agency action committed exclusively to agency

discretion. See Lincoln v. Vigil, 508 U.S. 182 (1993);

Heckler v. Chaney, 470 U.S. 821 (1985); Citizens to

Pres. Overton Park v. Volpe, 401 U.S. 402 (1971).

Statutory text, structure, and legislative history make

clear that, so long as the threshold requirements are

met, the Board has nearly unfettered discretion to

grant or deny a petition for inter partes review.

But these considerations carry no weight where

the Board has exceeded its congressional mandate.

Nothing in the AIA suggests that Congress meant to

except from judicial review those instances in which

the Board has exceeded its statutory authority.

Indeed, it is inconceivable that Congress would so

carefully delineate the contours of the Board’s

authority to institute inter partes review proceedings

and then strip federal courts of the authority to ensure

that the Board acted within those confines. The

proper reading of the statute is that it bars

interlocutory review of decisions declining to institute

inter partes review, and review of Board decisions to

institute review based on the considerations outlined

by Congress, but allows review of decisions to institute

review alleged to be ultra vires after the conclusion of

the inter partes review proceeding.

C. The Board’s Interpretation Would Work

a Serious Injury to the AIA’s Design.

Congress carefully limited the Board’s authority

to institute inter partes review proceedings. It may

institute proceedings to decide invalidity only on

claims identified by the petition, only on two discreet

grounds, based only on evidence and arguments

presented by the petitioner, and only if the Board

determines that there is a “reasonable likelihood” that

the petitioner is likely to prevail on at least one claim.

Any time the Board disregards any of these

requirements, it expands its authority beyond what

Congress conferred. If decisions to institute inter

partes review are deemed categorically unreviewable,

such accretions of power will go _ uncorrected

indefinitely.

For example, in this case, the Board considered

with regard to some claims in the petition prior art

presented by petitioner with regard to other claims.

This act was plainly ultra vires. But this violation is

relatively mild compared to other violations the Board

could commit. The Board could consider prior art

appearing nowhere in the petition, instead conducting

its own research and selecting its own combinations.

Consider an even more egregious example: In a case

featuring a petition challenging the validity of certain

claims, nothing would prevent the Board from

granting the petition with regard to those claims and

other claims in the patent that it believes

appropriately should be included in the inter partes

review proceedings. It could also decide, after looking

at a petition, that some of the claimed subject matter

may be ineligible for patent protection under 35 U.S.C.

§101, and thus institute proceedings to decide that

question, even though that is not a proper inquiry in

inter partes review. In the Director's view, the only

thing standing between the Board and such an

expansion of its own authority is voluntary restraint.

Congress surely did not contemplate such a system.

Lest there be any doubt, embracing the view of

Board discretion advanced by the Director will have

consequences beyond inter partes review. Section

324(e) circumscribes judicial review of other AIA post-

grant proceedings on the same terms as section 314(d).

Compare 35 U.S.C. §314(d), with 35 U.S.C. §324(e).

Adopting the Director’s position could thus mean, for

instance, that a decision that a patent is a “covered

business method patent” subject to review under the

specified covered business method patent review

procedures was unreviewable. See Versata Dev. Grp.,

Inc. v. SAP Am., Inc., 793 F.3d 1306, 1315 (Fed. Cir.

2015) (holding that §324(e) applies to covered business

method patent proceedings). A “covered business

method patent” is “a patent that claims a method or

corresponding apparatus for performing data

processing or other operations used in the practice,

administration, or management of a financial product

or service.” AIA §18(d)(1), 125 Stat. at 331, see 37

C.F.R. §42.301(a). “Technological inventions’ —

inventions that “recite[] a technological feature that is

novel and unobvious over the prior art; and solves a

technical problem using a technical solution”—are

expressly excluded from the definition of “covered

business method patents.” 37 C.F.R. §42.301(a), (b).

Of course, the Federal Circuit in Versata, 793 F.3d

1306, held that section 324(e), although largely

indistinguishable from section 314(d), authorized

judicial review of the threshold question of whether a

particular patent is a “covered business method

patent.” As both parties agree, Versata and Cuozzo

are difficult to reconcile, see Pet.22; BIO 21-22, anda

decision from this Court affirming the decision below

could very well call the continuing validity of Versata

into question. And were Versata to be overruled, that

would mean that a Board decision to initiate post-

grant review of a technological invention based on a

clearly erroneous conclusion that the invention, in

fact, falls within the definition of a “covered business

method patent,” is unreviewable. That is clearly not

what Congress intended.

Insulating the decision to institute covered

business method patent proceedings from judicial

review would be particularly problematic. Covered

business method patent review allows the broadest

possible consideration of the patent’s validity by

incorporating the standard for post-grant review.

Compare 35 U.S.C. §311(b) (invalidity only under

sections 102 and 103), with AIA §18(a)(1), 125 Stat. at

329, 35 U.S.C. §321(b), and 37 C.F.R. §42.304(b)(2)

(invalidity under any statutory ground). And whereas

post-grant review petitions must be filed within nine

months of the date of the grant, covered business

method patent proceedings may be initiated at any

point during the term of the patent before the

controlling review provisions sunset in 2020.

Compare 35 U.S.C. §321(c) (post-grant review), with

AIA §18(a)(1)(A), 125 Stat. at 329, and 37 C.F.R.

§42.303 (covered business method _ review).

Withholding review would thus subject patents of any

vintage to administrative action on all grounds of

patentability without meaningful judicial scrutiny.

The adverse consequences of this lack of Article

II] oversight would be compounded by the fact that the

Board has, in practice, given a very broad reading to

the definition of “covered business method” while

giving the technological invention exception a narrow

one. See, e.g., Jason E. Stach & Andrew G. Strickland,

Exploring the Expanding Scope of Covered Business

Method Reviews, 26 Intell. Prop. & Tech. L.J. 20

(2014); Symphony Health Solutions Corp. v. IMS

Health, Inc., No. CBM2015-00085 (P.T.A.B. Sept. 10,

2015) (a commercial business method patent’s claims

need not “particularly target the financial industry’);

FedEx Corp. v. Ronald A. Katz Tech. Licensing, L.P.,

CBM2015-00053, Paper 9 at 8-9 (P.T.A.B. June 29,

2015) (commercial business method patents include

patents that claim activities “incidental” or

“complementary” to a commercial transaction); see

also Transitional Program for Covered Business

Method Patents—Definitions of Covered Business

Method Patent and Technological Invention, 77 Fed.

Reg. 48,734, 48,736 (Aug. 14, 2012) (rejecting the

argument that “financial product or service” is

limited to the “products or services of the financial

services industry”). And given that covered business

method patent proceedings have resulted in

cancellation of the patent claims at issue more than

90% of the time, see PTO Statistics 13 (96% of written

decisions resulting in cancellation or unpatentability

finding); accord Justin Oliver et al., Js PTAB ‘death

squad’ just a myth?, Intell. Prop. Mag. 48, 49 (June

2015), the need for judicial review of the threshold

question of whether the patent in fact involves a

covered business method is imperative.

Without judicial review. there is no reason to

believe that Board errors will not be institutionalized

and proliferate. As errors cascade from case to case, it

is entirely possible that these unchecked errors will

result in a review institution process that is

completely arbitrary. Decisions will no longer be

tethered to the statutory criteria, but will instead be

based on the idiosyncrasies of individual cases and

Board panels. The statutory limitations will be

rendered inert, and the system will depend on the will

of the decisionmaker.

What is more, denying judicial review will also

seriously undermine the inter partes review process

itself. While inter partes review is not an Article III

adjudication, it is meant to be adversarial. As such,

discovering the truth depends, as Lord “ldon reminds

us, on both sides zealously presenting their cases to

the decisionmaker. This principle is not limited to the

merits of inter partes review, but also includes the

decision to institute that review in the first place.

Limiting the grounds for instituting inter partes

review to those raised in the petition facilitates the

adversarial process by ensuring that the respondent is

fully aware of the arguments and evidence raised

against it, and can fully respond to them. If the Board

is free to institute inter partes review proceedings for

whatever reason it deems appropriate, respondents

will be left to guess at the issues the Board deems

important and hope that their response correctly

anticipates those issues. That is not an adversarial

proceeding in any meaningful sense of the term.

CONCLUSION

For the foregoing reasons, this Court should hold

that the application of the broadest reasonable

interpretation standard in winter partes review

proceedings is appropriate because of the availability

of amendment. This Court should further hold that

judicial review of Board decisions to institute inter

partes review are reviewable under the limited

circumstances discussed herein.

Respectfully submitted,