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Supreme Court Hears Argument on Patent Claim Interpretation and Copyright Attorneys’ Fees

The Supreme Court on April 25, 2016, heard oral arguments on the correct standard for interpreting patent claims in inter partes review proceedings (IPRs), on the right to appeal from an IPR decision to institute, and on the proper standard for awarding attorneys’ fees in copyright litigation. Cuozzo Speed Technologies, LLC v. Lee. U.S. No. 15-446; Kirtsaeng v. John Wiley & Sons, Inc., U.S. No. 15-374.

Cuozzo Speed Technologies, LLC v. Lee

Appearing for Cuozzo Speed Technologies, Garrard Beeney of Sullivan & Cromwell argued that the Federal Circuit incorrectly approved of the “broadest reasonable interpretation” (BRI) standard used by the Patent Trial and Appeal Board in inter partes review (IPR) proceedings. Beeney maintained that Congress intended IPRs to be a quick and economical alternative to litigating in district court, and thus to apply district court standards of claim interpretation.

Justice Sotomayor pointed out that a critical difference between district court and IPR proceedings is that a patent owner can amend its claim in an IPR but cannot do so in district court. Beeney argued that the IPR statute provides only the right to seek and amendment, and that the vast majority of amendment requests are denied. Asked by Justice Alito about the different burden of proof in IPRs and district courts, Beeney said that Congress adopted the preponderance of the evidence standard for IPR proceedings (rather than clear and convincing evidence in district court proceedings) to recognize that IPRs are conducted by a panel of experts and that no presumption of validity applies.

Responding to a question from Justice Kennedy on the use of the BRI standard to determine patentability, Beeney indicated that BRI is not designed for that purpose but rather to identify ambiguities in patent claims that can be remedied by amendment. He cited In re Skvorecz for the proposition that BRI is an “examination expedient” rather than a rule of construction, intended to clarify claims during the application stage. 580 F.3d 1262, 1267-1268 (Fed. Cir. 2009). Justice Kagan observed that Congress could have specified a particular claim construction standard if it intended to depart from BRI, which has long been the standard used by the Office.

Appearing for the government, Curtis Gannon, Assistant to the Solicitor General, contended that BRI has long been the claim construction standard used by the Office where there is given an opportunity to amend the patent claim. Justice Sotomayor asked how the BRI standard is different from the “ordinary meaning” standard used by district courts. Gannon replied that the two standards generally arrive at the same place, except that the district court has the statutory presumption of validity to consider. He conceded that most requests to amend in IPRs have been denied, but pointed out that the denial has been based on a determination that the proposed amendment would be unpatentable.

Chief Justice Roberts asked about the risk that two different standards could result in two different interpretations of the same claim. Gannon replied that such a result is minimized by the fact that district courts will usually stay their proceedings while an IPR is pending, and that estoppel provisions limit the ability for a party to advance a conflicting result. Justice Roberts suggested that it is unusual for estoppel to apply where different standards are used to reach different results. Gannon also noted that a district court proceeding would have to end for mootness if the IPR resulted in a decision to cancel the patent because it never should have issued.

Justice Sotomayor asked about the nonappealability of decisions to institute an IPR under 35 U.S.C. 314(d). Gannon maintained that this provision parallels the nonappealbility of a Director denial of ex parte reexamination for lack of a substantial new question of patentability. Justice Ginsburg asked about the appealability of an improper decision to institute an IPR after a district court action has already been filed. Gannon said that decision to institute could not be appealed, although he conceded that mandamus review might be available. 

Kirtsaeng v. John Wiley & Sons, Inc. 

Appearing for Kirtsaeng, Joshua Rosenkranz, of Orrick, Herrington & Sutcliffe argued that Section 505 of the Copyright Act permits an award of attorneys’ fees to a prevailing party not only to deter parties from taking unreasonable positions, but also to encourage litigation of important principles in the public interest. According to Rosenkranz, the Second Circuit standard that relies on the objective reasonableness does nothing to encourage litigation of a good defense position

If Wiley were the prevailing party, Judge Ginsburg asked, do you think it should be awarded fees for presenting the other side of a difficult question? Justice Kagan also noted that this case presents an appealing “David and Goliath” scenario, but suggested that the Kirtsaengs of this world could be at significant risk of Goliath-scale fees under your proposed rule if a Goliath is the prevailing party.

Responding to a question from Justice Alito, Rosenkranz said the court should take into account the resources of the parties as a factor in considering the incentives to litigate the important questions. Justice Kagan suggested that small entities like Kirtsaeng might be better off with the “reasonable position” safe harbor against fee liability to the prevailing party to the extent that it could be more predictable than a multi-factor determination.

Rosenkranz stressed that district courts should consider the totality of the circumstances, including all of the factors set out in Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994). Justice Kagan asked why the statistics suggest that prevailing plaintiffs are far more likely to be awarded fees than prevailing defendants. Ropsenkranz replied that many of the awards to plaintiffs involved willful infringement and questionable litigation behavior by defendants.

Appearing for John Wiley & Sons, Paul Smith of Jenner & Block contended that attorneys’ fees should not be awarded at all when both parties advance reasonable positions.

Justice Sotomayor asked if the Second Circuit standard might be unfair to prevailing defendants given that they rarely are awarded fees under that standard. Smith replied that the statistics suggesting that disparity are misleading, adding that the award record for plaintiffs and defendants is actually about 50-50.

Responding to a question from Justice Kagan, Smith said the statistics include default judgments and many willful infringement cases. In general, plaintiffs decide what cases to bring, whereas defendants essentially just get caught. He also contended that extoling the virtues of fee awards will actually suppress litigation of important issues because risk-averse litigants will choose not to bring close cases.

Justice Roberts asked if courts should take into account that a party has engaged pro bono representation in deciding whether to award attorneys’ fees, commenting that it seems like an intrusion into the lawyer-client relationship. Smith answered that pro bono representation could be relevant to a Fogerty factor, such as the need for compensation. He added that, in any event, the necessary element is a structure that gives some predictability to fee decisions, which is why the Second Circuit test should be upheld or at least any new test should involve giving weight to the objective reasonableness factor.

Elaine Goldenberg, Assistant to the Solicitor General, supported the Second Circuit’s emphasis on objective reasonableness in awards of copyright attorneys’ fees. She also agreed that disparity in awards for prevailing defendants and plaintiffs is not as great as the statistics might suggest. According to Goldenberg, the Second Circuit standard, spelled out in Matthew Bender & Co. v. West Publishing Co. 240 F.3d 116 (2d Cir. 2001), is neutral and even-handed. She concluded that it is appropriate to give weight to the objective reasonableness of the arguments in making the fee decision.

To read the transcript of the Cuozzo argument, click here. To read the transcript of the Kirtsaeng argument, click here​.