In a group of recent decisions the Federal Circuit held that it lacks jurisdiction to review the PTO’s decision to institute both IPR and CBM proceedings. However, with regard to CBM proceedings, the Court appears to have created a potential “backdoor” method for challenging institution decisions.

In In re Cuozzo Speed Technologies, LLC, an earlier version of which we wrote about here, the Federal Circuit held that judicial review of a determination to institute IPR proceedings is precluded by statute. The operative statutory provision states that “[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” The Federal Circuit held that this bar to judicial review applies to both interlocutory appeals and those following a final decision of the PTAB.

The Federal Circuit reached a similar conclusion with respect to CBM proceedings in Versata Development Group, Inc. v. SAP America, Inc. (Versata I) and Versata Development Group, Inc. v. Lee (Versata II). In reaching that conclusion, the Court relied on nearly identical statutory language—“[t]he determination . . . whether to institute a post-grant review under this section shall be final and nonappealable.”

The combination of the Federal Circuit’s opinions in Cuozzo and both Versata cases seems to close the door on judicial review of PTAB institution decisions. As the saying goes, however, when one door closes, another opens. In Versata I, the Federal Circuit opened the door to challenges to the PTAB’s determination regarding whether a challenged patent is in fact a CBM-eligible patent.

The Court explained that although judicial review of the PTAB’s determination regarding “whether to institute” post-grant review proceedings is barred, there is no bar to judicial review of determinations regarding the PTAB’s ultimate authority to invalidate a patent. The statute granting the PTAB the authority to conduct CBM proceedings permits the PTAB to invalidate only “covered business method” patents, not those claiming technological inventions.

Though not explicitly stated, the Court appears to have drawn a distinction between a decision to institute post-grant proceedings (e.g., a determination regarding whether it is more likely than not that the challenged claims are invalid) and a decision regarding whether the PTAB has the authority to invalidate the challenged claims (e.g., a determination that the challenged claims relate to a covered business method rather than a technological invention).

The USPTO argued that, because the question of whether a patent is a CBM-eligible patent and thus “falls within the scope of the PTAB’s authority” is decided at the decision-to-institute stage, that decision “is immunized from . . . judicial review.” The Court rejected this argument, explaining that “[i]nstitution and invalidation are two distinct actions,” and the bar to judicial review of an institution determination does not preclude “review of whether the PTAB has violated a limit on its invalidation authority . . . .”

The Versata I decision therefore provides patent owners with a potentially powerful mechanism by which to challenge the institution of CBM proceedings and potentially nullify the PTAB’s determination of invalidity.