Government Entities Cannot Initiate Inter Parties Patent Proceedings to Invalidate Patents

U.S. Supreme Court Clarifies Scope of Who Can Bring an IPR

The U.S. Supreme Court has ruled that because portions of the Patent Act refer to “persons” who may initiate Inter Parties Patent Proceedings seeking to invalidate an issued patent, government entities, such as the United States Postal Services, are not “persons” within the purview of the statues and hence those government entities cannot file Inter Partes review to challenge patent validity. Return Mail, Inc. v. United States Postal Services, Case No. 17-1594 (S. Ct., June 10, 2019) (Full Opinion Available Here)

By enacting the Leahy-Smith America Invents Act of 2011, 35 U. S. C. §100 et seq., Congress created the Patent Trial and Appeal Board (PTAB) and established three new types of administrative proceedings before the PTAB that allow a “person” other than the patent owner to challenge the validity of a patent post-issuance. The question presented in this case is whether a federal agency is a “person” able to seek such review under the statute. The Supreme Court ruled that federal agencies are not persons and cannot file petitions in the PTAB.

In 2011, Congress overhauled the patent system by enacting the America Invents Act (AIA), which created the PTAB and phased out inter partes reexamination. See 35 U. S. C. §6. The three new PTAB administrative proceedings are listed below.

First, the “inter parties review” provision permits “a person” other than the patent owner to petition for the review and cancellation of a patent on the grounds that the invention lacks novelty or nonobviousness in light of “patents or printed publications” existing at the time of the patent application. §311.

Second, the “post-grant review” provision permits “a person who is not the owner of a patent” to petition for review and cancellation of a patent on any ground of patentability. §321; see §§282(b)(2), (b)(3). Such proceedings must be brought within nine months of the patent’s issuance. §321.

Third, the “covered-business-method review” (CBM review) provision provides for changes to a patent that claims a method for performing data processing or other operations used in the practice or management of a financial product or service. AIA §§18(a)(1), (d)(1), 125 Stat. 329, note following 35 U. S. C. §321, p. 1442. CBM review tracks the “standards and procedures of” post-grant review with two notable exceptions: CBM review is not limited to the nine months following issuance of a patent, and “[a] person” may file for CBM review only as a defense against a charge or suit for infringement. §18(a)(1)(B), 125 Stat. 330.

Per the Court: “In sum, in the post-AIA world, a patent can be reexamined either in federal court during a defense to an infringement action, in an ex parte reexamination by the Patent Office, or in the suite of three post-issuance review proceedings before the Patent Trial and Appeal Board. The central question in this case is whether the Federal Government can avail itself of the three post-issuance review proceedings, including CBM review.”

Return Mail, Inc., owns the’548 patent, which claims a method for processing mail that is undeliverable. The Postal Service tried, but failed, to obtain a patent license for Return Mail’s invention. After these failed licensing attempts, in 2006, the Postal Service introduced an enhanced address-change service to process undeliverable mail. Return Mail then asserted that the new service infringed the ’548 patent, and the company renewed its offer to license the claimed invention to the Postal Service. In response, the Postal Service petitioned for ex parte reexamination of the ’548 patent.

While the lawsuit was pending, the Postal Service again petitioned the Patent Office to review the ’548 patent, this time seeking CBM review. Patent claims subject matter that was ineligible to be patented.

The AIA provides that only “a person” other than the patent owner may file with the Office a petition to institute a post-grant review or inter partes review of an issued patent. 35 U. S. C. §§311(a), 321(a). The question in this case is whether the Government is a “person” capable of instituting the three AIA review proceedings.

Per the Court: “In the absence of an express statutory definition, the Court applies a ‘longstanding interpretive presumption that ‘person’ does not include the sovereign,’ and thus excludes a federal agency like the Postal Service. Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U. S. 765, 780–781 (2000).”

In Cooper, 312 U. S., at 604–605, 614, the Court held that the Federal Government was not “ ‘[a]ny person’” who could sue for treble damages under §7 of the Sherman Anti-Trust Act.

Per the Court: “In an ex parte reexamination, the third party sends information to the Patent Office that the party believes bears on the patent’s validity, and the Patent Office decides whether to reexamine the patent. If it decides to do so, the reexamination process is internal; the challenger is not permitted to participate in the Patent Office’s process. See 35 U. S. C. §§302, 303. By contrast, the AIA post-issuance review proceedings are adversarial, adjudicatory proceedings between the ‘person’ who petitioned for review and the patent owner: There is briefing, a hearing, discovery, and the presentation of evidence, and the losing party has appeal rights. Thus, there are good reasons Congress might have authorized the Government to initiate a hands-off ex parte reexamination but not to become a party to a full-blown adversarial proceeding before the Patent Office and any subsequent appeal.”

The Postal Service argues that it is subject to civil liability and can assert a defense of patent invalidity. See §§282(b)(2)–(3). “In the Postal Service’s view, it is anomalous to deny it a benefit afforded to other infringers—the ability to challenge a patent de novo before the Patent Office, rather than only as an infringement defense that must be proved by clear and convincing evidence. See ibid.; Microsoft Corp., 564 U. S., at 95 (holding that §282’s presumption of validity in litigation imposes a clear and convincing evidence standard on defendants seeking to prove invalidity).”

However, the Court pointed out that private parties have limited rights when asserting a patent against the government. “Most notably, §1498 restricts a patent owner who sues the Government to her ‘reasonable and entire compensation’ for the Government’s infringing use; she cannot seek an injunction, demand a jury trial, or ask for punitive damages, all of which are available in infringement suits against non-governmental actors under §271(e)(4).” Since private parties have limited rights against the federal government, Congress could limit the government’s rights by excluding those entities from the three PTAB procedures.

 

 

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