Patent Attorneys Address Implications of SCOTUS’ Return Mail Ruling

By IPWatchdog
June 11, 2019

“This case underscores the peril awaiting the industry relating to the America Invents Act. It was sold as making life easier, [but] the AIA has become a full-service employment act for lawyers and will remain that indefinitely.” – Gene Quinn

Yesterday, the U.S. Supreme Court ruled in Return Mail, Inc. v. United States Postal Service that the U.S. government doesn’t qualify as a “person” for the purposes of petitioning the Patent Trial and Appeal Board (PTAB) to institute inter partes review (IPR) proceedings under the America Invents Act (AIA). The majority opinion was authored by Justice Sonia Sotomayor and joined by Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh, while Justice Stephen Breyer dissented, joined by Justices Ruth Bader Ginsburg and Elena Kagan. While most in the patent community felt the decision was predictable considering the Supreme Court’s precedent on the topic, some saw the dissent’s point or expressed surprise at the narrowness of the holding and the disparate treatment by the court of the IPR process compared with other administrative procedures.

Richard Rainey, Covington

Beth Brinkmann, Covington

The Return Mail case was argued at the Supreme Court by Beth Brinkmann, co-chair of Covington’s Appellate and Supreme Court Litigation Group, who said, “The Court’s decision confirms that federal agencies do not get an extra chance to challenge privately held patents under the AIA.” Brinkmann’s colleague, Richard Rainey, who co-led the Supreme Court team and handled the case before the Federal Circuit, added: “This is a significant victory for Return Mail and for all technology companies and patent holders that may find themselves in the government’s crosshairs. By excluding federal agencies from AIA review proceedings, the Court’s decision limits the government’s ability to bring duplicative challenges to the validity of privately-owned patents.”

Here’s what some others in the patent community had to say.

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The Peril That Awaits

Gene Quinn. Source: IPWatchdog.

Gene Quinn, IPWatchdog

Despite the dissent, the decision is hardly shocking. This was a straightforward case of statutory construction. Only a “person” other than the patent owner can bring a challenge, and with the term “person” not being defined, Supreme Court precedent was about as clear as could be that the government does not qualify as a person.

Interestingly, this case related to a Covered Business Method (CBM) challenge, which is only supposed to be available for business method patents that relate to financial services or products. The invention in question clearly did not qualify as a CBM under the current definition demanded by the Federal Circuit stemming from Unwired Planet v. Google, where Judge Reyna wrote that simply because a patent can be used in a financial services context does not make it a financial services patent. Here, the patent related to a method for processing mail that is undeliverable, which obviously has applicability outside the financial services context. This should never have qualified for CBM review in the first place.

This case also underscores the peril awaiting the industry relating to the America Invents Act (AIA). It was sold as making life easier. Perhaps someday it will, but there are many terms that were left undefined, which means litigation is necessary, as in this case, to determine who is and who is not a person. The AIA has become a full-service employment act for lawyers and will remain that indefinitely.

A Narrow Approach

Jeremy Elman, Dorsey & Whitney

This is a surprisingly narrow decision interpreting the AIA. The Supreme Court has often treated corporations as people, including for purposes of Inter Partes Review (IPR). The Supreme Court is clearly saying that the IPR process is reserved for private sectors and not for the government. It is clear that the IPR process is being treated differently from many other administrative procedures by the Supreme Court. Justice Sotomayor, writing for the majority, used a pun to hold that the Postal Service “failed to deliver” a reason why the federal government should be able to invalidate patents through the IPR process, which makes sense in light of the limited scope of the IPR process for only private actors. It will further narrow the scope of IPRs, which has been a trend for the last few years.

The Dissent Was Right

Barry Herman, Womble Bond Dickinson

I think the dissent got it right. The majority states that allowing the government to invoke post-grant review procedures would create an “awkward situation” because one Government agency (the USPTO) would end up adjudicating the rights of another government agency (here, the Postal Service). How is that any more awkward than post-grant review procedures themselves, where a portion of the USPTO (the patent examiners) allows a patent, but then another portion of the USPTO (PTAB judges) routinely invalidates those same patents? Judge Breyer correctly dismissed the majority’s reliance on the fact that a government entity does not face the threat of a preliminary injunction, stating “infringement suits against the government can threaten to injure government interests even absent the threat of injunctive relief.” In my opinion, if the government can be sued for patent infringement and face the possibility of being responsible for a large damages award, it should be allowed to petition the USPTO to invalidate that patent, just like other accused infringers.

Congress May Step In

Justin Krieger, Kilpatrick Townsend & Stockton LLP

In February, I predicted the Supreme Court would reverse the Federal Circuit based largely on the well-established meaning of the term “person” and the presumption created by the Dictionary Act. Currently, the AIA does not indicate that its estoppel provisions apply to actions brought in the Court of Claims. As a result, I thought the Court would rely on the perceived unfairness of permitting the government to bring AIA challenges, while excluding it from the estoppel provisions that balance the playing field for patent owners.

Although the Court did rely largely on the term’s “common usage” and the Dictionary Act in reaching its decision, it relegated the unfairness issue to a mere footnote, indicating that it did not need to rely on this anomaly in reaching its conclusion because the USPS had failed to adequately rebut the presumption that the term “person” excludes government entities. (See note 10). Interestingly, the Court also commented that “the practical effect of the estoppel provisions’ potential inapplicability to the government is uncertain given that this Court has not decided whether common-law estoppel applies in [Court of Claims] suits.”

In any event, the legal impact of this decision may be short-lived. I expect Congress to address this legislative loophole in the near future to permit the government and its agencies to bring AIA challenges—ideally with the same potential estoppel limitations felt by non-governmental petitioners.

A Significant Limitation

Christopher Loh, Venable LLP

The Return Mail decision significantly limits the venues and circumstances in which the U.S. government can challenge the validity of an issued patent. After Return Mail, it seems that the only situation in which the government unambiguously can challenge the validity of an issued patent is by asserting such a challenge as a defense against a claim for damages filed by a patentee in the Court of Federal Claims. The Supreme Court’s reasoning that the term “person” does not include the government also casts doubt on whether the government can challenge the validity of issued patents through ex parte reexamination. Similar to the AIA, the ex parte reexamination statute, 35 U.S.C. 302, limits requests for reexamination to a “person.”

A Decision with Little Practical Effect

Robert Mallin, Brinks Gilson & Lione

The opposite conclusions [of the majority and the dissent] were consistent with the oral argument, where the Court seemed to signal that there was no clear decision as to what the term “person” was intended to mean with respect to the three AIA challenges. Indeed, during oral argument, Justice Alito questioned whether Congress “actually gave a second of thought to the issue” of what a “person” means with respect to the AIA challenges.

At the end of the day, this decision will likely have little practical effect on the way the government operates. Specifically, in response to a question from Justice Kavanaugh during oral argument, the government indicated that, in the almost eight years since the AIA was instituted, the government has filed less than 20 post-grant challenges. (In fact, the exact number appears to be 14 challenges – 13 IPRs and 1 CBMR). However, this decision may have an effect on future decisions in the IP arena and other areas as to the meaning of the term “person” in various statutes.

The Patent System Wins

Bradley J. Olson, Barnes & Thornburg LLP

I am pleasantly surprised that the Supreme Court held the federal government is not a “person” under the AIA capable of instituting any of three AIA review proceedings. Justice Sotomayor presented a short and kindly worded opinion in finding for the petitioner, Return Mail. The opinion listed a number of succinct reasons rebutting the arguments raised by the Postal Service in its briefs and during oral argument. However, the Majority left open the possibility that Congress may someday expressly provide that the government is a “person” for such AIA purposes, citing U.S. v. Cooper. In the dissent, led by Justice Breyer and joined by Justices Ginsberg and Kagan, the Justices tried to argue through a series of hypotheticals that the weight of Congressional policy and legislative intent supports otherwise, but that dissent did not go much beyond policy arguments.

Had the Court held otherwise, there would be the classic “nose under the tent” scenario where the AIA-provided statutory estoppel provisions would be set aside if the government was deemed a “person.”  The government could side-step the mandatory estoppel provisions of the AIA statutes, permitting the government “two bites at the apple” before the PTAB and then before the U.S. Court of Federal Claims, as that Court was expressly omitted from the district courts and ITC, where estoppel of “raised or could have been raised” invalidity arguments is mandatory. The patent system seems to be the overall winner after Return Mail.

A Longstanding Presumption Reaffirmed

Karen Sebaski, Holwell Shuster & Goldberg LLP:

The Supreme Court’s decision reaffirms a longstanding presumption of statutory interpretation that “person” does not include the government unless the context indicates otherwise or there is an affirmative showing of an intent by our legislature to include the government and its agencies. Through Return Mail, the Supreme Court had occasion to expand on the factors that should be considered and revisit the relative strength of the default rule that “person” does not include the government and declined to do so. As a result, yesterday’s decision makes clear that “absent other contextual indicators of Congress’s intent to include the government in a statutory provision referring to a ‘person,’ the mere furtherance of the statute’s broad purpose”—here, providing a cost-effective and efficient alternative to litigation regarding patent validity—likely will not be enough to “overcome the presumption.” Notably, the high-court’s decision precludes the government from initiating all forms of AIA review proceedings, including inter partes review, the most popular of the three current flavors. Had the Supreme Court limited its holding to covered business method review (CBM) proceedings, like the one initiated by the USPS, then the impact of Return Mail would have been more limited, as the CBM review program is temporary under the AIA and will sunset next year.

The Effect on Ex Parte Reexamination

Nathan Speed, Wolf Greenfield

Today’s decision is consistent with the oral argument in February, when a number of justices (including Justice Sotomayor) challenged the Postal Service’s interpretation of “person” and the awkwardness that would arise if one federal agency (here the Postal Service) was the prosecutor and another (the USPTO) was the judge. Even the attorney for the government acknowledged that there would only be a “small” impact on the government’s litigation efforts given that federal agencies had only filed 20 IPRs, post grant reviews (PGRs), and CBMs combined since they became available in 2012. In fact, the government apparently has only faced four new patent suits in the Court of Federal Claims over the past two years combined.

While Justice Breyer’s dissenting opinion noted that governmental agencies may still face large damages awards (such as the $112 million ultimately awarded to Hughes Aircraft in the late 1990s following a long-running battle concerning communications satellites that embodied a Hughes patent), the majority’s decision leaves open the possibility that agencies could file ex parte reexamination requests. That said, the ex parte reexamination statute uses the same language (“person”), and it is likely that patent owners facing ex parte reexamination requests will challenge such reexaminations and raise the same arguments concerning statutory construction. Given this uncertainty, it is possible that agencies will be more cautious about authorizing or consenting to the practice of patented technology pursuant to 28 USC 1498. Without such consent, private contractors (which remain free to file IPRs on their own) would face traditional patent infringement suits in district court.

Many More Questions to Answer 

Kenneth Weatherwax, Lowenstein & Weatherwax, LLP

America Invents Act post-grant proceedings have had a seismic impact on the U.S. patent system since they were created in 2012. Given the thousands of such cases since then, one might think their parameters would be largely settled. But as the decision in Return Mail v. United States illustrates, that is far from the case. Return Mail holds 6-3 that the government’s longstanding interpretation of the Act is wrong, and the government itself is, in fact, not among the “any person[s]” who can file a petition. So, a question about the scope of AIA cases that was long thought to be settled turns out to have, until now, been given the wrong answer.

The number of seemingly settled AIA questions that have turned out to be wrongly answered is growing. Just last year, for example, in SAS Institute v. Iancu, the Supreme Court threw out the longstanding practice of “partial institution”, upending many AIA cases in which petitions had been granted institution only in part, and setting off a widespread scramble to correct such cases. And the Federal Circuit’s Click-to-Call decision, which overturned the government’s longstanding position that complaints dismissed without prejudice do not raise an IPR time bar, is still the subject of a pending petition for certiorari. Many more answers to such questions are still to come in pending cases. And the Office’s new “Precedential Opinion Panel” procedure, though off to a relatively slow start, promises to give more definitive answers to still others.

Uncertainty in AIA proceedings is detrimental to the patent system, and has gone on too long. It is high time that the Office and the Courts settle these questions, as rapidly as possible.

 

 

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IPWatchdog

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Discuss this

There are currently 5 Comments comments. Join the discussion.

  1. mike June 11, 2019 10:55 pm

    “The AIA has become a full-service employment act for lawyers and will remain that indefinitely.” – Gene Quinn

    Amen to that, Gene. From my experience when speaking with attorneys and asking about their position on the AIA, none of them want to improve or remove the AIA. The AIA created an entire new division of work for them. So why would they want to change it? If you may recall, this website reported of entrepreneur Darcy Bisker providing testimony in the first hearing of the SUCCESS Act, where she commented on the lack of attorneys present in the room: “Why are there no attorneys or other members of the public here? … They should be here.”

    In fact, the latest attorney with whom I spoke suggested that patent owners, prior to licensing or bringing an infringement suit, use an IPR as a defense. He suggested that they look up patents of their opponents for the purpose of invalidating them, and then “putting their finger on the nuclear button by filing an IPR themselves. That will bring them to the negotiating table.” I thought “You mean, INCREASE the costs for the inventor??? Use IPRs as a weapon? Was that the original intent of the AIA?” Moreover, this is no solution anyway, because a) there is no guarantee that the infringing company will not call your bluff and say “sure, challenge me, and good luck with your increased costs here in this challenge AND in the IPR we file against you.”, and b) there is no guarantee that the infringing company has any patents themselves — there is no requirement to possess a patent in order to infringe on someone else’s patent. So this approach is riddled with problems and points out the very issue with lawyers being considered as stakeholders in the debate. All they care about is billing clients, and the AIA guaranteed that for all patent attorneys in a brand new tribunal: the PTAB.

    It is for THIS VERY REASON, Congress needs to include the inventors in the debate. Their opinion should carry far more weight. The patent system is designed around their innovation and what it brings. When I share my ideas regarding solving the AIA problem, many people ask me, “Have you talked to a patent lawyer?”, and my immediate response is “What does being a lawyer have anything to do with it? We don’t need lawyers. We need common sense.”

  2. Anon June 12, 2019 10:40 am

    mike,

    I for one take offense at your far too broadly painted disparaging view of attorneys.

    If you have been paying attention for any length of time, you would note that I – a USPTO registered patent attorney – certainly does not fit your description.

    I would posit that I am also certainly not alone in my views, my desire to help clients protect their innovation, and in championing a return to a US gold standard of legal innovation protection.

  3. mike June 12, 2019 12:31 pm

    Anon, do not read this personally. I began, “From my experience when speaking with attorneys…”

    I have no personal experience with you in that capacity. In fact, simply due to the fact of me paying attention to your comments, I would entertain such experience with you, but, alas, you remain … Anon… so unfortunately there is currently no method to engage in such pursuit.

  4. Anon June 12, 2019 6:09 pm

    Thanks mike, I recognize the context of your post now.

    (That being said, your post comes across a bit harsh to attorneys in general and I did want to stress that there are still plenty of us “good guys” out here)

  5. American Cowboy July 15, 2019 11:13 am

    Who else noticed how Justice Breyer showed how little he understands patent law in his discussion of “Protecting” government patents?

    See his discussion at page 4 of the slip opinion: “Second, the statutes help maintain a robust patent system in another way: They allow B, a patent holder who might be sued for infringing A’s (related) patent, to protect B’s own patent by more easily proving the invalidity of A’s patent.” He fails to understand that if A’s patent is prior art to B’s, invalidating A’s patent does not keep it from being invalidating prior art against B’s patent. What a miss!

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