“Although ‘competitor standing’ can be found to challenge government actions in certain situations, [here] the petitioner was unable to demonstrate any present or nonspeculative interest in engaging in conduct even arguably covered by the claims at issue.”
To seek relief in Federal Court, a plaintiff must demonstrate a personal, legally protectable interest in the outcome of the dispute for which relief is being sought, i.e., must demonstrate standing. The legally protectable interest may be under threat because of a government conduct. In patent disputes, the plaintiff may be an inter partes review (IPR) petitioner who has challenged a patent and is dissatisfied with the final written decision of the Patent Trial and Appeal Board (PTAB) regarding upholding of patent claims by the PTAB. Here, the decision upholding the claims would be the government conduct complained of. The dissatisfied petitioner may appeal to the Federal Circuit and, to prove standing, allege that it is injured because the decision upholding the claims reduces its ability to compete with the patent owner. If the petitioner has no current interest in practicing the claims, would it have standing? No, it would not, according to the Federal Circuit in AVX Corporation v. Presidio Components, Inc. 2018-1106 (Fed. Cir. May 13, 2019) (“AVX Corp.”), where this scenario played out. The court explained that although “competitor standing” can be found to challenge government actions in certain situations, this was not one of them, as the petitioner was unable to demonstrate any present or nonspeculative interest in engaging in conduct even arguably covered by the claims at issue. Avx Corp. at 9.
Competitor Standing: When Is it Found?
An assertion of competitor standing is likely to succeed when a government action alters competitive conditions. The competitive conditions must, however, be genuinely altered. A good example can be found in Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 152 (1970) (“Association of Data Processing”). In Association of Data Processing, petitioners Association of Data Processing Service Organizations, Inc., were found to have standing since they had alleged that competition from national banks, who were permitted to make data processing services available to other banks and bank customers following a ruling by the Comptroller of the Currency, caused them economic injury by increasing competition. An example of the reverse situation can be found in New World Radio, Inc. v. FCC, 294 F.3d 164, 172 (D.C. Cir. 2002) (“New World Radio”). In New World Radio, the D.C. Circuit determined that radio-station licensee did not have standing to challenge the FCC’s renewal of another firm’s license for a station that did not itself compete with the challenger since only the possibility of future competition was shown. Id. at 11. The agency action was, at most, the first step in the direction of future competition. Id.
As summed up by the Federal Circuit in AVX Corp., for standing to successfully rest on competitive harm, the challenged government action must nonspeculatively threaten economic injury to the challenger by the ordinary operation of economic forces. Id. This is likely when, for example, the government action has a natural price-lowering or sales-limiting effect on the challenger’s sales either by directly lowering competitors’ prices for competing goods or by opening the market to more competitors. Id.
AVX Corp.: Facts and Decision
As explained in a previous article about the estoppel issues in this case, AVX Corporation makes and sells electronic components, including capacitors, and is a competitor of Presidio Components, Inc., a producer of ceramic capacitors and owner of U.S. Patent No. 6,661,639 (“the ’639 patent”). The ’639 patent claims single-layer ceramic capacitors. AVX has not been sued by Presidio for infringement of the ’639 patent, but the parties have had a history of litigation between them. AVX petitioned the U.S. Patent and Trademark Office (USPTO) for an IPR of all claims of the ’639 patent and asserted several grounds for unpatentability based on obviousness. The PTAB instituted a review of all claims and issued a final written decision holding certain claims unpatentable but upholding others (the “upheld claims”). AVX appealed the decision as to the upheld claims to the Federal Circuit. Presidio responded on the merits but also argued that, while AVX had a statutory right to appeal, it lacked the standing required by Article III of the Constitution to appeal.
The Federal Circuit agreed. It found that AVX lacked current or nonspeculative interest in practicing the upheld claims, reminding that in similar circumstances, it had repeatedly denied standing. Id. at 12. According to the Court, the government action at issue – the upholding of specific patent claims – did not address prices or introduce new competitors, but rather gave exclusivity rights over precisely defined product features. Id. at 11-12. Such feature-specific exclusivity right does not, by the operation of ordinary economic forces, naturally harm a firm just because it is a competitor in the same market as the beneficiary of the government action (the patentee). Id. However, “a patent claim could have a harmful competitive effect on a would-be challenger if the challenger was currently using the claimed features or non-speculatively planning to do so in competition, i.e., if the claim would block the challenger’s own current or nonspeculative actions in the rivalry for sales,” the Court explained. Id at 12. Emphasis in the original.
A Concrete Interest
The Court found the following facts noteworthy in deciding against AVX. AVX had not shown that it was engaging or had non-speculative plans to engage in conduct even arguably covered by the upheld claims of the ‘639 patent. Id. AVX had not asserted, for example, that it was developing a new capacitor that Presidio would likely argue falls within the scope of the upheld claims. Id. Nor had AVX contended that it had set aside resources to develop such a product but could not move forward because the upheld claims stood in the way. Id. It did not matter that Presidio had sued AVX over capacitors not containing the specific feature claimed in the ‘639 patent. Id. Further, the Court added, AVX’s general observation that litigation could reduce customers’ goodwill said nothing about the concrete interest required for standing to litigate particular claims. Finally, according to the Court, AVX’s suspicion that Presidio would assert the upheld claims against AVX if it had a reasonable basis for doing so did not mean that there was any reasonable basis at the present time. Id.
The court compared AVX Corp. to a number of its recent cases. One such case in which the outcome was similar to that in Avx Corp. is Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168, 1171?72 (Fed. Cir. 2017). In Phigenix, the challenger/appellant, Phigenix was a for-profit company that worked on cancer treatments and maintained a significant portfolio of intellectual property but did not make any products. It claimed suffering an actual economic injury because the Immunogen, Inc. patent it challenged increased competition between itself and the patent holder and because the patent hindered its licensing opportunities. Id. at 13.
The court observed that Phigenix applied with equal force even though AVX, unlike Phigenix, manufactures and sells its own products because, like Phigenix, AVX had not presented allegations that it faced any risk of infringing the upheld claims of the ‘639 patent, that it was a prospective licensee of the upheld claims, or that it otherwise planned to take action that would implicate those claims. Id. at 14.
As a contrast to the outcome in AVX Corp., the court referred to E.I. DuPont de Nemours & Co. v. Synvina C.V., 904 F.3d 996, 1004-05 (Fed. Cir. 2018) in which it had held that IPR petitioner DuPont had standing to appeal the PTAB’s decision even though Synvina had never filed an infringement action against it because DuPont had designed and already begun operating a plant according to technical specifications that arguably made its conduct infringing. AVX Corp. at 15. The court noted that the process at the Dupont plant used the same reactants to generate the same products using the same solvent and same catalysts as claimed in Synvina’s patent at issue, making an infringement suit against DuPont a real possibility. Id. at 1005. The Court reminded again that AVX was not similarly undertaking or planning activity that gave it a concrete stake in obtaining an adjudication of unpatentability of the upheld claims of the ’639 patent. AVX Corp. at 15.
Risk of Future Infringement Necessary
To have standing, an IPR petitioner challenging a PTAB decision upholding claims of a challenged patent must be able to show that it is engaging in or has nonspeculative plans to engage in conduct at least arguably covered by the upheld claims. The planned conduct must create a substantial risk of future infringement or likely cause the patent owner to assert a claim of infringement. Simply alleging that litigation can reduce customers’ goodwill is not sufficient for the concrete interest required for standing to litigate.
Photos courtesy of DepositPhotos