High Court Says Federal Agencies Cannot Seek AIA Patent Challenges

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Earlier this week, the United States Supreme Court reversed the Federal Circuit’s finding that the government is a “person” eligible to petition for post-issuance AIA review proceedings. This 6-3 decision, Return Mail, Inc. v. United States Postal Service (June 10, 2019), reaffirmed the longstanding presumption of statutory interpretation that the term “person” excludes the federal government and its agencies unless the text or context of the statute affirmatively shows Congress intended otherwise.

Return Mail owns U.S. Patent No. 6,826,548 (the ʼ548 patent), which claims a method for processing mail that is undeliverable. In 2006, the United States Postal Service (USPS) began using an enhanced address-change service method to process undeliverable mail that Return Mail alleged infringed upon the ʼ548 patent. After receiving notice of the infringement allegations from Return Mail, the USPS requested an ex parte reexamination of the ʼ548 patent.  As a result of the reexamination, the United States Patent and Trademark Office (PTO) cancelled the original claims, but issued several new ones to Return Mail. Return Mail proceeded to sue the USPS in the Court of Federal Claims for infringement of the new patent claims.

While the lawsuit was pending, the USPS petitioned the PTO yet again—this time seeking a Covered Business Method (CBM) review under the America Invents Act (AIA). After institution, the Patent Trial and Appeal Board (PTAB) found the claims of the ʼ548 patent to be directed to patent ineligible subject matter and canceled the claims. Return Mail appealed the PTAB’s cancellation of the claims and the USPS’s standing to initiate an AIA proceeding. On appeal, the Federal Circuit affirmed the PTAB’s finding that the claims of the ʼ548 patent were invalid after concluding that the USPS had standing to petition for CBM review.

The High Court’s majority opinion, authored by Justice Sotomayor, primarily focused on who exactly qualifies as a “person” eligible to challenge the validity of a patent post-issuance under the AIA’s three review proceedings: inter partes review, post-grant review, and CBM review.  Since the relevant patent statutes do not expressly define the term “person,” the Supreme Court looked to the definition of “person” set forth in the Dictionary Act. The act, which has been used by the courts since 1947 to determine the meaning of Acts of Congress, defines a “person” as several entities, including corporations, companies, and individuals, but not the federal government. While there are exceptions to the exclusion, the Supreme Court noted that the exclusion can only be disregarded upon an affirmative showing of statutory intent.

In an attempt to show the AIA’s context intends to include the government as a “person,” the USPS relied on (1) the statutory text of the AIA, (2) the federal agencies’ long history with the patent system and ability to request an ex parte reexamination, and (3) the fact that, like other potential infringers, the federal government is subject to civil liability. Turning to the USPS’s first argument, the Supreme Court noted that, while words in one part of a statute often have the same meaning as words in another part, there was no clear trend in the meaning of the Patent Act and AIA’s 18 different instances of “person.” Some references included the government, others expressly excluded the government, and some, like the one at issue here, could be read either way.

The Supreme Court also shot down the USPS’s argument that the government’s ability to request ex parte reexamination, as provided by the Manual of Patent Examining Procedure (MPEP), suggests that Congress intended for the government to participate in AIA review proceedings as well. The Supreme Court bluntly noted that ex parte reexaminations (which were not at issue here) have no direct relevance to AIA review proceedings and emphasized the significant differences between the two. Unlike ex parte reexaminations, which are proceedings handled internally within the PTO, AIA trials are adversarial, adjudicatory proceedings handled between parties. The Supreme Court concluded that, while Congress may have had good reason to allow the government to initiate a “hands-off” ex parte reexamination, there were no such reasons for the government to become a party to a “full-blown adversarial proceeding.”

Finally, in response to the USPS’s argument that it would be anomalous to deny it the benefits of AIA review proceedings afforded to other alleged infringers, the Supreme Court saw no incongruity with this and pointed out that private parties can face injunctions, a jury trial, or even punitive damages for their infringement. Government agencies, on the other hand, only have to provide “reasonable and entire compensation.” The Supreme Court found that, because of the lower risk to government agencies, it was reasonable for Congress to treat federal agencies differently. Moreover, the Supreme Court noted that excluding federal agencies from AIA review proceedings “avoids the awkward situation” where a civilian must defend patentability in an adversarial proceeding initiated by one federal agency and overseen by a different one.

Disagreeing with the majority, Justice Breyer in his dissent reasoned that the language of other related patent provisions strongly suggests that “person” includes the government. He further opined that the statute’s purpose, as noted in the legislative history, shows that Congress intended the government to be included as a “person” to arrive at his conclusion that federal agencies count as “persons” who may invoke the AIA review proceedings to challenge validity of a patent.

In determining that the federal government and its agencies are not eligible to avail themselves of the AIA’s review proceedings, the Supreme Court has removed a significant page from federal agencies’ playbook for challenging the validity of an issued patent. In fact, the Supreme Court’s holding made it clear that the government has limited venues in which it can challenge the validity of a patent and that AIA review proceedings are reserved for private, non-government actors. Thus, while the federal government may still be sued for patent infringement (and present invalidity defenses) at the Court of Federal Claims, the federal government is not able to take advantage of the lower burden of proof for invalidity available at the PTAB.