In a 6-3 decision, the Supreme Court today held that federal government agencies cannot avail themselves of America Invents Act (AIA) post-grant proceedings. This decision was based on the Court's determination that the government is not a "person" as that term is used in relation to inter partes review (IPR), post-grant review (PGR), and covered business method (CBM) proceedings. To parties accusing the federal government of infringing their patents, the decision means that they will be free of AIA post-grant challenges from the accused agency. But more fundamentally, the decision serves as a Rorschach test for Supreme Court justices, showing how they feel about patents.
The AIA created three types of post-grant proceedings to allow "a person who is not the owner of a patent" to petition the Patent and Trademark Office for the cancellation of issued patent claims. First, IPRs allow such a person to seek to cancel claims for invalidity under § 102 or § 103 "on the basis of prior art consisting of patents or printed publications." 35 U.S.C. § 311. Second, PGRs allow such a person to seek to cancel claims on any statutory grounds for invalidity. 35 U.S.C. § 321. Third, a "person" who "has been sued for infringement of [a] patent or has been charged with infringement under [the] patent" -- or is related to a party that has been sued or threatened -- may bring a CBM review to invalidate claims of the asserted patent on any statutory grounds. AIA § 18(a)(1). These three proceedings have proven to be powerful alternatives to litigation, allowing potential infringers to invalidate patents and avoid infringement liability based on a preponderance of the evidence before the Patent Trial and Appeal Board (PTAB), rather than the clear and convincing evidence needed in litigation.
In this case, Return Mail obtained a patent on methods of handling undeliverable mail, then offered a license to the U.S. Postal Service. When negotiations broke down, the Postal Service petitioned for ex parte reexamination, which led to the cancellation of the initially issued claims but the issuance of new claims that the Patent Office deemed valid over the prior art. Return Mail then sued the Postal Service in the Court of Federal Claims; in addition to asserting invalidity as a defense, the Postal Service petitioned for CBM review. After the PTAB cancelled all of Return Mail's claims in the CBM review, Return Mail appealed based on the Postal Service not being a "person" eligible to petition for CBM review.
A split Federal Circuit panel affirmed the PTAB's decision, finding that a number of factors including the structure of the Patent Act and the policies underlying the AIA suggested that the term "person" be read to include federal agencies.[1] Judge Newman dissented, finding that long-standing precedent, the federal Dictionary Act, and the interplay between the benefit of AIA proceedings and the estoppel that generally arises from such proceedings (but would not apply against the Government in Court of Federal Claims cases) dictated that federal agencies not be "persons" permitted to bring AIA proceedings.[2]
The Supreme Court granted certiorari, but in doing so disaggregated the issues of whether the Government would be a "person" in relation to AIA proceedings and whether estoppel would apply in Court of Federal Claims cases.[3] Thus, the focus was to be primarily -- if not exclusively -- on the relevant statutes themselves. At oral argument, however, the justices addressed numerous other issues. Justices Breyer and Ginsburg appeared concerned that federal agencies could bring ex parte reexamination proceedings, but not more efficient AIA proceedings.[4] Other justices, including Justice Kavanaugh, seemed concerned by the ability of one federal agency to appear in a quasi-litigation proceeding in front of another federal agency, when the executive branch is assumed to speak with one voice.[5] In the end, however, the oral argument provided little insight into the Court's ultimate decision.
Justice Sotomayor, writing for the Court, started from the presumption (as had Judge Newman) that the Government is a sovereign, not a "person." That presumptive construction has a long pedigree in Supreme Court cases, reflects the common usage, and is also reflected in the general statutory definition for "person" in the Dictionary Act. But there can be -- and are -- exceptions to the presumption, including in the Patent Act itself. For example, under the Patent Act, federal agencies are "persons" expressly permitted to file patent applications, obtain patents, and can be sued for patent infringement. And federal agencies have also been permitted to seek post-grant invalidation of patents, including through ex parte reexamination. However, there are also uses of the term "person" in the Patent Act that clearly do not include federal agencies.
The Court found that the inconsistent usage of the term "person" in the Patent Act meant that the general presumption should apply. With regard to the AIA, both the text of the Act and the legislative history are silent on whether the government should be considered a "person." The Court's majority believed that Congress's silence meant the presumption excluding the Government from that term should apply. Finally, because the Government has advantages in actions brought in the Court of Federal Claims unavailable to private litigants defending against normal patent litigation (no injunctions, juries, or enhanced damages), the majority did not think it unfair that the Government would have to bear the burden of invalidating claims by clear and convincing evidence.
Justice Breyer (joined by Justice Ginsburg and Justice Kagan) split from the majority on the importance of the instances in which the Patent Act uses the term "person," as well as the interpretation of the AIA's silence on the issue. He asserted the uses of "person" that included federal agencies were more analogous to the use in relation to AIA review than the uses that excluded federal agencies. He then looked to the purported purposes of AIA review (specifically, improving patent quality and eliminating invalid patents) rather than interpreting the statutory language to define the term. That is, rather than basing his reasoning on what Congress actually said, he relied on his reading of what it intended. Finally, he felt the availability of potentially large compensatory damages awards would make it unfair for federal agencies to bear that burden in litigation. Notable in Justice Breyer's dissent, however, was that he did not rely on case law or the statutory language, instead focusing on his beliefs regarding the relevance of statutory provisions, the importance of policies underlying the statutes, and his view of potential litigation burdens.[6]
Ultimately, the scope of the Supreme Court's decision is limited -- closing the door to AIA review only for federal agencies -- although it may prove to be important from time to time. As the dissent points out, there have been cases with multimillion-dollar patent damages awards against the Government, and there is a potentially significant difference between the burdens of proof of invalidity in post-issuance proceedings (preponderance of the evidence) and Court of Federal Claims litigation (clear and convincing evidence). To a party litigating against a federal agency, the Return Mail decision may deliver a different outcome.
The real insight provided by the case, however, is into the Justices' attitudes toward patents. Justice Sotomayor's majority opinion approached the case from the point of view that the Patent Act and AIA are federal statutes like all other federal statutes. Her opinion seemed to view patents as conventional statutory constructs, and evinced no underlying hostility to their existence or validity. In that vein, her opinion deemed the AIA to provide a balance between expedited resolution of validity issues and countervailing estoppel. In contrast, Justice Breyer's dissent reflected his view that the intent of the AIA post-grant proceedings was to improve patent quality and eliminate invalid patents. Thus, ultimately, Return Mail provides the most guidance through its insight into the Justices' views on the importance of patents.
Return Mail, Inc. v. United States Postal Service (2019)
Opinion by Justice Sotomayor, joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch, and Kavanaugh; dissenting opinion by Justice Breyer, joined by Justices Ginsburg and Kagan
[1] For a more extensive discussion of the Federal Circuit decision, see https://www.patentdocs.org/2018/10/supreme-court-to-decide-if-government-can-bring-aia-proceedings.html.
[2] Id.
[3] Id.
[4] See https://www.patentdocs.org/2019/02/supreme-court-hears-oral-argument-in-return-mail-v-us-postal-service.html.
[5] Id.
[6] One other unusual aspect of Justice Breyer's dissent is that he relied heavily on lower court decisions, including establishing the burden of litigation in the Court of Claims based on a case brought by Hughes Aircraft in the Court of Federal Claims over 25 years ago. Slip Op. at p. 7, citing Hughes Aircraft Co.v. United States, 31 Fed. Cl. 481, 488 (1994).
