Earlier today, February 19, 2019, the Supreme Court heard oral argument in Return Mail, Inc. v. U.S. Postal Service, which presented the simple question whether the federal government is a "person" entitled to petition for post-grant review under the Leahy-Smith America Invents Act ("AIA"). While the issue may rarely arise, it poses a significant threat to the careful balance of the CBM, PGR, and IPR proceedings created by the AIA.
Four basic tenants of federal law -- including patent law -- stand in tension in the Return Mail case. First, absent an indication to the contrary in a specific statute, the federal government is not a "person." Second, for almost forty years, the federal government has been considered a "person" entitled to seek post-grant review of patents. Third, the AIA carefully balanced the availability of AIA post-grant proceedings with a broad estoppel against relitigation of issues that were raised, or could have been raised, in the proceedings in district court or International Trade Commission litigation, but not in the Court of Federal Claims. And fourth, the federal government is generally not subject to estoppel in the form of issue preclusion.
The starting point for determining who is a person under federal law is the federal Dictionary Act: "In determining the meaning of any Act of Congress, unless the context indicates otherwise . . . the words 'person' and 'whoever' include corporations, companies, associations, firms, partnerships, societies, and joint stock companies, as well as individuals."[1] Return Mail argued, supported by Supreme Court precedent, that the Dictionary Act's definition of "person" presumptively excludes government entities. While it pointed out that the definition is an inclusive list, not an exclusive one that excludes government entities, the Postal Service did not really fight that point. Rather, it focused on the initial, pre-definition clause and asserted that the Patent Act does indicate otherwise.
The Postal Service's argument relied on the text and structure of the Patent Act, and specifically the AIA, to suggest that the context does indicate that it is a person under the Act. First, it is uncontested that federal agencies are entitled to obtain patents (as assignees of rights); the language of 35 U.S.C. §§ 102, 118, and 119 identify that a "person" is entitled to a patent, may apply for a patent as an assignee, and may claim priority to a foreign application. Similarly, a "person" may be entitled to intervening rights under § 252 (and other provisions), and government entities have been found to have that right. As the government noted, "'[I]dentical words used in different parts of the same statute' are generally 'presumed to have the same meaning'" and that presumption is "doubly appropriate" when the various provisions are closely related and enacted at the same time. Some of the key provisions, including amended § 102 and some of the intervening rights provisions, are part of the AIA and closely related to the post-grant review proceedings.
However, Return Mail pointed out a number of other places in the Patent Act, including the AIA, where the government was not considered to be a "person." And, indeed, many of the provisions on which the Postal Service relied are more explicit in including government entities as "persons," contrary to the AIA's silence on post-grant proceedings. Thus, the parties read the Patent Act in completely opposite ways, with the Postal Service saying that it established an exception to the Dictionary Act and Return Mail saying that it did not.
The Postal Service therefore looked at the history of federal agencies' participation in the patent system, and most importantly post-grant proceedings. Unquestionably, federal agencies have been permitted to participate as "persons" in pre-AIA post-grant proceedings. Specifically, since 1980, federal agencies have repeatedly been involved in ex parte reexamination and inter partes reexamination. The latter proceedings are especially relevant, since "any person" is allowed to petition and the proceedings gave rise to an estoppel. Specifically, a requester in inter partes reexamination was estopped from asserting in a civil action the "invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings."[2]
However, while both inter partes reexamination and AIA post-grant proceedings call for estoppels, the scope of estoppel for AIA post-grant proceedings is importantly different. In both the earlier and current proceedings, estoppel is an important quid pro quo for the right to participate in the proceedings. But for inter partes reexamination, the estoppel would arguably apply to government agencies. Today, under the AIA, the estoppel applies only in district courts and the ITC:
The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review. [3]
That is, the estoppel clearly would not apply in actions brought in the Court of Federal Claims. Thus, there is no quid pro quo for government agencies, but that constituted a change from the previous statute. Return Mail argued that indicates that there was no intent to allow government agencies to participate in post-grant proceedings; the Postal Service argued that it indicated a reasoned decision by Congress, having considered prior statutes, to allow government agencies to have the benefit of participating in such proceedings without the concomitant burden of any estoppel. And while there are almost four decades of practice that would support allowing the government to participate in such proceedings, the Supreme Court has made it clear that it will show no deference to longstanding Federal Circuit practices that it determines to be incorrect under the law.[4]
The question of statutory estoppel is heightened because, unlike a private litigant, the government is generally not subject to estoppel. Of course, it is subject to collateral estoppel, but that relates only to issues actually litigated and determined in a prior proceeding. The statutory estoppel of AIA § 315 also applies to issues that could have been raised, but were not. Thus, government entities would be at a substantial advantage in avoiding statutory estoppel under the AIA.
The Justices, however, chose to focus their attention (and questions) elsewhere.
Several of the Justices, including Justices Ginsburg[5] and Breyer, were clearly bothered by the fact that government entities were entitled to participate in ex parte proceedings (including ex parte reexamination and third party submissions of art)[6], but would not be entitled to participate in "more efficient" inter partes proceedings. They questioned how a government department could be a "person" in ex parte proceedings but not in inter partes proceedings. That ex parte proceedings were in place long before the AIA, and have some textual support for considering a governmental entity to be a "person," seemed less of an issue than the incongruity of allowing government entities to participate in one type of proceeding and not the other.
On the other hand, several of the Justices -- most clearly Justice Kavanaugh -- questioned the government's position based on the premise that the executive branch is presumed, and entitled, to speak with one voice. It is one thing for one agency (such as the Postal Service) to turn back to the Patent and Trademark Office as the subject matter expert in patentability to correct an error in post-grant proceedings. It is quite another for that same agency, dissatisfied with the outcome of those post-grant proceedings, to be able to then go to the Court of Federal Claims and assert a defense that its sister agency erred in the post-grant proceedings. That is, the Postal Service's argument seems to conflict with the fundamental structural presumptions of the executive branch. And it certainly did not help that the government was unable to point to a clear textual basis for understanding that it was entitled to be a "person" for purposes of the AIA post-grant proceedings, and instead resorted to policy arguments to seek to turn the presumption that the government generally is not considered a "person" on its head.
Also notably, both parties gave little attention to a rule of construction that the Federal Circuit rested its opinion heavily upon: that the statute should be construed to allow a government entity to be a "person" if it would be benefited by such a reading, but not if the reading would be detrimental. The government mentioned the argument, but spent little time and faced no question on the issue. Rather, the government sought to stress more strongly that it could be a participant in post-grant proceedings as a patentee, but not as a challenger (at least, if Return Mail prevails). It was that unfairness that the government sought to highlight rather than the Federal Circuit's rule of thumb.
One last point raised during the government's argument made it clear, however, that the stakes of the case are relatively low. The government was asked about how frequently the issue before the Court arises. Since the enactment of the AIA in 2011, the government has brought only 20 post-grant proceedings. Thus, while there is significant academic question about the case, there is little direct practical effect to the Court's decision, regardless of how it rules.
[1] 1 U.S.C. § 1.
[2] Pre-AIA 35 U.S.C. § 315(c). The statute provided:
A third-party requester whose request for an inter partes reexamination results in an order under section 313 is estopped from asserting at a later time, in any civil action arising in whole or in part under section 1338 of title 28, the invalidity of any claim finally determined to be valid and patentable on any ground which the third-party requester raised or could have raised during the inter partes reexamination proceedings. This subsection does not prevent the assertion of invalidity based on newly discovered prior art unavailable to the third-party requester and the Patent and Trademark Office at the time of the inter partes reexamination proceedings.
The Postal Service argues that provision is broader than current § 315.
[3] 35 U.S.C. § 315(e)(2).
[4] See TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S. Ct. 1514 (2017).
[5] Justice Ginsburg asked the first question in her return to the bench after several weeks away for cancer treatment.
[6] The Justices also asked about a government entity calling the Director of the Patent and Trademark Office, seeking sua sponte reexamination of patents, as a means of post-grant review.
