On Friday, October 26, 2018, the Supreme Court granted certiorari in Return Mail, Inc. v. U.S. Postal Service, in order to answer the question whether the government can bring post-grant review proceedings under the Leahy-Smith America Invents Act, or AIA.  Specifically, the Supreme Court agreed to review whether the government is a "person" under the AIA, as is required to file a petition seeking the institution of AIA review proceedings.

The case began with Return Mail seeking to license its patent to the Postal Service as early as 2006.  Return Mail is the assignee of U.S. Patent No. 6,826,548, which claims methods, computer programs, and systems for processing undeliverable or returned mail.  Claim 1 covers using encoded data (essentially, a bar code) that is added to the item before mailing to identify the intended recipient and notify the sender with new recipient information to allow the sender to update its records.  Instead of licensing the '548 patent, the Postal Service filed a petition for ex parte reexamination with the U.S. Patent and Trademark Office.  The USPTO instituted the reexamination proceeding, but eventually confirmed the validity of the patent.  Return Mail then filed a complaint against the Postal Service in the Court of Federal Claims.

Return Mail's complaint against the Postal Service was based on the government's unlicensed use of the invention covered by the '548 patent, but it technically was not a patent infringement suit.  Rather, claims against the government seeking compensation are brought under 28 U.S.C. § 1498(a), an eminent domain statute.  While that action was pending, the Postal Service filed a petition seeking the institution of covered business method ("CBM") review of the '548 patent.

Return Mail opposed the institution of the CBM review​ on both substantive and procedural grounds, including that the Postal Service lacked standing to file a CBM petition.  Standing in administrative proceedings, like the USPTO's AIA proceedings, is different from the requirement for standing in a court.  Rather than requiring a case or controversy, it requires meeting statutory requirements.[1]  Under § 18(a)(1)(B) of the AIA, for CBM proceedings, "[a] person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person's real party-in-interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent."  Return Mail challenged the Postal Service's standing on two points:  first, that the government is not a "person" under the AIA; and, second, that the Postal Service had been (or could be) "sued for infringement of the patent" or "charged with infringement of that patent."

Return Service's challenge of the government's personalty under the AIA arose out of the interplay between the standing and estoppel provisions of the statute.  The estoppel provision, AIA § 18(a)(1)(D), states:

The petitioner in a transitional proceeding that results in a final written decision under Section 328(a) of title 35, United States Code, with respect to a claim in a covered business method patent, or the petitioner's real party in interest, may not assert, either in a civil action arising in whole or in part under section 1338 of title 28, United States Code, or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 (19 U.S.C. § 1337), that the claim is invalid on any ground that the petitioner raised during that transitional proceeding.

The estoppel was viewed as a cornerstone of the CBM process (and other AIA proceedings) and was intended to prevent CBM petitioners from getting more than one bite at the same apple in litigation.  But by its own language, this estoppel does not apply to a proceeding under § 1498 in the Court of Claims.

Both the PTAB and the majority of the Federal Circuit panel found that the Postal Service satisfied both the requirement that it be a "person" and that it be "sued for infringement of the patent" or "charged with infringement of that patent."  With regard to requirement that the petitioner be a "person," even the Postal Service noted the oddity of it not being subject to estoppel.  However, the panel majority believed that it would be better to assume that the Postal Service was a "person" and allow Congress to fix the estoppel problem, if it so desired.  The majority addressed two further points.  First, it noted that the parties had not discussed the issue in any detail, which would have constituted a waiver if the issue was waivable.  Second, assuming the issue was unwaivable, the majority found that the AIA as a whole suggested that the term should include the government because otherwise the government would not benefit from intervening rights with regard to patents amended during IPRs.

Judge Newman dissented on the issue of government personalty.  First, she asserted that standing -- as an aspect of subject matter jurisdiction -- cannot be waived.  She then noted that it was the Court's obligation to ascertain and confirm jurisdiction, which required it to look at the definitions in the statute.  In doing so, she relied on the longstanding rule that, absent an indication otherwise, the presumption has been that the government does not fall within the definition of a "person."  That applies both when the government would benefit from being a "person" and when it would be harmed by fitting in the definition.  And here, where the Federal government (albeit not the Postal Service) argued strongly for the estoppel provision to apply as the AIA was being considered by Congress, the statutory history suggests applying the presumption against government personalty rather than abandoning it.

In its petition for certiorari, Return Mail challenged both the finding that the Postal Service was a "person" and that it had been sued for patent infringement when Return Mail brought its § 1498 action in the Court of Claims.[2]  With regard to the definition of "person," Return Mail argued that the Federal Circuit's chosen meaning, based on the lack of express Congressional guidance, conflicted with Supreme Court precedent presuming that statutes presumptively exclude the government from the scope of this term.  That is especially true when the construction would be awkward, as Return Mail asserted it was in light of the conflict between the Federal Circuit's construction and the overall intent of the statutory scheme.  In addition, Return Mail asserted that the statutory scheme indicated an intent to exclude the government from the definition of "person."  Finally, Return Mail pointed out that the Federal government already had a role in CBM review, specifically the PTO sitting in judgment over the review.

The Federal government responded by arguing, first, that Return Mail had not raised the issue below and therefore the dispute had not been fully fleshed out.  Second, even though it acknowledged that the general rule is that the government is not a "person," the government argued that the context of the AIA and the CBM review provision reinforced that the government should be considered a "person" in these circumstances.  The government's argument relied on the fact that the Patent Statute permits the government to obtain patents, yet other sections (such as § 102) limit when "a person shall be entitled to a patent."  Third, the government argued that allowing it to bring CBM petitions was consistent with the statutory intent to allow streamlined review of suspect patents.  Finally, the government argued that this case was a poor vehicle for deciding this issue because the Postal Service was fundamentally different from other Federal agencies because it is more like a business than other agencies.

In its reply, Return Mail pointed out that this situation is important to patent owners, and has been a recurring issue.  The issue of whether the government is "person" extends to all AIA proceedings, and several have been brought by the Federal government.  In addition, Return Mail pointed out (as had one of the amici that filed a brief in support of Return Mail's petition) that the government was seeking to act as both a sovereign power and a private party in the same proceeding.

The Supreme Court granted certiorari only on the first issue identified by Return Mail, whether the government is a "person" in the context of the AIA's CBM proceeding.  Thus, by the middle of next year, we should know whether government agencies are "persons," permitted to bring AIA proceedings.

[1] Here, however, in the context of a CBM review, administrative standing incorporates the Article III courts' requirements for standing:

 A petitioner may not file with the Office a petition to institute a covered business method patent review of the patent unless the petitioner, the petitioner's real party-in-interest, or a privy of the petitioner has been sued for infringement of the patent or has been charged with infringement under that patent.  Charged with infringement means a real and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal court.

37 C.F.R. § 42.302.

[2] The Federal Circuit found that a § 1498 action was similar enough to a patent infringement action to give rise to standing, even though it clearly is not a patent infringement action and does not permit certain remedies (such as injunctive relief, treble damages, and attorneys' fees for an exception case).  In doing so, the unanimous panel found that "infringement" did not necessarily mean an action brought solely on the basis of the Patent Act.