No Refunds: Cancellation of Patent Claims in IPR Isn’t a Taking

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The US Court of Appeals for the Federal Circuit found that cancellation of a patent in an inter partes review (IPR) proceeding is not a taking and does not grant the patentee any compensable claim against the United States. Christy, Inc. v. United States, Case No. 19-1738 (Fed. Cir. Aug. 24, 2020) (Hughes, J.).

After Christy sued two competitors for infringement of a patent directed to a vacuum, one of the competitors filed petitions for IPR. The Patent Trial and Appeal Board (PTAB) instituted the IPRs and ultimately found a majority of the patent claims unpatentable. Christy appealed to the Federal Circuit, which affirmed the PTAB’s invalidity decision.

Christy then filed a class action suit in the US Court of Federal Claims to recover from the government the issuance and maintenance fees Christy had paid for the patent, investments Christy had made in the patented technologies, attorneys’ fees from defending the IPR proceedings, the value of the patent claims, royalties and other payments for use of the patents. The government moved to dismiss all six claims for lack of subject matter jurisdiction and failure to state a claim. The court partially granted the motion to dismiss, but found that it had jurisdiction to consider Christy’s Fifth Amendment takings claim. The court found that Christy did not state a claim for relief on the merits, and reasoned that the cancellation of claims in an IPR did not amount to a compensable taking of Christy’s property interest. The court held that it did not have jurisdiction to consider Christy’s alternative illegal exaction claim, since a statute granting authority to the US Patent and Trademark Office (PTO) to refund mistakenly excessive patent-related fees displaced the court’s Tucker Act jurisdiction. In any case, the court found that on the merits, Christy’s issuance and maintenance fees were properly owed at the time they were paid, and were not paid by mistake. The government did not require Christy to pay any alleged damages on the government’s behalf, or at all, and so Christy’s theory that damages were illegally exacted was found “devoid of merit.” Christy appealed.

On appeal, Christy argued that the claims court erred in finding 1) that Christy failed to state a compensable taking claim based on the cancellation of patent claims, 2) that the claims court lacked subject matter jurisdiction over the illegal exaction claim, and 3) that Christy failed to state a plausible illegal exaction claim. The Federal Circuit disagreed, affirming the claims court and reiterating its finding in Golden v. United States that the AIA did not displace Tucker Act jurisdiction over IPR-based takings claims, and that cancellation of patent claims in an IPR cannot be a taking under the Fifth Amendment. Thus, the Court found that the claims court correctly found that it had jurisdiction over Christy’s takings claim, but that such cancellation was not a taking.

The Federal Circuit next considered Christy’s illegal exaction claim. Illegal exaction occurs when money is “improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a statute, or a regulation.” Since the PTAB did not violate Christy’s Fifth Amendment rights, and Christy failed to otherwise assert a constitutional provision, statute or regulation that the PTO violated in failing to refund Christy’s patent-related fees, the Court found there was no basis for illegal exaction. Christy had argued that the PTAB’s later cancellation of patent claims amounted to an admission that the PTO’s earlier requirement of issue and maintenance fees payment was an error, leading to an “unjust” outcome. However, the Court found that the requirement to pay is without regard to any result of later proceedings, and is valid under the law and statutory authority delegated to the PTO. The Court deferred to Congress for any policy changes and delegation to the PTO that might address Christy’s concerns.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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