Supreme Court: Government Not a ‘Person’ and Cannot File Invalidity Petition

By: Irah H. Donner

In Return Mail Inc. v. U.S. Postal Service,1 in a 6-to-3 ruling, the Supreme Court held a federal agency is not a “person” authorized to petition for review of the validity of a patent, and therefore a federal agency cannot utilize the three types of administrative review proceedings set forth in the Leahy-Smith America Invents Act of 2011 (AIA). In addition, the Court held that the presumption against treating a federal agency as a person applies even though the federal agency would be deprived of an advantageous procedural proceeding.

Justice Stephen Breyer, joined by Justices Ruth Bader Ginsburg and Elena Kagan, dissented. Justice Breyer was of the opinion that it was clear that Congress intended federal agencies to be able to use the AIA review system. In support of his view, Justice Breyer explained that federal agencies can obtain patents, sue others for infringement and be forced to defend their patents against AIA challenges by others. 

The Court initially framed the issue and its holding as follows:

In the Leahy-Smith America Invents Act of 2011, . . . Congress created the Patent Trial and Appeal Board and established three new types of administrative proceedings before the Board that allow a “person” other than the patent owner to challenge the validity of a patent post-issuance. The question presented in this case is whether a federal agency is a “person” able to seek such review under the statute. We conclude that it is not.

The Court provided the following background information on Patent Office proceedings prior to the enactment of the AIA:

The Constitution empowers Congress “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective ... Discoveries.” Art. I, § 8, cl. 8. Pursuant to that authority, Congress established the United States Patent and Trademark Office (Patent Office) and tasked it with “the granting and issuing of patents.” 35 U.S.C. §§ 1, 2(a)(1).
 

To obtain a patent, an inventor submits an application describing the proposed patent claims to the Patent Office. . . . A patent examiner then reviews the application and prior art (the information available to the public at the time of the application) to determine whether the claims satisfy the statutory requirements for patentability, including that the claimed invention is useful, novel, nonobvious, and contains eligible subject matter. . . . If the Patent Office accepts the claim and issues a patent, the patent owner generally obtains exclusive rights to the patented invention throughout the United States for 20 years. . . .

After a patent issues, there are several avenues by which its validity can be revisited. The first is through a defense in an infringement action. Generally, one who intrudes upon a patent without authorization “infringes the patent” and becomes subject to civil suit in the federal district courts, where the patent owner may demand a jury trial and seek monetary damages and injunctive relief. . . . If, however, the Federal Government is the alleged patent infringer, the patent owner must sue the Government in the United States Court of Federal Claims and may recover only “reasonable and entire compensation” for the unauthorized use. . . .

Once sued, an accused infringer can attempt to prove by clear and convincing evidence that the patent never should have issued in the first place. . . . If a defendant succeeds in showing that the claimed invention falls short of one or more patentability requirements, the court may deem the patent invalid and absolve the defendant of liability.

The Patent Office may also reconsider the validity of issued patents. Since 1980, the Patent Act has empowered the Patent Office to reexamine—and perhaps cancel—a patent claim that it had previously allowed. This procedure is known as ex parte reexamination. “Any person at any time” may cite to the Patent Office certain prior art that may “bea[r] on the patentability of any claim of a particular patent”; and the person may additionally request that the Patent Office reexamine the claim on that basis. 35 U.S.C. §§ 301(a), 302(a). If the Patent Office concludes that the prior art raises “a substantial new question of patentability,” the agency may reexamine the patent and, if warranted, cancel the patent or some of its claims. §§ 303(a), 304–307. The Director of the Patent Office may also, on her “own initiative,” initiate such a proceeding. § 303(a).

In 1999 and 2002, Congress added an “inter partes reexamination” procedure, which similarly invited any person at any time to seek reexamination of a patent on the basis of prior art and allowed the challenger to participate in the administrative proceedings and any subsequent appeal (quotation marks omitted).

The Court then proceeded to explain the proceeding enabled under the AIA:

In 2011, Congress overhauled the patent system by enacting the America Invents Act (AIA), which created the Patent Trial and Appeal Board and phased out inter partes reexamination. . . . In its stead, the AIA tasked the Board with overseeing three new types of post-issuance review proceedings.

First, the “inter partes review” provision permits “a person” other than the patent owner to petition for the review and cancellation of a patent on the grounds that the invention lacks novelty or nonobviousness in light of “patents or printed publications” existing at the time of the patent application. § 311.

Second, the “post-grant review” provision permits “a person who is not the owner of a patent” to petition for review and cancellation of a patent on any ground of patentability. § 321 . . . Such proceedings must be brought within nine months of the patent’s issuance. . . .

Third, the “covered-business-method review” (CBM review) provision provides for changes to a patent that claims a method for performing data processing or other operations used in the practice or management of a financial product or service. . . . CBM review tracks the “standards and procedures of” post-grant review with two notable exceptions: CBM review is not limited to the nine months following issuance of a patent, and “[a] person” may file for CBM review only as a defense against a charge or suit for infringement. [AIA] § 18(a)(1)(B), 125 Stat. 330.

The AIA’s three post-issuance review proceedings are adjudicatory in nature. Review is conducted by a three-member panel of the Patent Trial and Appeal Board, . . . and the patent owner and challenger may seek discovery, file affidavits and other written memoranda, and request an oral hearing . . . . The petitioner has the burden of proving unpatentability by a preponderance of the evidence. . . . The Board then either confirms the patent claims or cancels some or all of the claims. §§ 318(b), 328(b). Any party “dissatisfied” with the Board’s final decision may seek judicial review in the Court of Appeals for the Federal Circuit, . . . and the Director of the Patent Office may intervene. . . .

In sum, in the post-AIA world, a patent can be reexamined either in federal court during a defense to an infringement action, in an ex parte reexamination by the Patent Office, or in the suite of three post-issuance review proceedings before the Patent Trial and Appeal Board. The central question in this case is whether the Federal Government can avail itself of the three post-issuance review proceedings, including CBM review.

The Court explained that the AIA states that only “a person” who is not the patent owner may petition to institute a post-grant review or inter partes review of an issued patent. The AIA statute also states that a person eligible to request CBM review may not do so “unless the person or the person’s real party in interest or privy has been sued for infringement.” AIA § 18(a)(1)(B), 125 Stat. 330.

The Court acknowledged that the patent statutes do not define the term “person.” Accordingly, since the statutes did not define “person,” the Court applied a “longstanding interpretive presumption that ‘person’ does not include the sovereign,” and accordingly excluded a federal agency like the Postal Service (quoting Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U. S. 765, 780–781, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000)).

The Court therefore presumed that the government was not a person to initiate AIA proceedings “absent an affirmative showing to the contrary.” The Court was not persuaded by the U.S. Postal Service’s arguments that the presumption was overcome, enabling a federal agency to be considered a person under the AIA. Therefore, the Court held that a federal agency was not a person who was permitted to petition for post-issuance review under the AIA.

Why it matters

The Return Mail decision eliminates the ability of (and threat by) a federal agency to challenge the validity of a patent under the America Invents Act (AIA). Thus, the federal government only has available ex parte reexamination at the U.S. Patent Office or civil litigation at the Court of Claims  under the clear and convincing evidence standard. However, the Return Mail decision does not eliminate the threat of AIA proceedings, since third parties, such as federal government contractors or other interested third parties, may still challenge the validity of a patent asserted against the federal government under the AIA.

1 Return Mail Inc. v. U.S. Postal Service, ---- S.Ct. ----, 2019 USPQ ----, 2019 WL 2412904 (2019).