U.S. Supreme Court Issues Ruling in Return Mail v. U.S. Postal Service Prohibiting Federal Agencies from Seeking AIA Review

In a 6-3 decision rendered earlier today, the Supreme Court decided that federal agencies are not “persons” who can petition for post-issuance review of patents under the America Invents Act (AIA).  Thus, the federal government cannot bring inter partes review (IPR), post-grant review (PGR), or covered business method (CBM) proceedings to cancel claims of issued patents and must, instead, either seek less attractive ex parte reexamination or defend itself in a Court of Federal Claims lawsuit.

The AIA created three types of post-issuance review that allow “a person who is not the owner of a patent” to petition the U.S. Patent and Trademark Office for the cancellation of issued patent claims.  First, IPR allows 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, PGR allows 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).  Those three mechanisms have proven to be powerful alternatives to litigation allowing potential infringers to invalidate patents and avoid infringement liability.

Here, Return Mail had obtained a patent on methods of handling undeliverable mail and offered a license to the U.S. Postal Service.  When negotiations broke down, the Postal Service petitioned for ex parte reexamination, which led to new claims that the Patent Office determined to be valid.  Return Mail sued the Postal Service, and the Postal Service petitioned for CBM review.  After that review proved successful and the Patent Office cancelled all of Return Mail’s claims, Return Mail appealed based on the Postal Service not being a “person” eligible to petition for CBM review.

As a starting presumption, 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 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.  For example, under the Patent Act, federal agencies are “persons” expressly permitted to file patent applications, obtain patents, and 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 Supreme Court split 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.  For the majority, the inconsistent usage in the Patent Act meant that the general presumption should apply; for the dissent, 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.  With regard to the AIA, again the majority believed that Congress’s silence meant the presumption should apply, whereas the dissent looked to the purposes of AIA review rather than interpreting the language to define the term.  Finally, the Supreme Court split on the importance of potential Government liability in the Court of Federal Claims – because the Government has advantages 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; the dissent felt the availability of potentially large compensatory damages awards would make it unfair for federal agencies to bear that burden in litigation.

While the scope of the Supreme Court’s decision is limited – closing the door to AIA review only for federal agencies – 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.

Decided June 10, 2019

The opinion can be found at https://www.supremecourt.gov/opinions/18pdf/17-1594_1an2.pdf.

Joshua R. Rich, a partner and General Counsel of McDonnell Boehnen Hulbert & Berghoff LLP, has over 20 years of litigating intellectual property cases and counseling clients, wherein he has built up broad experience in dealing with complex and difficult issues. He has successfully litigated in Federal and state trial and appellate courts throughout the United States, in cases involving patent, trade secret, trademark, copyright, and other commercial issues. He has also represented clients before the United States Patent and Trademark Office in inter partes review, reexamination, and interference proceedings, as well as in arbitrations around the world. rich@mbhb.com

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