On February 19, the U.S. Supreme Court heard oral arguments in Return Mail Inc. v. United States Postal Service—one of two IP cases the Court heard that week. The courtroom for the Return Mail hearing was particularly full of press because it was Justice Ruth Bader Ginsburg’s first hearing following a recent hiatus to have nodules on her lungs removed.
Return Mail asks whether the federal government constitutes a “person” for the purposes of instituting post grant review proceedings at the Patent Trial and Appeal Board (PTAB) under the Leahy-Smith America Invents Act (AIA). As reported earlier this week, the justices appeared to be dissatisfied with arguments from counsel on both sides—and skeptical that Congress had any view on the issue to begin with—but they arguably pushed back more against the government’s position.
As always, IPWatchdog reached out to the patent bar for their take on the arguments. Like the questioning, the predictions were mixed and reveal no clear path, but a narrow holding in favor of Return Mail could be likely.
Holding Could be Limited to CBMs
Karen Sebaski, Holwell Shuster & Goldberg LLP
With respect to America Invents Act (AIA) review proceedings, the Federal Circuit’s decision gives the government a big advantage over private petitioners who, under the AIA, are statutorily barred from asserting in district court or before the International Trade Commission challenges that were raised or reasonably could have been raised before the [Patent Trial and Appeal Board] PTAB. A broad affirmance of the Federal Circuit’s decision, therefore, could give the government a green light to file many more petitions for inter partes review. Prior to the AIA, the USPS had successfully requested ex parte reexamination of Return Mail’s patent, which resulted in the issuance of the very claims that were before the PTAB. Historical practice, therefore, arguably favors a different result. Notably, in Return Mail, the USPS initiated a covered business method [CBM] review proceeding, a temporary program under the AIA that will sunset next year. If the Supreme Court were to limit its holding to CBM proceedings and not construe “person” in the context of permanent inter partes review and post grant review proceedings under the AIA, or more broadly, then the impact of Return Mail will be much more limited.
The Fiction that Congress Cared
Robert Mallin, Brinks Gilson & Lione
Justice Alito provided perhaps the most memorable (and possibly most brutally candid) statement of the day. Specifically, after numerous questions and answers regarding what Congress intended when it used the word “person” in connection with filing a CBMR petition pursuant to Section 18(a)(1)(B) of the AIA, Justice Alito stated:
“If we indulge the possible fiction that Congress actually gave a second of thought to the issue that’s before us . . .. [Why would] Congress have wanted to treat the government differently from a private party as to these AIA proceedings? But on the other side . . . [why would] Congress have wanted different estoppel rules to apply to the government?”
While Justice Alito’s comment elicited laughter, in my opinion, he was spot on. Neither the attorney for Return Mail nor the government attorney for the USPS could provide a satisfactory reason why Congress would have wanted to treat the Government differently from private parties with respect to AIA proceedings or AIA estoppel rules. Significantly, the absence of any legislative record relating to the use of the term “person” or reasons for treating the government different from a private party supported Justice Alito’s statement.
At the end of the day, the Justices did not seem to tip their hand and could render an opinion that adequately supports either side’s position as to whether Congress’s use of the word “person” includes the government; and may also consider the practical effects of their decision, as evidenced by Justice Kavanuagh’s final question to the government’s attorney: “If you were not to prevail here, what would be the real world problems for the government?”
A Ruling for USPS Would Be “Surprising”
Stephen Kunin, Maier & Maier
The SCOTUS justices did not appear to favor oral arguments in Return Mail v. USPS that do not have clear bases in the statutes. In particular, the USPS has the heavy burden to establish that the federal government is a person in order to bring forth an AIA trial petition. It appears that the weight of the statutory law cuts against the USPS. It will be surprising if the Court finds in favor of the USPS. The justices seem very skeptical that the federal government can carry its burden.
A Close Case That May Signal Future SCOTUS Trends
Sharon A. Israel, Shook, Hardy & Bacon LLP
It’s difficult to predict how the Supreme Court will decide the Return Mail case. The justices had tough questions for both sides and the disposition of the case isn’t clear cut. The presumption under the Dictionary Act that the government is not a person may prevail. The idea that the government would be the only “person” as an AIA petitioner who would not be subject to the estoppel provisions in federal court seems anomalous, whereby private litigants could be subject to identical patent challenges before both the USPTO and the Court of Federal Claims. However, the use of the term “person” in the Patent Act is not a model of clarity. Ultimately, the impact of this case may be small. In response to a question by Justice Kavanaugh, the Deputy Solicitor General acknowledged that federal agencies have submitted only 20 requests for post-issuance review under the AIA.
It’s interesting to note that in the short time since appeals from AIA trial proceedings began, the Supreme Court has granted certiorari in four cases that involve decisions from the USPTO’s Patent Trial and Appeal Board—Cuozzo Speed Technologies, LLC v. Lee, SAS Institute Inc. v. Iancu, Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, and now the Return Mail case. The issues involved generally relate to procedural issues around the implementation of AIA trial proceedings and appeals from those proceedings. Given the continued popularity of these proceedings and the continued development of the laws, rules and regulations relating to them, we should expect continued review from the Supreme Court in this important field.
Erik Oliver, Richardson Oliver
Two moments from the oral argument stood out to me. First, the attorney for the USPS/Government stated that “[i]n the years since the AIA was enacted, federal agencies have submitted 20 requests for all forms of AIA post-issuance review combined” Transcript p 61, lines 1-5 (emphasis added). To put this in perspective, the USPTO PTAB site maintains a statistics page and, looking at the most recent data file (through Jan 31, 2019), there have been a total of 9,766 petitions for IPR, CBM and [post grant review] PGR combined. Governmental requests represent less than 1% of all requests. Which does raise the question of why the Supreme Court would have chosen to take this case? Perhaps for some of the stricter constructionist judges, certiorari was a vehicle for tackling perceived judicial overreaches in rewriting laws? Otherwise, this seems like an odd case for certiorari and argument.
A key second moment for me was earlier in the argument. Return Mail’s attorney acknowledged that: “[w]e know that ‘person’ is not used consistently in the America Invents Act or in the Patent Act.” Transcript p 11, lines 10-12. Given that Return Mail’s entire argument hinges on the correct legal meaning of the term “person” in the statute, this seems an odd admission. Obviously, Return Mail feels the ambiguity should resolve in their favor for the reasons in their brief and argumentation. I’m not convinced that Return Mail has the votes for their preferred outcome from my scorekeeping, but I am thinking this will be a close case, like SAS.
A related question is, irrespective of the outcome at the Supreme Court, what is the long-term win line for Return Mail? The Supreme Court outcome will not put the Section 101 “genie” that invalidated Return Mail’s patent fully back in the bottle. The USPS now has a roadmap from both the CBM and the 2-1 Federal Circuit affirmance. If the USPS is sued, these will guide the USPS’ invalidation of the patent on Section 101 grounds in the Court of Federal Claims.
Given the low number of impacted PTAB cases, I am mostly focused on how this case might split the Supreme Court judges on patent law issues going forward? My hypothesis post-SAS is that we might see a greater number of close (e.g. 5-4) patent-law decisions. This could potentially signal a continuation of that trend.
Kean DeCarlo, Womble Bond Dickinson
The justices’ questions appear to indicate a divided court. Some justices suggested that Congress could not have intended to exclude the government from the cost-efficient benefits of post-grant review, while other justices appeared to be troubled by the potential unfair leverage against a private citizen by the combination of USPTO, acting as a judge and jury, and another federal agency, acting as a prosecutor. Return Mail’s suggestion that an affected federal agency potential recourse if the agency is not considered a “person” under the AIA of contacting the USPTO ex parte directly so that the USPTO director can initiate the administrative patent review was met with skepticism by several justices. The justices may have tipped their hand in the latter stages of the arguments, when they appeared to focus on the lack of any apparent indication of congressional intent with respect to the question of whether or not the government is a “person” under the AIA.
In view of the admission that federal agencies had combined to submit only 20 requests for post-grant review since the enactment of the AIA, it is not unreasonable for the justices of the Court to rely on a presumption that the government is not a “person” under the post-grant provisions of the AIA in reaching their decision. This action would force Congress to amend the AIA if congressional intent was for governmental agencies to be considered a “person” for these statutory post-grant provisions. Further, such a presumption against agency “personhood” would ensure that federal agencies could not have the benefit of participating in post-grant proceedings without the concomitant burden of estoppel that acts as an important quid pro quo for the right to participate in the proceedings by non-governmental “persons.”
The Broader Implications
Jeffrey Ginsberg, Patterson Belknap Webb & Tyler LLP
Petitioner Return Mail argues that the government is not a ‘person’ and therefore the government is not permitted to file petitions for post-issuance review. In response, the government argues that the text and structure of the Patent Act, the history of federal agencies’ participation in the patent system and Congressional intent in enacting the AIA all confirm that a federal agency is a ‘person’ who may file a petition for post issuance review. While there does not appear to be a consistent definition of ‘person’ in the Patent Act or AIA, the Supreme Court’s decision in this case could have implications beyond the government’s ability to initiate post-issuance review proceedings including whether the government is entitled to obtain patents, claim intervening rights, and/or cite prior art to the Patent Office.
Justin Krieger, Kilpatrick Townsend & Stockton LLP
Whether the Government is a “person” authorized to bring an AIA proceeding before the Patent Trial and Appeal Board has broad-reaching implications for future agency actions. The primary problem for Return Mail in this case is its inability to articulate a cogent argument for why Congress would have wanted to exclude the Government from PTAB proceedings. On the other hand, the inequity of construing the statute as permitting the Government to participate in such proceedings without the potential for estoppel if the PTAB doesn’t find in its favor supports Return Mail’s position on principles of general fairness. Conversely for the USPS, no reasonable arguments can be made supporting why the Government should be permitted to launch multiple attacks on a challenged patent without impunity, frustrating a primary goal of the AIA of providing a lower cost alternative to district court litigation. It is clear from this tension that Congress simply forgot to address governmental agencies as possible petitioners when it enacted the AIA.
Insight can be gleaned from the Court’s handling of another recent decision. In Helsinn v. Teva, the Court held that meaning of the term “on sale” was well-established and that the phrase “or otherwise available to the public” added by the AIA to 35 USC § 102(a)(1) was insufficient to change that meaning. As a result, the Court held that the AIA did not alter the meaning of the on sale bar. Similarly, in this case, the Dictionary Act along with decades of jurisprudence provide an established meaning for the term “person”—one that presumptively excludes the Government. This presumption, coupled with the perceived unfairness of permitting the Government to bring AIA challenges without the risk of estoppel, weighs in Return Mail’s favor. If the Court so holds, look for Congress to enact a quick fix for this legislative loophole.
Bradley J. Olson, Barnes & Thornburg LLP
The Appellant’s brief, as well as amicus briefs filed in support, are replete with doctrinal support where the Court had no difficulty in holding that, unless expressly provided for via statute, the term “person” excludes the federal government and its agencies. The better statutory interpretation may well vest with Appellants, as one can figuratively just flip a few pages in the patent statutes to see that Congress had no difficulty in excluding “person” from what constitutes a “[f]ederal agency” when it promulgated the Bayh-Dole Act codified under title 35 Sections 200–212. The term “federal agency” was defined then to mean “any executive agency as defined in section 105 of title 5, and the military departments as defined by section 102 of title 5.” See 35 U.S.C. § 201(a).
The Return Mail opinion may also be remembered for the “law of unintended consequences” if the Court holds that “person” under the relevant AIA statutes also includes “federal government agencies.” When such petitioner is a “federal government agency,” such a holding for Respondent would likely eviscerate the AIA-provided statutory estoppel provisions that bar “petitioner(s)” from asserting challenges that could have been “raised or reasonably could have raised” in any actions in a federal district court action or the International Trade Commission investigation. The exclusive remedy for patentees challenging the unauthorized use or manufacture of a patented invention by the federal government is before United States Court of Federal Claims delimited to the recovery of “reasonable and entire compensation.” Congress omitted the Court of Federal Claims from the AIA estoppel provisions, lending inductive support that Congress did not intend federal government agencies to be permitted to bring AIA post-issuance review proceedings. Pandora’s Box may be opened if the Court now holds for Respondent, as federal government agencies seemingly would not be barred from re-litigating invalidity arguments before the Court of Federal Claims that were or could have been raised before the PTAB under the AIA post-issuance review proceedings. Besides inviting possible disparate validity outcomes, such an interpretation would assuredly increase the workloads of both the PTAB and the Court of Federal Claims.
Steve Saunders, Nutter
The outcome of Return Mail could have a significant impact on U.S. defense contractors, as the government will be able to effectively exercise eminent domain rights and yet, not be subject to estoppel provided by the AIA. The value of patents could potentially be reduced by billions of dollars if the government can take away a company’s legal rights, which could have a chilling effect on industries servicing the government; particularly, the defense industry. Further diminishing patent value, if the government paid a low royalty, that low royalty may be the source for future, unreasonably low damage calculations since the basis would be what the government paid,” said Steve Saunders, co-chair of Nutter’s Intellectual Property Department. “When the Supreme Court takes up a patent case, it often reverses the Federal Circuit, so on its face, that suggests that they will decide in favor of the Petitioner. Both arguments seem to have merit, however, and neither one is a clear winner.
The Weight of Amici May Tip the Scale Toward Petitioners
Ryan Phelan, Marshall Gerstein & Borun LLP
This case has an interesting history, where the party’s arguments before the Federal Circuit did not focus on the significance of the term “person” in AIA Section 18(a)(1)(B). Nonetheless, this became the first question presented in Return Mail, Inc.’s petition for writ of certiorari. The issue of whether the government can be a “person” was the topic of Judge Newman’s dissent. An overwhelming majority of amicus curiae briefs on file, including at least two briefs filed by law professors of various universities, support Judge Newman’s view, i.e.: because the government is immune from lawsuits and liability for infringement, it lacks the power that Congress has conferred upon infringers via the AIA to contest the validity of a patent in a covered business method proceeding.
Flynt Strean, Womble Bond Dickinson
Noting that the government is immune from federal district court and ITC patent litigation suits (the only forum for patent infringement claims against the government being the Court of Federal Claims and the AIA’s estoppel provisions do not mention this forum), Petitioners argue that by considering the government a “person” for purposes of post-grant challenges offered by the AIA, the government has the uniquely unfair advantage of having access to the AIA’s new patent challenging tools without the estoppel effects meant to balance them. The government argues that other provisions of the AIA consider the government a person, that the government has long participated in the patent system on the same terms as private entities, and that the government is sufficiently capable of identifying invalid patents. Based on a majority of amicus briefs filed with the Court, however, many practitioners, patent owners, and patent law professors side with Petitioners and consider the government persona non grata when it comes to review proceedings under the AIA.
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One comment so far.
JamesFebruary 24, 2019 01:29 pm
If the government is considered as a “person”, does that mean that sovereign immunity is waived (can a “person” have sovereign immunity)?
Also, since the courts have stated that patents are a franchise/contract right, does that open the USPTO for a breach of contract lawsuit between two people?
Seems like saying the government is considered as a person opens up more issues for the government then it solves.