Federal Circuit Rejects US Inventor Bid for Rulemaking to Limit IPR/PGR Institution

The U.S. Court of Appeals for the Federal Circuit (CAFC) on Friday issued a precedential decision affirming the U.S. Patent and Trademark Office’s (USPTO’s) denial of a petition for rulemaking filed by US Inventor (USI) asking the Office to establish criteria to limit its authority to institute inter partes review (IPR) or post-grant review (PGR) under the America Invents Act (AIA).

Following the denial of their petition by the USPTO in October 2021, USI filed a complaint with the United States District Court for the District of Columbia, arguing that the Office committed three errors in denying the rulemaking request:

“First, the PTO ‘failed to ‘conclude a matter presented to it’ ‘within a reasonable time’ under the Administrative Procedure Act (‘APA’)…because the PTO’s denial only promised consideration of the petition’s suggestions ‘in unspecified ‘future rulemaking.’ Second, the PTO failed to provide ‘a brief statement of the grounds for denial’ under the APA…because the PTO’s promise to consider the petition’s suggestion in a future rulemaking was not a ‘statement of the grounds for denial’ and was arbitrary and capricious. Third, the PTO failed to promulgate notice-and-comment rulemaking as required by the AIA’s ‘statutory framework.’”

The district court ultimately granted the USPTO’s motion to dismiss, however, chiefly because “appellants lacked organizational and associational standing” to sue.

On appeal to the CAFC, USI argued the district court erred in dismissing the complaint due to lack of standing because they have associational standing. USI told the CAFC the USPTO’s denial of the petition means “their members suffer the injury of ‘the risk of cancellation of a patent and/or patent claim as a result of institution,’” but the opinion said the injury was not shown to be “actual or imminent” but instead is “conjectural or hypothetical.”

USI attempted to use one of its members, 10Tales, to show imminent risk of harm, noting that, while the Patent Trial and Appeal Board (PTAB) denied institution on the merits, “10Tales still suffers imminent harm because it now faces a ‘renewed threat’ of cancellation if the petitioner files for reconsideration ‘without the benefit of regulations proposed to insulate small business from such assaults,’” according to the CAFC. But the denial of institution on the merits means 10Tales is only at the first step in an “extended chain of events” that would have to occur before one of USI’s members would be at imminent risk of cancellation, said the court. First, a third party would have to file an IPR or PGR against one of its members; then the petition would have to satisfy the requirements for institution; next, the Board would have to exercise the Director’s discretion to institute under current guidance; and lastly, institution would have to “increase the probability that the Board would cancel the challenged patent or claims as compared to alternative proceedings, such as district court litigation.”

“Even taking the well-pled factual allegations in appellants’ operative complaint as true, one or more of the links in this chain are speculative, so they lack standing,” wrote the CAFC.

One of USI’s members, Molly Metz, recently filed another Petition for Rulemaking asking the USPTO to clarify that cancellation of patent claims means the end of rights prospectively, rather than retroactively. Metz said in her petition that “retroactive cancellation of an issued patent raises deep constitutional concerns.”