The validity of a patent can be challenged in four different types of proceedings: ex parte reexamination, inter partes review, post grant review, and covered business method review. An ex parte reexamination is initiated by any person or by the PTO’s director to request that the PTO internally reexamine the claims of the patent based on prior art.
The other three proceedings were established by the America Invents Act. These proceedings are conducted by the Patent Trial and Appeal Board (PTAB) before a panel of three judges. The proceedings are adversarial; both the patent owner and the party challenging the patent participate in the proceeding.
An inter partes review is a proceeding in which any person other than the patent owner can petition the PTAB to invalidate the patent on grounds of novelty or non-obviousness based on prior art consisting of patents and printed publications.
A post grant review is a proceeding in which any person other than the patent owner can petition the PTAB to invalidate the patent on any grounds. The petition must be filed within nine months of the date the patent issues.
A covered business method review is a proceeding in which any person who has been accused of, or sued for, infringing a business method patent can petition the PTAB to invalidate the patent.
In a 6-3 decision, the Supreme Court decided this past Monday that the U.S. Government cannot utilize the three PTAB proceedings to challenge a patent because the Government is not a “person.” Return Mail, Inc. v United States Postal Service, 2019 U.S. LEXIS 4028(June 10, 2019).
The plaintiff, Return Mail, Inc., owned a patent for a method of processing undeliverable U.S. mail. In 2003, the U.S. Postal Service started to negotiate a license under the patent, but never completed a deal with Return Mail. In 2006, the Postal Service began using a new method to process undeliverable mail, and Return Mail again offered a license. The Postal Service did not take a license, but instead filed a request for ex parte reexamination. The PTO granted the request, but confirmed the patent’s validity.
Return Mail then sued the Postal Service in the Court of Federal Claims to obtain compensation for the Postal Service’s use of its patented method. The Postal Service filed a petition for covered business method review of the patent in the PTAB. The PTAB invalidated the patent on the grounds that it was directed to patent-ineligible subject matter. Return Mail appealed to the Federal Circuit Court of Appeals and the court affirmed the PTAB’s decision. The court held that the Government is a “person” within the meaning of the America Invents Act entitled to file for covered business method review, and that the patent was invalid for the PTAB’s reasons. Return Mail appealed to the Supreme Court.
The issue before the Supreme Court was whether the Government is a “person” within the meaning of the America Invents Act, and therefore entitled to file the three types of proceedings to challenge a patent in the PTAB.
The Court explained that the America Invents Act and the patent statutes do not define a “person.” Without such a statutory definition, the Court relied on the presumption that the term “person” excludes the sovereign (e.g. the Government and its agencies). Given this presumption, the Government had the burden to show that Congress intended to permit the Government to utilize the America Invents Act proceedings to challenge a patent.
The Postal Service argued that the word “person” in the America Invents Act includes the Government because other patent statutes suggest that the Government is a person.
The Court rejected this argument because there was no consistency in the statutes’ useage of “person” to include the Government. The Court said that the fact that the Government or a Federal agency can apply for and own a patent is irrelevant to the issue of whether the Government can utilize the America Invents Act proceedings.
The Postal Service also argued that the Government should be able to utilize the America Invents Act proceedings because the Government is inherently involved in the patent system. In particular, the Postal Service contended that the PTO rules permit federal agencies to challenge patents in ex parte reexaminations before the PTO. The Court was not persuaded by this argument. Without directly addressing the propriety of that conclusion, the Court explained that the PTAB did not exist at the time the patent rules were written, and that the America Invents Act proceedings in the PTAB are significantly different from the PTO’s internal reexamination procedure.
Lastly, the Postal Service argued that it had to be permitted to utilize in the America Invents Act proceedings because it was subject to a civil lawsuit by the patent owner for patent infringement and should have the same rights to challenge the patent as other accused infringers. The Court did not accept this argument, however, finding that the Government had the same rights as patent infringement defendants in litigation, and that America Invents Act proceedings were separate and unrelated.
The Court noted that its holding that the Government was not a “person” entitled to utilize the American Invents Act proceedings provided an additional benefit: a patent owner would not be subject to being challenged by one federal agency in proceedings before another Federal agency.
The effect of this case is that a Government agency, when sued for patent infringement, will have to challenge the patent in the litigation and prove invalidity by clear and convincing evidence. The Government agency will not be able to challenge the patent in the PTAB, where the burden of proof is the lesser standard of a preponderance of the evidence.