Supreme Court Update: Government Agencies Is Not a “Person” That May Initiate Post-Grant Proceedings

By Kevin Kuelbs

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In Return Mail, Inc. v. United States Postal Service, No. 17-1594 (June 10, 2019), the Supreme Court of the United States issued a 6-3 decision holding that a government agency is not a “person” eligible to challenge patents under the USPTO’s various post-grant trial proceedings.

Prior to the passage of the Leahy-Smith American Invents Act (AIA), there were two administrative options available for challenging the validity of an issued patent.  Specifically, a patent challenger could petition the USPTO for either ex parte reexamination or inter partes reexamination.  In 2011, Congress enacted the AIA creating three types of administrative trial proceedings: inter partes review (IPR) replacing inter partes reexamination, post-grant review, and a transitional program for covered business method patents (“CBM review”).  All three of these review proceedings are adversarial adjudicatory procedures, as opposed to ex parte reexamination that is performed by the USPTO and the patent owner without an adverse party’s participation.  To determine who may petition the USPTO to institute a post-grant review proceeding or CBM review, for example, 35 U.S.C. § 321(a) states that “a person who is not the owner of a patent may file with the [USPTO] a petition to institute a post-grant review of the patent.”  35 U.S.C. § 311(a) provides similarly for IPR petitioners.

In Return Mail, the Supreme Court answers whether a government agency is a “person” who can petition under 35 U.S.C. §§ 311, 321.  Turning to the background of the case, Return Mail owns a patent related to a method for processing undeliverable mail.  The U.S. Postal Service (“USPS”) had implemented improvements to the address-change service for processing undeliverable mail.  Return Mail asserted that these improvements infringed its patent.

Initially, USPS filed an ex parte reexamination of the patent at issue.  The patent owner amended the claims during the reexamination proceeding, and the final claims were ultimately found valid by the USPTO.  As such, the patent survived the ex parte reexamination with sufficient scope for Return Mail to continue its assertion of infringement.  Specifically, Return Mail sued USPS in the Court of Federal Claims, which is the procedure by which a non-government entity may sue a government agency for patent infringement according to federal law.  28 U.S.C. § 1498(a).

USPS then filed for a petition for CBM review, which was instituted by the USPTO; Return Mail’s patent claims were now determined to be patent-ineligible by the USPTO.  On appeal, the Federal Circuit affirmed this patent ineligibility finding and that the government agency, that is, USPS, qualifies as a “person” for the purposes of petitioning for CBM review.  Return Mail challenged this ruling at each step of the litigation, including appealing to the U.S. Supreme Court, contending that the Government does not qualify as “a person” in the context of initiating AIA trial proceedings.

As noted above, the text of the AIA defines only a “person” other than the patent owner and thus, the Supreme Court analyzed the question as to whether the Government is included in the definition of “a person” in the context of AIA trial proceedings.

The Supreme Court acknowledged that the patent statutes do not explicitly define the term “person.”  Moreover, the Supreme Court noted that “[i]n the absence of an express statutory definition, the Supreme Court applies a ‘longstanding interpretive presumption that ‘person’ does not include the sovereign.” However, the Supreme Court also noted that the presumption is not a “hard and fast” rule with the possibility of being “disregarded only upon some affirmative showing of statutory intent to the contrary.”  Thus, the Supreme Court noted that “[g]iven the presumption that a statutory reference to a ‘person’ does not include the Government, the U.S. Postal Service must show that the AIA’s context indicates otherwise.”

While a government agency may apply for patents, the Supreme Court noted that the term “person” is used inconsistently through the patent statutes — sometimes inclusive of the Government and sometimes exclusive.  In support of its interpretation, USPS contended that since the Manual for Patent Examination Procedure (MPEP) indicates a person, including a federal agency, may cite prior art in an ex parte reexamination it logically follows that USPS should qualify as a person for the purposes of AIA trial proceedings.  This  argument did not win because the Supreme Court noted the stark contrast between ex parte reexamination proceedings in which the challenger is not allowed to participate, on the one hand, and AIA trial proceedings which are adversarial in nature, on the other. Further, given the procedures defined in 28 U.S.C. § 1498, the Supreme Court reasoned that the Government is already in the unique position of limiting patent owners to bench trials before the Court of Federal Claims to claims for reasonable compensation, rather than monetary damages.  Therefore, despite having potential liability for infringement, government agencies “enjoy a degree of certainty about the extent of their potential liability that ordinary accused infringers do not.”

Consistent with this analysis, the Supreme Court also concluded that “excluding federal agencies from AIA review proceedings avoids the awkward situation that might result from forcing a civilian patent owner … to defend the patentability of her invention in an adversarial proceeding initiated by one federal agency … and overseen by a different federal agency.”  Deciding to avoid such awkwardness, the Supreme Court ruled in favor of Return Mail that the Government, and more specifically USPS, is not a “person” that may initiate AIA Post-Grant review proceedings.

For patent owners, this Supreme Court case is important in those limited circumstances where a government agency infringes the patent.  A government agency’s inability to use AIA validity challenge proceedings provides some tactical advantage to the patent owner, and ensures that issues of patent validity will be decided in a federal court, and not by the USPTO’s Patent Trial and Appeal Board, which handles all AIA proceedings.