Federal Agencies Ruled Not ‘Persons,’ May Not Petition for AIA Reviews - McDermott Will & Emery

Federal Agencies Ruled Not ‘Persons,’ May Not Petition for AIA Reviews



The US Supreme Court has now held that a federal agency is not a “person” under the America Invents Act (AIA). Therefore, a federal agency cannot be a petitioner seeking review under the various AIA patent review procedures.

In Depth

The US Supreme Court, in a 6-3 decision, held that the United States Postal Service, a federal agency, is not a “person” under the America Invents Act (AIA) and therefore cannot be a petitioner in a Covered Business Method (CBM) review under the AIA. Return Mail, Inc. v. United States Postal Service, Case No. 17-1594 (S. Ct. June 10, 2019) (Sotomayor, J.) (Breyer, J., dissenting).

Return Mail is the holder of a United States patent that claims a method for processing undeliverable mail. Return Mail alleged that its patent was infringed by an enhanced address-change service for processing undeliverable mail implemented by the US Postal Service. The Postal Service petitioned for ex parte reexamination of the patent, and the Patent Office confirmed the patent’s validity. Return Mail sued the Postal Service in the Court of Federal Claims, and the Postal Service petitioned the Patent Office to institute a CBM review. The Patent Trial and Appeal Board (PTAB) concluded that Return Mail’s claims were patent ineligible and canceled the claims underlying the patent.

Return Mail appealed to the US Court of Appeals for the Federal Circuit, arguing in part that the AIA only authorizes “a person” other than the patent owner to petition for review and the Government (of which the Postal Service is an agency) is not “a person.” The Federal Circuit affirmed the PTAB. IP Update, Vol. 20, No. 9. Return Mail sought certiorari, which the Supreme Court granted on the question of whether the Postal Service is a “person” eligible to petition for AIA review. IP Update, Vol. 21, No. 11.

Justice Sotomayor authored the majority opinion, holding that the Postal Service is not a “person” within the meaning of the AIA and therefore did not have standing to petition for CBM review. She was joined by Chief Justice Roberts and Justices Thomas, Alito, Gorsuch and Kavanaugh. Justice Breyer dissented, joined by Justices Ginsburg and Kagan.

The Government Is Presumptively Not a “Person”

Because the AIA does not explicitly define “person,” all nine justices appear to have agreed that the Court should apply the “longstanding interpretive presumption that ‘person’ does not include the sovereign.”

The majority, which held that the presumption was not overcome, required that the Postal Service “must point to some indication in the text or context of the statute that affirmatively shows Congress intended to include the Government.” By contrast, the dissent focused on precedent holding that the presumption is “no hard and fast rule of exclusion” that may be overcome when “the purpose, the subject matter, the context, the legislative history or the executive interpretation . . . indicate an intent” to include the Government.

The Post Office offered three primary arguments, each ultimately rejected, in support of its interpretation of “person” to include the Government. First, the Patent Act consistently uses “person” to include the Government. Second, the Patent Office has interpreted “person” in related provisions, specifically those governing ex parte reexamination, as including the Government. Third, the Government may be liable for patent infringement and should therefore be accorded the same defenses (and defensive procedures) as private litigants.

The Consistent-Usage Principle

The Post Office argued that its interpretation of “person” to include the Government in the AIA is supported by other references to a “person” in the Patent Act (35 U.S.C.) that include the Government.

The majority found that the usage of “person” in the Patent Act is inconsistent with respect to whether the Government is included and, therefore, that the consistent-usage principle does not apply. Although the Government is expressly permitted to apply for patents and therefore the best-known provisions of the Act include the Government as a “person” (e.g. § 102 stating that “A person shall be entitled to a patent unless . . . .”), the Patent Act sometimes refers to a “person” in a way that excludes the Government. For example, the majority wrote that the Patent Act provides that the administrative patent judges comprising the PTAB must be “persons of competent legal knowledge and scientific ability;” requires the Patent Office Director to treat as confidential any referral to the Attorney General of suspected fraud in the patent process unless the United States charge “a person” with a criminal offense in connection with the fraud; and authorizes the Patent Office to cover the expenses of “persons” other than federal employees attending programs on intellectual-property protection. These exemplary usages of “person” persuaded the majority that “person” was not used consistently in the Patent Act to include the Government.

The dissent observed that the examples provided by the majority are instances in which the Government cannot possibly be considered a “person.” For example, the Government can never serve as an administrative patent judge, can never be subject to criminal prosecution for fraud and can never attend a program on intellectual-property protection. Accordingly, the dissent found the examples on which the majority relied were not probative of how the Patent Act generally refers to “person.”

The Executive Interpretation

The Postal Service argued that its interpretation of “person” to include the Government is further supported by the Patent Office’s longstanding treatment, enshrined in the 1981 edition of the Manual of Patent Examining Procedures (MPEP), of federal agencies as “persons” who may cite prior art to the agency or request an ex parte reexamination of an issued patent.

The majority found this executive interpretation simply irrelevant because of distinctions it found between ex parte reexamination and AIA review proceedings. In particular, the majority noted that ex parte reexamination proceedings are distinct from AIA review proceedings because reexamination is “internal” to the Patent Office and the challenger is not permitted to participate, whereas the AIA reviews are adversarial proceedings between petitioners for review and patent owners. The majority also concluded that Government is in a unique position relative to private infringers because § 1498 limits patent owners to bench trials before the Court of Federal Claims and monetary damages, whereas § 271 permits patent owners to demand jury trials in the district courts and seek other types of relief. Finally, the majority observed that there was no “settled meaning” of “person” with respect to the AIA because “there is nothing to suggest that Congress had the 1981 MPEP statement in mind when it enacted the AIA.”

The dissent, by contrast, viewed the executive interpretation of “persons” with respect to ex parte reexaminations as evidence, which, alongside legislative intent for the AIA to “improve the quality of patents” and “make the patent system more efficient,” weighed in favor of an expansive interpretation of “persons.”

The Government Is Not Like Other Potential Infringers

The Postal Service’s third argument for its interpretation of “person” was that it must be a “person” under the AIA because, like other potential infringers, it is subject to civil liability and can assert a defense of patent invalidity. The majority found this unpersuasive because (1) the Government can still defend infringement allegations in the Court of Federal Claims, (2) the Government is not subject to the same liability or other forms of relief as other litigants, and (3) it would be awkward to force civilians to defend the patentability against one federal agency before another federal agency.

The dissent focused on the Patent Act’s explicit statement that the Government may “undertake all other suitable and necessary steps to protect and administer rights to federally owned inventions on behalf of the Federal Government.” (§207(a)(3)). This language, according to the dissent, favored including the Government within “persons” who may petition for AIA review because one purpose of AIA review proceedings is to protect patented inventions from claims of infringement by clearing away conflicting patents.

The dissent also criticized the majority’s “awkwardness” argument for ignoring that the Government has long been able to invoke other forms of administrative review to challenge the patentability of privately owned patents and that a private party challenging a Government patent in an AIA review would also be litigating against the Government before a Government agency.

Finally, the dissent argued that although the Government is not subject to all forms of relief for patent infringement that are available against private infringers, it may still be subject to large damages awards, the threat of which creates a strong need for speedy resolution of disputes regarding patent validity.

Finding no satisfactory explanation for why Congress would have wanted to deny Government agencies the ability to invoke AIA review procedures, the dissent argued that “the statutes’ purposes, the subject matter, the context, the legislative history and the longstanding executive interpretation, together with the way in which related patent provisions use the term ‘person,’ demonstrate that Congress meant for the word ‘person’ to include Government agencies.”

Practice Note: This case involved a federal agency as petitioner. It remains for another day to see if state governments (or their alter egos) will be similarly barred from access to the AIA.