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Return Mail, Inc. v. United States Postal Services

By Fritz Klantschi
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On June 10, 2019 the United States Supreme Court in Return Mail, Inc. v. United States Postal Service, 868 F.3d 1350 (“Return Mail v. USPS”) held that the federal government is not a “person” able of instituting AIA review proceedings.

Background

The decision centered around Section 18(a)(1)(B) of the America Invents Act (“AIA”), concerning Covered Business Method (CBM) patents, and reads “[a] person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person’s real party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent” (emphasis added). Return Mail, Inc. had sued the U.S. Postal Service in the U.S. Court of Federal Claims (“USCFC”) alleging infringement of its patent, and, in turn, the USPS challenged Return Mail’s patent under the AIA. A prior blog post on this site discussed the background of the case in further detail.

Supreme Court Decision

Justice Sotomayor delivered the opinion of the Court in a 6-3 decision. The Court held that, unless there is an express definition of the term “person” in the patent statutes, the courts must proceed with the presumption that the government is not a person, absent an affirmative showing to the contrary.

The USPS made three arguments that the Court addressed.

  1. 1. The USPS argued that AIA post-issuance review proceedings must include the government because other references in the patent statutes appear to do so. The Court however found that at least 18 references to “persons” in the Patent Act and the AIA showed no clear trend that the term “person” included the government.

 

  1. 2. Next, the USPS argued that, because the government has a longstanding history with the patent system, Congress must have intended to allow the government access to the AIA post-issuance reviews. The USPS and the dissent by Justice Breyer both noted that since 1981 the Patent Office treated federal agencies as “persons” who may request an ex parte reexamination. The majority however countered that they might take account of this “executive interpretation” if they were determining whether Congress meant to include the government as a “person” for purposes of the ex parte reexamination procedures. The Court also noted, even assuming the government may petition for ex parte reexamination, there are differences between an ex parte reexamination and an AIA proceeding such that there are good reasons why Congress might have authorized the government to request a “hands-off” ex parte reexamination but not be a party to a full-blown adversarial proceeding of an AIA review proceeding. The Court found there to be no “settled” meaning of the term “person” with respect to the AIA review proceedings and the Manual of Patent Examining Procedures (“MPEP”) does not justify putting aside the presumptive meaning of “person.”

 

  1. 3. Finally, the USPS argued that it must be a “person” because, like other infringers, it is subject to civil liability and can assert a defense of patent invalidity. The Court held however that, unlike a private party, the government faces lower risks in an USCFC trial because it cannot be subject to an injunction and there are legal limits on the damages that can be ordered. Since the USPS faces a lower risk, the Court found it is reasonable for Congress to treat federal agencies differently, even though the burden of proof for invalidity is greater at the USCFC (clear and convincing standard) than for an AIA proceeding (preponderance of the evidence). Also, excluding federal agencies from using the AIA review proceedings avoids the “awkward situation” of having a civilian patent owner defend its patent against one federal agency overseen by another government agency, the PTAB.

Conclusion

The Court held that a federal agency, such as the USPS, is not a person who may petition review under the AIA post-issuance proceedings. The decision of the U.S. Court of Appeals for the Federal Circuit was therefore reversed and the case remanded.  It can be argued, however, that it would be more efficient for the PTAB to hear validity claims in cases where a federal agency is sued for patent infringement, as opposed to the USCFC, which is the only court in which the government can be sued for patent infringement.  Congress may decide to amend the AIA to include the federal government as a “person” and address the estoppel provisions of the AIA to include the USCFC along with the ITC and civil actions.

The Return Mail decision does not address the ability of government contractors petitioning the PTAB to institute an AIA review proceeding to protect their interests. Government contractors have done so in the past.  Whether a government contractor can intervene will depend, in part, on whether the government contract that procured the alleged infringing product included a patent indemnity clause.

Finally, the language the Court used with respect to ex parte reexaminations may foreshadow the prospect that the federal government is not a person under 35 U.S.C. §301(a) which provides that “[a] person at any time may cite to the Office in writing . . .  prior art . . . which that person believes to have a bearing on the patentability of any claim of a particular patent,” and therefore cannot request an ex parte reexamination proceeding.