WASHINGTON (CN) – Ruling in favor of a small tech company going up against the U.S. Postal Service, the Supreme Court held Monday that a federal agency cannot initiate an administrative review of a company’s patent because it is not a “person” as defined by the law that allows such appeals.
The underlying case involves Return Mail Inc., a small technology company based in Birmingham, Alabama, that developed a system for processing returned and undeliverable mail using optical scanners, computer databases and other mechanisms.
The company claims that by January 2006, it entered into talks with the U.S. Postal Service for a licensing agreement to use the technology, but the agency later announced it was rolling out its own system, called “OneCode ACS,” to process returned and undeliverable mail.
Attorneys for Return Mail Inc. said its client informed the Postal Service that the OneCode ACS system violated its patent; the agency responded by challenging the validity of the patent.
The Patent Office ultimately confirmed the patent’s validity, and Return Mail sued the Postal Service in the Court of Federal Claims, seeking compensation.
While that action was pending, the Postal Service again challenged the validity of the patent, asking for a covered business method review under the Leahy-Smith America Invests Act
Passed by Congress in 2011, the Act allows a person who has been sued for patent infringement to challenge the patents validity through a covered business method review by the Patent Trial and Appeal Board.
A business method review looks at the validity of a patent that relates to a process rather than to a unique new technology. The process was initiated by Congress due to concerns about litigation abuse involving business method patents.
Return Mail argued that the Patent Trial and Appeal Board lacked statutory authority to consider the government’s claims because the Act explicitly bestowed the right to appeal to a “person,” and not to a government entity.
The board rejected Return Mail’s argument, initiated the review and ultimately invalidated the company’s patent.
A divided Federal Circuit affirmed the decision, but the U.S. Supreme Court reversed on Monday.
Writing for the six-member majority, Justice Sonia Sotomayor said the lower court’s interpretation of the statute governing who can file a patent appeal was flawed.
“The Postal Service argues that the government must be among those protected by these provisions and from there deduces that it must also be permitted to petition for AIA review proceedings because the review provisions and the intervening-rights provisions were all added to the Patent Act by the AIA at the same time,” the opinion states. “But regardless of whether the intervening-rights provisions apply to the government…the Postal Service’s chain of inferences overlooks a confounding link: The consistent-usage canon breaks down where Congress uses the same word in a statute in multiple conflicting ways.”
Sotomayor added “the mere existence of some government-inclusive references cannot make the ‘affirmative showing’…required to overcome the presumption that Congress did not intend to include the government among those ‘person[s]’ eligible to petition for AIA review proceedings.”
Chief Justice John Roberts and Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh joined Sotomayor in the majority.
Justice Stephen Breyer dissented, and was joined by Justices Ruth Bader Ginsburg and Elena Kagan.
He wrote that government agencies should count as “persons” for the purposes of the AIA.
“Government agencies can apply for and obtain patents; they can maintain patents; they can sue other parties for infringing their patents; they can be sued for infringing patents held by private parties; they can invoke certain defenses to an infringement lawsuit on the same terms as private parties; they can invoke one of the pre-existing administrative procedures for challenging the validity of a private party’s patents; and they can be forced to defend their own patents when a private party invokes one of the three procedures established by the America Invents Act,” the dissent states.
Breyer concluded, “Why, then, would Congress have declined to give federal agencies the power to invoke these same administrative procedures? I see no good answer to that question.”
Covington & Burling LLP partner Richard Rainey, who co-led the Supreme Court arguments on behalf of Return Mail against the Postal Service, welcomed the majority’s decision.
“This is a significant victory for Return Mail and for all technology companies and patent holders that may find themselves in the government’s crosshairs,” Rainey said in a statement sent to Courthouse News. “By excluding federal agencies from AIA review proceedings, the court’s decision limits the government’s ability to bring duplicative challenges to the validity of privately-owned patents.”
Matthew J. Dowd – an attorney for the Washington, D.C.-based Dowd Scheffel PLLC who wrote an amicus brief with several other property law professors “interested in preserving inherent limitations on sovereign powers” – was similarly pleased with the high court’s opinion and said ruling otherwise would have allowed the government to “have its cake and eat it too.”
“The U.S. Postal Service tried to invalidate a patent using a procedure reserved for ‘persons’ accused of infringement,” Dowd said.
Lawyers for the U.S. Postal Service did not return requests for comment Monday.