By Mark J. Cohen Ph.D.
In AVX Corporation v. Presidio Components, Inc., Appeal No. 2018-1106 (Fed. Cir. 2019), decided on May 13, 2019, before Judges Newman, O’Malley and Taranto, the Federal Circuit ruled that a party needs standing in an Article III Court in order to appeal an adverse decision in an inter partes review (”IPR”) from the Patent Trial and Appeals Board (“PTAB”). AVX Corporation (“AVX”), a manufacturer and seller of a variety of electronic components, including capacitors, is a competitor of Presidio Components, Inc. (”Presidio”), which manufactures and sells a variety of ceramic capacitors. As competitors, there is a history of several lawsuits between the parties since 2008.
In this case, AVX petitioned the United States Patent and Trademark Office (“USPTO”) for an IPR under 35 U.S.C. §§ 311-319 on the grounds that all of the claims of U.S. Patent No. 6,661,639 (“ ‘639 patent”),which is owned by Presidio and which describes and claims single-layer ceramic capacitors with certain features, are unpatentable based on obviousness under 35 U.S.C. §103. The PTAB instituted a review of all claims and held that five of the claims were unpatentable, but upheld the validity of the sixteen other claims, ruling that AVX failed to establish unpatentability of the other claims (“upheld claims”). AVX appeals the decision by the PTAB as to the upheld claims.
AVX did not have any problem petitioning for an IPR since a person does not need to have Article III standing to file an IPR petition and obtain a decision from the PTAB as Article III requirements do not apply to administrative agencies. However, an appeal from a PTAB is brought to the federal courts, and a person who appeals the decision must have Article III standing. An Article III court is the judicial branch of the federal government under Article III of the Constitution and includes the Supreme Court of the United States, and the inferior courts thereto established by the Congress, i.e., the 13 United States courts of appeals, the 91 United States district courts (including the districts of D.C. and Puerto Rico, but excluding three other territorial district courts), and the U.S. Court of International Trade. To have standing, a party must show (1) an injury in fact, (2) a causal connection between the injury and the conduct complained of and (3) a likelihood that the injury will be redressed by a favorable decision. “An injury in fact is ‘a legally protected interest which is (a) concrete and particularized’… and ‘(b) actual or imminent, not conjectural or hypothetical’…An injury is concrete if it is ‘real’ rather than ‘abstract,’ though it need not be ‘tangible.’… An injury is particularized if it “affect[s] the plaintiff in a personal and individual way.’” The AVX Court held that AVX did not have standing to appeal the decision from the IPR to the federal courts because it did not show that it was injured by the decision of the PTAB that upheld the validity of the 16 claims of the ‘639 patent.
AVX argued that it was injured by the Board’s rejection of its obviousness challenges to the upheld claims because the statutory estoppel provision under 35 U.S.C. 315(e) prevents it from asserting the same challenges if Presidio asserts those claims against AVX in the future. The first paragraph of the estoppel provision declares that once the Board issues its final written decision in an IPR, the IPR petitioner may not initiate another PTO proceeding to challenge the same patent claims on any ground that the petitioner “raised or reasonably could have raised” in the Board decided IPR. 35 U.S.C. §315 (e)(1). The second paragraph refers to appeals:
The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a) . . . may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
Id., §315(e)(2). AVX argued that this language means that AVX will be precluded from asserting in district court, at a later time, either in a declaratory judgment action or a defense to a counterclaim in an infringement action that the upheld claims are invalid for obviousness on the same grounds on which the IPR was instituted against Presidio.
The AVX Court rejected this argument for standing for several reasons. First, the Federal Circuit has previously held that that invocation of the estoppel provision is insufficient basis for standing in an Article III Court. Second, the AVX Court indicated that the Federal Circuit has never ruled heretofore on the effect of the estoppel provision on an IPR petitioner which lacked Article III standing to appeal the decision of the PTAB to the federal courts. However, the issue was not ripe before the court, and the AVX Court did not rule on this issue.
In addition, the AVX Court rejected AVX’s argument that it has standing because the PTAB decision reduces its ability to compete with Presidio. The AVX Court noted that AVX failed to prove that it is engaging in or has non-speculative plans to engage in conduct that is even arguably encompassed by any of the upheld claims of the ‘639 patent. In addition, the AVX Court observed that AVX did not assert that it is in the process of developing a capacitor that Presidio would likely argue falls within the scope of the upheld claims. In addition, the AVX Court noted that AVX did not contend that it has set aside resources to develop such product, but cannot proceed in the venture because of the upheld claim. The fact that AVX and Presidio are competitors in the capacitor market is not sufficient criteria to establish standing in the federal courts. As the AVX Court stated:
Because, for these reasons, AVX has not sufficiently alleged current or nonspeculative activities of its own that arguably fall within the scope of the upheld claims, we conclude that AVX has identified no harm to it, competitive or otherwise, resulting from the Board’s decision. Notably, AVX offers no argument for how, given our conclusion about AVX’s own activities, the Board’s decision is likely to strengthen Presidio’s ability to compete so as to cause harm to AVX. ..And there is simply no evidence in this case that, as an economic matter, Presidio’s ability to compete against AVX is enhanced by the upheld claims in a way that would harm AVX if AVX lacks a nonspeculative interest in itself engaging in conduct even arguably within the upheld claims… There is no evidence that losing the patent protection of the upheld claims would lead Presidio to invest less in making and selling its claim-covered product. Thus, whatever scenarios of competitive harm are conceivable in other cases, there is no showing here that cancelling the upheld claims would in any way benefit AVX as a competitor or otherwise.
Consequently, the Federal Court dismissed the appeal.
It is apparent that there is bad blood between AVX and Presidio. However, as this case has shown, the plethora of litigation between the petitioner and a patentee on other matters is insufficient basis to impart to the petitioner sufficient standing to appeal an adverse decision of the PTAB in an IPR upholding the validity of the patent to an Article III federal court. If the petitioner does not colorably infringe the claims of the patent or has no plans to invest in or develop a product that arguably falls within the scope of the claims of the patent, the petitioner should consider the strengths and weaknesses and consequences of instituting an IPR since the merits of the invalidity case may only be determined by the PTAB if it does not have any standing to appeal the decision to a federal court. As long as the petitioner understands the inability to appeal the decision of an IPR to a federal court if it does not have standing, there are certain advantages of bringing an IPR against a patent owner competitor.
First, an IPR is less expensive than litigation. Second, assuming that the petitioner does not have standing to bring an action in federal court, this is the only forum in which the petitioner can invalidate the claims of the patent; the petitioner may be successful in invalidating some or all of the claims of the patent. Moreover, the threat of bringing an IPR against a competitor patent owner may facilitate or provide leverage in negotiations of other disputes that the petitioner may have with the patent owner, such as settlement of other disputes and/or more favorable terms in settlement of these disputes or licensing arrangements. Even if the petitioner does not have standing in the federal court, the petitioner may contemplate bringing an IPR together with another competitor who does have standing to appeal any adverse decision of the PTAB; the petitioner could enter into a joint defense agreement and share the costs of the IPR proceeding and any appellate action with the other competitor; in this way, if there is an adverse judgment from the PTAB, the other party can appeal the adverse decision to the federal court.
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