US Inventor v. Vidal

In US Inventor v. Vidal, the Fifth Circuit affirmed per curiam in an unpublished decision a dismissal, for lack of standing, by the district court of a challenge to the America Invents Act. The court panel was bipartisan in their appointments, comprised of Judges King, Elrod, and Southwick, and their decision was unanimous in finding a lack of constitutional standing, without reaching the additional requirement of statutory standing.

Plaintiff US Inventor argued that there is a far higher invalidity of patents occurring in IPR and PGR proceedings (84%) as opposed to that in Article III proceedings (29%), but the Fifth Circuit expressed skepticism that these statistics capture the full picture, and at any rate did not see a sufficiently imminent harm to US Inventor justify standing. "This lack of individual standing also defeats any claim to associational standing," the Court held. Slip op. 9 n.6. The court felt that injury depended on a chain of speculative events, similar to the chain of events rejected as insufficient by the U.S. Supreme Court in Clapper v. Amnesty Int'l USA.

Background

In 2011, Congress passed the America Invents Act (“AIA”). The AIA established an executive adjudicatory body called the Patent Trial and Appeal Board (“PTAB”) within the U.S. Patent and Trademark Office (“PTO”). 35 U.S.C. § 6(a). The AIA creates a variety of avenues for patent challengers to contest the validity of a patent before the PTAB. Notable for this case are two such avenues: inter partes review (“IPR”) and post-grant review (“PGR”). See id. § 6(c).

IPRs and PGRs both have two phases: an institution phase and a trial phase. The institution phase’s purpose is for the PTAB to determine whether it should institute a trial on the merits. During an IPR, the patent challenger must demonstrate “that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.” Id. § 314(a). During a PGR, the patent challenger must demonstrate “that it is more likely than not that at least 1 of the claims challenged in the petition is unpatentable.” Id. § 324(a). If such showings are not met, the PTAB must deny institution and the proceeding ends there. Id. §§ 314(a), 324(a).

Even if the patent challenger does make the statutory showing, the PTAB may still choose not to institute a trial. This is so because, under Sections 314(a) and 324(a), “the agency’s decision to deny a petition is a matter committed to the Patent Office’s discretion.” Cuozzo Speed Techs., LLC v. Lee, 579 U.S. 261, 273 (2016) (regarding IPRs); Credit Acceptance Corp. v. Westlake Servs., 859 F.3d 1044, 1049 (Fed. Cir. 2017) (regarding PGRs). That said, the PTAB’s discretion is cabined by Congress, which requires that “[t]he [PTO] Director shall prescribe regulations ... setting forth the standards for the showing of sufficient grounds to institute” or deny either an IPR or PGR trial. See 35 U.S.C. §§ 316(a)(2), 326(a)(2).

Since the AIA was passed, PTAB panels have examined when “discretionary denials” are appropriate and have adopted a nonexclusive list of factors for consideration. See Gen. Plastic Indus. Co. v. Canon Kabushiki Kaisha, No. IPR2016-01357, 2017 WL 3917706 (P.T.A.B. Sept. 6, 2017); NHK Spring Co. v. Intri-Plex Techs., Inc., No. IPR2018-00752, 2018 WL 4373643 (P.T.A.B. Sept. 12, 2018); Advanced Bionics, LLC v. MED-EL Elektromedizinische Geräte GmbH, No. IPR2019-01469, 2020 WL 740292 (P.T.A.B. Feb. 13, 2020); Apple Inc. v. Fintiv, Inc., No. IPR2020-00019, 2020 WL 2126495 (P.T.A.B. Mar. 20, 2020). The director of the PTO (the “Director”) has designated these decisions “precedential” in the PTAB’s Standard Operating Procedure, meaning that these decisions are “binding Board authority in subsequent matters involving similar facts and issues.” PTAB, Standard Operating Procedure 2 (Revision 10), at 11 (2018), https://www.uspto.gov/sites/default/files/documents/SOP2%20R10%20FINAL.pdf.

This brings us to the instant case. Plaintiff-Appellants comprise several individual patent holders and US Inventor Incorporated (“US Inventor”), an organization representing patent holder interests. As beneficiaries of discretionary denials (because such denials avoid potentially costly IPRs or PGRs), Plaintiff-Appellants desire additional “offramps” to avoid PTAB trials. Consequently, they brought a two-count suit seeking a preliminary and permanent injunction against the Director. First, they argued that Sections 316(a) and 326(a) mandate that the Director engage in notice-and-comment rulemaking and, thus, that the Director must go through the Administrative Procedure Act’s (“APA’s”) notice-and-comment process to issue standards for when discretionary denial is appropriate. Therefore, they requested that the district court compel the Director to engage in notice-and-comment rulemaking when issuing discretionary denials. Second, they asserted that the issuance of the Standard Operating Procedure reflected that the Director engaged in rulemaking without notice and comment, and thus the Standard Operating Procedure must be set aside as unlawful. The Plaintiff-Appellants further sought a preliminary and permanent injunction enjoining the Director from granting institution in any AIA patent trial pending completion of the compelled rulemaking.

The Director moved to dismiss the complaint, arguing that the plaintiffs lacked individual or organizational standing. The district court agreed and dismissed the complaint. The court explained that the individual plaintiffs could not show a legally cognizable injury because their alleged injury—the potential increased risk to their patents if they do not receive a discretionary denial during the institution stage—was not sufficiently concrete. Additionally, the court found no organizational standing under either of US Inventor’s proffered theories because it (1) could not show that the purported actions (or inactions) of the Director caused the organization to expend resources beyond its normal expenditures and (2) did not suffer an informational injury because it was not denied any particular information to which it was entitled.

Plaintiff-Appellants timely appealed the decision to both this circuit and the Federal Circuit. The appeal in the Federal Circuit is being held in abeyance pending this court’s decision.

Resource diversion theory

The Court rejected plaintiffs' resource diversion theory of standing by holding:

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US Inventor has not suffered an injury-in-fact under a resource diversion theory because it has not expended resources outside of its ordinary course of operations.

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The Court distinguished a D.C. Circuit precedent, American Anti-Vivisection Society v. United States Department of Agriculture, 946 F.3d 615 (D.C. Cir. 2020) (lawsuit by the Avian Welfare Coalition to compel rulemaking, for which the court held that standing exists), by finding:

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US Inventor has not actually engaged in a practice outside of its ordinary scope.

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Informational injury

The Fifth Circuit rejected plaintiffs' argument of informational injury:

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Courts that have faced this issue have agreed that a failure to issue notice-and-comment rulemaking does not create a right to information for the purpose of standing.10 Bensman v. U.S. Forest Serv., 408 F.3d 945, 958– 60 (7th Cir. 2005) (distinguishing laws that create a notice-and-comment rulemaking requirement from laws that create a specific right to information); Wilderness Soc’y, Inc. v. Rey, 622 F.3d 1251, 1259 (9th Cir. 2010) (agreeing with the Seventh Circuit and explaining that a notice-and-comment mandate’s purpose is not to disclose information). We agree with their logic. As explained by the Seventh Circuit in Bensman, an informational injury can arise from a statute (such as FOIA or FACA) that aims to provide information to the public and then clearly creates a right to such information. Bensman, 408 F.3d at 958. When a statute serves some other purpose, such as increasing public participation in the decision-making process, there is no public right to information. Id. ....

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