On June 10, 2019, the Supreme Court ruled that federal government agencies do not qualify as a “person” under the 2011 Leahy-Smith America Invents Act (“AIA”) in Return Mail, Inc. v. United States Postal Service. Because of this, government agencies cannot challenge the validity of a patent via covered-business-method review (“CBM”), a type of post-grant patent review.
The AIA is thought to be the most significant reform in U.S. patents since the 1950s. Most importantly, it changed the U.S. patent system from first-to-invent to first-to-file. The AIA also created new mechanisms to challenge patents.
Under the AIA, issued patents can be challenged through inter partes review (“IPR”), post-grant review (“PGR”), or CBM. Each challenge is heard by the Patent Trial and Appeal Board (“PTAB”). CBM review is reserved for challenging patents for business methods that are financial but not technological. For example, a CBM patent might be filed to protect a method of data processing.
In Return Mail, Inc. v. United States Postal Service, the U.S. Postal Service challenged the validity of a patent secured by Return Mail. Return Mail, a small tech company in Alabama, solved the problem of undeliverable mail with a system that uses barcodes and scanners to process incorrectly addressed or otherwise returned mail. The U.S. Postal Service expressed interest in licensing Return Mail’s system but decided to develop its own system when negotiations broke down. When Return Mail sued, the U.S. Postal Service sought CBM review to invalidate the patent.
The Court’s analysis in Return Mail, Inc. v. United States Postal Service focused on two main issues. First, under the AIA, CBM review could only be initiated by a person “whose interest…has been sued for infringement.” Neither the text of the AIA nor the context surrounding it indicated any legislative intent to include government agencies within the meaning of the word “person.” Secondly, the Court believed allowing government agencies to challenge the validity of patents via CBM would create an “awkward situation” where a patent owner must “defend the patentability of her invention in an adversarial, adjudicatory proceeding initiated by one federal agency…and overseen by a different federal agency.” Justice Sotomayor, who authored the Court’s opinion, noted that “person” was used inconsistently throughout the AIA and chose to rely on its common usage in addition to its statutory definition in the Dictionary Act.
IP experts are torn on the ultimate importance of this decision. The CBM program was only intended to be temporary and is expected to “sunset” in 2020. (A sunset provision is one that has an automatic termination date unless the legislature votes to extend it. ) Furthermore, CBM filings have been on the decline since 2015. Some believe that this decision reveals the Court’s attitude towards patents in general. While the majority analyzed the AIA like any other statutory scheme, the dissent, including Justices Breyer, Ginsburg, and Kagan, acknowledged that improving patent quality was the underlying Congressional intent. Although this decision may seem of little impact, it may be suggestive of how the Court will analyze future AIA challenges.