Summary:  PGR and IPR proceedings may offer a cost effective pathway to preemptively challenge the validity of a patent.  While a party dissatisfied with the outcome of such a proceeding may appeal to the Federal Circuit, a party not currently engaging in infringing activity but instead relying on potential infringement liability may lack Article III standing to make such an appeal.  To establish standing, the party likely must show that it has concrete plans for future activity that create a substantial risk of infringement or, alternatively, that it has contractual rights that are affected by a determination of patent validity.  Given the estoppel effects of PGR and IPR proceedings, would-be petitioners should evaluate their product development activities as part of their pre-filing due diligence to determine whether Article III standing would be available for an appeal.

The United States Court of Appeals for the Federal Circuit (“Federal Circuit”) recently reiterated that a petitioner in a post grant review (“PGR”) or inter partes review (“IPR”) proceeding seeking to appeal an adverse final written decision from the United States Patent Trial and Appeal Board (“Board”) must show more than potential infringement liability to have Article III standing for such an appeal. JTEKT Corp. v. GKN Auto. Ltd., No. 2017-1828, 2018 U.S. App. LEXIS 21585, at *6-9 (Fed. Cir. Aug. 3, 2018).

JTEKT Corporation (“JTEKT”) manufactures driveline components. See id. at *7.  GKN Automotive Ltd. (“GKN”) owns U.S. Patent No. 8,215,440, entitled “Drive train for a vehicle with connectable secondary axle” (“the ’440 patent”). Id. at *1; ’440 patent (filed Apr. 30, 2009).  During development of a new product, JTEKT identified the ’440 patent as a potential infringement liability and petitioned the Board for IPR, seeking cancellation of certain claims of the ’440 patent as allegedly being obvious over prior art. JTEKT Corp., 2018 U.S. App. LEXIS 21585, at *1-2, 7-8.  The Board determined that JTEKT failed to establish obviousness of certain claims of the ’440 patent. Id. at *2.  JTEKT appealed the Board’s decision, but the Federal Circuit dismissed JTEKT’s appeal for lack of standing, holding that JTEKT asserted only a potential infringement liability, which was insufficient to establish an actual injury-in-fact sufficient to confer Article III standing. Id. at *9.

Article III of the Constitution of the United States limits the jurisdiction of federal courts to cases and controversies in which the challenging party has personally suffered some actual or threatened injury-in-fact that can fairly be traced to the challenged action of the defendant. Valley Forge Christian Coll. v. Ams. United for Separation of Church & State, 454 U.S. 464, 472 (1982) (citation omitted); see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (citations omitted).  To establish injury-in-fact, a plaintiff must show “‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan, 504 U.S. at 560-61).

In this regard, the Federal Circuit has developed precedent which establishes that, typically, in order to demonstrate an injury-in-fact sufficient to confer Article III standing for an IPR appeal, “the appellant/petitioner must show that it is engaged or will likely engage ‘in an[] activity that would give rise to a possible infringement suit,’ or has contractual rights that are affected by a determination of patent validity.” JTEKT Corp., 2018 U.S. App. LEXIS 21585, at *5-6 (quoting Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, 1262 (Fed. Cir. 2014)) (citing MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 137 (2007)).  Consequently, it is not uncommon for a party to lack Article III standing under this Federal Circuit precedent during the early stages of product development when the potential for infringement activity is relatively uncertain.

However, the Supreme Court has recognized that a party without Article III standing may petition the Board to institute PGR or IPR. Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143-44 (2016).  Further, Congress has granted a statutory right for a party dissatisfied with a final written decision of the Board in a PGR or IPR proceeding to appeal the decision to the Federal Circuit. 35 U.S.C. §§ 319, 329 (2012).  Nevertheless, legal precedent requires the party to demonstrate an injury-in-fact sufficient to confer Article III standing for the court to have jurisdiction over such an appeal. See JTEKT Corp., 2018 U.S. App. LEXIS 21585, at *3-5 (citing Cuozzo, 136 S. Ct. at 2143-44; Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168, 1172-76 (Fed. Cir. 2017); Consumer Watchdog, 753 F.3d at 1260).

As for JTEKT, the Federal Circuit found declarations that JTEKT submitted in support of its standing failed to establish that the product under development would create a substantial risk of infringement. Id. at *7.  To explain, the court noted that “while JTEKT and GKN are competitors generally, JTEKT expressly conceded that ‘no product is yet finalized’” and that “[the drive shaft] concept will continue to evolve and may change until it is completely finalized.” Id. at *7 (citations omitted).  In addition, the court highlighted that JTEKT’s risk of infringement pertained to “future development.” Id. at *8.  Thus, the court concluded “that JTEKT [had] not established at this stage of the development that its product create[d] a concrete and substantial risk of infringement or [would] likely lead to claims of infringement.” Id. at *8.  In particular, the court held that a party relying on potential infringement liability as a basis for standing “must establish that it has concrete plans for future activity that create[] a substantial risk of future infringement or [would] likely cause the patentee to assert a claim of infringement.” Id. at *6-7.

The scenario exemplified in JTEKT Corp. illustrates a dilemma for parties considering whether to challenge the validity of a patent during the early stages of product development.  While a petitioner may wish to challenge the validity of a patent through PGR or IPR before committing significant resources to product development, an early petition for PGR or IPR may precede activities that would be sufficient under current Federal Circuit precedent to confer Article III standing to appeal an undesirable Board decision.  Moreover, estoppel statutes may preclude PGR and IPR petitioners from later raising claims on any ground of invalidity that the petitioner “raised or reasonably could have raised” during the PGR or IPR proceeding. 35 U.S.C. §§ 315(e)(2), 325(e)(2) (2012).

While JTEKT Corp. may create a difficult decision for would-be PGR and IPR petitioners, a petition for a writ of certiorari is currently pending before the Supreme Court that, if granted, would address this dilemma. Petition for a Writ of Certiorari, RPX Corp. v. ChanBond LLC, No. 17-1686 (U.S. filed June 18, 2018).  In particular, the petition asks whether “the Federal Circuit can refuse to hear an appeal by a petitioner from an adverse final decision in [an IPR] on the basis of lack of a patent-inflicted injury in fact when Congress has . . . statutorily created the right for parties . . . to appeal to the Federal Circuit.” Id. at i.

Amicus briefs, including a brief filed by the New York Intellectual Property Law Association (“NYIPLA”), have been filed arguing that the petition should be granted. Brief of New York Intellectual Property Law Association as Amicus Curiae in Support of Neither Party, RPX Corp. v. ChanBond, LLC, No. 17-1686 (U.S. petition for cert. filed June 18, 2018).  In particular, the NYIPLA argues that the Federal Circuit failed to take into consideration that Congress has the power to define intangible harms that meet the minimum requirements for Article III standing and that Congress has in fact defined such an intangible harm sufficient to confer Article III standing by providing a statutory right to appeal an unfavorable Board decision to the Federal Circuit. Id. at 6-7.