Amicus Curiae Brief — General Electric Company, Petitioner v. Raytheon Technologies Corporation, fka United Technologies Corporation

Supreme Court briefMar 16, 2020

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No. 19-1012

In The

GENERAL ELECTRIC COMPANY,

Petitioner,

UNITED TECHNOLOGIES CORPORATION,

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Federal Circuit

BRIEF OF UNIFIED PATENTS, LLC; ENGINE

ADVOCACY; CABLE TELEVISION

LABORATORIES, INC.; THE R STREET

INSTITUTE; AND THE NISKANEN CENTER AS

AMICI CURIAE IN SUPPORT OF PETITIONER

Jonathan Stroud

UNIFIED PATENTS, LLC.

1875 Connecticut Ave. NW

Floor 10

Washington, DC 20009

Abigail A. Rives

ENGINE ADVOCACY

700 Pennsylvania Ave. SE

Second Floor

Washington, DC 20003

Ruthanne M. Deutsch

Counsel of Record

Hyland Hunt

DEUTSCH HUNT PLLC

300 New Jersey Ave. NW

Suite 900

Washington, DC 20001

(202) 868-6915

rdeutsch@deutschhunt.com

QUESTION PRESENTED

Whether competitive harm alone suffices to

confer Article III standing to appeal an IPR

determination, or whether an appellant must also

show concrete plans for future activity that creates a

substantial risk of a future patent infringement

action.

(i)

TABLE OF CONTENTS

INTEREST OF AMICI CURIAE ................................ 1

INTRODUCTION

AND

SUMMARY

ARGUMENT ......................................................... 2

ARGUMENT ................................................................ 5

The Federal Circuit’s Unique Appellate

Standing Rule Frustrates Congress’s Carefully

Balanced Policy To Root Out Questionable

Patents. ................................................................. 5

A. Inter Partes and Post-Grant Review Are

Important Means for Ensuring Patent

Quality. ............................................................ 7

B. The Rejection of Competitor Standing

Frustrates the Broad Appeal Right Congress

Considered Essential to Encourage Challenges

to Questionable Patents. ............................... 11

C. The Federal Circuit’s Asymmetric Rule Causes

Immediate Problems for the Post-Issuance

Process and the Development of Patent

Law. ................................................................ 15

II. The Federal Circuit’s Out-of-Step NoCompetitor-Standing Rule Is Particularly

Harmful to Startups. .......................................... 19

CONCLUSION .......................................................... 25

iii

TABLE OF AUTHORITIES

CASES

AVX Corp. v. Presidio Components, Inc.,

923 F.3d 1357 (Fed. Cir. 2019)........................ 16, 19

Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found.,

402 U.S. 313 (1971) ......................................... 14, 23

Bresnick v. U.S. Vitamin Corp.,

139 F.2d 239 (2d Cir. 1943) (Hand, J.) ........... 19–20

Cardinal Chem. Co. v. Morton Int’l, Inc.,

508 U.S. 83 (1993) ................................................. 15

Clinton v. City of New York,

524 U.S. 417 (1998) ............................................... 14

Consumer Watchdog v. Wis. Alumni Research Found.,

753 F.3d 1258 (Fed. Cir. 2014)........................ 12–13

Cuozzo Speed Techs., LLC v. Lee,

136 S. Ct. 2131 (2016) ............................................. 9

eBay Inc. v. MercExchange, L.L.C.,

547 U.S. 388 (2006) ............................................... 13

Holmes Grp., Inc. v. Vornado Air Circulation Sys.,

535 U.S. 826 (2002) ............................................... 13

HP Inc. v. MPHJ Tech. Invs., LLC,

817 F.3d 1339 (Fed. Cir. 2016).............................. 22

Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v.

Dana Corp.,

358 F.3d 1337 (Fed. Cir. 2004).............................. 14

Lear, Inc. v. Adkins,

395 U.S. 653 (1970) ........................................... 4, 18

Massachusetts v. EPA,

549 U.S. 497 (2007) ............................................... 13

MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118 (2007) ......................................... 15, 24

Midlantic Nat’l Bank v. N.J. Dep’t of Envtl. Prot.,

474 U.S. 494 (1986) ............................................... 13

Oil States Energy Servs., LLC v. Greene’s Energy

Grp., LLC,

138 S. Ct. 1365 (2018) ....................................... 9, 12

Picard v. United Aircraft Corp.,

128 F.2d 632 (2d Cir. 1942) (Frank, J., concurring)

.................................................................................... 23

Pope Mfg. Co. v. Gormully,

144 U.S. 224 (1892) ................................................. 9

Precision Instrument Mfg. Co. v. Auto. Maint. Mach.

Co.,

324 U.S. 806 (1945) ............................................... 14

Quanta Computer, Inc. v. LG Elecs., Inc.,

553 U.S. 617 (2008) ................................................. 7

Return Mail, Inc. v. U.S. Postal Serv.,

139 S. Ct. 1853 (2019) ............................................. 9

SAS Inst., Inc. v. Iancu,

138 S. Ct. 1348 (2018) ....................................... 8, 10

SCA Hygiene Prods. Aktiebolag v. First Quality Baby

Prods.,

137 S. Ct. 954 (2017) ............................................. 24

Spokeo, Inc. v. Robins,

136 S. Ct. 1540 (2016) ........................................... 13

STATUTES

35 U.S.C.

§ 283 ....................................................................... 22

§ 284 ....................................................................... 22

§ 311(a)................................................................... 10

§ 311(b)................................................................... 10

§ 315(e)(2) .............................................................. 16

§ 319 ................................................................... 6, 11

§ 321(a)................................................................... 10

§ 321(b)................................................................... 10

§ 321(c) ................................................................... 10

§ 325(e)(2) .............................................................. 16

§ 329 ....................................................................... 11

U.S. CONST. art. I, § 8, cl. 8 ......................................... 7

OTHER AUTHORITIES

Michael J. Burstein, Rethinking Standing in Patent

Challenges, 83 GEO. WASH. L. REV. 498 (2015) .... 6, 18

Cost of Inter Partes Review: Everything You Need to

Know, UPCOUNSEL (last visited Feb. 28, 2020) ........ 21

Matthew Dowd & Jonathan Stroud, Will the Federal

Circuit Consider the Competitor Standing Doctrine?,

LAW360 (Dec. 18, 2018) ............................................... 6

Erin Duffin, Number of Patents in Force in the U.S.

2004-2018, STATISTA (Dec. 18, 2019)........................... 8

FED. TRADE COMM’N, TO PROMOTE INNOVATION: THE

PROPER BALANCE OF COMPETITION AND PATENT LAW

AND POLICY (2003)...................................................... 23

Robin Feldman, Patent Demands & Startup

Companies: The View from the Venture Capital

Community, 16 Yale J.L. & Tech. 236 (2014) ........... 23

Ryan Fitzgerald, No Leg to Stand On: How the

Federal Circuit Improperly Restricted the Application

of the Competitor Standing Doctrine to Patent

Challengers When Establishing Article III Standing

Upon Appealing an Inter Partes Review, MINN. L.

REV. De Novo Blog (posted Nov. 25, 2019) ................. 6

vii

Michael D. Frakes & Melissa F. Wasserman,

Irrational Ignorance at the Patent Office, 72 Vand. L.

Rev. 975 (2019) ........................................................ 8–9

Stuart J.H. Graham et al., High Technology

Entrepreneurs and the Patent System: Results of the

2008 Berkeley Patent Survey, 24 BERKELEY TECH. L.J.

1255 (2009)........................................................... 22–23

GREENBLUM & BERNSTEIN, P.L.C., KEEPING TABS:

INTER PARTES, COVERED BUSINESS METHODS AND

POST-GRANT REVIEW FILINGS AT THE PTAB (2020) .. 11

H.R. REP. NO. 112-98 (2011) .................................. 3, 10

Sapna Kumar, Standing Against Bad Patents, 32

BERKELEY TECH. L.J. 87 (2017) ................................. 18

Jean O. Lanjouw & Mark Schankerman, Enforcement

of Patent Rights in the United States, in PATENTS IN

THE KNOWLEDGE-BASED ECONOMY (Welsey M. Cohen

& Stephen A. Merrill eds., 2003) ........................ 23–24

Mark A. Lemley, Fixing the Patent Office, 13

INNOVATION POL’Y & ECON. 83 (2012) ......................... 8

Mark A. Lemley, Essay, Rational Ignorance at the

Patent Office, 95 Nw. U. L. Rev. 1495 (2011) ............. 8

Christopher R. Leslie, The Anticompetitive Effects of

Unenforced Invalid Patents, 91 MINN. L. REV. 101

(2006) ............................................................. 19, 20, 23

viii

Letter from James Madison to Congress (Apr. 11,

1816) ............................................................................. 7

JANICE M. MUELLER, PATENT LAW (3d ed. 2009) ...... 17

Joe Mullin, New Study Suggests Patent Trolls Really

Are Killing Startups, ARSTECHNICA (June 11, 2014,

8:55 PM) ..................................................................... 24

Malathi Nayak, Costs Soar for Trade Secrets,

Pharma Patent Suits, Survey Finds, BLOOMBERG LAW

(Sept. 10, 2019, 8:01 AM) .......................................... 21

Daniel Nazer, EFF Wins Final Victory over

Podcasting Patent, ELEC. FRONTIER FOUND. (May 14,

2018) ........................................................................... 21

Patent Quality Initiative Statistics—Dispelling PTAB

Myths, UNIFIED PATENTS (Feb. 5, 2020) ................... 11

S. REP. NO. 110-259 (2008) ........................................ 12

U.S. PATENT & TRADEMARK OFFICE, FY 2019

PERFORMANCE ACCOUNTABILITY REPORT ............... 8, 9

INTEREST OF AMICI CURIAE 1

Amici are five organizations, representing

businesses from all sectors of the economy, dedicated

to ensuring that the patent system works as intended

to foster innovation, not stifle it, in part through

effective administrative mechanisms for voiding

invalid patents.

Unified Patents, LLC is a membership

organization dedicated to deterring nuisance

settlements based on patent claims that should not

have issued. Unified’s more than 250 members are

Fortune 500 companies, startups, automakers, opensource developers, high-technology companies,

industry

groups,

cable

companies,

banks,

manufacturers, cybersecurity companies, and others

devoted to reducing the drain on the U.S. economy

caused by baseless lawsuits asserting infringement of

questionable patents.

Engine Advocacy (“Engine”) is a non-profit

technology policy, research, and advocacy organization

that bridges the gap between policymakers and

startups, working with governments and hightechnology, growth-oriented startups across the

nation to support the development of technology

entrepreneurship.

Cable Television Laboratories, Inc. (“CableLabs”)

is a non-profit research and development organization

1 Counsel of record for all parties received timely advance

notice of the intent to file this brief and consented to the filing of

the brief. S. Ct. R. 37(2)(a). No counsel for any party authored this

brief in whole or in part, and no person or entity other than

amicus curiae or its counsel made a monetary contribution

intended to fund the brief’s preparation or submission.

(1)

owned by the cable industry. CableLabs has 65

members world-wide, including all of the major U.S.

cable operators (e.g., Comcast, Charter, Cox, Altice

USA, MediaCom, CableOne, etc.) representing over 45

million cable subscribers.

The R Street Institute is a nonprofit, nonpartisan

public-policy research organization. R Street’s mission

is to engage in policy research and educational

outreach that promotes free markets as well as limited

yet effective government, including properly

calibrated legal and regulatory frameworks that

support economic growth and individual liberty.

The Niskanen Center is a nonprofit, nonpartisan

public policy think tank. Niskanen works to advance

an open society both through active participation in

the marketplace of ideas and direct engagement in the

policymaking process. Niskanen develops policy

proposals, works with other interested groups to

support them, and promotes those ideas to legislative,

executive, and judicial decision makers.

Amici write to share the perspective of

innovation-driven businesses in general, and hightechnology startups in particular, that the Federal

Circuit’s crabbed approach to appellate standing

causes substantial harm, encourages the propagation

of questionable patents in contravention of Congress’s

clear intent, and cries out for this Court’s review.

INTRODUCTION

AND SUMMARY OF ARGUMENT

Amici agree with Petitioner that a dissatisfied

party to a patent challenge before the Patent Trial and

Appeal Board (“PTAB”), brought by one competitor

against another, has the right to appeal a decision

denying the relief it requested. The Federal Circuit’s

patent-cases-only appellate standing standard

unevenly favors the holders of questionable patents,

thwarting Congress’s reason for establishing

streamlined administrative proceedings in the first

place. Beyond resolving the conflict with other circuits

and this Court’s precedent, this Court’s intervention is

urgently needed to avoid the harms to the patent

system, and the innovation economy, caused by the

Federal Circuit’s lopsided deference to the non-Article

III decisions of the PTAB.

Administrative patent review proceedings, like

inter partes review (“IPR”) and post-grant review

(“PGR”), were designed to serve Congress’s goals to

“improve the quality of patents” and “make the patent

system more efficient,” by providing an easier way to

challenge “questionable patents.” H.R. REP. NO. 11298, pt. 1, at 39, 48 (2011). Providing appellate review,

in an Article III court, for any party dissatisfied by the

administrative decision, was a carefully considered

choice by Congress, central to the effectiveness of the

revamped administrative review process. By unduly

circumscribing the judicial review of agency action

promised by Congress, the Federal Circuit has

impeded the effective functioning of this system.

Invalid patents create a drain on American

innovation, increase the costs of competition, and can

block competition and research and development

altogether. With the modern volume of patent

applications, no one expects initial grants to be

perfect. The private sector can (and does) help the

government promote patent quality by challenging

invalid patents. Such challenges pursue “the

important public interest in permitting full and free

competition in the use of ideas which are in reality a

part of the public domain.” Lear, Inc. v. Adkins, 395

U.S. 653, 670 (1969).

Competitors are best positioned to perform this

function—they have the incentive and they have the

knowhow. They also suffer when questionable patents

crowd the market in which they operate—whether

they are poised to infringe or not. By closing its eyes to

these harms, and effectively requiring competitors to

admit planned infringement to justify judicial review,

the Federal Circuit has discouraged the most likely

would-be patent challengers from using the

streamlined administrative review proceedings that

Congress sought to promote.

If left unchecked, the Federal Circuit’s one-sided

rule will reduce patent quality—by limiting Article III

review of agency rulings upholding (but not denying)

the validity of questionable patents and distorting the

uniform development of patent law that the Federal

Circuit was created to promote.

Competition and innovation will be harmed

across the economy, but startups, especially, will pay

the price. Startups cannot effectively compete with

established incumbents who hold large patent

portfolios unless they have opportunities to reduce the

risk and cost imposed by issued-but-invalid patents.

The only meaningful way for resource-constrained

new companies to address questionable patents is the

administrative process. And they need to be able to

invoke that process—including congressionallyprovided judicial review—long before they get to the

point of planning to infringe a patent. Otherwise,

potential investors are likely to balk due to the cloud

of extortionate licensing requests or infringement

suits looming in the horizon.

For startups and established innovators alike,

the Federal Circuit’s lopsided regime that stacks the

appellate-review deck against patent challengers will

undermine the very efficiencies in the patent quality

ecosystem that Congress sought to promote when it

revamped the administrative patent review process.

The Federal Circuit having rejected en banc review,

only this Court can restore proper functioning to the

critical administrative system Congress established to

promote patent quality.

ARGUMENT

The Federal Circuit’s Unique Appellate

Standing

Rule

Frustrates

Congress’s

Carefully Balanced Policy To Root Out

Questionable Patents.

Petitioner has thoroughly covered how the

Federal Circuit’s patent-specific standing decisions

conflict with other circuits’ decisions and this Court’s

precedent. Amici agree with Petitioner’s analysis, as

do many commentators. 2 And that divide in authority,

alone, warrants this Court’s review. When coupled

with the harm caused by the Federal Circuit’s rule, the

case for certiorari is overwhelming.

The Federal Circuit’s one-sided appellate review

standard causes substantial harm to innovation.

Congress

set

streamlined,

cost-effective

administrative procedures for a reason: such review

makes it easier to challenge questionable patents and

thereby improve patent quality. The Federal Circuit’s

asymmetric appeal rule vitiates Congress’s considered

choice to make judicial review equally available to

dissatisfied parties, without regard to who prevailed

below. 35 U.S.C. § 319. And it causes immediate and

substantial harm to the patent system by weakening

judicial review of an important tool for identifying and

voiding patents that should never have issued in the

first place—the efforts of competitors, armed with the

knowhow and incentive, in invoking an efficient

e.g., Matthew Dowd & Jonathan Stroud, Will the

Federal Circuit Consider the Competitor Standing Doctrine?,

LAW360 (Dec. 18, 2018) (Federal Circuit may be “taking an overly

patent-focused view and not looking to nonpatent precedent,” and

“has struggled with determining what constitutes Article III

standing for purposes of appealing a PTAB decision”); Michael J.

Burstein, Rethinking Standing in Patent Challenges, 83 GEO.

WASH. L. REV. 498, 500 (2015) (“Federal Circuit … has crafted

patent-specific standing rules that are more restrictive than

those called for under the Supreme Court’s broader standing

precedents”); Ryan Fitzgerald, No Leg to Stand On: How the

Federal Circuit Improperly Restricted the Application of the

Competitor Standing Doctrine to Patent Challengers When

Establishing Article III Standing Upon Appealing an Inter Partes

Review, MINN. L. REV. De Novo Blog (posted Nov. 25, 2019).

2 See,

administrative process to clear invalid, innovationconstraining restrictions from the marketplace.

Inter Partes and Post-Grant Review

Are Important Means for Ensuring

Patent Quality.

The “primary purpose of our patent laws”—

including the America Invents Act, Pub. L. No. 112-29,

Sec. 3(a), 125 Stat. 284 (2011), which created the IPR

and PGR procedures (including the appeal right at

issue here)—“is not the creation of private fortunes for

the owners of patents but is ‘to promote the progress

of science and the useful arts.’” Quanta Computer, Inc.

v. LG Elecs., Inc., 553 U.S. 617, 626 (2008) (quoting

U.S. CONST. art. I, § 8, cl. 8). From inception, this has

required wrestling with the problem of questionable

patents. The Founders recognized that wrongful

claimants would obtain patents, and that

improvidently granted ones could be the source of

fiscal harm. See Letter From James Madison to

Congress (Apr. 11, 1816) (“I recommend . . . that

further restraints be imposed on the issue of patents

to wrongful claimants, and further guards provided

against fraudulent exactions of fees by persons

possessed of patents.”).

As patent application volume has grown

dramatically, so too has the questionable-patent

problem. An all-time high of over 330,000 U.S. utility

patents issued last year, and over 4 million patents

remain in force. 3 Overtaxed examiners and officials do

their level best to promote patent quality;

“[s]ometimes, though, bad patents slip through.” SAS

Inst., Inc. v. Iancu, 138 S. Ct. 1348, 1353 (2018); see

also Mark A. Lemley, Fixing the Patent Office, 13

INNOVATION POL’Y & ECON. 83, 83 (2012) (discussing

the “large number of dubious patents” issued “over the

past twenty years, particularly in the software and

electronic commerce space”).

Practically speaking, questionable patents are a

necessary cost for a sprawling system sifting through

more than 600,000 new applications annually. See

generally Mark A. Lemley, Essay, Rational Ignorance

at the Patent Office, 95 NW. U. L. REV. 1495 (2001)

(arguing it would be inefficient and near impossible to

fund and administer air-tight examination; and

expecting absolute perfection from all patent

examiners would risk reducing allowances to a

trickle). There is much to be done to improve the

quality of granted patents, and while strides could be

made to improve examination, there will always be

questionable patents that issue in error, necessitating

a robust ex post mechanism to review patent quality.

See, e.g., id. at 1512; Michael D. Frakes & Melissa F.

Wasserman, Irrational Ignorance at the Patent Office,

Unified’s internal estimates, pulled from the PTO and other

databases, count over 4,340,000 active grants.

See

https://portal.unifiedpatents.com/patents/analytics/ptab-andlitigation. In 2018, Statista estimated over 3,06 million patents

in force. See Erin Duffin, Number of Patents in Force in the U.S.

2004-2018, STATISTA (Dec. 18, 2019), https://tinyurl.com/rofwhoj.

For current issuance data, see U.S. PATENT & TRADEMARK

OFFICE, FY 2019 PERFORMANCE ACCOUNTABILITY REPORT 169,

https://tinyurl.com/qozmxnd.

72 VAND. L. REV. 975, 978 (2019) (finding U.S. patent

examiners have, on average, only eighteen hours total

to review a patent application, and suggesting ways to

improve examination). 4

This inevitability of some bad patents slipping

through, and the need to ensure that competition is

not “repressed by worthless patents,” Pope Mfg. Co. v.

Gormully, 144 U.S. 224, 234 (1892), means that the

patent system cannot effectively promote the sciences

and useful arts without effective post-issuance error

correction. Today, Congress’s chosen way to ensure

that patent protection is “just right” rather than “too

much” is via post-issuance administrative review.

In 2011, Congress replaced earlier contested

administrative proceedings with IPRs and PGRs,

whereby the USPTO can take “a second look at an

earlier administrative grant of a patent.” Cuozzo

Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2144 (2016);

see also Return Mail, Inc. v. U.S. Postal Serv., 139 S.

Ct. 1853, 1860–61 (2019) (describing the evolution of

post-issuance agency review proceedings); Oil States

Energy Servs., LLC v. Greene’s Energy Grp., LLC, 138

S. Ct. 1365, 1374 (2018) (PTAB proceedings “protect[]

the public’s paramount interest in seeing that patent

monopolies are kept within their legitimate scope”)

(quotations omitted).

4 In

2019, the USPTO employed just over 8,000 patent

examiners, and those 8,000 individuals were responsible for

granting over 370,000 patents. U.S. PATENT & TRADEMARK

OFFICE, FY 2019 PERFORMANCE ACCOUNTABILITY REPORT 169,

194, https://tinyurl.com/qozmxnd.

Congress’s aim in revamping post-grant

procedures was to prevent unnecessary district court

litigation by creating an “adversarial process before

the Patent Office that mimics civil litigation,” SAS

Inst., Inc., 138 S. Ct. at 1352, yet provides a more

accessible alternative, given the “growing sense that

questionable patents are too easily obtained and too

difficult to challenge.” H.R. REP. NO. 112-98, pt. 1, at

39 (2011). Neither IPR nor PGR are intended to

replace litigation, but instead can provide affordable

litigation alternatives by accomplishing slightly

different things. Anyone other than the patent’s owner

can file for review—opening the door to a wider group

of would-be challengers than infringement litigation.

35 U.S.C. §§ 311(a), 321(a). But PTAB post-issuance

proceedings are also narrower than litigation. In IPRs,

the PTAB can review only the novelty and obviousness

of issued claims, and only a subset of specific types of

printed prior art. 35 U.S.C. § 311(b). For PGRs, the

PTAB can review patent validity only within nine

months after a patent is granted; a shortened time

span during which infringement, much less litigation,

is unlikely. 35 U.S.C. § 321(c). 5 And the PTAB cannot

adjudicate infringement.

Congress’s goals to avoid costly litigation, and

thereby foster patent quality, have been somewhat

successful. Thus far, roughly 20% of patents

challenged by IPR avoid litigation; the corresponding

5 By contrast to IPR, in PGR a challenger can raise any

basis for invalidity. 35 U.S.C. § 321(b).

share for PGRs is roughly half. 6 Fierce competitors

(like the sophisticated parties here) know that postgrant procedures are important for clearing patent

thickets or establishing freedom to operate well before

bringing a potentially infringing product to market.

And the expedited agency review procedures provide a

welcome pathway to police those patentees that overpatent, over-assert, or strategically evade invalidity

litigation by avoiding suing those likely to pay to

defend themselves, or those with the strongest prior

art.

The

Rejection

Competitor

Standing Frustrates the Broad

Appeal Right Congress Considered

Essential to Encourage Challenges

to Questionable Patents.

When Congress revamped post-grant procedures

to improve patent quality, Congress expressly granted

“a party dissatisfied” with the results the right to

appeal PTAB decisions. 35 U.S.C. §§ 319, 329. That

statutory grant—evenhanded as to both patent

challengers and patentees—was plainly intended to

afford appellate standing to the limits of Article III

authority. Amici agree with Petitioner that, under this

Court’s precedent and the settled rule in other circuits,

Patent Quality Initiative Statistics—Dispelling PTAB

Myths,

Unified

Patents

(Feb.

2020),

https://tinyurl.com/uwfes34; see, e.g., Greenblum & Bernstein,

P.L.C., Keeping Tabs: Inter Partes, Covered Business Methods

and Post-Grant Review Filings at the PTAB (2020),

https://tinyurl.com/urvxoex (listing 2019 PGRs and related

litigations, or lack thereof).

Article III’s injury-in-fact requirement can be satisfied

through a showing of competitive harm, and that

courts can “apply simple economic logic to determine

the existence of an injury-in-fact.” Pet. at 17. The

Federal Circuit’s refusal to apply this competitorstanding rule—particularly given Congress’s promise

of a statutory appeal right to aid competitors and

make it easier for them to invalidate patents—

demands this Court’s review.

The statutory appeal right was a considered

choice. Earlier patent administrative review

proceedings had not worked as well as they could have

due to pre-AIA restrictions on appellate rights. Thus,

in discussing the addition of the appeal-right

provision, the Judiciary Committee explained that

before the AIA, “a challenger that lost at the USPTO

under reexamination had no right to appeal … either

administratively or in court. Restrictions such as

these made reexamination a much less favored

avenue to challenge questionable patents than

litigation." S. REP. NO. 110-259, at 18-19 (2008)

(emphasis added). A motivating factor for including an

even-handed right to appeal in the AIA was thus to

encourage administrative challenges with full Article

III review. 7 And when Congress provides such a fullthroated grant of appellate review, certain standing

requirements, “namely immediacy and redressability,

as well as prudential aspects that are not part of

Article III—may be relaxed.” Consumer Watchdog v.

Wis. Alumni Research Found., 753 F.3d 1258, 1261

7 The

availability of Article III review also protects the

constitutionality of such administrative proceedings—a question

raised but avoided in Oil States. See Oil States, 138 S. Ct. at 1379.

(Fed. Cir. 2014) (citing Massachusetts v. EPA, 549 U.S.

497, 517–18 (2007).

Congress has a role to play in defining when a

litigant has suffered an injury-in-fact, as well. See

Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016)

(“Congress is well positioned to identify intangible

harms that meet minimum Article III requirements,”

so “its judgment is also instructive and important.”).

And Congress would have expected its broad judicialreview grant to apply to all cases meeting the usual

well-established

standing

doctrines—including

competitor standing.

Congress enacts all legislation, including patent

legislation, against the backdrop of this Court’s

decisions. Midlantic Nat’l Bank v. N.J. Dep’t of Envtl.

Prot., 474 U.S. 494, 501 (1986). So Congress was

presumptively aware of this Court’s repeated

admonitions that federal procedure in patent cases

should not diverge from the general rules governing

Article III courts, absent explicit statutory

instructions otherwise. See, e.g., eBay Inc. v.

MercExchange, L.L.C., 547 U.S. 388, 391, 394 (2006)

(four-factor test for granting permanent injunctions in

other areas of law “apply with equal force to disputes

arising under the Patent Act”); Holmes Grp., Inc. v.

Vornado Air Circulation Sys., 535 U.S. 826, 832–34

(2002) (rejecting that the term “arising under” in the

statute granting the Federal Circuit exclusive

jurisdiction over patent appeals should be interpreted

differently than that phrase is interpreted in other

jurisdictional statutes).

By 2011, when Congress created the streamlined

PTAB post-issuance review procedures, complete with

the uncircumscribed appeal right, it was well

established that “[p]atent law is not an island

separated from the main body of American

jurisprudence.”

Knorr-Bremse

Systeme

Fuer

Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337,

1351 (Fed. Cir. 2004) (en banc) (Dyk, J., concurring in

part and dissenting in part). Standing based on

competitive harm, too, was well-established. See, e.g.,

Clinton v. City of New York, 524 U.S. 417, 433 (1998).

So the Federal Circuit’s erection of a patent-specific

rule that cripples competitor standing flies in the face

of Congress’s carefully considered choice, against a

backdrop of well-established legal principles, to grant

review to unsuccessful patent challengers, as well as

unsuccessful patent defenders.

Jettisoning Congress's even-handed approach,

the Federal Circuit quickly adopted a for-patents-only

rule that unduly and unfairly constrains judicial

review of PTAB rulings, forcing unsuccessful patent

challengers—but not defenders—into effectively

conceding planned willful infringement just to

maintain their access to the promised Article III

review of agency action, even when they can point to

concrete and particularized competitive harm caused

by a questionable patent granted by the USPTO and

wrongly upheld by the PTAB. This rule flies in the face

of the public’s “paramount interest in seeing that

patent monopolies . . . are kept within their legitimate

scope.” Blonder-Tongue Labs., Inc. v. Univ. of Ill.

Found., 402 U.S. 313, 343 (1971) (quoting Precision

Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324

U.S. 806, 816 (1945)).

This Court’s decisions on validity challenges have

long-rejected what the Federal Circuit now requires—

allowing only would-be challengers who are at or near

the point of infringement access to Article III courts.

See, e.g., Cardinal Chem. Co. v. Morton Int’l, Inc., 508

U.S. 83, 95–98 (1993) (finding of non-infringement

does not moot validity challenge); MedImmune, Inc. v.

Genentech, Inc., 549 U.S. 118, 128–29 (2007) (infringer

does not have to put itself at risk of infringement

litigation before filing declaratory judgment). That a

“plaintiff must destroy a large building, bet the farm,

or (as here) risk treble damages” to have standing in

district court “finds no support in Article III,”

MedImmune, 549 U.S. at 134. And the same holds true

for an appellant seeking the Article III review of

agency action that Congress expressly provided for the

purpose of encouraging administrative challenges to

questionable patents. If left standing, the Federal

Circuit’s contrary rule will harm not only competitors,

but also Congress’s efforts to promote patent quality

more broadly.

The Federal Circuit’s Asymmetric

Rule Causes Immediate Problems

for the Post-Issuance Process and

the Development of Patent Law.

The Federal Circuit’s restrictive approach to

standing undermines the value of the procedures that

Congress established to make patent challenges

easier, and skews the uniform development of patent

law that the Federal Circuit is charged with

promoting.

First, the interaction between the AIA’s estoppel

provisions and the Federal Circuit’s one-sided

standing rule are likely to deter competitors from

bringing even strong administrative challenges—

thwarting Congress’s goal of establishing an effective

administrative mechanism to encourage the timely

testing of questionable patents. In raising validity

challenges, petitioners will understandably want to be

sure that a court—at some point—has eyes on the

issues. But because limiting appellate review of PTAB

decisions for patent challengers might mean a patent

challenger has no avenue for judicial review on

invalidity, the Federal Circuit’s rule risks eliminating

the most important administrative challenges—those

brought by competitors with the means and motive to

identify invalid patents.

An IPR or PGR petitioner “may not assert . . . in

a civil action . . . that the [already challenged] claim[s

are] invalid on any ground that the petitioner raised

or reasonably could have raised” during that IPR or

PGR. 35 U.S.C. §§ 315(e)(2), 325(e)(2). The Federal

Circuit has not definitively resolved how this estoppel

provision would operate for cases dismissed on appeal

for lack of standing. See AVX Corp. v. Presidio

Components, Inc., 923 F.3d 1357, 1363 (Fed. Circ.

2019) (discussing but declining to reach the issue). But

as Judge Hughes explained, the potential effects of

estoppel, and uncertainty for a party like GE as to

what defenses are left after IPR, “underscore the

problems with [the Federal Circuit’s] increasingly

narrow approach to Article III standing,” Pet. App.

18a—and heighten the harm to the post-grant system

by leaving the Federal Circuit’s lopsided review

approach uncorrected.

A would-be patent challenger who unsuccessfully

raises invalidity arguments before the PTAB could be

barred from making those arguments (or others that

could reasonably have been made) in later defending

against a district court infringement action. And this

is so even if there was no Article III review of the

administrative ruling. As such, the consequences of

losing an IPR or PGR challenge are potentially severe.

The very real and open question of whether a

party in GE’s position—if it were to later infringe the

challenged patent—would be estopped from raising

invalidity to defend itself in later litigation is itself

enough to chill use of the administrative procedures

that Congress sought to promote. Many would-be

patent challengers, especially ones like the hardfought competitors here, might sensibly decide not to

risk having their only bite at the invalidity-challenge

apple be one where there is slim chance of review by

an Article III judge. If they must be near or already

infringing to get judicial review, they might as well

wait to be sued.

Second, appeals—in general and especially in the

singular Federal Circuit—are supposed to promote

quality and uniformity in development of the law. The

creation of the Federal Circuit “resulted in a single,

relatively coherent body of patent case law” on which

parties “can rely with greater certainty.” JANICE M.

MUELLER, PATENT LAW 39 (3d ed. 2009). But an

appellate court cannot develop a uniform and coherent

body of law if it structures the appeal process to review

mostly decisions upholding questionable patents. By

unduly and unevenly limiting the administrative

appeals it hears—and ignoring most appeals where

the PTAB declines to invalidate a patent not yet

infringed—the Federal Circuit is unilaterally

deferring to the agency in one category of decisions.

Sapna Kumar, Standing Against Bad Patents, 32

BERKELEY TECH. L.J. 87, 130 (2017) (under the status

quo, patent challengers and patent owners have

lopsided access to the court). The Federal Circuit’s

refusal to apply settled competitor-standing principles

thus not only undermines the agency review process,

it also ties its own hands (and this Court’s) from

reviewing the universe of PTAB decisions,

jeopardizing the uniform development of patent law.

Ultimately, the Federal Circuit’s miserly

approach to appeals by unsuccessful petitioners in AIA

post-issuance proceedings works to discourage

competitors from raising the early patent challenges

that Congress aimed to foster. This is particularly

problematic because competitors are generally best

positioned to police each other’s patents and there is

little societal benefit to forcing them into litigation

before they can do so. Competitors have the strongest

incentive; with a questionable patent gone, the

competitor can generate revenue, freely license, and

increase market share. See, e.g., Lear, 395 U.S. at 670

(licensee may be the only ones with enough economic

incentive to challenge validity); Burstein, supra, at

545–46

(discussing

cost-benefit

analysis for

competitors challenging invalid patents). And a

competitor is likely to have the technical knowledge

relevant to assessing patent validity, understand the

perspective of a person of ordinary skill in the art, and

identify relevant prior art. Selectively straightjacketing their right to appeal makes little sense. Only

this Court can restore the effective functioning of the

post-grant administrative process.

II.

The Federal Circuit’s Out-of-Step NoCompetitor-Standing Rule Is Particularly

Harmful to Startups.

The nation’s startups—major drivers of

innovation—will be disproportionately shut out of

Article III review by the Federal Circuit’s blinkered

approach to standing. The Federal Circuit’s rule is

based on the flawed patent-centric assumption that a

company is injured by a questionable patent only if it

is already—or very close to—infringing. See, e.g., AVX

Corp., 923 F.3d at 1365 (suggesting only those

“currently

using

the

claimed

features

nonspeculatively planning to do so” can be harmed by

a patent). Not so. The competitive harm from a

questionable patent starts upstream, long before

litigation or any concrete plan of infringement, much

less an infringing act. Why else would competitors

spend hundreds of thousands of dollars in fees for proactive challenges?

T he mere existence of a patent can distort the

market, even if the patent owner never asserts it and

even if others never infringe it. A questionable patent

can operate like a scarecrow, deterring competitors

and follow-on innovation. Christopher R. Leslie, The

Anticompetitive Effects of Unenforced Invalid Patents,

91 MINN. L. REV. 101, 115–16 (2006) (citing Bresnick

v. U.S. Vitamin Corp., 139 F.2d 239, 242 (2d Cir. 1943)

(Hand, J.)). “[I]nvalid patents can create unacceptable

litigation risks for potential entrants, raise entry

costs, delay entry, deter customers and business

partners from contracting with new entrants, and

impose inefficiencies while distorting innovation.”

Leslie, supra, at 114.

Startups are particularly vulnerable to this

deterrence effect, as they are less able to absorb costs

or tolerate certain risks. Precarious new businesses

hoping to innovate rely on Congress’s promise of lowcost alternatives to patent litigation. The Federal

Circuit’s standing decisions upend that promise,

effectively denying parties full access to IPR and PGR

until they are already close to infringement. But

waiting so late to seek an administrative

determination of patent invalidity—complete with the

promised Article III oversight—defeats the purpose.

The point of streamlined administrative review is

to settle questions of patent validity—conclusively—

before undertaking activities that would risk

infringement, not after. Short-circuiting that process

by eliminating Article III review particularly harms

startups because litigation is not a reasonable

alternative for them; the limitation on judicial review

lessens the likelihood that larger competitors will

clear the field for innovation; and startups are much

more likely to drop their innovative plans than risk

even a weak infringement lawsuit.

First, for most startups, there are no reasonable

alternatives to administrative review. By design,

PTAB post-issuance review proceedings are shorter

and less expensive than district court patent

litigation. Smaller companies, including startups, can

pursue these alternatives more readily than they can

undertake the risks and costs of litigation. The cost of

an IPR is still significant for startups, but it is an order

of magnitude less expensive than defending a district

court case. 8 Resolving patent validity early and

efficiently through IPR or PGR, as Congress intended,

supra part I.B, allows startups to focus their time and

resources on doing what they do best—innovating and

generating new economic opportunities.

Second, even when larger, more-established

firms (like GE) enjoy full access to IPR and PGR, and

mount successful challenges to questionable patents,

it creates opportunities and clears risk for smaller

innovators as well. When one patent stands in the way

of countless innovators, each small entity does not

have to step up to bring its own validity challenge.

Instead, if there is the opportunity and incentive for

one challenger to invest the time in challenging the

patent, the benefits will be felt more broadly. See, e.g.,

Daniel Nazer, EFF Wins Final Victory over Podcasting

Patent, ELEC. FRONTIER FOUND. (May 14, 2018),

https://tinyurl.com/yddantkn (describing use of IPR to

invalidate one patent that was at risk of being

asserted against a plethora of small podcasting

8 Cost of Inter Partes Review: Everything You Need to Know,

UPCOUNSEL, https://tinyurl.com/ukxamjp (last visited Feb. 28,

2020) (approximating the cost of an IPR at $300,000–$600,000);

Malathi Nayak, Costs Soar for Trade Secrets, Pharma Patent

Suits, Survey Finds, BLOOMBERG LAW (Sept. 10, 2019, 8:01 AM),

https://tinyurl.com/rwh5htv (reporting the average cost of an

electrical or computer-related IPR as $150,000 in 2019, compared

to the $1.5 million cost of even a mid- to smaller-stakes patent

case).

entities); HP Inc. v. MPHJ Tech. Invs., LLC, 817 F.3d

1339, 1342 (Fed. Cir. 2016) (after letters were

“sent . . . to numerous small businesses, alleging that

those businesses likely infringed the '381 patent,” and

“[b]ecause the letters were sent to users of HP's multifunction printers, HP petitioned for IPR of the '381

patent”).

Third, startups—which have slimmer coffers to

protect against downside risks—are less likely to

proceed with new innovative or competitive activity if

there is litigation risk. If a company develops a product

and is later found liable for patent infringement, the

consequences are significant. See, e.g., 35 U.S.C. § 284

(treble damages for willful infringement); id. at § 283

(enjoining future conduct). And the risk of being sued,

irrespective of ultimate liability, causes substantial

harm on its own.

Even if suit is not imminent, and even if one is

certain a patent is invalid, litigation costs are

staggering, and a startup may not be able to cover

those costs through the point that it ultimately

prevails. The risk of litigation, alone, is thus enough to

chill innovation. Startups are “particularly sensitive to

accusations of infringement because they are likely to

experience resource constraints when faced with the

costs of funding a suit.” Stuart J.H. Graham et al.,

High Technology Entrepreneurs and the Patent

System: Results of the 2008 Berkeley Patent Survey, 24

BERKELEY TECH. L.J. 1255, 1315 (2009). 9

The mere risk of an infringement suit may also

make investors balk. “Venture capitalists do not

eagerly embrace business models based on a product

that infringes the patent of a dominant player when

assertions of invalidity cannot be tested before

entering the market.” Leslie, supra, at 126. “The

threat of being sued for infringement by an

incumbent—even on a meritless claim—may

‘scare . . . away’ venture capital financing.” FED.

TRADE COMM’N, TO PROMOTE INNOVATION: THE PROPER

BALANCE OF COMPETITION AND PATENT LAW AND

POLICY 7–8 (2003); see also, e.g., Robin Feldman,

Patent Demands & Startup Companies: The View from

the Venture Capital Community, 16 YALE J.L. & TECH.

236, 280 (2014) (survey of venture capitalists revealed

patent demands could deter all investors).

And for a startup that does get off the ground,

questionable patents might still curtail its innovation.

For any company, even a large one, another “firm’s

questionable patent may lead [it] to forgo R&D in the

areas that the patent improperly covers.” FTC at 5.

Startups, with less capital, will be even more inclined

to avoid R&D if there is a high threat of patent

litigation down the line. See, e.g., Jean O. Lanjouw &

Mark Schankerman, Enforcement of Patent Rights in

the United States, in PATENTS IN THE KNOWLEDGEThis concern is not new. Decades ago, this Court

acknowledged that “the expense of defending a patent suit is

often staggering to the small businessman.” Blonder-Tongue

Labs., Inc., 402 U.S. at 334 (quoting Picard v. United Aircraft

Corp., 128 F.2d 632, 641 (2d Cir. 1942) (Frank, J., concurring)).

BASED ECONOMY 145, 146 (Wesley M. Cohen &

Stephen A. Merrill eds., 2003) (referring to evidence

that “small firms avoid R&D areas where the threat of

litigation from larger firms is high”).

An example of one startup accused of

infringement illustrates the stark harms questionable

patents cause in the startup space. Even though the

suit was ultimately dismissed, one startup’s valuation

dropped by $4 million during the suit, and as a result

the company had to lay off over 25% of its staff. 10

Congress provided startups a tool to avoid these

harms when their path to innovation and growth was

blocked by a questionable patent. The Federal

Circuit’s asymmetrical competitor-standing rule

hobbles it. This Court has made clear that there is no

room for federal procedure rules that apply in patent

cases only, see, e.g., SCA Hygiene Prods. Aktiebolag v.

First Quality Baby Prods., 137 S. Ct. 954, 964 (2017),

and that the law should not require a company to

expose itself to infringement liability or concede

willfulness before seeking freedom to operate. See

MedImmune, Inc., 549 U.S. at 132 n.11. The Federal

Circuit’s failure to abide by those maxims causes

immediate and substantial harm to the patent system,

which only this Court can correct.

10 See Joe Mullin, New Study Suggests Patent Trolls Really

Are Killing Startups, ARSTECHNICA (June 11, 2014, 8:55 PM),

https://tinyurl.com/vwlfqhg.

CONCLUSION

The Court should grant the petition for writ of

certiorari.

Respectfully submitted.