Automated Merchandising Systems, Inc. v. Lee

Addressing the U.S. Patent and Trademark Office’s (PTO’s) refusal to terminate four inter partes reexaminations after a corresponding district court action was terminated, the U.S. Court of Appeals for the Federal Circuit explained that the PTO’s refusal to terminate was not subject to review while the reexaminations were still in progress. Automated Merchandising Systems, Inc. v. Lee, Case No. 14-1728 (Fed. Cir., Apr. 10, 2015) (Taranto, J.) 

Automated Merchandising Systems (AMS) filed a lawsuit against Crane Co. asserting infringement of four patents related to vending machines. Years into the case, Crane filed requests for inter partes reexamination against the asserted patents. The PTO granted the requests and initiated reexaminations. While they were pending, AMS and Crane settled the lawsuit, and the district court entered a judgment noting that the parties stipulated to the validity of the patents. AMS then asked the PTO to dismiss the reexaminations pursuant to the pre-America Invents Act version of 35 U.S.C. § 317(b), under which reexaminations were terminated if the requester failed to prove invalidity in a district court case. The PTO refused to terminate the proceedings and characterized its refusal as a “final agency action.”

AMS responded to the PTO’s refusal by filing a suit in district court premised on the Administrative Procedure Act (APA), along with the court’s mandamus authority, and the Declaratory Judgment Act. The PTO did not dispute that its denial was a final agency action subject to APA review. The district court proceeded to the merits and found that a stipulation to validity did not constitute a failure to prove invalidity.  AMS appealed.

On appeal, the PTO switched gears and argued that its denial was not in fact a final agency action. The Federal Circuit considered this question to be jurisdictional and thus waived, but overlooked the waiver in order to address the question of whether a PTO refusal to terminate ongoing proceedings was immediately reviewable, which it considered to be a significant question of continuing public concern despite the fact that the particular proceedings at issue here, inter partes reexaminations, had been eliminated by the AIA. As to that question, the Federal Circuit answered that refusals to terminate were interlocutory in nature—akin to a denial of a motion to dismiss—and were not immediately reviewable, but rather only became subject to review at the end of the proceedings. The Court also rejected AMS’s mandamus and declaratory judgment grounds, and affirmed the district court’s denial of relief.