The US Court of Appeals for the Federal Circuit found that federal government agencies have standing to challenge a patent in covered business method (CBM) review under the America Invents Act (AIA). Return Mail, Inc. v. United States Postal Service, Case No. 16-1502 (Fed. Cir., Aug. 28, 2017) (Prost, CJ) (Newman, J, dissenting).

Return Mail owns a patent directed to allowing returned mail to be processed automatically through the exchange of data files between computers. After being sued for infringement of Return Mail’s patent, the US Postal Service (USPS) filed a petition for CBM review, arguing that the claims were directed to ineligible subject matter under § 101. In response, Return Mail argued that USPS did not have standing under the AIA to petition for CBM review, and also argued that the claims were patentable.

The Patent Trial and Appeal Board (PTAB) disagreed, finding that USPS had standing, and instituted CBM review. The PTAB ultimately held that the challenged claims were directed to ineligible subject matter. Return Mail appealed.

The Federal Circuit first considered whether it could address issues related to “standing” since PTAB institution decisions are final and non-appealable. USPS argued that under the 2016 Supreme Court of the United States decision in Cuozzo v. Lee (IP Update, Vol. 19, No. 7), the PTAB’s decision on standing was not reviewable. The Court disagreed, finding that determining whether a party is qualified to petition for CBM review is a condition precedent independent from a threshold determination regarding the likelihood of success on the merits. The Court explained that despite the AIA’s no-appeal provision, judicial review is still available to determine whether the PTAB exceeded any statutory limits to its authority, and this includes the decision on standing.

In arguing that USPS did not have standing, Return Mail focused on the interplay between § 18(a)(1)(B) of the AIA and 28 USC § 1498. Under § 18 of the AIA, a petition for CBM review of a patent may only be filed by a person after being sued or charged with infringement of the patent. Section 1498 is an eminent domain statute where the government has consented to be sued for taking a patent license without compensation. Return Mail argued that since the government was sued under § 1498, it was sued for taking a patent license by eminent domain and not for patent infringement. Return Mail concluded that since USPS was never “sued for infringement,” it did not have standing under § 18 to file the CBM petition.

The Federal Circuit, however, rejected this argument and found that being sued under § 1498 is broad enough to encompass being “sued for infringement” as that term is used in § 18. The Court noted that § 18 does define the term “infringement” and both parties acknowledged that the ordinary meaning of “infringement” is broad. Moreover, the Court found that determining infringement of the patent by the government was a prerequisite for finding liability under §1498. Thus, USPS had been “sued for infringement” and had standing to file the CBM petition.

Having determined that USPS had standing, the Federal Circuit applied a routine analysis of the Alice two-step patentability test. It found that the claims were directed to an abstract idea and nothing transformed the abstract idea into “something more.”

In dissent, Judge Newman argued that USPS is not a “person” under § 18 of the AIA since the general statutory definition of “person” does not include the United States and its agencies unless expressly provided. Judge Newman found that nothing in § 18 or the legislative history intended to include the government as a “person” and argued that USPS thus does not have standing to file a CBM.