MadStad Eng’g, Inc. v. USPTO  

The U.S. Court of Appeals for the Federal Circuit faced an issue of first impression when a named inventor on three patents challenged the first-inventor-to-file provision of the America Invents Act (AIA) as unconstitutional under Article I, Section 8, Clause 8 of the United States Constitution.  Affirming the legal conclusion of the district court that appellants lacked standing to bring the declaratory judgment action, the unanimous panel did not reach the constitutional arguments.  MadStad Eng’g, Inc. v. USPTO, Case Nos. 13-1511, -1512 (Fed. Cir., July 1, 2014) (O’Malley, J.).

MadStad sued the U.S. Patent and Trademark Office, seeking a declaration that certain provisions of the AIA were unconstitutional.  The appellants also sought a permanent injunction barring enforcement of the AIA.  MadStad was not awarded any relief, but in disposing of the case the Federal Circuit provided useful guidance regarding its own jurisdiction and also discussed the metes and bounds of what constitutes an alleged injury flowing out of the AIA’s adoption of a file-to-file patent protection scheme.

At the district court and at the Federal Circuit MadStad argued that the U.S. Constitution speaks to exclusive rights for “inventors” and that this language is synonymous with “first and true inventor,” not the first entity to file a patent application.  According to MadStad, it faced escalating harms following the enactment of the AIA—especially the escalation of costs—because the first-to-file provision purportedly:  forced MadStad to enhance computer security to protect against an increased threat of computer hacking and theft of its intellectual property,  increased the time and effort required to file extra patent applications, put MadStad at a competitive disadvantage with larger companies, and caused MadStad to lose business and investment opportunities for fear of intellectual property theft.  The district court, in ruling on a motion to dismiss, concluded as a matter of law that MadStad lacked standing to challenge the AIA.  On appeal the Federal Circuit agreed, holding that the district court properly relied on the standing analysis set forth in an earlier pre-enforcement constitutional challenge to a government regulation as explained in the 2013 Supreme Court decision Clapper v. Amnesty International USA.

The Federal Circuit first addressed the threshold issue of jurisdiction, weighing whether MadStad’s claims “arose under” an Act of Congress relating to patents.  Applying the Supreme Court’s rationale in Gunn v. Minton, (IP Update, Vol. 16, No. 2) and Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., the Court concluded that jurisdiction was proper because a matter can “‘arise under’ an Act of Congress even when the claim ‘finds its origin’ in other legal predicates.”

On the issue of standing, the Federal Circuit reiterated that a party invoking federal jurisdiction must establish the three elements underlying Article III standing and affirmed the district court’s finding that each of MadStad’s alleged harms were hypothetical and demanded an “acutely attenuated concatenation of events.”  The panel’s treatment of standing extensively discussed Clapper v. Amnesty Int’l USA, (a case challenging secret National Security Agency wiretapping) to bolster the conclusion that MadStad’s four alleged harms were too speculative to satisfy the Article III requirements of actual and immediate harm.

Practice Note:  The Federal Circuit, in limiting the decision to the facts of this particular record, did not foreclose future constitutional challenges to the first-inventor-to-file provision of the AIA.  Indeed, the decision emphasizes that in this case MadStad’s claims failed because the alleged injury was based on speculative, future activity of third parties.  Thus, the door remains open for a challenger to attempt to establish standing by demonstrating its alleged harms are “certainly impending” through factual circumstances that support a “substantial risk” of injury flowing from the statutory requirement.