Federal Circuit Requires Standing to Appeal PTAB’s Final Decisions
Published: January 20, 2017
Although arguably foreshadowed, some may be surprised to learn that a party with the right to challenge the validity of a patent at the United States Patent and Trademark Office (“USPTO”) may not have the right to appeal an unfavorable decision. In Phigenix v. ImmunoGen, the Federal Circuit clarified that while there is no standing requirement to challenge a patent at the USPTO via an inter partes review (“IPR”), standing is required to appeal the Patent Trial and Appeal Board’s (“PTAB”) final decision to the Federal Circuit.
In 2014 in Consumer Watchdog v. Wis. Alumni Research Fund, the Federal Circuit ruled that there was no standing to appeal the PTAB’s final decision in a re-examination proceeding. But is standing required to appeal decisions in IPRs and post-grant reviews, which are procedures created by the America Invents Act (“AIA”)? After all as a result of the AIA, 35 U.S.C. §141(c) states “[a] party to an inter partes review or a post-grant review who is dissatisfied with the final written decision of the Patent Trial and Appeal Board  may appeal the Board’s decision only to the United States Court of Appeals for the Federal Circuit.” In Cuozzo Speed Techs., LLC v. Lee, the U.S. Supreme Court noted that a party initiating an IPR “need not have a concrete stake in the outcome,” but it may lack standing to sue in federal court. Now, erasing any remaining doubt as to whether the standing requirement applies to appeals of PTAB decisions in IPRs, the Federal Circuit in Phigenix found that 35 U.S.C. §141(c) does not confer standing on IPR petitioners nor does it remove the requirement for standing to appeal final written decisions of the PTAB.
While not manufacturing any of its own products, Phigenix purportedly “has developed, and is developing, an extensive intellectual property portfolio” that it claims includes a patent that covers Genentech’s activities relating to the breast cancer drug Kadcyla. While refusing to license Phigenix’s patent, Genentech licensed a patent from ImmunoGen, Inc., for use in making Kadcyla. Phigenix sought redress in various forums. As part of its strategy, Phigenix challenged the validity of ImmunoGen’s patent in an IPR proceeding. Apparently, Phigenix felt that invalidating ImmunoGen’s patent would “further [Phigenix’s] commercialization efforts with respect to its patent portfolio” by capturing at least some of the licensing revenue Genentech is paying to ImmunoGen. However, this challenge failed when the PTAB ruled the Immunogen patent claims were not obvious in light of the prior art.
Phigenix then appealed the PTAB’s decision to the Federal Circuit, but ImmunoGen moved to dismiss the appeal for lack of standing. The Federal Circuit heard the issue of standing along with the substantive issues of the appeal.
The requirement of standing to sue comes from Article III of the U.S. Constitution, which “confines the judicial power of federal courts to deciding actual ‘Cases’ or Controversies.’” The minimum requirement for standing consists of three elements. “An appellant ‘must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the [appellee], and (3) that is likely to be redressed by a favorable judicial decision.’” The party seeking judicial review, Phigenix, “bears the burden of establishing that it has standing.”
Interestingly, however, in the nearly thirty-five years since the inception of the Federal Circuit, the Court had “not established the legal standard for demonstrating standing in an appeal from a final agency action,” such as a final written decision of the PTAB. Such a “standard must identify the burden of production; the evidence an appellant must produce to meet that burden; and when an appellant must produce that evidence.” Setting the standard in Phigenix, the Federal circuit determined that the summary judgment burden of production applies. If standing is not self-evident, this means identifying any record evidence that was before the agency, and relying on evidence, such as affidavits and declarations, typically produced at the summary judgment stage. The Federal Circuit further explained that an appellant must identify the relevant evidence demonstrating its standing at the earliest possible opportunity.
In its attempt to show standing, Phigenix did not contend that it faced the risk of infringing the patent at issue, that it was an actual or prospective licensee of the patent, or that it otherwise planned to take any action related to the patent. Rather, first Phigenix argued that it suffered economic injury because of the competition between ImmunoGen’s patent and Phigenix’s similar cancer drug patent. Phigenix asserted that the mere existence of ImmunoGen’s patent hindered Phigenix’s licensing program “while ImmunoGen receives millions of dollars in licensing revenue,” a portion of which Phigenix contended would inure to it if ImmunoGen’s patent were invalidated. Phigenix, however, did not substantiate its arguments but instead relied on a conclusory declaration and an attorney letter that the Court found insufficient to demonstrate injury in fact. The Court noted that if had Phigenix licensed its patents to the same parties to which ImmunoGen had licensed the challenged patent, then invalidation of the ImmunoGen patent could have increased Phigenix’s revenues. But Phigenix produced no evidence that it had ever licensed its patent to anyone must less to the Immunogen licensees. Thus, the Federal Circuit found that Phigenix did not establish an injury in fact that could confer standing.
Second, Phigenix argued it suffered an injury in fact because 35 U.S.C. §141(c) “provides a statutory basis for appeal.” The Federal Circuit, however, found that Phigenix could not “base its injury in fact upon a violation of §141(c) because [Phigenix] has been permitted to file its appeal, and the exercise of its right to appeal does not necessarily establish that it possesses Article III standing.”
Finally, Phigenix asserted injury in fact based on the estoppel effect of the PTAB’s final decision, which means Phigenix “may not request or maintain a proceeding before” the USPTO, the U.S. International Trade Commission, or a federal district court with respect to any ground raised or that reasonably could have been raised during the IPR. But, as in Consumer Watchdog, the Federal Circuit explained that estoppel “do[es] not constitute an injury in fact” when, as here, the appellant “is not engaged in any activity that would give rise to a possible infringement suit.” Failing to establish standing, Phigenix’s appeal was dismissed.
Standing issues will not arise in the majority of appeals from IPRs because, as previously reported, around 80% of IPRs are brought by parties involved in underlying patent infringement controversies. But the petitioners in the remainder of IPRs face the real likelihood they may have no ability to appeal unfavorable PTAB decisions. As a result, public interest groups, hedge funds, patent holding companies, and others looking to invalidate patents owned by other entities may be precluded from challenging an unsuccessful IPR in federal court because they will not be able to show that there is an actual case or controversy that would confer standing.
Therefore, before petitioning for review of a patent at the USPTO, a petitioner should consider whether he or she will have standing to appeal an unfavorable decision. Of course, if the IPR is successful, there is no need for the appeal.
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