Amici for Apple Tell SCOTUS Federal Circuit’s Article III Standing Ruling Violates Precedent, Upsets Congressional Intent in Enacting AIA Trials

In mid-November, consumer tech giant Apple filed a petition for writ of certiorari asking the U.S. Supreme Court to review the Federal Circuit’s decision to dismiss Apple’s appeal of unsuccessful inter partes review (IPR) challenges to the validity of several patents owned by Qualcomm. In that ruling, the Federal Circuit found that Apple’s choice to enter a patent licensing agreement with Qualcomm covering the patents-at-issue extinguished Article III standing as to Apple’s appeals from the Patent Trial and Appeal Board (PTAB).

The question presented by Apple’s petition is: “Whether a licensee has Article III standing to challenge the validity of a patent covered by a license agreement that covers multiple patents.” Drawing a great deal of support from Circuit Judge Pauline Newman’s dissent in the Federal Circuit’s decision, amicus briefs supporting petitioner Apple, which became due on December 20, have asked the Supreme Court to grant cert in order to correct what they feel is the Federal Circuit’s misapplication of Supreme Court precedent on Article III standing, as well as uphold Congressional intent in devising a broad right of appeal for validity challenges the legislature enacted through passage of the America Invents Act of 2011 (AIA).

Amicus Brief of Engine Advocacy, Public Interest Patent Law Institute and ACT | The App Association

Amici organizations joining this brief purport to represent public interest and small business organizations in various high-tech sectors. In the case of Engine, we’ve previously reported on that organization’s ties to Google and how Congressional testimony offered by Engine’s director has favored large tech companies, who traditionally prefer weaker patent rights, over small businesses who need patent protection.

The Federal Circuit’s determination that Apple lacked Article III standing to appeal its IPRs against Qualcomm deviates from Supreme Court precedent, Engine et. al. argue, by unduly limiting the doctrine of competitive standing. In cases such as Clinton v. City of New York (1998), the Court has recognized that governmental actions altering competitive conditions creates a probable economic injury satisfying Article III’s injury-in-fact requirement for standing. “[W]hen [government action] upholds a questionable patent, it is preserving a monopoly that inherently and adversely affects competition,” amici argue. They also point to what they see as several anomalous results in standing analyses at the Federal Circuit, which has upheld standing in cases like E.I. DuPont de Nemours & Co. v. Synvina C.V. (2018) where the appellant has sunk substantial costs into potentially infringing business activities, but found no Article III standing for the appellant in JTEKT Corp. v. GKN Automotive Ltd. (2018), where the appellant was involved in developing a potentially infringing product.

“Invalid patents corrode the benefits of the patent system,” amici argue, “and this Court has repeatedly articulated the underlying importance of the public interest in patent law to preserve access to fundamental ideas that facilitate downstream innovation.” Apple’s status as a licensee of Qualcomm’s patents gives the company incentive to challenge those patents and the requisite technical knowledge to mount an effective validity challenge.

Amici also argue that the Federal Circuit’s approach to Article III standing flouts Congressional intent in creating validity trials under the AIA. A broad approach to standing is necessary, amici contend, because of the large number of patents examined each year by the U.S. Patent and Trademark Office, citing to statistics showing that patent examiners typically have between 8 and 25 hours to examine each of the 600,000 patent applications filed annually at the USPTO. Under the relevant AIA statutes, “a party dissatisfied” with the results of either an IPR or post-grant review (PGR) proceeding may appeal the PTAB’s decision, creating a broad approach to appellant standing. The Federal Circuit’s ruling also arguably creates tension with the AIA’s estoppel provisions, which bars petitioners from raising invalidity arguments presented to the PTAB in subsequent infringement litigation in U.S. district court. Given that the Federal Circuit reverses at least parts of PTAB rulings in 20 percent of IPR appeals, amici argue that eliminating Article III standing for licensees disincentivizes meritorious appeals.

Finally, amici contend that upholding the Federal Circuit’s ruling will harm the development of innovative startups and small businesses. Here, amici cite to a report on the economic impacts of the PTAB, which arguably does not take into account economic losses incurred by the invalidation of patent rights. They also argue that the IPR process has allowed parties to avoid $2.31 billion in economic losses, but fail to note that the top four PTAB petitioners (Apple, Samsung, Google and Microsoft)  hardly represent the economic interests of small businesses.

Amicus Brief of Senator Patrick Leahy and Congressman Darrell Issa

Also supporting petitioner Apple is a brief submitted by Senator Patrick Leahy (D-VT), one of the main co-sponsors of the AIA, and Representative Darrell Issa (R-CA), who is back in the House of Representatives after a previous stint during which he comported himself as a very useful ally to the efficient infringer lobby, while pushing a definition of “patent troll” that would have included his own patent enforcement activities prior to serving in Congress, and raised the ire of the American Board of Trial Advocates for his personal attacks on U.S. District Judge J. Rodney Gilstrap during a Congressional hearing.

Leahy’s and Issa’s sole concern in filing the amicus brief is “for the continued availability of inter partes reviews as a meaningful tool to improve patent quality.” The enactment of the AIA created an effective and efficient mechanism providing a meaningful test for patent validity after the patent issues, says the brief. Citing to Justice Kennedy’s concurrence in eBay v. MercExchange (2006)–which former Federal Circuit Chief Judge Paul Michel has said is infected with unsupported factual assertions on patent assertion entities–Leahy and Issa argue that “[h]olders of questionable, untested patents can use the expense of district court litigation and threat of market interruptions to gain undue leverage in negotiations.” The Federal Circuit’s Article III standing requirement “threaten[s] to unravel this regime by discouraging interested parties from bringing such challenges in the first place.”

Leahy and Issa note that Apple’s case is not the only instance in which the Federal Circuit has invoked Article III standing to dismiss appeals from the PTAB, including Consumer Watchdog v. Wisconsin Alumni Research Foundation (2014) and RPX Corp. v. ChanBond LLC (2018). Although the Federal Circuit acknowledged in JTEKT that “IPR petitioners need not concede infringement to establish standing to appeal,” other Federal Circuit rulings have required a concrete threat of an infringement suit to satisfy Article III standing. Leahy and Issa also argue that the Federal Circuit misapplied Supreme Court precedent on standing from Lujan v. Defenders of Wildlife (1992) by finding that Apple’s patent license with Qualcomm makes Apple’s risk of being sued “conjectural or hypothetical,” disregarding the fact that Apple was previously sued for infringing patents challenged in the present appeal.

The Federal Circuit reaches a contrary result by requiring a patent challenger who has already been sued for specific activity and paid for a license, to rebut an additional presumption that it will have abandoned that same activity when the license expires. That piled-on presumption is an unwarranted obstacle to judicial review with no basis in precedent.

Leahy and Issa also present some anecdotal evidence from one law review article and two op-ed articles penned by patent attorneys, and while they acknowledge that “some of these cautionary notes may overgeneralize,” amici argue that those concerns that PTAB reviews will be undermined by the Federal Circuit’s Article III standing requirements underscore the need for Supreme Court review in this case.

Amicus Brief of Unified Patents

Unified Patents, which filed the fifth-most PTAB petitions for AIA validity trials in 2021, notes that the PTAB is the busiest venue for patent disputes in the United States. Unified Patents counts eight Federal Circuit decisions since 2017, including Apple’s appeal, in which the appeals were dismissed on Article III standing grounds. The brief argues that the Federal Circuit’s standing requirements for validity challenges do not comport with Supreme Court precedent from cases such as Cardinal Chemical Co. v. Morton International, Inc. (1993), which rejected the Federal Circuit’s practice of dismissing validity challenges when the appellate court upheld a noninfringement ruling, as well as this year’s Minerva Surgical, Inc. v. Hologic, Inc., in which the Court narrowed the Federal Circuit’s doctrine of assignor estoppel. Unified also points to a 12% drop in Moderna stock following a pair of Federal Circuit losses this December, one on the merits and one on standing, as proof that “the court’s narrow view of standing causes immediate financial ramifications that go beyond the cost of the license.”

Along with upsetting Supreme Court precedent on Article III standing in the patent law context, Unified Patents argues that the Federal Circuit decision disregards the Congressional scheme enacted for appeals of AIA trials. Unified contends that the statutory right to appeal IPR decisions should lead to relaxed redressability and immediacy requirements to show standing under the Court’s 2007 decision in Massachusetts v. EPA. Unified also argues that the Federal Circuit failed to appreciate the AIA’s estoppel provisions preventing Apple from raising similar invalidity contentions in court, which the brief argues gives rise to an injury supporting Article III standing. “[E]stoppel is a statutory penalty to licensees, potential licensees, and other market participants that renders analogy to Lujan inappropriate,” Unified contends.

Finally, Unified Patents’ brief argues that the Federal Circuit’s ruling conflicts with principles of competitor standing, which typically arise when the underlying case involves government action affecting market competition. “When the Patent Office confirms patent claims, it essentially gold-plates the patent,” Unified contends, failing to note data showing that serial petitions are a recurring problem at the PTAB. Still, Unified notes both that the Federal Circuit has recognized competitor standing in cases involving U.S. trade laws, and that the D.C. Circuit, which also hears a large number of appeals from agency decisions, applies competitor standing broadly in those cases.

Amicus Brief of Thales

German-based Thales DIS AIS Deutschland GmbH and its U.S. subsidiary develops wireless solutions for machine-to-machine communications, the interoperability of which requires compliance with several wireless standards promulgated by the European Telecommunications Standards Institute (ETSI). “Depending on the complexity of the standard at issue, thousands of declared SEPs may be implicated when the standard is practiced,” Thales’ brief reads, noting that cellular technology standards often rise to this level of complexity. Standard-essential patents (SEPs) are declared by the companies contributing to standards like ETSI’s, and Thales contends that over-declaration of SEPs have led courts to find that 80 percent to 90 percent of litigated SEPs to be found either invalid or non-essential to the standard.

Thales joins the other amici filing briefs in arguing that the Federal Circuit’s denial of Article III standing for Apple’s appeal conflicts with the Supreme Court’s 2007 decision in MedImmune, Inc. v. Genentech, Inc., which held that a patent licensee does not need to breach the license agreement to show Article III standing for a declaratory judgment action challenging the patent’s validity. In MedImmune, the Court opined that it “probably makes no difference to the ultimate issue of subject-matter jurisdiction” whether the suit involves a freestanding claim of invalidity or if contractual rights like royalty payments would be affected by the invalidity claim. “The decision below, if left in place, would improperly limit the application of MedImmune to single-patent licenses, where it is self-evident that a validity determination will affect a licensee’s royalty payments,” Thales’ brief reads.

Briefs in support of Qualcomm are due January 19.

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