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Patent Act Precludes Review of Issued Patents Under the APA

December 06, 2012
Allen, Scott A.

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Last Month at the Federal Circuit - January 2013

Judges: Prost, Clevenger, Reyna (author)

[Appealed from: E.D. Va., Judge Lee]

In Pregis Corp. v. Kappos, Nos. 10-1492, -1532 (Fed. Cir. Dec. 6, 2012), the Federal Circuit affirmed the denial of DJ defendant Free-Flow Packaging International, Inc.’s (“Free-Flow”) motion for JMOL, holding the asserted claims of Free-Flow’s U.S. Patent Nos. 7,325,377 (“the ’377 patent”), 7,526,904 (“the ’904 patent”); and 7,536,837 (“the ’837 patent”) invalid for obviousness. The Court also affirmed the dismissal of Pregis Corporation’s (“Pregis”) claims against the PTO under the APA for lack of subject matter jurisdiction.

Free-Flow and Pregis are competitors in the air-filled packaging cushion industry, providing cushions to fill excess space in shipping boxes. Pregis sued Free-Flow for DJ of noninfringement and Free-Flow counterclaimed for infringement of its patents relating to manufacturing air-filled packaging cushions. After a jury trial resulted in a verdict for Pregis, Free-Flow moved for JMOL, which the district court denied. On appeal, Free-Flow argued that the district court erroneously denied JMOL as to the validity and infringement of three of its patents.

The Federal Circuit first addressed the question of validity. As to Free-Flow’s first argument that no evidence at trial provided a reason to combine the prior art references, the Court found sufficient factual underpinnings in the testimony of Pregis’s expert witness. While Free-Flow asserted that Pregis’s expert’s testimony was inadequate for failing to opine on the legal conclusion of obviousness, the Court explained that the “ultimate legal conclusion of obviousness . . . was appropriately left to the district court and to this court on review of the verdict.” Slip op. at 10.

In response to Free-Flow’s argument that the prior art reference taught away from using the prior art machine in a manner suggested by Pregis’s expert, the Court identified substantial evidence to support the jury’s finding. The Court held that the mere fact that the prior art reference taught the “creation of bubble-wrap as a preferred embodiment [did] not constitute ‘teaching away’ from other reasonable uses,” such as the air-pillow packaging discussed by Pregis’s expert. Id. at 11.

Finally, the Federal Circuit held that Free-Flow’s evidence of copying and commercial success—objective indicia of nonobviousness—failed to establish the validity of the disputed claims. The Court explained that the “lack of nexus between the claimed subject matter and the commercial success or purportedly copied features . . . render[ed] Free-Flow’s proffered objective evidence uninformative to the obviousness determination.” Id. at 12. For these reasons, the Court affirmed the denial of Free-Flow’s motion for JMOL. Because the Court held the asserted claims of the patents invalid for obviousness, it declined to address the remainder of Free-Flow’s contentions or Pregis’s remaining invalidity defenses.

Next, the Court turned to the district court’s dismissal of Pregis’s claims against the PTO under the APA. In what the Court termed as an “unusual step,” Pregis sued not only Free-Flow for DJ in district court, but also the PTO to prevent the issuance of Free-Flow’s patent applications. Id. at 5. During the early stages of litigation, Free-Flow’s applications issued as patents and Pregis amended its complaint to add all of the patents-in-suit to its APA claims. Then, in a bench ruling, the district court dismissed Pregis’s APA claims for lack of subject matter jurisdiction. On appeal, the Federal Circuit affirmed the dismissal, holding “that a third party cannot sue the PTO under the APA to challenge a PTO decision to issue a patent.” Id. at 15.

The Court identified three reasons why the statutory scheme of the Patent Act precluded judicial review of issued patents under the APA. First, the statute provides specific procedures by which a patent applicant may appeal PTO rejections of patent claims. Second, “the statute permits third parties to challenge issued patents through carefully-circumscribed reexamination proceedings,” noting the passage of the new post-grant review procedures. Id. at 16. And third, potential infringers with a case or controversy may sue for DJ or raise invalidity as a defense to infringement in district court.

The Court explained that Congress enacted those specific procedures in order for “third parties to attack the validity of issued claims,” but decided “not to provide for third parties to obtain review of the reasons for allowance of claims.” Id. at 17. It stated that “[o]nly a patent applicant may challenge an examiner’s decision to reject claims in original examination under 35 U.S.C. § 131.” Id. Ultimately, the Court explained that “[a]llowing competitors to collaterally attack issued patents through suits under the APA would destroy the Patent Act’s careful framework.” Id. at 19.

Additionally, since the APA authorizes judicial review where no other adequate remedies exist in court, the Federal Circuit identified three remedies available to competitors allegedly harmed by the PTO’s erroneous issuance of a patent. First, third parties may request inter partes reexamination or post-grant review of issued patents. Second, third parties may seek Board and judicial review of reexamination proceedings. And third, DJ and invalidity defenses are available to putative infringers.

In response to Pregis’s arguments that DJ and defenses in infringement suits are not adequate “because not all PTO mistakes are recognized as defenses under § 282,” the Court held that the scheme under § 282 simply reflected congressional intent. Id. at 20. It explained that “the specific list of defenses available under § 282 reflects the deliberate judgment of Congress that not every error during prosecution should provide a defense to a claim of patent infringement.” Id. Furthermore, the Court reasoned that an issued patent’s presumption of validity, with an associated higher “clear and convincing” standard of proof, also reflected Congress’s intent as to what constituted an “adequate remedy.” The Court held that, in any event, to preclude judicial review under the APA, a judicial remedy need not be identical to relief under the APA, “so long as it offers relief of the same genre.” Id. at 21 (quoting Garcia v. Vilsack, 563 F.3d 519, 523 (D.C. Cir. 2009)) (internal quotation marks omitted). Accordingly, the Court affirmed the district court’s dismissal of Pregis’s claims against the PTO under the APA.

Summary authored by Scott A. Allen, Esq.