Appeal of PTO Validity Decision Dismissed in Light of Patent Owner's Unilateral Covenant Not to Sue the Appellant

Authored by D. Brian Kacedon, John C. Paul, and Robert D. Wells

Abstract

Adverse decisions by the U.S. Patent Office may not be appealed to a federal court unless the appellant meets constitutional standing requirements by demonstrating that it suffered actual or imminent threat of harm. In PPG Industries, Inc. v. Valspar Sourcing, Inc., the Federal Circuit held that although a patent owner never directly threatened to assert two patents, a competitor had standing to appeal the PTO’s validity decisions of the patents. But in light of the patent owner’s covenant not to sue the competitor for infringing the patents, the court found the appeals moot and dismissed the competitor’s appeals.

In order for a patent challenger to appeal a decision of the U.S. Patent Office’s Patent Trials and Appeals Board (PTAB) rejecting that challenge to a patent’s validity, the Federal Circuit requires the challenger to demonstrate that it meets the requirements of the U.S. Constitution to appear in federal court. Specifically, the challenger must show that it faces an actual or imminent injury. In PPG Industries, Inc. v. Valspar Sourcing, Inc., the Federal Circuit found that a patent challenger faced with an adverse decision of the PTAB met these requirements even though the patent owner never directly threatened to assert the patents against the appellant. But the Federal Circuit went on to vacate the PTAB’s decisions and dismiss the appeals, finding them moot in light of the patent owner’s unilateral covenant not to sue the challenger or its customers for infringing the patents in question.

Background

PPG Industries appealed the PTAB’s adverse decisions from reexamination of two Valspar patents related to commercial beverage can-interior coatings. Because standing is evaluated at the time an appeal is filed in federal court, Valspar argued that PPG could not establish any actual or imminent injury because Valspar never directly threatened to assert the patents in question against PPG.

Valspar waited until six months after PPG appealed the PTAB’s decisions to bring a lawsuit accusing PPG of infringing four of its other closely-related patents. After PPG appealed the PTAB’s validity decisions, Valspar also promised not to sue PPG or its customers for infringing the reexamined patents. Valspar argued that PPG’s appeal was moot in light of its covenant not to sue.

PPG argued that the relevant time to analyze PPG’s standing was when it appealed the PTAB’s validity decisions, which was prior to Valspar’s covenant not to sue and at a time when it faced a threat of imminent injury. Specifically, at that time, PPG had developed and commercially launched a beverage can-interior coating product. And while Valspar never directly threatened to assert the patents against PPG, it had threatened PPG’s customers. Therefore, PPG argued, it had standing to appeal the PTAB’s validity decisions in federal court to eliminate the potential risk they presented to PPG’s R&D and commercial activities.

The PPG Decision

The Federal Circuit found that PPG demonstrated a particularized and concrete interest in the patents, and therefore did have standing to appeal the PTAB’s validity decisions. PPG had a legitimate concern that the manufacture and sale of its can-interior coating product would draw an infringement action by Valspar. And PPG’s concern proved valid since Valspar did subsequently file a patent infringement action against PPG, accusing it of infringing four other closely related patents.

Although it had standing to appeal the PTAB’s validity decisions, however, the court went on to find that PPG’s appeals were moot in light of Valspar’s covenant not to sue PPG or its customers for infringing the patents at issue. Valspar’s covenant not to sue PPG or its customers for infringing the patents in question eliminated the parties’ legal interest in the outcome of the appeal. Therefore the court vacated the PTAB’s ruling and dismissed the appeals.

Strategy and Conclusion

This case demonstrates that standing to appeal a PTAB validity decision may exist even if the patent owner does not directly threaten or accuse a party of infringement. But a patent owner can moot such a challenge on appeal by providing a covenant not to sue.

Further Information

The PPG opinion can be found here.