PTO Invalidity Decisions Cannot Be Appealed as a Matter of Right: Unsubstantiated Allegations of Injury to Licensing Opportunities Are Insufficient to Confer Standing for Federal Circuit Appeal

Authored by Laith M. Abu-Taleb, D. Brian Kacedon, and John C. Paul

Abstract

Constitutional standing requirements to bring an action in a federal court do not necessarily apply when bringing an action before an administrative agency like the Patent and Trademark Office’s Patent Trial and Appeal Board ("PTAB"). As a result, while a validity challenge may be brought at the PTAB, an adverse decision by the PTAB may not necessarily be appealed to a federal court unless those constitutional standing requirements are met. In Phigenix, Inc. v. ImmunoGen, Inc., the appellant’s allegations of injury, based on hypothetical licensing revenues expected if it had won its invalidity challenge at the PTAB, were found to be too hypothetical to adequately show actual injury necessary to establish standing.

The Federal Circuit found a company that challenged the validity of a patent in a proceeding at the U.S. Patent and Trademark Office Patent Trial and Appeal Board could not appeal an adverse decision of the PTO Board upholding the validity of the patent. The Court dismissed the appeal in Phigenix, Inc. v. ImmunoGen, Inc., finding the challenger did not sufficiently substantiate its claimed licensing injuries and therefore did not meet its standing burden of showing actual or imminent injury necessary to bring an appeal in federal court.

Background

ImmunoGen provided a worldwide exclusive patent license to Genentech, Inc., under which Genentech produces the breast cancer drug Kadcyla®™. Phigenix does not manufacture any products, but claimed to have an extensive intellectual property portfolio including a patent covering Genentech’s activities related to Kadcyla and, thus, the subject matter of ImmunoGen’s patent. Phigenix attempted to license its patent to Genentech, but when Genentech refused, Phigenix sought to invalidate the claims of ImmunoGen’s patent by petitioning for inter partes review ("IPR") at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board ("PTAB"). After the PTAB rejected Phigenix’s challenges, Phigenix appealed the PTAB’s decision to the Federal Circuit.

The Phigenix Decision

The requirements imposed by the U.S. Constitution to bring an action in a federal court do not necessarily apply when bringing an action before an administrative agency. But an appellant must meet those constitutional requirements to have a federal court review a decision of an administrative agency. To meet the "irreducible constitutional minimum" of Article III standing, an appellant must have (1) suffered an injury in fact, (2) that is fairly traceable to the conduct of the appellee, and (3) that is likely to be redressed by a favorable judicial decision. As to the injury-in-fact requirement, the appellant must show that an injury is both concrete and particularized, such that the injury either actually existed at the time of the suit, or was imminent. For the first time since its inception, the Federal Circuit, in Phigenix, Inc. v. ImmunoGen, Inc., set forth the legal standards for demonstrating standing in an appeal from a decision of the U.S. Patent and Trademark Office. Applying these standards, the Federal Circuit ruled that Phigenix did not raise sufficient facts to show that it was actually injured, or that it will be injured imminently. Phigenix relied principally upon declarations from its experts and an attorney’s letter stating that ImmunoGen’s patent was causing it to lose licensing opportunities on its patent. According to Phigenix, if ImmunoGen’s patent were invalidated, Phigenix would receive at least a portion of the millions of dollars in licensing revenue being received by ImmunoGen. The court considered Phigenix’s showing on this alleged licensing injury to be too conclusory and hypothetical, but noted that Phigenix perhaps could have showed standing if it actually licensed its patent to the same parties to which ImmunoGen licensed its patent such that invalidation of ImmunoGen’s patent might actually increase Phigenix’s revenues. The court also rejected Phigenix’s reliance on Section 141(c) of the Patent Act, which states that a party "who is dissatisfied with the final written decision of the [PTAB] ... may appeal the [PTAB]’s decision only to the … Federal Circuit." Although § 141(c) provides a statutory basis for appeal from the PTAB to the Federal Circuit, the constitutional requirements of standing must also be met. The court looked to the Supreme Court’s decision in Cuozzo Speed Techs., LLC v. Lee, which explicitly observed that a party may initiate an IPR at the PTAB and yet still lack constitutional standing to sue in federal court. Having found that Phigenix failed to adequately substantiate its allegations of injury, the Federal Circuit dismissed the appeal for lack of standing.

Strategy and Conclusion

This case demonstrates that a losing party at the PTAB may not always have standing to appeal the PTAB’s final decision to the Federal Circuit. While standing is self-evident when the losing party is the target of a litigation action by the winning party, in other situations, the losing party must adequately show actual or imminent injury to establish standing.

Further Information

The Phigenix decision is found here.