August 2014
Speculative Injury Insufficient for Standing to Challenge AIA’s First-Inventor-to-File Provision
| Judges: Newman, O’Malley (author), Wallach |
| [Appealed from M.D. Fla., Judge Merryday] |
In MadStad Engineering, Inc. v. U.S. Patent & Trademark Office, Nos. 13-1511, -1512 (Fed. Cir.
July 1, 2014), the Federal Circuit affirmed the district court’s dismissal for lack of standing.
Mark Stadnyk and MadStad Engineering (collectively “MadStad”) filed a constitutional challenge to the America Invents Act (“AIA”) against the PTO seeking DJ that the “first-inventor-to-file” provision of the AIA was unconstitutional and seeking a permanent injunction barring enforcement of the AIA. The district court granted the government’s motion to dismiss for lack of standing, relying on the Supreme Court’s decision in Clapper v. Amnesty International USA, 568 U.S. __, 133 S. Ct. 1138 (2013). MadStad appealed.
On appeal, the Federal Circuit first considered whether it had jurisdiction over the appeal. Looking to the principles of federal jurisdiction, the Court explained that a case can “aris[e] under” an act of Congress even if the claim “‘finds its origin’ in other legal predicates.” Slip op. at 6. Determining a resolution of MadStad’s claim, the Court explained, would require interpreting the terms “inventor” and “first-inventor-to-file” in the AIA and the term “Inventor” in the U.S. Constitution. The Court also explained that patent-related matters lie at the heart of the parties’ dispute, because a judgment in MadStad’s favor would not only result in a declaration that the first-inventor-to-file provision is unconstitutional, but could compel that the entirety of the AIA falls within that provision. Next, the Court explained that placing jurisdiction in the regional circuit courts would upset the “balance” of jurisdiction between the Court and the other circuits because the matters raised in MadStad’s complaint were important to the uniform application of patent laws. Id. at 8. The Court thus held that it had jurisdiction over the appeal because MadStad’s claims arose under an act of Congress relating to patents.
“[B]ecause this alleged injury is dependent upon the hypothetical, illegal decisions of independent actors, it is not ‘concrete, particularized, and actual or imminent.’” Slip op. at 15 (quoting Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010)).
The Court next examined whether MadStad had standing to assert its claim. The Court reviewed and rejected MadStad’s arguments that the AIA forced MadStad to enhance its computer security to prevent theft of its intellectual property, increased the time and effort to file patent applications, disadvantaged MadStad with respect to larger companies, and resulted in lost business and investment opportunities to MadStad as a result of intellectual property theft.
The Court considered and rejected MadStad’s argument that the AIA forced it to enhance its computer security systems, explaining that the “mere fact that MadStad, like all other people and companies, faces cyber threats does not create standing.” Id. at 14. The Court found that MadStad had not shown that its alleged injury—cost to increase security measures and threat of cyber-attacks—was “fairly traceable” to the AIA. Id. The Court stated that nothing in the record indicated that, in response to the AIA, hackers began launching cyber-attacks that MadStad’s old security system could not handle, but an upgraded system could. The Court also found there was no evidence that the AIA had caused an increase in cyber-attacks to steal intellectual property. The Court, therefore, held that MadStad’s claim of cyber-attacks did not confer standing because it depended “upon the hypothetical, illegal decisions of independent actors” and was “not ‘concrete, particularized, and actual or imminent.’” Id. at 15 (quoting Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010)).
The Court next considered MadStad’s contention that the AIA forced it “to divert business resources to prepare more patent applications and file them sooner, in order to compete in the race to the PTO.”
Id. at 16 (citation omitted). The Court found this argument unconvincing, pointing to the fact that MadStad had not asserted that it had filed any patent application under the AIA, had no patent applications currently ready to file, and had only an intention of filing patent applications in the future. The Court explained that “merely testifying that [Mr. Stadnyk] intends to file for another patent at some unknown point in the future” is insufficient to meet the “concrete, particularized, and actual or imminent” injury requirement for standing. Id. at 19 (quoting Monsanto, 561 U.S. at 149). Although the Court did not define the actions needed to confer standing, it held that, in this case, MadStad failed to establish standing “based on its fear of the increased effort and costs involved,” and because MadStad did “not assert that Mr. Stadnyk has an invention for which an application could be filed.” Id. at 20.
The Court then considered and rejected MadStad’s contention that the AIA’s first-inventor-to-file provision placed it at a competitive disadvantage relative to larger companies because MadStad would be forced to expend its limited resources to develop and test its products in-house to avoid intellectual property theft. The Court observed that MadStad had not asserted that it had actually set up any of these in-house facilities or that it was engaged in any product development that would require such facilities; therefore, MadStad’s concerns were again “too speculative and generalized to meet the ‘concrete, particularized, and actual or imminent’ injury requirement.” Id. at 21 (quoting Monsanto, 561 U.S. at 149). The Court also explained that, like MadStad’s arguments regarding an increased risk of hacking, MadStad failed to show that its alleged injury was fairly traceable to the AIA because the injury would require that MadStad’s outside vendors do not have adequate security measures in place, that hackers could bypass those measures, and that hackers would steal MadStad’s designs and file patents on MadStad’s designs. This level of attenuation, the Court explained, was too remote to establish standing based on alleged competitive disadvantage.
The Court then rejected MadStad’s contention that the AIA inhibited it from sharing ideas with potential investors and partners, causing lost business and investment opportunities. The Court found that although MadStad had not disclosed secret information to a potential investor who would not sign a
nondisclosure agreement, MadStad’s “subjective belief that it needs a non-disclosure agreement to dissuade any incentive to ‘scoop’ its IP” was too attenuated to create standing. Id. at 22-23.
The Court last considered whether the district court’s reliance on the Supreme Court’s Clapper decision was proper. The Court stated that, although the series of events in Clapper was more attenuated than in MadStad’s case, MadStad’s injuries were still too speculative to create standing. In addition, the Court rejected MadStad’s argument that it should be accorded standing under an alternative test requiring showing of a “substantial risk” of injury. Id. at 25. The Court also distinguished MadStad’s situation from the Supreme Court’s decision in Susan B. Anthony List v. Driehaus, No. 13-193, 2014 WL 2675871 (S. Ct. June 16, 2014), in which the petitioner had expressed the intention of engaging in actions that would subject it to the threat of criminal prosecution under a statute that had a history of past enforcement. The Court held that the district court did not err by relying on Clapper or concluding that MadStad lacked standing to assert its constitutional claims.
Accordingly, the Court affirmed the district court’s determination that MadStad lacked standing to challenge the first-inventor-to-file provision of the AIA.
