Federal Circuit Finds That Direct Competitor Lacks Standing To Appeal Unfavorable IPR Decision
07/23/2019On July 10, 2019, the Court of Appeals for the Federal Circuit (CAFC) issued an opinion dismissing for lack of standing an appeal of a Patent Trial and Appeal Board (PTAB) inter partes review (IPR) decision finding certain patent claims not unpatentable. General Electric Co. v. United Technologies Corp., —F.3d—, (Fed. Cir. July 10, 2019). The CAFC ruled that the patent challenger lacked standing to appeal the adverse decision even though, among other things, it is a direct competitor of the patent owner.
An IPR is an administrative procedure by which one can challenge the validity of an issued patent. The patent challenger files a petition in the Patent Office, the patent owner may respond, and the PTAB decides whether to institute an IPR. If an IPR is instituted, the PTAB ultimately issues a written decision finding the challenged claims either unpatentable or not. If the claims are found to be not unpatentable, the patent challenger is estopped from making certain invalidity arguments in future proceedings.
The patent that was the subject of the appeal is directed to turbofan aircraft engines, and, in particular, to engines with “an axially moveable variable area fan nozzle.” After instituting IPR, the PTAB issued a final written decision that the challenged claims of the patent were not shown to be unpatentable for obviousness. The patent challenger appealed that decision. After motion practice, briefing, argument, and post-argument submissions, the CAFC dismissed the appeal for lack of standing.
On the standing question, the patent challenger had submitted evidence that it had developed an engine with a variable area fan in the 1970s, and that it had recently “expended time and money researching and further developing” that technology in response to a customer inquiry. The challenger claimed to have suffered various injuries-in-fact from the PTAB decision, including economic loss from its potentially wasted development work, competitive injury (the patent owner is the patent challenger’s direct competitor in a three-player market), and the estoppel that could arise from the adverse decision pursuant to 35 U.S.C. § 315(e).
The CAFC found that this record did not show a sufficient injury-in-fact. With respect to economic-loss argument, the Court stated that the patent challenger had not provided sufficient detail of the alleged losses—“It fails to provide an accounting for the additional research and development costs expended to design around the ’605 patent”—and that any losses resulting from the 1970s development work were too remote from the present dispute to constitute an “imminent injury.”
With respect to the competitive-injury argument, the Court found that the patent challenger’s “purported competitive injuries are too speculative to support constitutional standing.” That is, there was “no evidence that [the challenger] lost business or lost opportunities because it could not deliver a geared-fan engine covered by the upheld claims or any evidence that prospective bids require geared-fan engine designs.” The Court also found that the decision to uphold the challenged patent did not “change the competitive landscape,” even though by upholding the patent owner’s right to exclude, the decision clearly created an increased competitive burden on the patent challenger compared to a world in which the claims were held to be unpatentable.
And with respect to the § 315(e) estoppel argument, the Court simply relied on its precedent that the estoppel provision does not create standing when “the appellant does not currently practice the patent claims and the injury is speculative.”
One judge submitted a concurring opinion in which he stated that the prior case on which the panel opinion relied was wrongly decided, and that when the patent challenger and patent owner are direct competitors, the decision to uphold a patent, and thus potentially to estop the patent challenger, should be found to be a sufficient injury to create standing to appeal. That judge also noted the uncertainty now facing the patent challenger, because the CAFC has not “decided whether § 315(e) would estop an IPR petitioner who lacked standing to appeal.”
Practitioners will have to wait to see how the CAFC ultimately resolves the estoppel question, and whether resolution of that question—or an en banc opinion—will change the IPR-appeal standing rule. For now at least, lack of standing to appeal remains a danger for patent challengers.