On February 20, 2019 the Supreme Court heard yet another case stemming from the implementation of the 2011 Leahy–Smith America Invents Act. Judging solely from the Question Presented, this is little more than a run–of–the–mill statutory interpretation case where the Court will consider whether in context of this statute, the word “person” includes the federal government. However, the oral argument showed that in reality much weightier issues such as separation of powers, the power of independent agencies to act contrary to the policies of the rest of the Executive Branch, and due process lurk right under the surface.
Return Mail Inc. v. USPS began when the Petitioner, an owner of U.S. Patent No. 6,826,548 directed to the processing of mail items that are undeliverable due to an inaccurate or obsolete address, sought to license its patent to the United States Post Service. After some negotiations, the USPS refused to take a license, and Return Mail responded by suing the USPS in the Court of Federal Claims — a traditional method of enforcing patent rights against the Federal Government. In such a litigation, the Government is able to raise all of the traditional defenses available to an accused patent infringer including noninfringement and invalidity. (Technically speaking, such a suit against the Government is not an action for infringement, for which the Government had not waived sovereign immunity, but an action for taking of private property under the Fifth Amendment). Instead of proceeding with litigation, the USPS, however, chose to instead seek administrative cancellation of the patent before a panel of Administrative Patent Judges.
The procedure that the USPS invoked was authorized by the AIA and adjudged as constitutional last Term in Oil States Energy Services, LLC v. Greene's Energy Group, LLC. The AIA created a procedure for certain “covered business method” (“CBM”) patents to have their validity reviewed, and if necessary, cancelled, not in court but before a panel of Administrative Patent Judges. Under the statute “a person” who has been sued for patent infringement can seek such review by filing the appropriate petition with the PTO.
Return Mail resisted USPS’s petition and argued that “person” does not include “sovereign,” but both the PTO and the U.S. Court of Appeals for the Federal Circuit rejected that argument. The debate between the Court of Appeals’ panel majority and dissenting Judge Pauline Newman centered on the overall structure and purpose of the Patent Act and the AIA. What was absent from the debate, however, are the constitutional implications of the Government’s position. These implications are explored in an amicus brief filed by Cato Institute and myself.
First, the Government’s position raises the prospect of having two separate agencies of the Federal Government litigating against each other. Although in the present case the PTO cancelled Return Mail’s patent and therefore the PTO and the USPS are on the same side of the argument, had the PTO declined to cancel Return Mail’s patent claims, and had the USPS appealed from that decision, the courts would have been required to resolve and inter–branch dispute between two agencies. As then–Judge Kavanaugh wrote in his concurring opinion in S.E.C. v. Fed. Labor Relations Auth., 568 F.3d 990, 996 (D.C. Cir. 2009) “a case pitting two agencies in the Executive Branch against one another” a “constitutional oddity.” It is an oddity because the Constitution vests “[t]he executive Power” in the President alone, and agencies suing each other is essentially a case of the President suing himself. When an independent agency can go to court to contradict and undermine the policies, priorities and judgment of the President the “executive Power” is, contrary to the constitutional design, at danger of being dispersed across multiple (unelected and therefore not politically responsible) actors. Although the Court has blessed the creation of independent agencies, in recent years it has been more willing to police the requirement of Presidential control of the entire Executive branch. The present case presents another opportunity for the Court to ensure that independent agencies do not stray too far from Presidential control.
There is another potential problem with the USPS’s position. Adopting it risks violating the due process rights of patentees who must defend their patents in the PTO proceedings. Although the Supreme Court upheld administrative cancellation proceedings against a constitutional challenge, all Justices agreed that patents are “property for purposes of the Due Process Clause,” i.e., that the administrative cancellation proceedings must comply with the constitutional due process requirements. One of the most fundamental requirements of due process is that no one can be a judge in his own case. Indeed, this requirement predates the founding of the Republic by over a century and a half. At the same time, the Executive Branch will often have a direct, financial interest in the cancellation of many patents rather than paying appropriate royalties following litigation in the Court of Federal Claims. To permit the employees of the Executive Branch (which Administrative Patent Judges are) to adjudicate a dispute in which the Executive Branch itself has a financial interest runs as serious risk of making PTO–based adjudications constitutionally deficient.
During the Petitioner’s argument, the Justices focused mostly on the statutory structure, the history of the post–issuance review mechanisms, and the interaction of the statutory provision under review with other portions of the Patent Act. However, when the Government took its place before the lectern, questions quickly shifted to the potential constitutional problems with the Government’s position. Justice Sotomayor was first to refer to the Cato brief, and her concerns were quickly picked up by Justices Gorsuch, Kavanaugh, Alito, and Roberts. As a result, the inquiry quickly shifted to the role of the President, independent agencies, and the courts in the functioning of the government.
Whether the Supreme Court will ultimately address these complicated constitutional questions remains to be seen. However, it is a good sign that these concerns are not escaping the Court’s attention as it is considering whether to affirm the judgment below.