Courthouse Steps Decision Teleforum: Return Mail v. US Postal Service

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Administrative Law & Regulation Practice Group and the Intellectual Property Practice Group, was recorded on Wednesday, June 12, 2019, during a live teleforum conference call held exclusively for Federalist Society members.       

 

Wesley Hodges:  Welcome to The Federalist Society’s teleforum conference call. This afternoon’s topic is a Courthouse Steps Decision discussion on Return Mail v. U.S. Postal Service. My name is Wesley Hodges, and I’m the Associate Director of Practice Groups at The Federalist Society.

 

As always, please note that all expressions of opinion are those of the experts on today’s call.

 

Today, we are very fortunate to have with us Professor Adam MacLeod, who is Professor of Law at Faulkner University.

 

Also with us is Mr. Matthew J. Dowd, who is founder and partner of Dowd Scheffel PLLC. After our speakers give their opening remarks, we will move to an audience Q&A, so please keep in mind what questions you have for this case, for anything related to the subject matter, or for one of our speakers. Thank you very much for sharing with us today. Matthew, I believe the floor is yours to begin.

 

Matthew J. Dowd:  Thank you, Wesley. Good afternoon to the audience members, and good morning to our friends who are west of the Eastern Time Zone. It’s my pleasure to be here today with Professor MacLeod to discuss the Supreme Court’s most recent foray into patent law in Return Mail v. U.S. Postal System. In one sense, this case is a relatively straightforward statutory construction case about a single word – the word “persons” in the Patent Act. But at another level, we believe that the underlying dispute in the Court’s opinions and reasons for taking the case raise broader administrative law questions, including issues about separation of powers and limitations on executive powers.

 

Now, before we begin, I’d like to just give you an overview of how we plan to proceed this afternoon. Now, I suspect that there are listeners who are more interested in patent law versus the admin law issues. And then, there are some others who are more interested in the admin law issues versus patent law. And we hope to provide something for everyone. Professor MacLeod will start with a general overview of the background of the admin law issues. After that, I will return and discuss the Return Mail case itself, including the underlying factual dispute and the Supreme Court’s decision. We’ll then return to Professor MacLeod for a dive into the doctrinal implications of the Court’s decision, with respect to the important administrative law issues. Then, after that, we hope to have some time for questions from our audience.

 

And with that, it’s my pleasure to turn it over to Adam. And before I do that, I would like to give a little more background in terms of Adam’s expertise because it is quite impressive. As Wesley noted, he’s a Professor of Law at Faulkner University. He’s also been a Visiting Fellow in the James Madison program in the American Ideals and Institutions at Princeton University. His scholarship focuses on the foundations of private law and private ordering, including property rights. And he has an intriguing recent article in the Alabama Law Review titled “Patent Infringement as Trespass.” With that, Adam, I turn it over to you.

 

Prof. Adam MacLeod:  Well, thanks very much, Matt, for the very kind introduction. Thank you to The Federalist Society for hosting this call on what I think is an important case. And to everyone listening, thanks for calling in. The decision of the Federal Circuit -- the judgement of the Federal Circuit, which the Supreme Court reversed on Monday, is an important decision, not just, as Matt indicated, for patent law, but also, it has broader implications for our constitutional structure and for administrative law. So I’m just briefly going to motivate our call by hitting some highlights of some of the broader jurisprudential implications of the decision and then hand back to Matt for a detailed discussion of the case itself.

 

The ruling of the Federal Circuit was that the United States Postal Service is a person within the meaning of a provision of the America Invents Act – an act which amended the Patent Act to create three kinds of inter partes proceedings in the Patent and Trademark Office -- administrative review proceedings of the validity of a patent. Now, the jurisprudential implications of this ruling are, essentially, that the Federal Circuit was ruling that the Postal Service can enjoy all of the legal advantages of sovereignty, including immunity from infringement liability and the remedies specified in Section 271 of the Patent Act, which apply to private party accused infringers but not the government. And, simultaneously, the government could enjoy the legal advantages of a private party who’s accused of infringement, including the power to initiate an inter partes proceeding before the PTO under the America Invents Act.

 

So in a little while, I’m going to talk about three classes of implications of the Supreme Court’s reversal of that judgement. The first concerns separation of powers because, in an inter partes proceeding where a government agency appears before another government agency, the executive is essentially speaking with two different, and potentially conflicting, voices on substantive legal questions. The second set of issues concerns patent rights and innovation because, unlike private parties, the government is not estopped under the America Invents Act from taking multiple bites at the patentee’s apple. It can challenge the patent validity both in an inverse condemnation proceeding under Section 1498 of the Patent Act, and then, if unsuccessful in that proceeding, can challenge the patentee’s validity again in an inter partes review.

 

And then, the third class of implications more generally deals with the government’s duty to pay just compensation under the Fifth Amendment Takings Clause and other inherent limitations on sovereign executive power, insofar as the government can choose when it wants to act like a sovereign with all the sovereign’s rights and disadvantages and when it wants to avoid sovereign responsibilities and duties by instead acting like a private right bearer, while simultaneously enjoying immunity from the various remedies that are imposed on a private wrongdoer, such as a trespasser or a patent infringer. So we’re going to get into all of that in a little while.

 

First, I’m now going to hand it back to Matt to talk about the case and about the legal issues. Matt is a very experienced patent litigator who has appeared as counsel in Section 1498 proceedings and in other patent proceedings. He knows the Patent Act inside and out and is expert both by experience and as a matter of doctrinal understanding on the legal questions. So he’s going to give us a discussion of the case itself.

 

Matthew J. Dowd:  Let’s get into the underlying dispute and frame the dispute that’s gone back for some years now. And ultimately, this is a patent case, and there is a patent that Return Mail has. It’s a 528 patent. It was issued in 2004 and is basically directed to an automated method of processing mail that is undeliverable. In 2003, Return Mail was involved in licensing talks with the United States Postal Service. In 2006, the Postal Service implemented a new system that enhanced their address change service for undeliverable mail.

 

At that point, according to the facts of the opinions, the Return Mail contended that the new service infringed the 528 patent. The talks continued between the parties, but the Postal Service opted to file what’s called an ex parte re-exam request – an administrative proceeding asking the Patent Office to revoke the patent. And the Patent Office instituted that proceeding but confirmed the validity of the patent. Ultimately, talks broke down between the parties. And in 2011, Return Mail sued the United States government or the Postal Service, bringing an action under 28 U.S.C. 1498(a) in the Court of Federal Claims for the Postal Service’s -- I’ll call it infringement of the patent. But Adam later will discuss some of the nuances between infringement via private party versus the unlicensed or unauthorized use by the federal government.

 

After that action was instituted in 2014, the Postal Service filed a CBM review of certain claims of the patent. And the CBM is short for covered business method review. And it is one of the three types of administrative proceedings under the America Invents Act. Now, I’ll provide some details about these proceedings, but all of the details and nuances are certainly beyond the scope of our presentation today. But as many of you certainly know, there are three types of AIA proceedings: inter partes review, called IPR; post-grant review, called PGR; and the covered business method review, called CBM.

 

Now, with the CBM, there are at least two requirements of particular relevance to our discussion today. In particular, the patent that is being challenged must be a covered business method patent. That’s one thing that distinguishes it between the PGR and IPR process.

 

Another distinguishing element is that, in the CBM process—or proceeding—a party can raise a 101 challenge, which cannot be raised in an IPR challenge. And then, the other requirement for a CBM is that the petitioner—the party seeking the invalidation of the patent—must have been, quote, “sued for infringement.” That is an element that we will be focusing on a fair bit today. Now, the CBM process was enacted as part of the AIA, but it is an uncodified section of the act. So it’s part of Section 18 of the AIA.

 

When it was enacted, it has a sunset provision. So it was intended to last for about ten years. Whether that gets renewed or not, it’s uncertain. But that was one of the elements that was going into the overall consideration of this case. So that’s a little bit about the CBM process. It relates, to some extent, to the older processes and proceedings of ex parte re-exam, which has been around since 1980. And the three AIA proceedings essentially were intended to replace the more recent inter partes re-exam proceedings of 1999, as modified in 2002.

 

So turning back to the CBM that the Postal Service filed against Return Mail’s patent, the Postal Service raised three grounds of invalidity. First, the claims were directed to patent ineligible subject matter under 101. Second, the claims were anticipated under Section 102. And third, the claims were obvious under Section 103. And when a petitioner files a petition, an AIA petition such as a CBM, the petitioner lays out the grounds. And the board will decide whether or not to institute based on any one or more of those grounds. In this instance, the board instituted based on 101 and 102 and, in its final written decision, ultimately decided that while the claims were not anticipated under 102, they were patent ineligible under Section 101. And with that adverse decision in hand, Return Mail appealed to the Federal Circuit.

 

The Federal Circuit heard oral argument and briefing and issued a decision in August of 2017. And that decision, written by Chief Judge Prost, joined by Judge Wallach, affirmed by holding of the board. Judge Newman dissented from the decision. And without getting into the substance of the 101 issue, I’m going to focus on some of what Adam had previously mentioned. But there are three issues that the Federal Circuit addressed in its opinion. First, it addressed whether the Court had authority to review the institution decision. Again, the nuances of this element are beyond really the scope of what we’re discussing today, but it does tie into the Cuozzo Supreme Court decision, which many of you are certainly aware of. The Court did decide that it had authority -- the Federal Circuit did decide in the Return Mail case that it had authority to review the board’s institution decision.

 

And this relates to the other challenges that Return Mail had raised. Specifically, Return Mail argued that, because it had instituted a 1498(a) action against the Postal Service, that that did not constitute being sued for infringement, which is a requirement of Section 18 of the AIA. And as Adam stated, the Federal Circuit ruled that, essentially, in its view, a 1498(a) action, which falls under Title 28, is, for purposes of the AIA, the same as an infringement action under Title 35. And the third issue that the Court addressed is the issue that the Supreme Court ultimately took up and decided this past week. And this issue was raised by Judge Newman. And the question is whether the Postal Service is a person for purposes of the America Invents Act post-grant reviews.

 

One of the other requirements, or at least statutory requirements for filing a petition under the AIA, is that it is filed by, quote, “a person.” And Judge Newman argued that the Postal Service, being a governmental entity, does not qualify as a person. The majority for the Federal Circuit disagreed with her, ultimately ruling that the narrow interpretation that Judge Newman advanced was not in comport with the purpose and the overall goals of the statute. Now, with that adverse decision from the Federal Circuit, Return Mail filed a cert petition, raising two grounds. The first was whether the government is a person under the AIA, and the second is whether Section 1498(a) action for the eminent domain taking of a patent license by the government is a suit for patent infringement under the AIA. The Court granted cert, but only on the first issue.

 

So the opinion, as I’ll discuss momentarily is, at least on its face, focused primarily on what can be viewed as a relatively straightforward statutory construction case. But for reasons that Adam will discuss in more detail, we think that there is more going on. And there’s certainly more implicated for cases in the future.

 

As I stated, the Supreme Court issued its decision this past Monday. The case was argued on February 19, 2019. Return Mail was represented by the Covington Law Firm. Beth Brinkmann argued the case, and the case is also being -- another counsel intimately involved with the case throughout its proceeding was Richard Rainey. They’ve both done an excellent job with the case. The Court reversed the Federal Circuit in a 6-3 decision.

 

And one sort of noteworthy point—a trivia point, perhaps for the court watchers—is that this is a rare instance of Justice Sotomayor writing the majority opinion and being joined by the five -- what we would call the conservative justices. So you don’t see that lineup too frequently. Now, I’d like to turn to the analysis of the Court’s reasoning and the outcome of the case. I’ll first talk about Justice Sotomayor’s majority opinion. And then, we’ll turn briefly to Justice Breyer’s dissent. Justice Sotomayor started off with a very basic and accepted proposition that the patent statute does not define the term “person.” And it certainly doesn’t define the term person with respect to the AIA provision -- or provisions.

 

So with that lack of an expressed statutory definition, Justice Sotomayor turned to the long-standing interpretive presumption that the term “person” generally does not include a sovereign, such as a government agency. And the Court cited cases going back to 1877 and also noted that that presumption -- there’s a reason for that presumption because it reflects the common usage of the term. And the Court also noted that it reflects the Dictionary Act, which is Section 1 of Title 1 of the U.S. Code. For those of you who handle cases -- statutory interpretation cases even outside the patent law context, the Dictionary Act is an important thing to keep in mind when you’re interpreting a provision or a term in the statute and there’s no expressed definition.

 

Now, the government responded by saying the presumption is weakest when it benefits the government. So in this instance, they were trying to turn the tables in terms of the purpose of the presumption. But the majority opinion did not accept that invitation. But more specifically, with the presumption accepted, the Court noted that it is now the government’s burden to establish that the context of the AIA indicates a meaning to the term “person” that is different than the presumption -- or that the presumption is overcome. Now, you don’t need an expressed definition in the statute, of course. But you look to the context and any textual indication that might affirmatively show that Congress intended the term “person” to include government in Section 18 of the AIA.

 

The term “person” is used throughout the Patent Act, and the government -- and actually, both sides relied on different provisions. And we could run through some of these. So for example, one of the first provisions that the majority opinion notes is that the government points to Section 296(a). This is in a footnote in the opinion. And 296(a) in Title 35 states that the States, meaning the federal states, shall not be immune from suit in federal court by any person, including any governmental or non-governmental entity. So there is an instance where, under the statute, the term “person” expressly includes a governmental entity. But the majority responds because there are other provisions where the term “person” is necessarily excluding a governmental entity.

 

For example, in Section 6 of the Title 35 -- and this is a section that was enacted with the AIA. It defines administrative patent judges as persons of competent legal knowledge and scientific ability. Now here, clearly, a governmental unit cannot be a person who could be an APJ. So going along these lines, the majority opinion runs through various examples. It looks at Section 207(a)1 of Title 35 that allows the government to obtain a patent. And that section uses the term “person.” But the majority responds -- says, “Well, there’s no context about what the agency may or may not do after the issuance of someone else’s patent.” So basically, it’s saying, with Section 207(a), yes. It acknowledges that “person” includes government.

 

But it’s not speaking to the same issue that’s presented in this case, specifically whether person includes a government and allowing the government to challenge a patent in this new post-grant proceeding process. And so there are a number of these examples. Another example, the Court notes, are the sections of that patent statute dealing with intervening rights. And these are Section 252, 307(b), and 318(c) and 328(c) -- are the intervening rights provisions in the AIA. But ultimately, what the Court says is, yes, some of these clearly refer to the government as being within “persons” -- in the term “persons.” But some of them don’t.

 

The only reasonable conclusion is that the consistent usage doctrine, or the canon of interpretation, ultimately breaks down when Congress uses that same term in a statute in conflicting ways. Now, another point that the government tried to focus on is that the federal government has had a long history with the patent system. Specifically, federal offices could apply for a patent in the name of the federal government since at least 1883. The majority says, “Well, that’s not enough.” The re-exam statute, for example -- any patent practitioners who are listening today are intimately familiar with the re-exam statute. That’s been -- it’s another administrative proceeding that allows a party to ask the Patent Office to administratively revoke issued patents.

 

Now, that’s been around since, as I said, 1981. The majority dismisses the reliance on that evidence—the legal evidence—for several reasons. First, the majority says, “Well, that’s an executive interpretation, necessarily not bound by it.” The majority also says that the relevance -- that issue is relevant to reexamination, but it’s not directly applicable to the issue here because AIA proceedings, at least in the view of the majority, are, quote/unquote, fundamentally different than proceedings under the AIA.

 

Now, I think it’s important to note that, at least in this decision, the Court doesn’t necessarily agree that the government can participate in re-exam proceedings. It’s just saying, “Well, even if we accept that as being legally accurate, it’s not enough to get over the presumption that the term “person,” as used in the AIA Section 18, does not include a government.”

 

Now, the government also argues -- or it did argue that there was some anomaly in denying a benefit to the government that’s afforded to, quote, “other infringers.” Now, specifically, there’s a lower burden of proof to invalidate a patent in the AIA process. Now, the majority says that, “Well, basically, the Postal Service overstates the symmetry.” And I think this is where there’s really some interesting issues that are bubbling below or between the text of the opinion. Here, the majority acknowledges that there are significant differences between an action under 28 U.S.C. § 1498(a) against the federal government versus an infringement action under Title 35 against private parties.

 

For example, if a party brings a 1498(a) action against the federal government in the Court of Federal Claims, the only available remedy is a reasonable compensation. There’s no ability to have an injunction under Section 283 of Title 35. There’s no jury trial. There’s no availability of treble damages under Section 284. There’s no availability of attorney’s fees under 285, and also there’s no notice requirement in terms of marking under Section 287. So the majority, interestingly, highlights all of these differences between a 1498(a) action and a 271 action under Title 35.

 

But the way the majority uses these differences is by saying, essentially that, because of these differences, the federal agency essentially faces lower risks; in other words, no risk of injunction and other outcomes. And therefore, it’s reasonable for Congress to have treated them differently under the statute. And therefore, again, we’re not getting over the presumption that the term “person” does not include the federal government. But I will say that Adam, I’m sure, will have plenty more to say about these differences between 1498(a) actions and traditional infringement actions against private parties.

 

Now, the majority also notes the estoppel issue. This is another thing that Adam mentioned -- is that under the AIA, a party that brings a post-grant proceeding is generally estopped from litigating that same issue in district court. This is in 315(e) and 325(e).

 

But as those statutes are written on their face, they would not estop the federal government because you’re suing the federal government in the Court of Federal Claims, which is not a district court. The Federal Circuit’s opinion below acknowledged this but sort of dismissed it as saying “Well, it’s not enough to narrowly construe the statute.” And if this is an anomaly, let Congress go fix it. The Supreme Court looked at it differently. Now, the Supreme Court said, “Well, we don’t need to rely on this issue, but it still would phase -- sorry. It would rule in favor of yet another reason why the government is not included in the persons who can institute an AIA review.”

 

But the Court also did note that it never has decided whether common law estoppel would apply to a 1498(a) action. The last point in favor of Return Mail’s argument was that a private party, if they’re forced to go through a CBM proceeding such as Return Mail in this one, is put into an awkward position of facing the government as the adversary and the government as the decider of the issue -- and not only the government, but the same branch of the government, meaning the Executive Branch.

 

Now, I will quickly note a few points that Breyer raised in dissent. I won’t go through them in all the detail. But ultimately, Breyer acknowledges that there’s a presumption but thinks that all the evidence -- the legal evidence overcomes the presumption. He runs through the same statutory provisions. Essentially, he just views them differently as the majority. And not surprisingly, Justice Breyer also takes a more purposive approach to interpreting the statute – looking at the purpose of it and trying to assess whether the correct interpretation or the government’s interpretation of it satisfies the congressional purpose of the statute.

 

And I think with that, that provides a pretty comprehensive run through of the decision and its analysis. And I will turn it back to Adam to provide some more insight on both the doctrinal issues and some implications moving forward.

 

Prof. Adam MacLeod:  Well, thank you, Matt. That was an excellent distillation of the essential premises of the two opinions. And it makes my job really easy. As I said at the outset, I think we can divide the broader implications of this decision into three categories. The first you might call an administrative law set of implications, the second a patent law set of implications, and the third a constitutional or jurisprudential set. And I’ll note at the outset you can clearly tell from Matt’s presentation the majority opinion, authored by Justice Sotomayor, treats this as a relatively technical and narrow case about statutory interpretation and the interplay between various canons of interpretation and more or less avoids—or just mentions in passing—the broader constitutional and jurisprudential questions bubbling below the surface.

 

But it’s hard to understand why the Court would have granted cert in this case were there not at least some appreciation of the broader implications. One reason is because, as Matt pointed out, the CBM provisions of the America Invents Act, which authorizes CBM, are temporary provisions not codified. And the CBM is actually due to sunset after next year. So there’s not much permanent doctrinal implication at stake, unless you understand what’s at work underneath the text itself. And then, a second set of evidence that the Court might have been aware of some of the issues here is found in the end of Justice Breyer’s dissent, which I’ll get to in just a moment.

 

So starting with the separation of powers issues, this is a set of issues that was raised by a brief filed by the Cato Institute and Professor Greg Dolan. And they pointed out to the Court, in an amicus brief filed at the merit stages, that, if the word “person” in the America Invents Act included executive agencies, then independent executive agencies could undermine the uniform enforcement of the patent laws, essentially because it would allow for this odd situation where to agencies in the Executive Branch could be arguing at cross purposes. It’s not exactly the same reason or argument offered by Justice Sotomayor when she refers to the, quote, awkward situation of appearing in front of one executive agency with the opposing party being a different executive agency. But it’s a more general observation that, where you have two executive agencies, that arguably the executive power, which is a unitary power vested in the President, has actually been split and put in opposition to itself.

 

And so the Cato brief points out that the America Invents Act could permit the Federal Circuit’s interpretation of person—one executive agency, for example, the Postal Service—to challenge another agency’s interpretation of application of federal law, even to, they say, litigate that dispute against the other agency in an Article III court. And they call that an oddity. I think that’s an understatement. They point out, for the amendment’s due process clause, it requires the President to provide impartial forums. But if the word “persons” in the America Invents Act includes executive agencies, then that’s going to make it awfully hard for the Executive to provide a forum free of apparent bias, if executive agencies can challenge the validity of a patentee’s patent rights.

 

The second set of implications concerns patent rights specifically and the innovation incentives to which they give rise. Now, Breyer’s dissent goes through a number of different cases in which the government wanted to use a patented technology, and some patent owner asserted his or her rights against the government in a 28 U.S.C. § 1498 proceeding to require the government to pay just compensation for the use of the patented technology. And Breyer presents this as a problem, that essentially the government -- the implicit premise in the dissent is that the government should be free to use these technologies for the public interest or the government’s interest, as he puts it. And when patent owners are asserting their rights in this way, this prevents the government from doing what it needs to do to advance the government’s interest.

 

But of course, technologies are not like grasslands or apples in Locke’s state of nature. They’re not pre-existing common resources that are just free to the air to use. People have to create them. And so, of course, people have to have rights which secure their productive labor and their incentives to create them. And that’s the whole reason why we have patents. And the inter partes and CBM proceedings under the America Invents Act threaten, possibly, to undermine patents and the incentives that they create to the extent that challengers can take multiple hits at a patent’s validity in different venues and in different proceedings in the same venue. And so this is why -- one of the reasons why the anomaly which Matt pointed to -- that the estoppel provisions within the America Invents Act don’t cover Section 1498 proceeding against the government.

 

So the government could get multiple bites at the apple. It could lose its defense of patent invalidity in a Section 1498 proceeding and then prevail in a subsequent proceeding in front of the Patent Office.

 

Now, the third set of issues I’ll spend a little bit more attention on. And I think this is the sort of broader implications of the case, not just for patent law, but for a number of different areas of law. And it’s this -- that an accused infringer, we think, is not the same as a sovereign. In fact, an accused infringer and a sovereign actually are different entities or different offices with different sets of rights and duties. And to get into this, I’ll start at the end of Breyer’s dissent. Breyer is sort of poking at Justice Sotomayor’s majority opinion and particularly calling attention to the fact that the implications of the majorities view are that the government gets treated differently under the America Invents Act while, Sotomayor conceded, the government can, nevertheless, be held liable for infringement like any other accused infringer.

 

And Breyer raises what he calls the basic question why. And here I’ll just quote. He says, “Government agencies can apply for an obtain patents. They can maintain patents. They can sue other parties for infringing their patents. They can be sued for infringing patents held by private parties. And they can be forced to defend their own patents when a private party invokes one of the three procedures established by the America Invents Act. Why then,” Breyer asks, “would Congress have declined to give federal agencies the power to invoke the same administrative procedures. I see no good answer to that question.” We think the answer to that question is the answer that we offered in our brief, the brief that Matt and I wrote on behalf of several law professors.

 

There were actually two briefs in which we advanced this argument -the first at the petition stage on behalf of 15 law professors and then the second at the merit stage on behalf of a smaller number. And the basic answer is this -- that the government is not, in fact, an infringer within the meaning of Section 271 of the Patent Act but is, instead, a sovereign who enjoys the rights of sovereignty. In particular, these include the power of eminent domain to use patent rights just as it would take private property for a public use and, secondly, sovereign immunity from liability for wrongs, such as trespass and infringement. And insofar as the government is a sovereign with the rights of sovereignty, it also has the legal disadvantages of the sovereign.

 

And they are the two which correlate with its two sovereign rights -- first, the duty to pay just compensation under the Fifth Amendment’s Takings Clause when it takes patent rights. And second would be the no power—or in jurisprudential terms, a legal disability—to initiate invalidity review proceedings in front of the Patent Office because that power doesn’t belong to the sovereign. It belongs only to, quote, private parties, as both the government and Return Mail argued in their briefs. Private parties, of course, have no sovereign immunity and no power of eminent domain. And they can, therefore, be held liable for infringement.

 

Now, we think there are two classes of evidence for this proposition that Congress has established a distinct and separate offices for infringers and for the sovereign. The first Matt already touched on. And that is, if you contrast the infringement action authorized by 35 U.S.C. § 271 with the inverse condemnation action authorized by 28 U.S.C. § 1498, you see a number of differences. And these differences are the ones you would expect to see if 271 were a private cause of action for infringement or trespass and 1498 were an action against a sovereign for inverse condemnation and just compensation -- for example, no jury trial in 1498, as Matt mentioned, only compensation. Compensation, of course, is the term used by the Fifth Amendment -- no punitive damages, no equitable relief, and, as the government itself pointed out, no derivative liability for inducement or contributory infringement. And we think the reason for all of this is that Section 1498 is not, in fact, an infringement action properly understood.

 

Whatever one wants to call it, it’s an inverse condemnation proceeding to require the government to pay just compensation and satisfy its constitutional duties. And then, finally, the Patent Act as a whole -- if you look at the entire scheme set out in the Patent Act and the America Invents Act, you see distinct offices with different sets of rights and duties. And so the two that are at stake here -- on one hand an infringer -- an accuse infringer -- this is a legal wrongdoer -- an alleged wrongdoer with private rights. And the private rights at stake there are the person’s liberty and immunity. As opposed to an agency of the government, which is not a wrongdoer precisely because it enjoys to sovereign power of eminent domain, which is a right not a wrong. And accordingly, the government has an inherit duty to pay just compensation when it exercises that sovereign power.

 

And so the government tried to have its cake and eat it, too. It wanted both immunity from 217 infringement remedies and the private party power to initiate inter partes proceedings. Sotomayor doesn’t expressly mention any of this, except in passing. She says there are, quote, good reasons for Congress’ provision. And she allows that the government is, quote, in a unique position. But I think Breyer is absolutely correct that her opinion implicates these profound constitutional and jurisprudential questions. Why would Congress separate the rights and powers as it did unless private rights and public powers are inherently distinct and have different constitutional implications? Justice Breyer is practically begging someone to explain this to the Court, and I hope litigants in future cases will do that.

 

Wesley Hodges:  Adam and Matthew, do you have any further points that you’d like to make or something else that you’d like to jump into?

 

Matthew J. Dowd:  Wesley, thank you. This is Matthew Dowd. I’ll add one further comment. This is an issue -- I focused on patent law issues, but it relates to a point that Justice Breyer made in his dissent. And it was along the lines of why he thinks his interpretation supports the purpose of the statute. And this is on page 5 of the slip opinion. But he writes, “The statutes help maintain a robust patent system in another way. They allow B, a patent holder who might be sued for infringing A’s related patent, to protect B’s own patent by more easily proving the invalidity of A’s patent,” end quote.

 

And to me, I’m still struggling with this statement here because it seems to suggest that invalidating one party’s patent more easily allows them to invalidate another patent. I’m not sure if the reasoning here is correct. Generally, when you’re dealing with the validity or invalidity of claims -- of separate patents, there are distinct issues. And one doesn’t necessarily affect the other. And they don’t necessarily affect, I think, some of the incentives of the patent system. So it’s a little bit of an arcane point, but I thought I’d add it in at the end since we do have some time. If there are no questions, I think that’s all I have to add. And I’ll turn it back to Adam to see if he has anything else.

 

Prof. Adam MacLeod:  Yeah. I’ll just -- thank you, Matt. I’ll just very briefly connect maybe this case with the Oil States Energy case from last term, for those who are familiar. Certainly the patent practitioners will remember it. It’s the case in which the Court, famously, ruled that patents are so-called public rights and that Congress can decide where their validity can be adjudicated without any implications for due process and so forth. That was taken by many people to be sort of a definitive statement. In an unequivocal sense, patents are public and not private, and therefore, there’s no -- none of the constitutional protections that apply to private rights would be implicated. Justice Thomas, in his opinion for the Court in Oil States, went out of his way to insist that that’s not the case.

 

The Court was reserving judgement on questions such as whether the government has to pay just compensation under the takings clause when it exercises someone’s patent rights. And so the Court strongly indicated in Oil States that it was leaving open the question of whether patents might be private rights or, more generally, whether there’s a difference between private rights and public rights for other purposes. And just looking at the Court’s ruling in Return Mail on Monday, it looks like the Court is going to have to deal with those sorts of questions at some point. They’re going to continue to bubble up. It’s not accident, I think, that Congress has set out different proceedings for infringement and for inverse condemnation precisely because there are private rights at stake in the first and public rights at stake in the second. And so it looks more and more as though patents are really, really complicated -- that there are both public rights and private rights at stake.

 

And so it’s not immediately obvious, for example, that the government should be immune from paying just compensation under the Fifth Amendment’s Takings Clause. So these questions, I think, are going to continue to recur. And I think this ruling is just one more datum which indicates that there’s not one simple and elegant answer to all of these questions. But again, thank you to The Federalist Society for hosting this. It’s been enjoyable.

 

Wesley Hodges:  Of course. Well, a big thank you to you, Adam, and to you, Matthew. We do appreciate you spending the time today. On behalf of The Federalist Society, I would like to thank you for the benefit of your very valuable time and expertise today. We welcome all listener feedback by email at [email protected]. Thank you all for joining. This call is now adjourned.

 

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