Should the Federal Circuit Lower the Threshold for Article III Standing to Appeal Adverse Decisions in AIA Trial Proceedings?

I. POTENTIAL INFRINGEMENT LIABILITY

The Federal Circuit has held that a petitioner’s potential liability for infringement of a challenged patent can constitute an injury in fact sufficient to confer standing upon the petitioner to appeal an adverse PTAB decision. When an appellant relies on potential infringement liability as a basis for injury in fact, “it must establish that it has concrete plans for future activity that creates a substantial risk of future infringement or likely cause the patentee to assert a claim of infringement.” ¹⁵

In E.I. DuPont de Nemours & Co. v. Synvina C.V., the Federal Circuit found that the petitioner (DuPont) had standing to appeal an adverse decision in an IPR proceeding. ¹⁶ The patent was directed to a method of oxidizing 5-hydroxymethylfurfural (“HMF”) under specified reaction conditions to form 2,5-furan dicarboxylic acid (“FDCA”). DuPont and Synvina are competitors in the production of FDCA for industrial use. FDCA has attracted commercial interest because of its potential in the “green” chemical industry. Since FDCA can be produced from sugars using biological or chemical conversion, the U.S. Department of Energy has identified FDCA as a potential “building block[]” for “high-value bio-based chemicals or materials.” ¹⁷

In finding that DuPont had standing to pursue the appeal, the court found that, as in the declaratory judgment context, a petitioner who appeals from an IPR decision need not face “a specific threat of infringement litigation by the patentee” to establish jurisdiction. Rather, on appeal the petitioner must generally show a controversy “of sufficient immediacy and reality” to warrant the requested judicial relief. ¹⁸ The court found the existence of such a controversy in this case because DuPont was operating a plant capable of infringing the patent. The court also found it significant that DuPont was an avowed competitor of the patent owner. According to DuPont’s declarations, the process conducted at its plant uses the same reactants to generate the same products using the same solvent and same catalysts as the patent. Likewise, the temperature and pO² ranges used at the plant overlap with those claimed in the patent. The court further concluded that the patent owner’s allegations of copying before the PTAB and its refusal to grant DuPont a covenant not to sue further confirmed that DuPont’s risk of liability was not “conjectural” or “hypothetical.”

In Altaire Pharms., Inc. v. Paragon Bioteck, Inc., the Federal Circuit held that a PGR petitioner (Altaire) had standing to challenge an adverse decision of the PTAB based on the real and imminent threat that the owner of the challenged patent (Paragon) would sue the petitioner for infringement of the patent. ¹⁹ Prior to the PGR petition, Altaire and Paragon had entered into an agreement to pursue FDA approval for certain drug products being manufactured by Altaire. Pursuant to the agreement, Paragon was responsible for preparing and submitting the new drug applications. The relationship between the parties broke down and Paragon sought a declaratory judgment in federal court that it had the right to terminate the agreement. This declaratory judgment action was pending at the time it sought to appeal the PTAB decision in the PGR proceeding that upheld the challenged patent claims.

In concluding that Altaire had standing to appeal the outcome of the PGR, the court noted that Altaire intended to file an abbreviated new drug application (ANDA) once the agreement was no longer in effect, and that the filing of the ANDA would likely result in Paragon filing a lawsuit alleging infringement of the challenged patent. The court noted that not only was Altaire seeking termination of the agreement, but that in any event the agreement would expire in a few years. Furthermore, Paragon had refused to stipulate that it would not sue Altaire for infringement of the patent. The court found that under the circumstances Altaire’s injury was inevitable, creating a threat of infringement litigation that was real and imminent. The court further found that the injury was concrete and particularized, pointing to testimony by Altaire’s chief executive explaining that invalidating the patent was “imperative to removing the patent as an obstacle to the filing and approval of Altaire’s ANDA.”

In ModernaTx, Inc. v. Arbutus Biopharma Corp.(ModernaTx I), the Federal Circuit held that a petitioner (Moderna) had standing to challenge a PTAB decision in an IPR proceeding upholding as not unpatentable claims relating to stable nucleic acid-lipid particles (SNALP). ²⁰ A SNALP is a form of lipid nanoparticle (LNP) that can be used to deliver a nucleic acid, such as an interfering RNA. RNA interference (RNAi) is a biological process in which recognition of double-stranded RNA leads to posttranscriptional suppression of gene expression. Moderna asserted as a basis for standing that there was a substantial risk that the patent owner (Arbutus) would assert the patent in an infringement suit targeting Moderna’s COVID-19 vaccine. In connection with its burden to show standing, Moderna supplemented the record with a declaration from its Senior Vice President and Deputy General Counsel (Mr. Ryan) describing Moderna’s work to harness its “proprietary mRNA technology, delivery technologies, and manufacturing processes to develop its COVID-19 vaccine, mRNA-1273. The court also deemed relevant the company’s plans to release a COVID-19 vaccine, its emergency use authorization, and its subsequent commercial shipments of the vaccine.

The declaration listed a series of public statements made by Arbutus in 2017 regarding the alleged extensive scope of its patent coverage over virtually all LNP delivery systems. Mr. Ryan quoted a statement from former Arbutus CEO Mark Murray in Forbes Magazine that Arbutus “invented, developed and dominate[s] the field of LNP.” Furthermore, Mr. Ryan attested that Arbutus and its affiliates had consistently taken the position with Moderna that Moderna would requires a license to Arbutus’s patents, including the challenged patent.

The court held that Moderna had demonstrated enough of a risk that it will be faced with an infringement suit based on the combination of its own activities in developing the COVID-19 vaccine, Arbutus’s broad public statements about its extensive patent coverage in this area, and Arbutus’s refusal to grant a covenant not to sue. The court noted that:

On the other hand, in a number of cases the Federal Circuit has found that potential infringement liability asserted by a petitioner seeking to appeal an adverse decision of the PTAB lacked sufficient particularity or concreteness to establish standing.

In Allgenesis Biotherapeutics Inc. v. Cloudbreak Therapeutics, LLC, for example, an IPR petitioner (Allgenesis) sought to invalidate patent claims directed towards the use of nintedanib (a multikinase inhibitor) for the treatment of pterygium. ²² Pterygium is an eye condition in which a tumor-like growth extends from the nasal or temporal side of the eye to the cornea. The PTAB held that Allgenesis had failed to prove that the claims are unpatentable, and the Federal Circuit dismissed Allgenesis’s appeal for failure to establish an injury in fact sufficient to confer standing.

In support of standing, Allgenesis submitted a declaration from its Vice President of Finance, Jack Chang. Mr. Chang testified that Allgenesis had been and was continuing to develop formulations of nintedanib for the treatment of pterygium and “reasonably expects that Cloudbreak will seek to enforce [the ‘820 patent] against any product brought to market.” However, the Federal Circuit found that the declaration failed to identify any specific, concrete plans for Allgenesis to develop a nintedanib product that might implicate the unsuccessfully challenged claims.

Although Mr. Chang testified that “Allgenesis is engaged in research and clinical trials” to develop its nintedanib product, the only evidence of this engagement he pointed to in his declaration was a Phase II clinical trial completed over three years earlier, and a related 2020 publication. He did not identify any of Allgenesis’ development activities since the completion of its Phase II trial in 2020 or its plans for future clinical development. For example, he had not identified any plans to conduct Phase III trials or seek FDA approval. Instead, he made more generic statements such as “Allgenesis has not abandoned its development of nintedanib and is continuing to devote resources to the development of this project.” The court found this testimony to be conclusory and insufficient to establish that Allgenesis has any concrete plans to develop and bring to market a nintedanib treatment for pterygium. The court acknowledged that Allgenesis had asserted in its briefing and at oral argument that it plans to engage in Phase III trials, but found this to be insufficient given the lack of record support for the assertion. In particular, Mr. Chang’s declaration made no mention of phase III trials.

In JTEKT Corp. v. GKN Auto. LTD., the Federal Circuit also found that a petitioner had failed to establish an actual injury sufficient to confer Article III standing to appeal of an adverse IPR decision. ²³ Although the in petitioner (JTEKT) had submitted two declarations to the effect that the two parties were competitors, in a general sense, and that JTEKT had plans to produce a product that might lead to charges of patent infringement, JTEKT had expressly conceded that no product had been finalized. JTEKT’s proposed product was in development and, according to JTEKT, “will continue to evolve.” The declaration of JTEKT’s Chief Engineer admitted that “JTEKT is [still] currently validating its design, including tuning and conducting customer demonstrations. … [t]he concept will continue to evolve and may change until it is completely finalized.” While expressing concern about a “potential risk of infringement,” JTEKT had repeatedly stressed that “[b]ecause JTEKT has not yet developed a final product, there is nothing that can be analyzed for infringement.” One of the declarants admitted that “because the product was not—and is not—yet finalized, JTEKT cannot definitively say whether or not it will infringe the ‘440 patent and the potential risk of infringement … is impossible to quantify at this time.” JTEKT’s declarations only went so far as to state that “the general features of JTEKT’s current concepts [are] similar enough to the features of the ‘440 patent,” to justify filing the IPR to “negat[e] any potential risk for JTEKT … down the line,” and that “JTEKT determined that the ‘440 patent posed a risk to future development significant enough to warrant filing the IPR.” While the court acknowledged that IPR petitioners need not concede infringement to establish standing to appeal, it concluded that JTEKT has not established that it had a product at a sufficiently advanced stage of development that would create a concrete and substantial risk of infringement or will likely lead to claims of infringement.

Interestingly, in ModernaTx, Inc. v. Arbutus Biopharma Corp.(ModernaTx II), decided the same day as ModernaTx I, the Federal Circuit found that Moderna did not have standing to appeal a PTAB decision upholding other challenged patent claims owned by Arbutus. ²⁴ The patent at issue in ModernaTx II is also directed to SNALPs. The divergent outcomes in the two cases appear to have hinged upon the timing of the PTAB decisions, and the effect of that timing on the dates on which the appeals were initiated. In ModernaTx I, the petitioner was appealing a PTAB decision from July 2020, and standing was found based upon Moderna’s development of an mRNA-based COVID-19 vaccine, which were well underway at the time the appeal was filed. In contrast, ModernaTx II involved the appeal of a September 2019 PTAB decision, and at the time the appeal was filed, Moderna apparently had yet to embark upon its development of the COVID-19 vaccine. In fact, in January 2020, in opposition to the patent owner’s motion to dismiss the appeal, Moderna had argued that it standing was not based on the threat of an impending infringement suit, but rather on the financial burden of sublicensing the patent for use in other research projects pre-dating the company’s COVID-19 vaccine development activities.

In Momenta Pharms., Inc. v. Bristol-Myers Squibb Co., a PGR petitioner (Momenta) was developing a biosimilar for a drug made by the patent owner (BMS), another pharmaceutical company. ²⁵ During the litigation, Momenta’s biosimilar failed Phase I clinical trials, and Momenta issued a press release noting that it intended “to exit its participation in the development of … five biosimilar programs,” including the program related to BMS’s product. The Federal Circuit rejected Momenta’s attempt to establish standing because Momenta “made clear that no concrete plans [were] afoot.”

In Incyte Corp. v. Sun Pharm. Indus., Inc., the petitioner (Incyte) challenged patent claims directed toward methods that require: (1) treating a hair loss disorder like AA (2) using deuterated ruxolitinib, and (3) administering it at a specific dose of either 16 or 24 mg/day. ²⁶ The Federal Circuit held that in order to have standing to appeal the PTAB’s decision, Incyte was required to show that it had concrete plans to develop and bring to market a deuterated ruxolitinib product to treat hair loss and that the product will be administered at 16 or 24 mg/day.

In an attempt to show that it had concrete plans to develop and bring to market a deuterated ruxolitinib product, Incyte relied on declarations in which declarants testified that, since the early 2000s, Incyte has made substantial investments in developing and obtaining FDA approval for ruxolitinib-based drugs, and that at the time the appeal was filed, Incyte had allocated funding for the development and launch of a deuterated ruxolitinib product to treat AA and had experience developing non-deuterated ruxolitinib products.

The court, however, found that Incyte’s declarations merely showed that Incyte had allocated a small amount of funds one month before filing this appeal for initial development of two topical drugs to treat AA: one with the active ingredient implicated by the claims at issue, i.e., deuterated ruxolitinib, and the other with non-deuterated ruxolitinib, which undisputably would not be covered by the claims at issue. Incyte’s testimony had not identified what portion of the initial funding was allocated to either product. The court found that the testimony showed that, when it filed this appeal, Incyte faced significant manufacturing, formulation, testing, and regulatory hurdles to bring either product to market.

Although Incyte’s development plans expressed an intent to create a product that runs a substantial risk of infringement if it is able to clear all development hurdles, secure FDA-approval, and bring its product to market, the court found that this evidence was too speculative to show concrete plans to develop a deuterated ruxolitinib product to treat hair loss at the specified dosages. ²⁷ The court concluded that, as of the time the appeal was filed, the record created, at best, a wish to enter the market with no concrete plan how to do so.

The court further found that Incyte had failed to demonstrate concrete plans to develop and market a deuterated ruxolitinib product that would be administered at the claimed dosage

Although Incyte argued that the company anticipated spending significantly more money in the coming years—after it concluded initial development activities—to formulate, test, and gain regulatory approval, the court found this argument to be unavailing because it does not change any of the facts as of the date Incyte filed its appeal. Incyte also argued that its substantial investment into researching and developing ruxolitinib-based products demonstrated its concrete, non-speculative plans to develop a deuterated ruxolitinib product. Again, the court disagreed, explaining that while “significant involvement in research and commercial activities involving the claimed subject matter” supports standing, ruxolitinib is not the claimed subject matter, and Incyte had failed to prove that its prior research and development efforts for a different compound not covered by the claims at issue overcame its lack of development activities for the claims at issue.

II. COMPETITOR STANDING DOCTRINE

The doctrine of competitor standing “relies on economic logic to conclude that a plaintiff will likely suffer an injury-in-fact when the government acts in a way that increases competition or aids the plaintiff’s competitors.” ²⁸ The Federal Circuit has stated that standing based on competitive harm requires “the challenged government action nonspeculatively threatened economic injury to the challenger by the ordinary operation of economic forces.” ²⁹

In Phigenix, Inc. v. Immunogen, Inc., the petitioner (Phigenix) argued that even though it did not face any risk of infringing the challenged patent, and the company did not otherwise plan to take any action that would implicate the patent, such as by licensing the patent, the company had suffered an actual economic injury because the patent increased competition between itself and the patent owner (ImmunoGen), and that this increase in competition represents a cognizable Article III injury. ³⁰ Phigenix held its own patent (the “534 patent”), in which it alleged “covers” the subject matter claimed in the patent that was challenged in the IPR proceeding (the “856” patent). Phigenix argued that it was Immunogen’s “licensing competitor,” and that the existence of ImmunoGen’s ‘856 patent had encumbered Phigenix’s licensing efforts, while ImmunoGen purportedly was receiving millions of dollars in licensing revenue. Phigenix contended that “[t]he most reasonable and commonsense conclusion is that at least a portion of that licensing revenue would inure to Phigenix if the ‘856 patent were invalidated.”

The court rejected these assertions, finding that Phigenix had failed to substantiate these arguments with record evidence developed before the PTAB. The court explained:

In AVX Corp. v. Presidio Components, Inc., an IPR petitioner (AVX) argued that, under the doctrine of “competitor standing,” a PTAB decision upholding certain challenged patent claims injured AVX because the decision reduced AVX’s ability to compete with the patent owner (Presidio). ³² The Federal Circuit rejected this argument, finding that the “competitor standing” cases cited by AVX arose in nonpatent contexts, and that the rationale for finding standing in those nonpatent cases did not carry over to support standing in the case at hand, where AVX had no present or nonspeculative interest in engaging in conduct even arguably covered by the patent claims at issue.

The court pointed out that one of the cases cited by AVX, Canadian Lumber Trade Alliance v. United States, involved the interplay between the North American Free Trade Agreement and the Continued Dumping and Subsidy Offset Act, which distributes antidumping and countervailing duties to harmed domestic producers. ³³ Other cases in which the competitor standing doctrine was found applicable involved regulatory law. The court found that, in all the cases cited by AVX in which standing rested on competitive harm, the challenged government action nonspeculatively threatened economic injury to the challenger by the ordinary operation of economic forces. In contrast, the court found that the government action of upholding specific patent claims is quite different, not addressing prices or introducing new competitors, but rather giving exclusive the rights over precisely define product features. According to the court, that sort of feature-specific exclusivity right does not, by the operation of ordinary economic forces, naturally harm a firm just because it is a competitor in the same market as the beneficiary of the government action, i.e., the patentee.

The court acknowledged that a patent claim could have a harmful competitive effect on a would-be challenger if the challenger was currently using the claimed features or nonspeculatively planning to do so in competition, i.e., if the claim would block the challenger’s own current or nonspeculative actions in the rivalry for sales.

Taking all of AVX’s allegations as true, the court concluded that AVX has not shown that it was engaging in, or had nonspeculative plans to engage in, conduct even arguably covered by the upheld patent claims. AVX had not pointed to a product at any stage of development that might implicate the upheld claims. Nor had it presented allegations that it faces any risk of infringing the upheld claims, that it is a prospective licensee of the upheld claims, or that it otherwise plans to take action that would implicate those claims. To the contrary, AVX had failed to establish that it was undertaking or planning activity that gave it a concrete stake in obtaining an adjudication of unpatentability of the upheld claims.

Given AVX’s failure to allege current or nonspeculative activities of its own that would arguably fall within the scope of the upheld claims, the court concluded that AVX had not identified sufficient harm to it, competitive or otherwise, as a result of the PTAB’s decision. Notably, AVX offered no persuasive argument as to how the PTAB’s decision was likely to strengthen Presidio’s ability to compete so as to cause harm to AVX. The court pointed out that:

In Gen. Elec. Co. v. United Techs. Corp., the IPR petitioner (GE) invoked the competitive standing doctrine, but the Federal Circuit found the purported competitive injuries to be too speculative to support constitutional standing. ³⁵ The challenged patent was generally directed to a gas turbine engine designed for use in airplanes and having a “a geared turbofan engine with a variable area fan nozzle,” i.e., a “geared-fan engine design.” GE submitted two declarations of GE’s Chief IP Counsel and General Counsel of Engineering for GE Aviation, Mr. Long. These declarations explained that the commercial aircraft engine business operates on a long life-cycle and that airplane engines are designed to meet certain specifications for certain aircraft. Because the design of aircraft engines can take eight years or more, GE develops new engines based on old designs. In the 1970s, GE developed a geared turbofan engine with a variable area fan nozzle for NASA. GE asserted that the patent impedes its ability to use its 1970s geared-fan engine design as a basis for developing and marketing future geared turbofan engine designs with a variable area fan nozzle, thereby limiting the scope of GE’s engine designs and its ability to compete in a highly regulated industry. Mr. Long also declared that designing around the patent restricts GE’s design choices and forced GE to incur additional research and development expenses.

Mr. Long further declared that Boeing had requested information from GE and several of its competitors for engine designs for future Boeing aircrafts, and regarding designs for both geared-fan engines and direct-drive engines. In response to Boeing’s request, GE researched a geared-fan engine design that would potentially implicate the challenged patent. GE asserts it expended time and money researching and further developing this technology for the potential business opportunity with Boeing. Ultimately, GE chose not to submit to Boeing a geared-fan engine design and instead submitted a design for a direct-drive engine of the type used in GE’s current engine designs. The record did not indicate why GE submitted a direct-drive engine design instead of a geared-fan engine design. Nor did Mr. Long state whether GE lost this particular bid. He did contend that to maintain GE’s competitive position, it needs to be able to meet customer needs with a geared-fan engine design that might implicate the challenged patent.

The court reviewed the declarations and GE’s arguments, and concluded that GE’s purported competitive injuries were too speculative to support constitutional standing. The court noted that Mr. Long’s declarations did not assert that GE lost bids to customers because it could offer only a direct-drive engine design, nor did he attest that GE submitted a direct-drive engine design to Boeing because of the ‘605 patent. Although Boeing may have asked for information regarding a possible geared-fan engine design, the court found no evidence that Boeing demanded or required an engine covered by the challenged patent claims, and there was no indication that GE lost the Boeing bid. The evidence showed that GE submitted to Boeing a direct-drive engine design, but there was no indication as to why it opted not to submit a geared-fan engine design. There was also no evidence that GE 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 concluded that GE had asserted only speculative harm, untethered to the patent, and without a real, particularized injury, GE lacked standing to appeal the IPR decision.

The GE court explained that for the competitor standing doctrine to apply, the government action must change the competitive landscape by, for example, creating new benefits to competitors, i.e., the government action must alter the status quo of the field of competition. Here, the court concluded that the PTAB’s upholding of the challenged claims did not change the competitive landscape for commercial airplane engines, and for that reason, the court saw no competitive harm to GE sufficient to establish standing to appeal.

In Incyte Corp. v. Sun Pharm. Indus., Inc., the Federal Circuit also rejected the Incyte’s assertion that it had suffered an injury in fact based on the doctrine of competitor standing. ³⁶ Specifically, Incyte argued that Sun was developing a deuterated ruxolitinib product that will directly compete with Incyte’s products under development and those licensed to other manufacturers. But the court rejected this argument, stating that Federal Circuit caselaw, and in particular the AVX decision, had firmly established that if the petitioner is not currently engaged in infringing activity and has no concrete plans to do so in the imminent future, a PTAB decision to uphold a challenged patent does not invoke the competitor standing doctrine. As discussed above, the court further found Incyte has not shown that it was currently engaging in, or had nonspeculative plans to engage in, conduct covered by the claims of the challenged patent. For that reason, the court concluded that Incyte was precluded from relying on the competitor standing doctrine to confer standing.

III. STATUTORY ESTOPPEL

The estoppel provisions of 35 USC § 315(e) apply after a final written decision is issued in an IPR by the PTAB. They bar the IPR petitioner—as well as any real party in interest or privy—from raising invalidity arguments in future proceedings that were or reasonably could have been raised during the IPR. This estoppel applies to both proceedings before the USPTO, e.g., another IPR, and to civil litigation or ITC proceedings. The corresponding estoppel provisions of 35 U.S.C. § 325(e) impose the same restriction on PGR petitioners and their privies. This statutory estoppel is intended to promote efficiency and finality by preventing repetitive challenges based on prior art that could have been addressed during the AIA trial proceeding.

Petitioners have argued that the Patent Act’s estoppel provisions constitutes an injury in fact sufficient to warrant standing to appeal an adverse decision of the PTAB. As described in this section of the article, the Federal Circuit has for the most part rejected this argument, although the court issued a decision in 2018, Altaire Pharms., Inc. v. Paragon Bioteck, Inc., that allowed it some credence. ³⁷

In Consumer Watchdog v. Wisconsin Alumni Rsch. Found., a party that requested inter partes re-examination (the pre-AIA predecessor to IPR proceedings) of a patent attempted to appeal a decision by the PTAB upholding the validity of patent claims relating to human embryonic stem cells, arguing that estoppel provision provided under Section 317(b) of the pre-AIA Patent Act and applicable to inter partes re-examination differentiated the requester’s interest in the appeal from that of the public, thereby creating an injury in fact. ³⁸

In a decision denying the requester standing, the Federal Circuit rejected this estoppel-based argument. The requester in this case was a public interest group that wanted to invalidate the patent, but it was not a potential infringer of the patent, so the only potential impact of the estoppel would be with respect to the requester’s ability to request another inter partes re-examination of the patent. The court pointed out that the requester was not engaged in any activity that would give rise to a possible infringement suit, nor had it provided any indication that it would file another request seeking to cancel claims at the Patent Office. The court concluded that the requester only had a “general grievance” against the patent, and that the “conjectural or hypothetical” nature of any injury flowing from the estoppel provisions was insufficient to confer standing. The court did, however, explicitly “leave[] it to future panels to decide whether, under other circumstances, the preclusive effect of the estoppel provisions could constitute an injury in fact.”

In Phigenix, Inc. v. Immunogen, Inc., an IPR petitioner (Phigenix) argued that the estoppel provisions of 35 U.S.C. § 315(e) created an injury in fact for purposes of standing to appeal an adverse PTAB decision. ³⁹ Phigenix held its own patent (the “534 patent”) which it alleged “covers” the subject matter claimed in the patent (the “856” patent) that was challenged in the IPR proceeding. Phigenix argued that it was a “licensing competitor” of the owner of the challenged patent (Immunogen), and that with the PTAB ruling intact the petitioner was no longer able to provide a “full warranty that the practice of Phigenix’s ′534 patent will not infringe ImmunoGen’s ′856 patent.” Citing U.C.C. § 2–312, Phigenix argued that representations and warranties non-infringement are frequently incorporated by default in intellectual property-related contracts. Phigenix pointed out that, in contrast, the nonprofit group in Consumer Watchdog would never be affected by the estoppel because the group had no relevant intellectual property to license. According to Phigenix, the estoppel provision negatively affected the ability of Phigenix to license its intellectual property portfolio, thus reducing its value.

However, the Federal Circuit rejected this argument. The court provided no real explanation for this decision, beyond a statement that “in Consumer Watchdog, we explained that a similar estoppel provision does not constitute an injury in fact when, as here, the appellant is not engaged in any activity that would give rise to a possible infringement suit. We see no reason to reach a different conclusion on the facts before us.” ⁴⁰ I think that the Phigenix court mis-states the court’s earlier statement in Consumer Watchdog. The Consumer Watchdog court never said that an appellant must be engaged in activity that would give rise to a possible infringement suit in order for the estoppel provision to constitute an injury in fact. Rather, the court pointed out that not only was the requester not engaged in any activity that would give rise to a possible infringement suit, the requester had also not provided any indication that it would file another request seeking another inter partes re-examination of the claims.

In JTEKT Corp. v. GKN Auto. LTD., the petitioner (JTEKT) argued that the creation of statutory estoppel based on its participation in the IPR constitutes a separate, and independent, injury in fact. ⁴¹ But the Federal Circuit rejected this argument, citing Phigenix for the proposition that “estoppel provisions do not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit.” As was the case in Phigenix, the court offered no further insight or rationale for this determination.

In AVX Corp. v. Presidio Components, Inc., an IPR petitioner (AVX) argued that it was injured by the Board’s rejection of its obviousness challenges to the claims at issue because the statutory estoppel provision, 35 U.S.C. § 315(e), would prevent it from asserting the same challenges—the merits of which will not have been reviewed by an Article III court if it was determined that AVX lacked Article III standing—if the patent owner (Presidio) were to assert those claims against AVX in the future. ⁴² The Federal Circuit rejected AVX’s argument for standing on this basis, again citing to Phigenix, and stating that in that decision the court “held that § 315(e) does not constitute an injury in fact when, as here, the appellant is not engaged in any activity that would give rise to a possible infringement suit.” But unlike the case in JTEKT Corp., the AVX court does provide some further rationale for its position:

In a 2018 decision, Altaire Pharms., Inc. v. Paragon Bioteck, Inc., the Federal Circuit concluded that an unsuccessful PGR petitioner (Altaire) had experienced an injury in fact sufficient to confer standing due to a sufficient imminent threat of infringement litigation, and that this injury had been “compounded by the likelihood that it would be estopped from arguing that the [challenged] patent would have been obvious over [the asserted prior art].” ⁴⁴ The court acknowledged its statement in Phigenix that “a similar estoppel provision does not constitute an injury in fact when the appellant is not engaged in any activity that would give rise to a possible infringement suit,” but found that the injury experienced by Altaire in this case differed materially from the injuries alleged by the petitioners in Phigenix and Consumer Watchdog. The court explained that in this case Altaire’s injury was imminent, whereas the appellant in Consumer Watchdog “only alleged a general grievance concerning” the challenged patent, and the appellant in Phigenix only alleged its aspirations of licensing its patent portfolio.

Significantly, although the Altaire court found that the estoppel effect in that case provided further support for the claimed injury in fact, in view of the threat of infringement litigation, the court explicitly declined from deciding whether the potential effect of the statutory estoppel provision would be sufficient to independently to establish standing in the absence of a sufficient risk of infringement liability.

IV. JUDGE HUGHES’S CONCURRENCES

Writing in concurrence with the Federal Circuit’s 2019 decision in General Electric Co. v. United Technologies Corp., Judge Hughes took issue with the Federal Circuit’s approach to the doctrine of competitor standing, arguing that the Federal Circuit’s approach to the doctrine is “patent-specific” and “out of step with Supreme Court precedent.” Judge Hughes found that the Supreme Court has repeatedly held that government actions that alter the competitive landscape of a market cause competitor’s probable economic injury sufficient for Article III standing, and that a PTAB decision erroneously upholding a competitor’s patent in an IPR is not meaningfully different from the type of government action held to invoke competitor standing in those cases.

Judge Hughes takes particular issue with the Federal Circuit’s decision in AVX Corp. v. Presidio Components, Inc., ⁴⁵ which was decided shortly before General Electric. As discussed earlier in this article, AVX Corp. held that a PTAB decision to uphold a challenged patent does not invoke the competitor standing doctrine if the petitioner is not currently engaged in infringing activity and has no concrete plans to do so in the imminent future. AVX Corp. found that the “government action at issue [in an IPR] is quite different” from the government action in other cases applying competitor standing. ⁴⁶ According to AVX Corp., the “feature-specific exclusivity right [of a patent] does not, by the operation of ordinary economic forces, naturally harm a firm just because it is a competitor in the same market as the beneficiary of the government action (the patentee).” But Judge Hughes complained that it was wrong for the court to adopt this patent-specific approach, which essentially sets patents apart from other applications of competitor standing on the basis that the patent’s exclusivity right is different than other interests. He argues that the Supreme Court has made clear that “patent laws are governed by the same common-law principles, methods of statutory interpretation, and procedural rules as other areas of civil litigation.” ⁴⁷

Judge Hughes states in his General Electric concurrence that, were it not for the precedent established by AVX Corp., he would have concluded that GE possesses Article III standing. He explains that the facts of General Electric serve to illustrate why AVX Corp.’s patent-specific approach is incorrect:

Judge Hughes opined that this costly competitive burden clearly constituted a concrete and particularized harm to GE, and that GE certainly had a personal stake in the validity of a patent owned by its direct competitor covering technology over which the parties compete.

Judge Hughes also argued in his GE concurrence that the estoppel provisions of 35 U.S.C. § 315(e) have an especially significant impact where the parties are direct competitors. He notes that the Federal Circuit has yet to clarify whether § 315(e) would estop an IPR petitioner who lacked standing to appeal an unfavorable Board decision, ⁴⁹ and until the court does, UTC’s patent serves as an even greater competitive deterrent for GE, given the uncertainty as to whether it is estopped from raising an invalidity defense on any ground “that [it] raised or reasonably could have raised during” its IPR. ⁵⁰ According to Judge Hughes, this uncertainty makes facing potential infringement litigation significantly more impactful on GE’s future design choices. While he agrees that 35 U.S.C. § 315(e) estoppel alone does not create an injury-in-fact, he argues that its potential effects in this case underscore the problems with the Federal Circuit’s “increasingly narrow approach to Article III standing.”

Judge Hughes followed up his GE concurrence with a similar concurrence in Incyte v. Sun, reiterating his disagreement with AVX Corp. and expanding upon some of the points he made in GE. While he agrees with the Incyte majority that Federal Circuit precedent dictates the conclusion that Incyte lacked standing in this case, he found it “difficult to imagine a more compelling set of facts for establishing an injury in fact where the patent challenger has such a significant personal stake in the outcome.”

Judge Hughes argues that the “special standing rule for patent cases” established by AVX Corp. is too restrictive, improper, and especially problematic in the pharmaceutical space. In particular, he finds that Federal Circuit caselaw more often finds insufficient injury in fact, and thus, no standing, in cases that implicate pharmaceutical patents than in cases that implicate patents from other industries. He explains that:

V. CONCLUDING THOUGHTS

It remains to be seen whether Judge Hughes’s views on Article III standing in the context of AIA trial proceedings will gain traction at the Federal Circuit, or perhaps even garner the attention of the Supreme Court. In 2007, the Supreme Court took up the issue of Article III standing in patent declaratory judgment actions, significantly lowering the threshold in MedImmune, Inc. v. Genentech, Inc. ⁵² Prior to MedImmune, the Federal Circuit had applied the “reasonable apprehension of suit” test to determine standing. Under that test, a licensee that continued to pay royalties was generally not seen as under threat of suit, and therefore lacked standing. The Supreme Court rejected this strict requirement and held that a justiciable case or controversy can exist even if the licensee is in full compliance with the license agreement (i.e., still paying royalties). More broadly, the test for Article III standing in declaratory judgment actions is whether there is a real and immediate dispute. The appellant does not necessarily have to show that there is any likelihood of being sued for infringement.

MedImmune applies to declaratory judgment actions, which can function as an alternative to an AIA trial proceeding, allowing a third-party to challenge the validity of patent claims without waiting to be sued for infringement. The Supreme Court, or the Federal Circuit (perhaps en banc) could likewise recalibrate the judicial interpretation of standing under Article III, perhaps along the lines urged by Judge Hughes.

In his Incyte concurrence, Judge Hughes points out that development of a new pharmaceutical is very expensive, unpredictable, and takes a long time, requiring a great deal of upfront investment. For that reason, he suggests that it is particularly important for pharmaceutical companies to be allowed to challenge a potentially infringed patent early, so as to decide whether it makes sense to invest in the development of a product, rather than requiring the company to wait until late in the development process to ascertain the validity and scope of a patent of concern.

This concern about predictability of patent rights early in the pharmaceutical development process is reminiscent of policy considerations that the Federal Circuit addressed in its 1995 In re Brana decision. ⁵³ Prior to that decision, some PTO examiners were essentially requiring applicants for pharmaceutical patents to present evidence that a potential therapeutic compound was safe and effective in the treatment of humans in order to satisfy patent law’s utility requirement. In In re Brana the Federal Circuit significantly clarified and lowered the threshold for satisfying the utility requirement under 35 U.S.C. § 101 in the context of pharmaceutical and biotechnology inventions. The court explained that proof of a drug’s safety and efficacy is a matter for the FDA, not the PTO, and that the threshold for satisfying the utility requirement is significantly lower than that of FDA marketing approval. The court discussed the policy implications of a higher utility threshold for pharmaceutical inventions, pointing out that a pharmaceutical company would be unlikely to make the substantial investment required to establish the safety and efficacy of a drug without some assurance of patent protection for the drug should it prove successful. Judge Hughes is basically pointing out another facet of this concern about IP predictability in the context of pharmaceuticals—not only is it important for drug developers to have some predictability in terms of their own IP protection, drug developers also have a legitimate interest in ascertaining whether a product under development will infringe someone else’s patent.