AVX Corp. v. Presidio Components, Inc. (Fed. Cir. 2019)

By Josh Rich --

AVX Corporation and Presidio Components are long-standing competitors in the market for electronic components, including capacitors.  Their competition has caused animosity, which in turn has resulted in patent infringement litigation.  And that litigation led AVX to challenge one of Presidio's patents, U.S. Patent No. 6,661,639, through inter partes review.  The Patent Trial and Appeal Board rendered a split decision, and AVX appealed to the Federal Circuit.  Rather than a substantive resolution on the merits, however, the Federal Circuit decided that AVX lacked standing and dismissed the appeal.

Over the past five years, the Federal Circuit has begun outlining the requirements for standing for appeals of IPRs.  Standing is one of the constitutional requirements for a "case or controversy" that can be decided by a Federal court -- it ensures that there is actual, redressible harm that is being litigated.  Specifically, standing requires (1) an "injury in fact," (2) "a causal connection between the injury and the conduct complained of," and (3) a likelihood that "the injury will be redressed by a favorable decision."[1]  Standing must be shown for a Federal court to exercise jurisdiction over a case, including when the Federal Circuit hears appeals of IPRs.

In contrast, there is no need to show any harm to bring an IPR in the Patent and Trademark Office.  As a creation of statute (specifically, the America Invents Act) to be decided by an administrative agency, IPRs can be brought by anyone with an interest in starting a fight and the willingness to pay the fees.  That is, as the Supreme Court held in Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143-44 (2016), there is no requirement for standing in an IPR because the requirements of Article III of the U.S. Constitution do not apply to administrative agency proceedings.

Thus, AVX was free to bring its IPR and fight before the PTAB.  But when the PTAB rendered a split decision, invalidating claims 13-16 and 18 of the '639 patent while leaving the other eighteen claims intact, AVX filed an appeal to seek invalidation of the entire patent before the Federal Circuit.  And when the Federal Circuit took on the case, AVX was required to show that it had standing under Article III.  AVX had a statutory right to appeal but that was a required, yet not sufficient, condition for an appeal because Congress cannot supersede the Constitution by statute.

AVX raised two arguments for standing.  First, it argued that it was injured by the PTAB's failure to invalidate all of the claims because it would be statutorily estopped from arguing invalidity in any litigation over products it develops in the future.  AVX did not argue that any of its current offerings would infringe the '639 patent; rather, it was concerned about litigation over as-yet-undeveloped products that it might choose to bring to market in the future.

AVX argued that the Federal Circuit should exercise jurisdiction over its appeal because it would otherwise be estopped from asserting the invalidity of the surviving claims in later infringement litigation (which it foresaw because of the animosity between the parties).  Section 315(e) of the Patent Act estops a petitioner who receives an unfavorable Final Written Decision from bringing another U.S. Patent and Trademark Office proceeding or asserting invalidity in Federal Court or the U.S. International Trade Commission based on any ground that the petitioner "raised or reasonably could have raised" during the IPR.  AVX read that provision as establishing that it would be barred from raising invalidity in any future litigation despite having no right to appeal.  As prior panels had done several times over the years, the Federal Circuit found that § 315(e) did not itself create an injury in fact if AVX was "not engaged in any activity that would give rise to a possible infringement suit."[2]

Tantalizingly, the panel refused to say whether AVX's concern was well-founded -- whether it would actually be estopped from asserting invalidity in later litigation.  To the contrary, it noted that traditional principles provided that neither claim preclusion nor issue preclusion would apply when appellate review of a decision is unavailable.[3]  But the panel refused to decide whether the traditional principles would apply under these circumstances, as the issue had not been squarely presented to it.

Second, AVX argued that it had "competitor standing" to challenge government action.  Competitor standing has been recognized in a series of cases where government regulatory actions that "alter competitive conditions" may give rise to injuries that suffice for standing.  But it does not apply in every case where the competitive landscape is altered, only when the decision provides benefits to an existing competitor or expands the number of entrants into the market.  Here, the panel found, the situation was fundamentally different.  The government action was upholding patent claims, not addressing prices or introducing new competitors.  And the patent claims wouldn't have any harmful effect on AVX now because it had no product that arguably fell within their scope and no concrete plans for future activity that would fall within their scope.  That is, unlike the cases in which a concrete harm could be identified as either existing or coming up inevitably, AVX's assertion of a possibility of future harm was overly speculative, despite the past fights between the parties.

Finally, the panel rejected any argument that the continued existence of patent claims would inherently provide AVX with a competitive disadvantage.  The claims did not permit Presidio to come to market with a product, they only allowed Presidio to seek to prevent others from entering the market with products within the scope of those claims.  And the chilling of other competitors would not harm AVX; to the contrary, it would tend to help it by reducing competition.  Thus, the panel found that there was no basis for standing and therefore no jurisdiction to hear the appeal.

AVX Corp. v. Presidio Components, Inc. (Fed. Cir. 2019)
Panel: Circuit Judges Newman, O'Malley, and Taranto
Opinion by Circuit Judge Taranto

[1] Slip op. at 5 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 5601-61 (1992)).

[2] Slip op. at 8 (quoting Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168, 1175-76 (Fed. Cir. 2017); Consumer Watchdog v. Wis. Alumni Research Found., 753 F.3d 1258, 1262 (Fed. Cir. 2014); citing JTEKT Corp. v. GKN Automotive Ltd., 898 F.3d 1217, 1220 (Fed. Cir. 2018).

[3] Slip op. at 8-9 (citing Penda Corp. v. United States, 44 F.3d 967, 973 (Fed. Cir. 1994); Kircher v. Putnam Funds Tr., 547 U.S. 633, 647 (2006); SkyHawke Techs., LLC v. Deca Int'l Corp., 828 F.3d 1373, 1376 (Fed. Cir. 2016)).

Comments

[Skeptical]

It may be interesting to contrast this clear and direct decision with some of the arguments that have been made seeking to bootstrap the NON Article III portion of the dual-zone AIA created mechanism as a means to avoid having actual Article III standing.

[Jonathan]

Unfortunately the court’s “competitor standing” analysis is erroneous. Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150 (1970) (7:2) (Majority: Douglas, J.; Brennan and White, JJ. concurring in the result but dissenting in the treatment of the standing question) (Justices Brennan and White staunchly support the injury in fact test expressed in the Majority opinion written by Douglas, J.) (9:0); Companion case: Barlow v. Collins, 397 U.S. 159 (1970) (Originally Brennan, J. was assigned to write the opinion in Barlow) (Note: Dissenting Brennan, J. in Barlow/Data Processing is more liberal than Douglas, J. writing for the Majority in Data Processing/Barlow) (Court finding Competitor standing).

First, Data Processing is generally acknowledged as establishing the modern standing doctrine, and in Data Processing the Supreme Court recognized and finds competitor standing. See id. at 152. Second, the Data Processing Court had “no doubt” that the plaintiff suffered “injury in fact, economic or otherwise” because the alleged increased competition “might entail some future loss of profits.” The nature of injury in fact in Data Processing is seldom discussed at any length either in the briefs or opinions. But a close reading of Data Processing is very instructive and makes clear that court's opinion in AVX is not supported by the facts of Data Processing. In Data Processing the petitioner alleged, as its injury, that the [agency] ruling "might entail some future loss of profits" and that a defendant bank was "performing or preparing to perform services for two customers for whom petitioner... had previously agreed or negotiated to perform such services." These allegations did not involve “actual” injury in fact but rather an entirely speculative detriment/injury/harm: the possible loss of future profits and the possible disruption of relationships which seem to have been in the early (preliminary) negotiation stage. Yet, apparently on the basis of these allegations of possible future harm alone, the Data Processing Court found that "there can be no doubt that the petitioner plaintiffs had satisfied this [injury in fact] test.” Third, since Data Processing, and in all subsequent competitor standing cases with a similar procedural posture, the USSC never mentioned a “nonspeculatively threatened economic injury” requirement. The Data Processing line of cases support a finding of standing on appeal in Avx Corp. v. Presidio Components.

[Skeptical]

Jonathan,

Does that "close reading" move items from the dissent into being some type of holding?

Or should that close reading note that a certain desired view failed (turning a directed majority position writer into being a dissent writer)?

On that last note, this type of "lost majority position writer" status was also evident in what was to be the bookend patent case for Justice Stevens in Bilski (viewing his "concurrence" for what in truth it was: a dissent on what Justice Stevens wanted to do).