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GE’s Supreme Court Appeal Plan Tests Patent Challenge Tactics

Jan. 21, 2020, 11:31 AM

General Electric Co. is poised to ask the U.S. Supreme Court to consider when patent challengers can appeal a loss at the Patent Trial and Appeal Board, drawing attention to a question that can influence companies’ strategies for warding off infringement lawsuits.

The U.S. Court of Appeals for the Federal Circuit held GE lacked standing to appeal the administrative board’s decision to uphold claims in a rival’s jet engine patent. The 2019 ruling underscored that companies who preemptively challenge a patent before being sued may not be able to appeal an unfavorable decision by the Patent and Trademark Office tribunal.

Attorneys say the case is part of a developing area of law that they’re watching closely, because certain clients may hesitate to challenge a patent before getting sued if they can’t appeal a potential future loss. The issue is especially important to drug companies that want to knock out patents so they can launch a new product.

“Standing is putting a damper on people that are preemptively going out and challenging patents,” Michelle Armond, co-founder of the intellectual property litigation firm Armond Wilson LLP, said. “If you take a shot at invalidating a patent and you lose, there is no automatic path up to the Federal Circuit right now.”

GE says the court has adopted a rigid standing rule in patent validity disputes that harms competition. The Supreme Court recently extended to Feb. 12 the deadline for GE to file a petition for review.

Catch-22

With limited exceptions, anyone can challenge a patent’s validity at the PTAB in what’s known as an inter partes review. But the U.S. Court of Appeals for the Federal Circuit has said those who want to appeal the board’s final validity decision must have Article III standing, which requires a concrete injury related to the patent.

Establishing standing hasn’t been an issue for companies sued over a disputed patent, or for those whose patent was invalidated. But there are gray areas for petitioners trying to get in front of a potential infringement fight with a competitor by launching a PTAB challenge.

The Federal Circuit sharpened those lines last year, making clear that the existence of a competitive relationship by itself isn’t enough to establish standing in an IPR appeal. Ropes & Gray LLP partner Matthew Rizzolo said it can be a Catch-22 for some companies.

“You’re allowed to use the IPR statute to try to clear the market of a potential blocking patent, but if you lose at the PTAB, then you’re not allowed to appeal,” Rizzolo, who works with technology companies in intellectual property litigation, said.

To find standing, even in cases between direct competitors, attorneys say the Federal Circuit appears to want an admission that the challenger is already infringing the patent or is likely to infringe in the near future. Those aren’t statements many companies want to make.

“That’s the challenge here—what could a petitioner say short of I’m infringing, or I am likely to infringe, or I am going to infringe in the near future, that would get them Article III standing,” Pauline Pelletier, a director in the trial & appellate group at Sterne Kessler Goldstein & Fox PLLC, said. “That’s one of the open questions that parties are waiting to see as this body of case law develops.”

‘Frustrates Outside Scrutiny’

GE went to the Federal Circuit after the PTAB found it hadn’t shown certain claims in a United Technologies Corp. patent are invalid. GE and United Technologies unit Pratt & Whitney are part of a small group of companies that compete to make jet engines.

GE argued the patent impacted its ability to develop certain engines and said it devoted resources to considering alternative designs. But the court tossed the appeal in July, after finding GE hadn’t suffered a competitive harm that could establish standing.

Judge Todd Hughes wrote a separate opinion, agreeing that Federal Circuit precedent required the panel to dismiss GE’s appeal. But the judge said that precedent was wrong.

“As Judge Hughes recognized, the Federal Circuit has taken ‘a patent-specific approach to the doctrine of competitor standing that is out of step with Supreme Court precedent,’” GE wrote in a December filing asking the high court for more time to file a petition for a writ of certiorari.

GE says other federal appeals courts take a more flexible approach when considering the competitive harms that can establish standing. It also noted statutory language in patent law that says a party to an IPR “who is dissatisfied” with the PTAB’s final decision may appeal.

“The Federal Circuit’s rule thus frustrates precisely the outside scrutiny of the USPTO’s determinations that Congress intended to foster: when a competitor is unable to convince the USPTO to reverse its own patent determinations in administrative proceedings, the Federal Circuit’s rule ensures that judicial review will frequently be unavailable,” GE wrote.

The case is:General Electric Co v. United Techs. Corp, U.S., No. 17-02497, deadline extension for cert petition granted 1/6/20

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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