Patent Lawsuit Aims at Uncommon Defendant: the US Patent Office

A patent infringement lawsuit filed in late March resembles thousands filed annually: it describes an invention, alleges it was used without permission, and claims the patent owner is entitled to damages.

But unlike most cases, the target isn’t a tech company or other business, but the US Patent and Trademark Office—the very agency that scrutinized and issued the six patents it’s now accused of infringing through two-factor authentication on various agency websites.

The government faces a handful of patent infringement lawsuits each year, but complaints targeting the PTO itself are far more unusual. The lawsuit, from Virginia-based Factor2 Multimedia Systems LLC, is just the second alleging infringement at the PTO out of 51 infringement cases filed against the government since 2014, according to a Bloomberg Law analysis of patent dockets at the US Court of Federal Claims, or CFC, which has jurisdiction over such cases.

Suing the patent office for infringement comes with a particular set of challenges—including assistance from its own patent experts—that will make it more difficult than cases against other agencies, according to Lionel Lavenue, a partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP and former CFC clerk.

“They’ll be able to mount a little better of a defense than a normal agency would,” Lavenue said. But, he added, an infringement judgment against a government agency can pay off given the size of the US government and potential scope of the infringement.

“If one of them hits it could be a lot of money, so I can see why someone might give it a whirl,” he said.

Tough Row to Hoe

Patent infringement cases against the government tend to be harder to win and slower to reach a final judgment than suits in federal district courts, according to several lawyers who’ve been involved in them. Recent CFC dockets don’t contain any examples of patent infringement suits that were settled cheaply before a substantive response from the defense, a frequent occurrence in other federal courts.

“Generally with these kinds of claims the government will defend—and they’ll defend on the merits,” said Matt Rizzolo, a patent litigator at Ropes & Gray LLP. “They’ll raise non-infringement. They’ll raise invalidity.”

The pace can be slower, too, Lavenue said, because the government is routinely granted extensions that can lengthen the life cycle of a patent case at the CFC.

Joe Zito, Factor2’s attorney, acknowledged the challenge.

“The Court of Federal Claims is not the most favored place, but I’ve been there a half dozen times or so and sometimes it’s appropriate,” Zito said.

Factor2 has also sued several tech companies in district courts over its two-factor authentication patents, filing complaints against TikTok Inc., Amazon.com Inc., and SNAP Inc. in Texas and Washington, D.C., federal courts before and after it sued the government.

“We’re casting a wide net. They fall in the net,” Zito said of the PTO.

Spokespeople for the PTO and the US Justice Department, which defends federal agencies in court, declined to comment.

An average of five patent infringement suits have been filed against the government each year over the last decade, according to a Bloomberg Law analysis of court dockets.

Plaintiffs in these suits often allege infringement by the military branches or the agencies responsible for issuing passports and other government identification cards. One high-profile suit, centered on US Postal Service mail sorting technology, made it to the US Supreme Court before the patent was ultimately invalidated.

The most recent suit alleging infringing activity specifically at the PTO targeted 22 agencies by name—and others more generally—for alleged use of “patented Web applications on a Web browser.” That case was filed in 2016 by Lakshmi Arunachalam, the self-proclaimed “Inventor of the Internet of Things.” Her suit was dismissed more than four year later after a federal judge ruled that “all of the the patent claims at issue in this case are invalid” due to a prior administrative challenge to Arunachalam’s patent by a tech company she’d previously sued.

Lavenue wrote a master’s thesis on what are known as 1498 suits—named for the section of the code that allows intellectual property owners to pursue copyright and patent infringement claims against the United States. He calculated the win rates for patent owners in such cases resolved on the merits at the CFC at 34%, with cases lasting on average between five and seven years.

Suing the government for infringement may be a “daunting prospect,” Rizzolo wrote in a 2023 article co-authored by fellow Ropes & Gray attorneys Steven Pepe and Brendan McLaughlin. Plaintiffs can’t enjoin the government from infringing or seek treble damages, the attorneys said. But patent owners avoiding such suits may still be missing out.

“The US government is the largest buyer of goods and services in the world, spending hundreds of billions of dollars per year—much of which likely implicates patent rights,” they wrote.

Plaintiffs suing the government have at least one advantage compared to bringing a traditional patent suit in district court.

The government can’t challenge patents at the PTO’s Patent Trial & Appeal Board, taking a defendant-friendly counter-tactic off the table. The Supreme Court, in a 2019 opinion in Return Mail Inc. v. United States Postal Service, held that under the 2011 America Invents Act, the government is not a “person” eligible to challenge the validity of patents at the PTAB. That disallowed government-initiated inter partes review proceedings at the tribunal.

If the alleged act of infringement ropes in a product or service provided to the government by an outside company, however, that entity could still in some instances mount a validity challenge at the PTAB, according to Lavenue.

“The funny part is that if a third-party vendor is involved” because it provided the PTO with the allegedly infringing authentication technology, “then it could file an IPR against the patent, and the PTO would be deciding it still,” he said.

Suits of a Recent Vintage

Traditional patent suits date back at least as far as 1797, when Eli Whitney begin suing for infringement of his cotton gin patent in Georgia. Suits against the government became possible a century and a half later.

Before 1910, “the Supreme Court considered patent infringement to be a tort claim for which the government had not waived sovereign immunity,” according to a history written by former CFC Judge Mary Ellen Coster Williams and former CFC clerk Diane Ghrist.

The modern framework for patent suits against the government took its shape in 1949 after an act of Congress, and most actions “today center on wartime and national security needs,” according to the article. “Other suits involve government-dominated research areas such as outer space exploration.”

Suits filed in the last decade have accused the government of copying patented inventions for advanced shooting simulators, stealth aircraft detection, and “quick-release” body armor, among others.

Another Wrinkle

Factor2’s suits and its patents cover a type of authentication tool used by businesses and governments to control access to websites. The patents were granted to inventor brothers, Nader and Kamran Asghari-Kamrani, and the recent round of lawsuits aren’t the first infringement suit rodeo for the family of patents.

In 2015, they sued United Services Automobile Association over a related patent—US Patent No. 8,266,432, which also describes a method for two-factor authentication—in the US District Court for the Eastern District of Virginia, where they reside.

The court found that patent invalid as it was directed to an abstract idea. The US Court of Appeals for the Federal Circuit summarily affirmed the lower court ruling in 2018.

At the time, Fish & Richardson PC, the law firm representing USAA, issued a news release hinting that more lawsuits could be forthcoming over the broader patent family.

“The Asghari brothers have threatened many other companies with this patent, from financial services entities to IT security firms,” Fish & Richardson principal Michael Zoppo said in the release. Zoppo added that comments from judges during oral argument should’ve “put the Asghari brothers on notice that the entire patent family should be considered invalid under Alice,” a reference to the Supreme Court case laying out the test for patent eligibility.

Since 2018, the Asghari brothers have assigned batches of their patents to AmeriTech Solutions Inc., which in 2023 assigned the asserted patents to Factor2. On its various complaints, Factor2 lists as an address a condo in Clifton, Virginia, owned by Nader Asghari.

Zito said he takes Zoppo’s comment about the patent family with a “grain of salt,” and he rejected the notion that the USAA ruling in any way would determine the outcome of the more recent suits.

“They’re different patents, different claims, different scope, he said. “Each patent needs to be judged on its own merits.”

He offered a prediction for how the six asserted patents would fare when they do get their day in court.

“I’ve never lost a case at the CFC,” he said, “and I’m not going to start now.”

The case is Factor2 Multimedia Sys., LLC v. USA, Fed. Cl., 1:24-cv-475.