Fed Circuit refuses refunds for cancelled patents
The US Court of Appeals for the Federal Circuit has dismissed a company’s attempt to recover compensation for patents invalidated by the Patent Trial and Appeal Board (PTAB).
In a precedential opinion handed down yesterday, August 24, the Federal Circuit affirmed the US Court of Federal Claims’ decision to reject Christy, Inc’s suit for failure to state a claim.
The panel of judges concluded that it’s not an unconstitutional taking or an illegal exaction for the government to retain issuance and maintenance fees for a patent that is subsequently invalidated.
Back in 2003, Christy applied for a patent on its “ambient air back-flushed filter vacuum”. The 7,082,640 patent was issued in 2006 and, as required by law, Christy paid the $1,000 issuance fee, followed by subsequent maintenance fees.
In 2014, Christy and its licensee, CDC Larue Industries sued two competitors for patent infringement. One of those competitors, manufacturing company Black & Decker, filed two petitions for inter partes review (IPR) of the ‘640 patent.
The PTAB’s final written decisions found claims 1–18 unpatentable, while dependent claims 19–20 were not challenged in the proceedings and remained valid.
“Aggrieved by the cancellation of its first 18 claims of the ‘640 patent, Christy filed a class-action suit in the Court of Federal Claims,” said Circuit Judge Todd Hughes, on behalf of the court, yesterday.
In addition to seeking compensation for the patent’s issuance and maintenance fees, Christy was also seeking compensation for investments made in the patented technologies, Christy’s attorneys’ fees spent in defending its patent, and the value of the patent claims, including expected royalties.
Christy’s suit raised six claims for compensation from the government: a Fifth Amendment takings claim, four claims based on contractual theories, and an illegal exaction claim raised in the alternative to the takings claim.
The court granted the government’s motion to dismiss all the claims, so Christy appealed against the decision to the Federal Circuit.
Yesterday, the Federal Circuit quickly disposed of two of Christy’s claims by citing the recently issued case of Golden v US, where the court had rejected the argument that cancellation of a patent in an America Invents Act post-grant proceeding violates the Fifth Amendment’s takings clause.
Finally, Christy argued that the Court of Federal Claims had erred in finding that Christy had failed to state a plausible claim of an illegal exaction, which occurs when money is “improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a statute, or a regulation”.
In this case, Christy argued that the US Patent and Trademark Office’s (USPTO) requirement to pay issuance and maintenance fees for the ‘640 patent was “in error” and so should be refunded.
“Christy’s argument fails because the law requires payment of these issuance and maintenance fees without regard to any later result of post-issuance proceedings,” said Hughes.
He added: “That Christy finds the legal scheme dictating patent issuance and maintenance fees ‘unjust’ raises a policy question properly addressed to Congress or the USPTO, for Congress has the authority to set the terms of the patent right.”
The court concluded that Christy’s payment of the fees—and the USPTO’s refusal to refund such fees after patent claims were cancelled—didn’t “stem from any mistake or impropriety” by the office, but followed the requirements of the law.
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