Aug 27, 2020Legal
Canceled Patent Claims Do Not Entitle Former Patent Owner to a Refund

CHRISTY, INC. v. UNITED STATES

Before LOURIE, REYNA, and HUGHES.  Appeal from the Court of Federal Claims.

Summary: The government’s refusal to refund patent issue and maintenance fees after patent claims are canceled during inter partes review does not constitute a Fifth Amendment taking or an illegal exaction.

Christy, Inc. (“Christy”) obtained a patent for its “ambient air backflushed filter vacuum” and paid all required maintenance fees after it issued. During inter partes review (“IPR”), the Patent Trial and Appeal Board (“PTAB”) canceled several claims of the patent. Christy then filed a class-action lawsuit against the government in the Court of Federal Claims (“CFC”). Christy asserted that the United States owed it just compensation for the issuance and maintenance fees, investments it made in the patented technology, the attorneys’ fees spent in defending the IPRs, and the value of the patent claims. Christy asserted six government compensation claims: a Fifth Amendment takings claim, four contractual claims, and an illegal exaction claim raised in the alternative to the takings claim.

The government moved to dismiss all claims for both lack of subject matter jurisdiction and failure to state a claim. The CFC granted the government’s motion. The CFC found that it had jurisdiction to consider the takings claim, but that Christy failed to state a claim for relief. In contrast, the CFC held that it did not have jurisdiction to consider the illegal exaction claim. It held that a statute granting authority to the USPTO to refund mistakenly excessive patent-related fees displaced Tucker Act jurisdiction over those fees. Nonetheless, the CFC still addressed the merits of the illegal exaction claim, finding that Christy’s issuance and maintenance fees paid for the patent “were owed at the time they were paid, and as such, were not fees paid by mistake.” Thus, it found Christy’s theory that damages were illegally exacted without merit. Christy appealed to the Federal Circuit.

The Federal Circuit clarified that the America Invents Act (“AIA”) did not displace Tucker Act jurisdiction for takings claims arising due to canceled patent claims during IPRs, based on its ruling in Golden v United States.  However, the Federal Circuit affirmed that Christy failed to state a plausible claim for a taking based on its canceled patent claims.

The Federal Circuit also affirmed the finding of no illegal exaction for the government’s failure to refund Christy’s issue and maintenance fees. The Court explained “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, see, e.g., 35 U.S.C. §§ 41, 151. Christy identifies no statute, regulation, or constitutional provision compelling the fees’ refund if claims are later canceled in post-issuance proceedings. Without showing how the PTO’s actions ‘contravene[ed] . . . the Constitution, a statute, or a regulation,’ Christy cannot state a claim for an illegal exaction.” The Court concluded by noting that Christy’s arguments that payment of issue and maintenance fees for canceled claims was unjust were a matter of public policy, more fit for Congress or the USPTO.

Editor: Paul Stewart

Written by: Radhika K. Raman & Nicole R. Townes

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