Injured by Estoppel

A major limitation on Federal Court policy-setting is the actual-controversy limitation housed in Article III of the U.S. Constitution.  “Article III” courts are limited to hearing “actual cases and immediate controversies.”  Hollingsworth v. Perry, 133 S. Ct. 2652 (2013).  As an executive agency, the USPTO is not so limited.  Rather, the USPTO is empowered to decide AIA-style patent challenges regardless of whether any actual controversy exists between the patent-challenger and the patent owner.  Thus, when Altair Pharma filed its Post Grant Review petition, the USPTO did not even need to consider whether Altair had any interest in the litigation.  However, even in AIA-trials, the case-or-controversy issue arises upon appeal to the Federal Circuit since the Federal Circuit is an Article III court bound by the case-or-controversy jurisdictional limit.  Here, the PTAB sided with the patentee Paragon and a major element stumbling block for Altair’s appeal was proving it had standing.

In Altaire Pharma v. Paragon Biotech, App. No. 2017-1487 (Fed. Cir. May 2, 2018) (Opinion not released until May 11, 2018), the Federal Circuit has issued a sharply split decision on whether PGR petitioner Altair has constitutional standing to appeal the PTAB decision confirming patentability of Paragon’s U.S. Patent No. 8,859,623 (method of using an ophthalmic composition for pupil dilation).

Injury-in-Fact: In many standing cases, the largest hurdle is showing “injury in fact.”  In Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Supreme Court explained that the injury must be concrete (actually exist), be particularized to the party, and actual or imminent rather than “conjectural or hypothetical.”  Although there must be an actual injury (or potential injury), the court has reduced “the normal standards for redressability and immediacy” based upon the express statutory right of appeal. Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168 (Fed. Cir. 2017).

Here, Altaire included an affidavit that it intends to seek FDA approval of its own formulation phenylephrine as soon as a prior joint-operation agreement between the parties was terminated. (A separate lawsuit is pending to terminate that agreement).  The majority saw this potential sequence of events sufficient to find immediate injury — “Altaire’s injury is inevitable.”  Writing in dissent, Judge Schall argued that the injury remained speculative:

First, leaving aside the possibility of a settlement, one of two things will happen in the [parallel] breach of contract suit. Either Altaire will prevail; or Paragon will prevail, in which case Paragon perhaps will be given the right to terminate the Agreement. At this point, though, we do not know what will happen. Moreover, should Altaire prevail in the suit, the possibility that Paragon will be given the right to terminate the Agreement before 2021—which is a critical linchpin of Altaire’s claim of imminent harm will have been eliminated. It seems to me that, by any standard, we presently are in a situation where a determination of imminent harm is speculative.

Estoppel as an Injury Generator: The most interesting legal point in the analysis is the majority’s conclusion that the “injury is compounded” by the estoppel created from the PGR.  Here, the court attempted to distinguish Phigenix and Conusmer Watchdog. In those cases, the Federal Circuit held plainly that the estoppel “does not constitute injury-in-fact.” According to the majority, the difference here is that the there is the aforementioned potential upcoming infringement — that makes the estoppel more real than those prior cases.

As explained above, Altaire’s injury is imminent, whereas the appellant in Consumer Watchdog “only alleged a general grievance concerning” the challenged patent, and the appellant in Phigenix only alleged its aspirations of licensing its patent portfolio.

Here, the majority used estoppel as a bonus-injury — one that “further supports Altaire’s claimed injury in fact.”  The court reserves for another day the question of whether estoppel could be “sufficient independently to establish standing.”  In dissent, Judge Schall writes that it should not be sufficient.

On the Merits, the court sent the case back down to the PTAB — holding that it should have considered Altaire proffered expert testimony.

Although the PTAB “has broad discretion to regulate the presentation of evidence,” that discretion is not without limits, Ultratec, Inc. v. CaptionCall, LLC, 872 F.3d 1267 (Fed. Cir. 2017). The PTAB’s decision to assign no weight to Mr. Al Sawaya’s [expert] testimony was an abuse of discretion. . . . [T]he agency must take account of all the evidence of record, including that which detracts from the conclusion the agency ultimately reaches.”

Note here that this case was filed as a Post Grant Review rather than Inter Partes Review.  PGR’s are broader in scope and allow the patent to be challenged on a wide range of patentability questions. Here, Altaire relied upon its own prior chemical production Lots #11578 and #11581 that were sold and distributed to another Altaire customer in 2012.  According to the PTAB – those uses qualified at least as being “in public use, on sale, or otherwise available to the public” 35 U.S.C. § 102(a)(1).


5 thoughts on “Injured by Estoppel

  1. 3

    Irony alert. Courts only have jurisdiction to decide “cases and controversies” a doctrine underpinned by the separate nature of the Art III department, and it’s prohibition on “advisory opinions” ergo “dispositive” decisions not subject to collateral attack by the other branches. #patent anomaly #2: Advisory opinions ok in the case of patents under the “public rights” theory because PTAB might subsequently decide that the “patent should have never issued in the first place” void ab initio. #Hayburn’s Case.

  2. 2

    Re: “Note here that this case was filed as a [rare] Post Grant Review rather than Inter Partes Review. PGR’s are broader in scope and allow the patent to be challenged on a wide range of patentability questions.”

    Yes, that makes the scope of estoppel for PGRs very much broader than for IPRs, applying to almost any and all potential prior art that could reasonably have been found by the Petitioner in the PGR [and any privy]. Hence a much stronger argument for being able to appeal to the Fed. Cir. than from an IPR.

  3. 1

    and actual or imminent rather than “conjectural or hypothetical.”

    Hmmm, sort of like the Supreme Court when it muses about what MAY happen to innovation down the road when it (re)writes the law of 101….

    Oh wait…

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