Bozeman Financial LLC v. Federal Reserve Bank of Atlanta, et al. (Supreme Court 2020)
The question in this case is whether the Federal Reserve Banks are people. The Patent Act allows any “person” to file a petition for covered-business-method review (or IPR/PGR). Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019) held (1) the U.S. Gov’t is not a person under the statute and (2) consequently the USPS (a branch of the US gov’t) is not permitted to petition the USPTO for review of a patent. The question before the Supreme Court is whether these banks are part of the government.
Whether the regional Federal Reserve Banks—the “operating arms” of the Federal Reserve System, which is the central bank of the United States—are “distinct” from the Federal Government, and qualify as “persons” permitted to seek post-issuance patent review under the America Invents Act, when the Federal Government may not under the Court’s holding in Return Mail, Inc. v. United States Postal Serv., 139 S. Ct. 1853 (2019).
Alexander Hamilton was instrumental in the creation of the First Bank of the United States. That Bank’s charter ended in 1811, but the foundation served for future national banks and eventually for creation of the Federal Reserve in 1913. The Federal Reserve system includes twelve regional Federal Reserve Banks that are largely controlled by private banking interests. The twelve are self-described “instrumentalities of the United States that, collectively, make up the operating arm of the Federal Reserve System, the central bank of the United States.” (Bank Complaint). The system as a whole is controlled by the Board of Governors of the Federal Reserve System. The Board members are presidential appointees.
Bill Bozeman’s patents cover what he calls “Universal Positive Pay” for fraud detection and check clearing. Back in 2017, the 12 Federal Reserve Banks (but not the Board) sued Bozeman seeking a declaratory judgment of non-infringement. The banks then also filed for Covered Business Method (CBM) review of the patents at the USPTO. The PTO instituted review and concluded that the claims were ineligible under Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014). In its decision, the Federal Circuit affirmed and also held that the banks are “persons” under the statute because they “are distinct from the government for purposes of the AIA.”
In other contexts, courts have found a very close link between the Banks and the Gov’t.
- Fed. Reserve Bank of Bos. v. Comm’r of Corps. & Taxation of Com. of Mass., 499 F.2d 60, 62 (1st Cir. 1974) (Bank is a “public governmental body” whose “interests seem indistinguishable from those of the sovereign”)
- Jet Courier Servs., Inc. v. Fed. Reserve Bank of Atlanta, 713 F.2d 1221 (6th Cir. 1983) (Banks are not “persons” under the Sherman Act because they are part of the Federal Reserve System, “an agency of the federal government.”)
- Schroder v. Volcker, 864 F.2d 97, 99 (10th Cir. 1988) (no antitrust action against defendants “affiliated with the Federal Reserve System”, including individual banks)
- United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982) (Fed Reserve Bank employees are public officials for purposes of anti-bribery statute).
- Berini v. Fed. Reserve Bank of St. Louis, 420 F. Supp. 2d 1021, 1028 (E.D. Mo. 2005) (“[C]ontrol and supervision of the federal reserve banks is vested in a Board of Governors appointed by the President with the advice and consent of the Senate”)
This case is not huge for the patent system — although there are hundreds of federally-created entities that might be “people.” In addition, the CBM program has sunset and is unlikely to be revived.
The case is still a big deal as our country discusses the role of socialist governmental policies providing a safety net for Americans. The US system is already ripe with “private” entities designed to serve a public good: Federal Reserve banking system; Fannie Mae; Freddie Mac; Highly regulated utilities (that are given the power of eminent domain); etc. For over 100 years, this approach has been a form of back-door socialism that becomes palatable because of paperwork showing a separation from government. This case would shine some interesting light on the field with the simple question — Are the Federal Reserve Banks part of the U.S. Government?