Madstad Eng. v. USPTO: Challenge to Constitutionality of AIA Fails for Lack of Standing

Category: Civil Procedure   
By: Jesus Hernandez, Blog Editor/Contributor 
TitleMadstad Eng'g., Inc. v. U.S. Patent and Trademark Office, No. 2013-1511, 1512 (Fed. Cir. July 1, 2014).
[1: Jurisdiction] Because MadStad does not assert a claim under the AIA and, instead asserts a claim directly under the constitution challenging the AIA’s constitutionality, we must determine whether MadStad’s claims “arise under” an Act of Congress relating to patents as that jurisdictional principle has been interpreted by the United States Supreme Court.
Madstad Eng., Inc. at *5.
[2: Standing] MadStad contends that the district court’s reliance on Clapper was misplaced because the threats of harm upon which it relies are far less speculative than those asserted in Clapper. It also asserts that it faces a sufficient “substantial risk” of suffering the injuries it identifies to satisfy Article III standing under traditional standing principles which the Clapper Court did not expressly reject.
Id. at *12.
[1: Jurisdiction] [W]e find, as we did impliedly in Patlex, that MadStad’s claims and this appeal “arise under” an Act of Congress relating to patents within the meaning of both 28 U.S.C. §§ 1338 and 1295(a)(1) [because assessing the use and scope of the term ‘inventor’ in the Constitution and the AIA is within the CAFC’s domain] and that we, thus, may properly exercise jurisdiction over this appeal.
Id. at *8-9 (text added).
[2: Standing] [W]e hold that the district court did not err by relying on Clapper or concluding that MadStad lacked standing to assert the constitutional claims in its complaint [because there is no evidence of a likelihood that any of the alleged harms are specifically attributable to the AIA, the alleged harms including: computer hacking, time and effort to file additional patent applications, competitive disadvantage, of lost business].
Id. at *27 (text added).

Procedural HistoryIn this constitutional challenge, Mark Stadnyk and MadStad Engineering, Inc. (collectively, “MadStad”) filed suit against the United States Patent and Trademark Office (“PTO”), its then director, David Kappos, in his official capacity, and the United States of America (collectively, “the Government”) in the United States District Court for the Middle District of Florida. MadStad Eng’g, Inc. v. U.S. Patent & Trademark Office, No. 8:12-cv-1589, ECF No. 1 (July 18, 2012). MadStad sought a declaratory judgment that the “first-inventor-to-file” provision of the Leahy-Smith America Invents Act (“AIA”), Pub. L. No. 112-29, § 3, 125 Stat. 284, 285–294 (2011) is unconstitutional and a permanent injunction barring enforcement of the AIA. The district court granted the Government’s motion to dismiss for lack of standing. MadStad Eng’g, Inc. v. U.S. Patent & Trademark Office, No. 8:12-cv-1589, 2013 WL 3155280 (M.D. Fla. May 8, 2013). MadStad appeals this dismissal and requests that we declare the AIA to be unconstitutional.
Madstad Eng., Inc. at *2.
Legal Reasoning (Newman, O’Malley, Wallach)
AIA, generallyOn September 16, 2011, the President signed into law the AIA. The AIA, inter alia, adopted the “first-inventor- to-file” principle for determining priority among patents and patent applications. AIA § 3, 125 Stat. at 285–294. Before the AIA, the United States typically gave priority to the first to invent.1 Under the AIA, however, priority will go to the first inventor to file a patent application. The named inventor must have invented the invention independently and not derived the idea from another. See 35 U.S.C. § 102 (2012).
Madstad Eng., Inc. at *3.
[1: Jurisdiction]
Patlex PrecedentThe Supreme Court has not had occasion to determine whether a claim attacking the constitutionality of an Act of Congress relating to patents is one arising under that Act of Congress within the meaning of 28 U.S.C. §§ 1295 and 1338. It appears, moreover, that we have faced this question only once. In Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), we considered whether “certain provisions of the patent reexamination statute and implementing regulations” were unconstitutional under the Fifth and Seventh Amendments of the United States Constitution. 758 F.2d at 596. While, as here, appeals from the trial court’s resolution of their claims were originally asserted in both the relevant regional circuit— the Third Circuit—as well as this one, the Third Circuit dismissed its appeal upon motion that the appeal was properly brought in the Federal Circuit, and we proceeded to decide the matter.
Madstad Eng., Inc. at *6.
Reasons For JurisdictionFirst, a resolution of the constitutional challenge here would require this court to interpret the terms “inventor” and “first-inventor-to-file” under the AIA and to assess the interactions between those terms and the use of the term “Inventor” in the Intellectual Property Clause of the United States Constitution—Article I, Section 8, Clause 8. It will also cause us to address the scope of protections afforded to “inventors” by the right to bring derivation actions encompassed within the first- inventor-to-file provision of the AIA. [...] Second, a review of the parties’ briefs, both on the merits and with respect to the standing question, makes clear that these matters are at the heart of the parties’ dispute. […] Finally, to the extent Congress has attempted to “balance” the matters committed to the jurisdiction of this court and those committed to the regional circuits, we believe that balance would be upset by placing jurisdiction over interpretations of the AIA and an assessment of its constitutional validity in the hands of any circuit other than this one.
Id. at *7-8.
[2: Standing]
Standing, generallyTo satisfy the minimum standing requirements of Article III, a party must demonstrate an injury in fact that is: (1) “concrete, particularized, and actual or imminent”; (2) “fairly traceable to the challenged action”; and (3) “redressable by a favorable ruling.” Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 149 (2010). The party invoking federal jurisdiction has the burden of establish- ing each of these elements. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
Madstad Eng., Inc. at *9.
Madstad's allegations of Harm from AIA
a. Increased risk of computer hackingThe mere fact that MadStad, like all other people and companies, faces cyber threats does not create standing. In fact, MadStad cites statistics that indicate hacking was a growing threat well before the AIA was even enacted. […] Even if cyber-attacks were to increase because of the AIA, moreover, MadStad has not presented any evidence that, because of the AIA, there will be an increase in successful cyber-attacks orchestrated to steal a company’s IP so that a hacker can quickly file a patent on that IP. […] Finally, even assuming that the AIA leads to an increase of cyber-attacks, that those attacks are successful, and that one of those attacks allows a hacker to steal MadStad’s IP for the intended purpose of obtaining a patent thereon, that hacker would still have to interpret all of MadStad’s data, finish developing the product to a point where it can be patented, successfully file for a patent, and prosecute that application successfully, all before MadStad can file its own patent application.
Id. at *14-16.
b. Increased time and effort to file additional patent applications[W]e conclude that, on the record before us, MadStad has not established standing based on its fear of being forced into filing a patent application sooner than it would prefer or would normally do. Mr. Stadnyk is admittedly speculating about whether his current research and development will result in a patentable invention. Mr. Stadnyk admits that he still has more research, development, and testing to do before he can file a patent application, early or not. In other words, he currently has not filed, nor is he preparing to file, a patent application in the first-inventor-to-file system. His declarations, moreover, give no specific time frame in which he expects to file another patent applica- tion, other than to abstractly say he “believe[s] that some of [his] inventions are in fact close to patentability.”
Id. at *19.
c. Competitive disadvantage relative to competitors[W]e find that MadStad’s argument that it is at a competitive disadvantage because it is forced to compete with larger competitors that have a greater ability to file numerous patent applications fails for many of the same reasons its argument that it is injured by having to file additional applications fails. MadStad has not asserted that it has, in fact, set up in-house research facilities which it did not have in place before the AIA and has not even alleged that it is engaged in a research project that would employ or make use of any such new facilities. Again, we find MadStad’s concerns too speculative and generalized to meet the “concrete, particularized, and actual or imminent” injury requirement. […]
Id. at *21 (internal citations omitted).
d. Lost business and investment opportunities[U]nder Clapper, the injury claimed by MadStad is neither fairly attributable to the AIA nor sufficiently imminent. See Clapper, 133 S. Ct. at 1147. While MadStad may have a subjective belief that it needs a non-disclosure agreement to dissuade any incentive to “scoop” its IP which the AIA creates, we again find the threat of such injury too attenuated to create standing here.
Id. at *22-23.
For the foregoing reasons, we affirm the district court’s dismissal for lack of standing.
Madstad Eng., Inc. at *27.
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