HGD Hits US Gov’t With $100M Class Action Over AIA Reviews

Law360 (May 11, 2018, 8:53 PM EDT) — The U.S. government has been hit with a $100 million lawsuit alleging the cancellation of patents in America Invents Act reviews represents an unconstitutional taking of property rights.

The proposed class action was filed in the Court of Federal Claims on Wednesday by Christy Inc., an Oklahoma company that had claims in its vacuum cleaner patent found inv

alid by the Patent Trial and Appeal Board following a challenge from Black & Decker (U.S.) Inc.
Christy argues this violates the takings clause of the Fifth Amendment, which states that private property cannot be taken for public use without fair compensation. It is also bringing a claim for breach of contract. The proposed class would include anyone who has had claims in a patent invalidated in an AIA review.

“Somebody must be held responsible for decimating these duly issued patent rights through [inter partes reviews] and these other post-grant AIA proceedings,” said James McDonough III​ of Heninger Garrison Davis LLC, an attorney for Christy. “Since the government is the one that claims to have created this whole mess in the first place, then it should be the one that has to pay.”

The lawsuit, which seeks compensation for expected royalties related to the patents, as well as various fees paid to the USPTO, states the amount owed to the potential class is “greater than $100 million.” The U.S. Patent and Trademark Office, of which the PTAB is a part, does not comment on litigation.

The 2011 AIA created IPRs and other reviews proceedings, which were designed to be a more efficient, lower-cost alternative to district court litigation for determining a patent’s validity. The lawsuit comes less than a month after the U.S. Supreme Court in Oil States v. Greene’s ruledIPRs do not violate the Seventh Amendment’s right to a jury trial.

Matthew Rizzolo of Ropes & Gray LLP, who is not involved with Christy’s case, said patent owners filing lawsuits against the U.S. government wasn’t a surprising next step following Oil States. He predicted there would be such cases earlier this month.

“For me, this is one of the places I thought they would turn,” he said.

In its complaint, Christy said AIA reviews have decimated the value of patents, and the cost to inventors and the overall economy has been “staggering.” Meanwhile the PTAB was a “money printing machine” for the USPTO, it said, estimating tens of millions of dollars have been paid in AIA review filing fees.

“Also at the center of this lawsuit is the public (and shocking) admission by the USPTO that [AIA reviews] are designed to invalidate patents that were erroneously granted in the first instance,” Christy wrote, citing comments made during the Oil States case.

Christy argues a contract exists in which the USPTO will issue a patent in exchange for fees paid by the owner. It contends the USPTO shouldn’t be allowed to keep those fees if it fixes its mistakes and the patents are found invalid.

Similarly, Christy contends patent owners shouldn’t be forced to defend these patents in AIA reviews — and spend hundreds of thousands of dollars in attorneys fees in the process.

“But for the fact that the patents were issued (and a property right granted in the first place), the patent owners would not have invested the time, resources and money into the subject inventions and the monetization of those inventions, whether through product development or otherwise.

Christy is represented by James McDonough III​, Jonathan R. Miller, Travis E. Lynch, Timothy C. Davis, W. Lewis Garrison Jr., Christopher B. Hood and Anna M. Carroll of Heninger Garrison Davis LLC.

Counsel information for the government wasn’t yet available.

The case is Christy Inc. v. United States of America, case number 18-657, in the U.S. Court of Federal Claims.

–Editing by Bruce Goldman.