Jtekt Corporation v. Gkn Automotive Ltd. , 898 F.3d 1217 ( 2018 )

United States Court of Appeals
for the Federal Circuit
______________________
JTEKT CORPORATION,
Appellant
v.
GKN AUTOMOTIVE LTD.,
Appellee
______________________
2017-1828
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2016-
00046.
______________________
Decided: August 3, 2018
______________________
WILBUR T. BAKER, Oblon, McClelland, Maier & Neu-
stadt, LLP, Alexandria, VA, argued for appellant. Also
represented by LISA MANDRUSIAK, RYAN W. SMITH.
LINDA METTES, Brooks Kushman PC, Southfield, MI,
argued for appellee. Also represented by SANGEETA G.
SHAH, KRISTIN LEE MURPHY.
______________________
Before PROST, Chief Judge, DYK and O’MALLEY, Cir-
cuit Judges.
2 JTEKT CORPORATION v. GKN AUTOMOTIVE LTD.
DYK, Circuit Judge.
GKN Automotive LTD (“GKN”) owns U.S. Patent No.
8,215,440 (“the ’440 patent”). In inter partes review
(“IPR”), the Patent Trial and Appeal Board (“the Board”)
found claims 2 and 3 of the ’440 patent not unpatentable.
JTEKT Corporation (“JTEKT”), the petitioner in the IPR,
appealed. Because JTEKT lacks standing to appeal, we
dismiss the appeal.
BACKGROUND
GKN’s ’440 patent describes a drivetrain for a four-
wheel drive vehicle that is made up of primary and sec-
ondary drivetrains. The drivetrain can be switched
between two-wheel drive mode and four-wheel drive
mode. The claimed drivetrain operates to reduce the
number of rotating components when the secondary
drivetrain is disconnected.
JTEKT petitioned for IPR of the patentability of
claims 1–7 of the ’440 patent in IPR2016-00046. The
Board instituted IPR on all challenged claims. After
institution, GKN disclaimed claims 1, 4, and 5. Accord-
ingly, the IPR focused on whether JTEKT had shown that
claims 2 and 3 would have been obvious over the prior art
of Teraoka in view of Watanabe and whether claims 6 and
7 would have been obvious over the prior art of Teraoka in
view of Burrows. Claims 2 and 3—the claims currently on
appeal—specify that two side-shaft couplings connect the
secondary axle rather than one side-shaft coupling. These
side-shaft couplings provide both transverse and longitu-
dinal power distribution between the left and right wheels
and the front and rear wheels.
On January 23, 2017, the Board held that claims 6
and 7 would have been obvious over Teraoka in view of
Burrows, but that JTEKT did not show that claims 2 and
3 would have been obvious over Teraoka in view of
Watanabe. The Board decided that JTEKT had failed to
JTEKT CORPORATION v. GKN AUTOMOTIVE LTD. 3
establish that a person of ordinary skill “would have had
a reasonable expectation of reducing vehicle weight with
the proposed modification,” that being the stated motiva-
tion to combine. J.A. 0032.
GKN did not appeal the Board’s decision with respect
to claims 6 and 7. But JTEKT appealed the Board’s
decision regarding claims 2 and 3. GKN’s motion to
dismiss the appeal based on lack of standing was denied
by a motions panel of this court, which “deem[ed] it the
better course for the parties to address the standing issue
in their briefs.” Order, No. 17-1828, ECF No. 23. JTEKT
asserts that we have jurisdiction under 28 U.S.C.
§ 1295(a)(4)(A).
DISCUSSION
Under the IPR statute, any person or entity may peti-
tion the Patent Office to institute an IPR proceeding. 35
U.S.C. § 311(a). There is no requirement that the peti-
tioner have Article III standing, as “[p]arties that initiate
[IPRs] need not have a concrete stake in the outcome;
indeed, they may lack constitutional standing.” Cuozzo
Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2143–44 (2016).
We have similarly concluded that “Article III standing is
not necessarily a requirement to appear before an admin-
istrative agency.” Consumer Watchdog v. Wis. Alumni
Research Found., 753 F.3d 1258, 1261 (Fed. Cir. 2014)
(citation omitted). The statute also provides that an
unsuccessful petitioner may appeal an adverse final
written decision. 35 U.S.C. § 141(c) (“A party to an inter
partes review or a post-grant review who is dissatisfied
with the final written decision of the Patent Trial and
Appeal Board . . . may appeal the Board’s decision . . . to
the United States Court of Appeals for the Federal Cir-
cuit.”).
In a series of decisions, we have held that the statute
cannot be read to dispense with the Article III injury-in-
fact requirement for appeal to this court. In Phigenix,
4 JTEKT CORPORATION v. GKN AUTOMOTIVE LTD.
Inc. v. Immunogen, Inc., we wrote that “[a]n appellant’s
obligation to establish an injury in fact remains firm even
though it need not ‘meet all the normal standards for
redressability and immediacy’ when, as here, a statute
provides that appellant with a right to appeal.” 845 F.3d
1168, 1172 n.2 (Fed. Cir. 2017) (citations omitted); see
also 35 U.S.C. § 141(c). Phigenix lacked standing to
appeal an IPR because it did not face an actual injury.
Phigenix, 845 F.3d at 1176. Phigenix did not argue that it
was at risk of “infringing the [patent at issue], that it is
an actual or prospective licensee . . . or that it otherwise
plans to take any action that would implicate the patent
. . . . Instead, Phigenix assert[ed] that it . . . suffered an
actual economic injury because the [patent at issue]
increases competition” for Phigenix. Id. at 1173–74. This
was not enough to establish Article III standing. Id. at
1175–76.
Similarly, in Consumer Watchdog, a nonprofit organi-
zation (Consumer Watchdog) petitioned for IPR concern-
ing a patent for embryonic stem cells, but was
unsuccessful before the Board. Consumer Watchdog, 753
F.3d at 1260. Consumer Watchdog appealed to this
court. Consumer Watchdog did not “allege[] any involve-
ment in research or commercial activities involving hu-
man embryonic stem cells. Nor . . . that it [was] an actual
or prospective competitor of [the patent owner] or licen-
see.” Id. We held that there was no standing “[b]ecause
Consumer Watchdog [did] not establish[] an injury in
fact.” Id. These cases stressed that the “obligation to
establish an injury in fact” for appellants “remains firm.”
Phigenix, 845 F.3d at 1172 n.2.
Supreme Court cases establish that the injury in fact
must be “an injury that is both ‘concrete and particular-
ized.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1545 (2016)
(emphasis in original) (citation omitted). Injuries that are
“conjectural or hypothetical” will not provide standing.
Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992) (cita-
JTEKT CORPORATION v. GKN AUTOMOTIVE LTD. 5
tions omitted). That being said, the Supreme Court has
pointed out that “[t]he rule that a plaintiff must . . . bet
the farm, or . . . risk . . . damages . . . before seeking a
declaration of its actively contested legal rights finds no
support in Article III.” MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 134 (2007). Our cases establish that
typically in order to demonstrate the requisite injury in
an IPR appeal, the appellant/petitioner must show that it
is engaged or will likely engage “in an[] activity that
would give rise to a possible infringement suit,” Consumer
Watchdog, 753 F.3d at 1262, or has contractual rights
that are affected by a determination of patent validity, see
generally MedImmune, 549 U.S at 137.
As the party seeking judicial review, JTEKT has the
burden of establishing that it possesses the requisite
injury. See DaimlerChrysler Corp. v. Cuno, 547 U.S. 332,
342 (2006). Thus, in IPR appeals, “an appellant must . . .
supply the requisite proof of an injury in fact when it
seeks review of an agency’s final action in a federal court,”
by creating a necessary record in this court, if the record
before the Board does not establish standing. Phigenix,
845 F.3d at 1171–72. When the record before the Board is
inadequate, the appellants “must supplement the record
to the extent necessary to explain and substantiate its
entitlement to judicial review,” such as by submitting
“affidavits or other evidence to demonstrate its standing.”
Id. at 1173 (citations omitted).
The fact that JTEKT has no product on the market at
the present time does not preclude Article III standing,
either in IPRs or in declaratory judgment actions. See,
e.g., Altaire Pharms., Inc. v. Paragon Bioteck, Inc., 889
F.3d 1274, 1280–83 (Fed. Cir. 2018). Both IPRs and
declaratory judgment actions enable a party to secure a
judicial determination in advance of actual, liability-
creating injury. But where the party relies on potential
infringement liability as a basis for injury in fact, but is
not currently engaging in infringing activity, it must
6 JTEKT CORPORATION v. GKN AUTOMOTIVE LTD.
establish that it has concrete plans for future activity that
creates a substantial risk of future infringement or likely
cause the patentee to assert a claim of infringement.
While JTEKT has submitted two declarations in sup-
port of its standing, JTEKT’s problem is that these decla-
rations do not establish that its planned product would
create a substantial risk of infringing claims 2 or 3 of
GKN’s ’440 patent or likely lead to charges of infringe-
ment. GKN has not alleged infringement, see PPG Indus.,
Inc. v. Valspar Sourcing, Inc., 679 F. App’x 1002, 1004
(Fed. Cir. 2017) (non-precedential), and, while JTEKT
and GKN are competitors generally, JTEKT expressly
conceded that “no product is yet finalized.” J.A. 1642, at ¶
13. JTEKT’s product is in development and “will continue
to evolve.” J.A. 1642, at ¶ 15. The declaration of Mik-
iharu Oyabu, JTEKT’s Chief Engineer, admits that
“JTEKT is [still] currently validating its design, including
tuning and conducting customer demonstrations. . . . [t]he
concept will continue to evolve and may change until it is
completely finalized.” J.A. 1642, at ¶¶ 14–15.
The declaration of Koji Morita, a patent engineer for
JTEKT, states that JTEKT began development on its own
driveshaft concept in 2015, and opines that there is a
“potential risk of infringement.” J.A. 1636, at ¶ 14. But
JTEKT repeatedly stressed that “[b]ecause JTEKT has
not yet developed a final product, there is nothing that
can be analyzed for infringement.” J.A. 1644, at ¶ 23; see
also J.A. 1637, at ¶ 16. Morita admits that “because the
product was not—and is not—yet finalized, JTEKT can-
not definitively say whether or not it will infringe the ’440
patent and the potential risk of infringement . . . is impos-
sible to quantify at this time.” J.A. 1637, at ¶ 16.
JTEKT’s declarations only state that “the general fea-
tures of JTEKT's current concepts [are] similar enough to
the features of the ’440 patent,” to justify filing the IPR to
“negat[e] any potential risk for JTEKT . . . down the line,”
J.A. 1636, at ¶ 14, and that “JTEKT determined that the
JTEKT CORPORATION v. GKN AUTOMOTIVE LTD. 7
’440 patent posed a risk to future development significant
enough to warrant filing the IPR.” J.A. 1641, at ¶ 10
(emphasis added). To be sure, IPR petitioners need not
concede infringement to establish standing to appeal. See
MedImmune, 549 U.S. at 134. But we conclude that
JTEKT has not established at this stage of the develop-
ment that its product creates a concrete and substantial
risk of infringement or will likely lead to claims of in-
fringement.
Although JTEKT argues that the creation of estoppel
based on its participation in the IPR constitutes a sepa-
rate, and independent, injury in fact, we have explained
that “estoppel provision[s] ‘do[] not constitute an injury in
fact’ when . . . the appellant ‘is not engaged in any activity
that would give rise to a possible infringement suit.’”
Phigenix, 845 F.3d at 1175–76 (quoting Consumer Watch-
dog, 753 F.3d at 1262).
CONCLUSION
Because JTEKT has failed to establish an actual inju-
ry sufficient to confer Article III standing, we dismiss this
appeal.
DISMISSED
COSTS
No costs.