By Jason Rantanen

The Innovation, Business & Law Center at the University of Iowa College of Law is hosting the USPTO’s China Intellectual Property Roadshow next Tuesday from 8:45 – 4:15 p.m.  If you’re interested in attending this free program, you can register on the event website: https://ibl.law.uiowa.edu/event/uspto-china-intellectual-property-roadshow.   (Sorry, but we will not be recording or live streaming this program.  It’s a one-time live event.)

DATE:            Tuesday, August 28, 2018

LOCATION:  Levitt Auditorium,University of Iowa College of Law

CLE Credits:  6.25 credits for Iowa attorneys

Morning Session:

8:00 – 8:45      Check in and breakfast

8:45 – 9:15      Welcome Remarks

• Jason Rantanen, Professor of Law and Ferguson-Carlson Fellow in Law, Director of the University of Iowa Innovation, Business & Law Program
• Kevin Washburn, N. William Hines Dean of the University of Iowa College of Law
• James O. Wilson, Supervisor, USPTO Midwest Regional Office
• Cynthia Henderson, Attorney Advisor, USPTO

9:15 – 9:30      The Future of Intellectual Property in China

•  Elaine Wu, Senior Counsel for China, OPIA, USPTO

9:30 – 10:30    Overview of Intellectual Property Protection in China

 Moderator: Cynthia Henderson, Attorney Advisor, USPTO

• How to Protect your Trademark in China and Avoid Pitfalls: Dan Chen, Senior Partner, Unitalen
• Patent Protection and Trade Secret Protection in China: Jay Sha, Liu Shen and Associates
• 3 Key Differences in China’s Trademark System and How They Impact Your Business and Copyright Protection in China: Amy Hsiao, Partner, Swanson & Bratschun, LLC

10:30 – 10:45  Coffee/Tea Break

10:45 – 11:45  Intellectual Property Enforcement in China

Moderator:  Kelu Sullivan, Of Counsel, Kelly IP

• E-Commerce Perspective – Notice and Take-Down Procedures: Dan Dougherty, Global IP Enforcement, Alibaba
• Enforcing Trademark Rights in China: Amy Hsiao, Partner, Swanson & Bratschun, LLC
• Enforcing Patents in China: Allen Tao, Liu Shen and Associates

11:45 – 12:00  U.S. Government Resources for China Intellectual Property Matters

• Cynthia Henderson, Attorney Advisor, USPTO

12:00 – 13:00  Lunch

Afternoon Session:

13:00 – 14:15  Enforcing Intellectual Property Rights in the U.S.

Moderator:  Elaine Wu, Senior Counsel for China, OPIA, USPTO

• Criminal Investigation: Jerry Wilson, Supervisor of Criminal Investigations, FBI Omaha Division
• Criminal Investigation: Adam Marasco, Special Agent, Homeland Security Investigations, Cedar Rapids, Iowa
• Criminal Prosecution: Tony Morfitt, Assistant U.S. Attorney, U.S. Attorney’s Office, Northern District of Iowa
• Section 337 Investigations: Anthony Del Monaco, Partner, Finnegan, Henderson, Farabow, Garrett & Dunner
• Federal Court Civil Intellectual Property Litigation: David Gerasimow, Associate, Husch Blackwell

 14:15 – 14:30  Coffee/Tea Break

 14:30 – 16:00  Intellectual Property Protection and China:  The IOWA Experience

 Moderator:  Jason Rantanen, Professor of Law and Ferguson-Carlson Fellow in Law, Director of the University of Iowa Innovation, Business & Law Center

• Pioneer Seed Theft Case: Judge Stephanie Marie Rose, United States District Judge of the United States District Court for the Southern District of Iowa
• Agricultural issues, IP and Asset Protection: Barry Nelson, Research Scientist, Global Research IP Asset Protection, Corteva Agriscience
• China IP Protection: Donna Suchy, Rockwell Collins
• Managing an IP Portfolio in China from a Corporate Perspective: Jim Hansen, General Counsel, Musco Lighting
• Experience in Enforcing IP in China: Jeff Harty, Nyemaster Goode, P.C.

16:00 – 16:15  Closing Remarks

• Molly Kocialski, Regional Director, USPTO Rocky Mountain Regional Office

By Jason Rantanen

Trustees of Boston University v. Everlight Electronics Co., Ltd. (Fed. Cir. 2018) Download Opinion
Panel: Prost (author), Moore, Reyna

This opinion provides an example of how Section 112 can function as a commensurability requirement.  The court’s final lines say as much:

“Having obtained a claim construction that included a purely amorphous
layer within the scope of the claim, BU then needed to successfully defend against an enablement challenge as to the claim’s full scope…Put differently, if BU wanted to exclude others from what it regarded as its invention, its patent needed to teach the public how to make and use that invention. That is ‘part of the quid pro quo of the patent bargain.'”

Slip Op. at 14 (citations omitted).

I like the opinion because the court’s analysis fits neatly with my conceptual explanation of how enablement analyses are actually performed: it’s a two-step process, with the first step being the articulation of the relevant target and the second asking whether the patentee managed to hit that target.  Here, the court defined the target as consisting of one of six possible permutations under the claim construction the patent owner had sought.  Unfortunately, the evidence did not support the conclusion that a person having ordinary skill in the art could make that permutation without undue experimentation.

In the Federal Circuit’s words, Patent No. 5,686,738 “relates to the preparation of monocrystalline GaN films via molecular beam epitaxy.”  Slip Op. at 4. These films are used in creating blue light LEDs.  The plaintiff, Trustees of Boston University (BU), sued defendants for infringing the ‘738 patent.  Following a jury trial, BU obtained a verdict of infringement and no invalidity.  The district judge subsequently denied defendants’ renewed motion for judgment as a matter of law, in which defendants had argued that the asserted claim was not enabled.  Defendants appealed.

Only claim 19 of the ‘738 patent was at issue.  That claim states:

A semiconductor device comprising:

Two constructions were key here.  The court construed “grown on” to mean “formed indirectly or directly above” and “a non-single crystalline buffer layer” to mean “a layer of material that is not monocrystalline, namely, [1] polycrystalline, [2] amorphous or [3] a mixture of polycrystalline and amorphous, located between the first substrate and the first growth layer.”  (emphasis added).  It also understood “growth layer” as including within its scope a monocrystalline growth layer.  BU did not challenge any of these constructions on appeal.

In the Federal Circuit’s view, collectively these constructions raised six possible permutations for the relationship between growth layer and buffer layer:

• (1) monocrystalline growth layer formed indirectly on a polycrystalline buffer layer;
• (2) monocrystalline growth layer formed indirectly on a buffer layer that is a mixture of polycrystalline and amorphous;
• (3) monocrystalline growth layer formed indirectly on an amorphous buffer
  layer;
• (4) monocrystalline growth layer formed directly on a polycrystalline buffer layer; (5) monocrystalline growth layer formed directly on a buffer layer that is a mixture of polycrystalline and amorphous; and
• (6) monocrystalline growth layer formed directly on an amorphous buffer layer.

Slip Op. at 6. Of these six permutations, defendants focused their enablement argument on #6: whether a person of ordinary skill in the art could practice the invention with a monocrystalline growth layer formed directly on an amorphous buffer layer.

With the court’s attention focused on permutation #6, the enablement analysis was relatively straightforward.  The evidence supporting enablement of #6 was weak: the only technique described in the patent, epitaxy, doesn’t work to grow a growth layer directly on an amorphous structure.  BU tried to argue that the patent didn’t actually teach epitaxy, but the court was unpersuaded: “The ’738 patent’s specification is concise—just over four columns of text—and focuses on epitaxy. Indeed, it is saturated with the word ‘epitaxy’ or variants thereof.”  Id. at 9.  BU also argued that what the patent taught could not be epitaxy “because epitaxy invovles a crystalline layer on top of another crystalline layer,” and an amorphous layer is not “crystalline.”  Id. at 10.  But regardless of whether one called it epitaxy or not, the problem was that  BU couldn’t identify anywhere in the specification that taught how to grow a monocrystalline layer directly on an amorphous layer.  Nor was the expert testimony sufficient as it consisted of conclusory statements.  Testimony that other people had successfully grown a monocrystalline layer on top of an amorphous buffer layer didn’t help either, as “[s]imply observing that it could be done–years after the patent’s effective filing date–bears little on the enablement inquiry.”  Id. at 12.

In light of how the court understood the focus of the enablement issue, BU’s final argument–that the specification enabled 5 out of the 6 permutations and that was enough–didn’t work.  The court cited the “full scope” language from precedent here, and the “gap-filling” approach didn’t work here since that concept “is merely supplemental; it cannot substitute for a basic enabling disclosure.”   Ultimately, the court concluded that the patent needed to enable all six permutations–a result consistent, the court noted, with the claim constructions that BU itself had sought.  In the end, the court saw this as being in the vein of Liebel-Flarsheim: if you get the claim scope you ask for through construction, you’re also going to need to show enablement of that scope.

For enablement-timing gurus, there’s some interesting language in the section about the post-application successes to ponder.

By Jason Rantanen

Saint Regis Mohawk Tribe, Allergan, Inc. v. Mylan Pharmaceuticals Inc., Teva Pharmaceuticals USA, Inc., AKORN, Inc. (Fed. Cir. 2018) Download Opinion

Panel: Dyk (concurring), Moore (author), Reyna

Last fall, Allergan transferred a set of patents relating to its Restasis product (the “Restasis Patents”) to the Saint Regis Mohawk Tribe (“the Tribe”). The Tribe promptly asserted tribal sovereign immunity in the pending inter partes review proceedings involving the Restasis patents.  In February, the PTAB denied the Tribe’s motion to terminate the IPRs, a decision the Tribe appealed.  Following an expedited briefing schedule, the Federal Circuit has now affirmed the PTAB’s denial of sovereign immunity.

The panel opinion, joined by all three judges, addressed only one of the arguments against sovereign immunity: that under the Supreme Court’s analysis in Fed. Maritime Comm’n v. S.C. State Ports Auth., 535 U.S. 743 (2002), tribal sovereign immunity does not apply.  It’s important to note at the outset that “Generally, immunity does not apply where the federal government acting through an agency engages in an investigative action or pursues an adjudicatory agency action.”   Slip Op. at 5.

The Court in FMC looked to whether the adjudications at issue were “the type of proceedings from which the Framers would have thought the States possessed immunity when they agreed to enter the Union.”  Id. at 5-6. In particular, the Federal Circuit observed that “[i]n doing so, the Court recognized a distinction between adjudicative proceedings brought against a state by a private party and agency-initiated enforcement proceedings.”  Id. at 6.

This question is similar to that of whether an administrative agency can hear a dispute at all, and unsurprisingly the court looked to the Supreme Court’s recent decisions for guidance.  “IPR is neither clearly a judicial proceeding instituted
by a private party nor clearly an enforcement action brought by the federal government,” the court observed, before comparing the views offered by the Court in Oil States v. Greene’s Energy and SAS v. Iancu.  Ultimately, the court concluded, “IPR is more like an agency enforcement action than a civil suit brought by a private party….”  Thus, “we conclude that tribal immunity is not implicated.”  Id. at 8.

How is IPR more like an agency enforcement action?  For one thing, the Director chooses whether to institute an IPR.  And while that discretion is limited to an all-or-none decision under SAS, “if the Director decides not to institute, for whatever reason, there is no review.”  Id. at 8.  In addition, “the Board may choose to continue review even if the petitioner chooses not to participate,” reinforcing “the view that IPR is an act by the agency in reconsidering its own grant of a public franchise.”   Id. at 9.  There are also differences between the IPR rules of procedure and the Federal Rules of Civil Procedure; because of these distinctions “the agency procedures in FM much more closely approximated a civil litigation than those in IPR.”  Id. at 10.  Nor does the existence of more “inquisitorial” proceedings in which sovereign immunity would not apply, such as ex parte and inter parte reexamination, mean that sovereign immunity must apply to IPRs.

Judge Dyk joined the panel opinion in full, but wrote separately to describe the history of inter partes review and why those reviews are not adjudications between private parties.  His opinion is a great reference if one wants a thorough description of the history of the proceeding, complete with numerous source citations.

This dispute is clearly not at an end, and I suspect that the Tribe and Allergan will seek en banc review, if not head straight for a cert petition.  Given the expedited briefing schedule, I expect this issue to continue to move quickly.  At the same time, however, keep in mind that in the parallel infringement proceeding in the Eastern District of Texas,  Judge Bryson (sitting by designation) found the Restasis Patents obvious following a bench trial.  Allergan (now joined by the Tribe) appealed that determination.  Oral argument is currently scheduled for September.

Guest post by Professor Jorge L. Contreras of the University of Utah School of Law.  Note that the author was a partner at a law firm that was involved in Rambus v. FTC and Broadcom v. Qualcomm while those cases were litigated and decided.  The author had no direct involvement in either case.

During the dozen years demarcated by the FTC’s 1996 consent decree with Dell Computer (121 FTC 616 (1996)) and the DC Circuit’s 2008 decision in Rambus, Inc. v. FTC (522 F.3d 456 (D.C. Cir. 2008)), the U.S. saw a spate of cases in which participants in voluntary standards-development organizations (SDOs) were alleged to have violated an SDO’s rules by failing to disclose patents essential to the SDO’s standards.  In addition to Dell and Rambus, highly-publicized deception cases such as Broadcom v. Qualcomm (548 F.3d 1004 (Fed. Cir. 2008)) explored what SDO policies actually required of their participants and what penalties could be imposed for their breach, whether under contract, equity, patent or antitrust law.  These questions, and the large sums at stake, generated a cottage industry of legal and economics scholarship around the law and lore of standardization.  But by the early 2010s, the information and communications technology (ICT) sector seems to have learned the lessons of Dell, Rambus and Qualcomm: SDOs improved the clarity of their internal processes, SDO participants adopted a policy of “disclose, disclose, disclose” (on the theory that it can never hurt to disclose too many patents), and the cases turned to other pressing questions like the meaning of SDO commitments to license patents on terms that are “fair, reasonable and nondiscriminatory” (FRAND), which continues to bedevil courts today. I was thus intrigued to see a case that harkens back to the heyday of the old SDO deception cases in a pair of recent decisions in Momenta Pharmaceuticals, Inc. v. Amphastar Pharmaceuticals, Inc. (D. Mass., No. 11-cv-11681, Feb. 7, 2018 and No. 16-10112-NMG, Mar, 19, 2018).  Surprisingly, this non-ICT case may give courts an unexpected opportunity to revisit the DC Circuit’s controversial decision in Rambus v. FTC, which found no antitrust liability for an allegedly deceptive failure to disclose patents to an SDO.

The ‘886 Patent Dispute

The long-running dispute in Momenta is between two generic producers of the blockbuster anticoagulant drug enoxaparin, which Sanofi-Aventis first marketed in 1993 under the brand name Lovenox (2009 U.S. sales $2.7 billion).  In July 2010, Momenta Pharmaceuticals, in conjunction with Novartis’s Sandoz division, received FDA approval for a biosimilar version of enoxaparin.  Amphastar Pharmaceuticals, another generics manufacturer, received FDA approval for its own biosimilar version of enoxaparin on September 19, 2011.  Two days later, Momenta sued Amphastar for infringement of U.S. Patent 7,575,886 (the ‘886 Patent), which claims a quality control process used in the manufacture of enoxaparin.  Momenta applied for the ‘886 Patent in 2003; it was issued in 2009 listing five inventors including Dr. Zachary Shriver. After a lengthy set of proceedings, including two separate appeals to the Federal Circuit, a jury found in 2017 that Amphastar infringed the claims of the ’886 patent, but that the claims were invalid due to lack of enablement and inadequate written description.

Dispute Over Method 207

The United States Pharmacopeial Convention (USP) is an SDO that develops standards for testing the quality and purity of foods and drugs.  In 2006, with the encouragement of Sanofi-Aventis, USP began to consider a standard for testing enoxaparin.  Beginning in 2008, Momenta’s employee Dr. Shriver participated in the USP advisory panel that developed what came to be known as USP Method 207 pertaining to enoxaparin manufacture, which USP eventually approved and adopted as a standard in 2009.  Amphastar alleges that the claims of the ‘886 patent cover key portions of Method 207.

USP has a number of written policies that are binding on individuals and firms participating in its standardization work.  Amphastar argues that USP’s written policies required Dr. Shriver to disclose the existence of Momenta’s application for the ‘886 patent to USP prior to approval of the standard, which he did not.  Due to this failure, Amphastar alleges that Momenta intentionally violated USP’s policies.  In consequence, Amphasrar argues that (1) Momenta has waived its right to enforce the ‘886 patent, (2) Momenta is estopped from enforcing the ‘886 patent, and (3) Momenta and Sandoz violated Section 2 of the Sherman Act, as well as various state antitrust and competition statutes by “wrongfully acquiring monopoly power by deceiving the USP into adopting a standard which they later claimed was covered by” the ‘886 Patent (Mar. 19, 2018, slip op. at 9).  These allegations reflect the classic SDO deception scenario, akin to those alleged in cases like Dell, Rambus and Qualcomm. In each of these cases the central issue is “the consequence of silence in the face of a duty to disclose patents in a standards-setting organization” (Qualcomm, 548 F.3d at 1008).

The USP Policies

In assessing Momenta’s obligation to disclose the ‘886 patent, Judge Nathaniel Gordon of the District Court for the District of Massachusetts considered three of USP’s written policies.  First, Section 2.05 of the Rules and Procedures of the USP Council of Experts (the “Expert Rules”) states that no advisory panel member with a “financial or other interest that may conflict, or may appear to conflict, with his or her duties and responsibilities with respect to a particular matter, shall vote on such matter.”  Dr. Shriver abstained from voting on the Method 207 standard (Feb. 7, 2018, slip op. at 10).

Second, Section 2.06(a) of the Expert Rules requires that each advisory panel member submit to USP a written statement disclosing his or her employer, sources of research funding, and “other professional or financial interests, including intellectual property rights, that may result in a conflict of interest or the appearance of a conflict of interest” (id. at 9, emphasis added).  Dr. Shriver submitted such a statement in which he identified Momenta as his employer.

Third, under a separate document known as the USP Guidelines, all “Sponsors” of USP technical proposals are requested to disclose “whether any portion of the methods or procedures submitted are subject to patent or other IP rights” (id. at 10). Momenta made no disclosure responsive to this provision.

Amphastar argued that these three provisions, individually and collectively, required Momenta, through Dr. Shriver, to disclose the existence of the ‘886 patent and its relevance to Method 207 while it was under consideration at USP.  Judge Gordon, however, disagreed.  With respect to Section 2.05 of the Expert Rules, Dr. Shriver’s abstention from the vote on Method 207 was in compliance with the Rules.  As for the Guidelines, Momenta was not formally a “Sponsor” of Method 207 (the only official Sponsor being Sanofi-Aventis), making the patent disclosure request inapplicable to Momenta.  Finally, Dr. Shriver’s conflict of interest form correctly identified Momenta as his employer.  At most, the catch-all provision requiring disclosure of “other professional or financial interests” was ambiguous in its requirements.  Accordingly, Judge Gordon found the USP policies to be ambiguous regarding Momenta’s obligation to disclose the ‘886 patent (id. at 11).

Participant Understanding of Disclosure Requirement

Notwithstanding the ambiguity of USP’s policies, Judge Gordon, citing Qualcomm (548 F.3d at 1012), went on to consider whether USP participants may have “understood the policies to include a duty to disclose” patents essential to USP standards (id. at 11-12).  A former USP employee testified that there was a “common understanding” among USP participants that patent disclosures were required (Feb. 7, 2018, slip op. at 15).  In addition, the witness described a 2008 advisory panel meeting at which USP noted that Sanofi-Aventis, the Sponsor of Method 207, had disclosed a relevant patent.  According to the witness, a representative from Momenta then requested that Sanofi-Aventis be requested to abandon the patent before the standard was approved, which it ultimately did (id. at 13).  These factors, taken together, the court reasoned, “indicate[d] that Momenta itself, a participant in the USP, acknowledged its own obligation to disclose and abandon like patents” (id.). Thus, as in both Qualcomm and Rambus, Inc. v. Infineon Techs. AG (318 F.3d 1081, 1098 (Fed. Cir. 2003)), the court found that, notwithstanding the absence of an express requirement that patents essential to an SDO’s standards be disclosed by SDO participants, such an obligation existed on the basis of unwritten participant expectations (a good example of private ordering influencing legal determinations).

Interestingly, Momenta argued that it should not be deemed to have an obligation to disclose the ‘886 patent because it opposed the approval of Method 207 at USP, principally because it used a different method for testing enoxaparin.  What’s more, Method 207 was not a compulsory standard, meaning that even if Momenta held a patent covering the standard, it could not hold the industry “hostage” (id. at 15).  The court did not find these arguments persuasive, noting in particular Amphastar’s claim that the FDA did require it to use Method 207 in order to secure approval of its biosimilar version of enoxaparin.

Waiver

Amphastar argued that Momenta’s breach of its obligation to disclose the ‘886 patent to USP should result in a waiver of Momenta’s right to enforce the patent.  The unenforceability remedy in patent law is a harsh one, usually extending not only to the infringer, but to the entire world (see Qualcomm, 548 F.3d at 1024, and this article, discussing unenforceability in earlier standards cases). In both Dell and Qualcomm, the unenforceability remedy was limited to implementations of the standards in question and, in theory, the patents could have been enforced against products that did not comply with those standards.  The court in this case likewise limited unenforceability of the ‘886 patent to Method 207.   Judge Gordon carefully analyzed the precise manufacturing processes used by Amphastar to determine which the processes the unenforceability remedy should apply to.  Momenta alleged that three different manufacturing processes used by Amphastar, referred to as the “15-25%” procedure (both original and revised) and the “DBB” procedure, infringed the ‘886 patent.  But the court concluded that the DBB procedure did not conform to Method 207.  Accordingly, the ‘886 patent was held to be unenforceable as to the 15-25% procedures, but not to DBB (Feb. 7, 2018, slip op. at 16-18).

Equitable Estoppel

Amphastar also argued that because it reasonably relied on Momenta’s misleading conduct (i.e., failing to disclose the existence of the ‘886 patent) and made investments in manufacturing capacity for enoxaparin on that basis, Momenta should be estopped from enforcing the patent against it.  Judge Gordon agreed, citing Hynix Semiconductor Inc. v. Rambus, Inc. (645 F.3d 1336, 1348 (Fed. Cir. 2011)).  But as with waiver, the remedy was applied only to the 15-25% process, and not to the DBB process.

Antitrust Claims

In addition to the waiver and estoppel defenses raised by Amphastar, Amphastar brought a separate action charging Momenta and Sandoz with violations of the Sherman Act and California antitrust and competition law based on Momenta’s failure to disclose the ‘886 patent to USP.  Amphastar argues that Momenta “wrongfully acquir[ed] monopoly power by deceiving the USP into adopting” the Method 207 standard.  This conduct, Amphastar alleges, both improperly excluded Amphastar from the market for generic enoxaparin and drove up the price of generic enoxaparin by billions of dollars over the years (Mar. 19, 2018, slip op. at 6).

In denying Momenta’s motion to dismiss, Judge Gordon looked to Broadcom Corp. v. Qualcomm, Inc., 501 F.3d 297, 314 (3^rd Cir. 2007), which explains that “[d]eception in a consensus-driven private standard-setting environment harms the competitive process by obscuring the costs of including proprietary technology in a standard and increasing the likelihood that patent rights will confer market power on the patent holder”.  Accordingly, he held that Amphastar had articulated a cognizable claim for monopolization under the Sherman Act.

A jury trial in the antitrust case is currently scheduled to begin in September 2019.  While there appears to be ample basis in the record supporting Amphastar’s claims regarding Momenta’s deceptive conduct toward USP, Amphastar’s greatest challenge at trial will likely be proving the existence of an antitrust injury, particularly in view of the FTC’s case against Rambus, which faltered on this very point. As the DC Circuit explained in Rambus, Inc. v. FTC, 522 F.3d at 466, “An otherwise lawful monopolist’s end-run around price constraints, even when deceptive or fraudulent, does not alone present a harm to competition in the monopolized market.”  Rather, antitrust injury – harm to competition, rather than to a competitor – cannot be said to exist if an SDO, “in the world that would have existed but for [the patent holder’s] deception, would have standardized the very same technologies” (id.).    Thus, will Amphastar be able to show that but for Momenta’s deceptive conduct, the Method 207 standard would not have been approved by USP?

The result will be interesting, both at trial and, if appealed, at the First Circuit, which is not strictly bound to follow the DC Circuit’s precedent in Rambus v. FTC.  There are certainly many, including Commissioners at the FTC, who felt the DC Circuit’s decision in Rambus was excessively forgiving of deceptive conduct within SDOs.  Momenta, which unexpectedly raises a fact pattern that has all but disappeared from the ICT litigation landscape, may give courts an opportunity to revisit this controversial decision in a new context.

By Jason Rantanen

In Cuozzo v. Lee (2015), the Supreme Court affirmed the USPTO’s use of the Broadest Reasonable Interpretation (BRI) approach to claim construction in inter partes review.  As Dennis wrote in May, the PTO is now considering changing the standard it uses to that of “a civil action to invalidate a patent under 35 U.S.C. 282(b), including construing the claim in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent.”  Changes to the Claim Construction Standard for Interpreting Claims in Trial Proceedings Before the Patent Trial and Appeal Board, 83 Fed. Reg. 21221, 21226 (proposed May 9, 2018).  Here’s the Notice of Proposed Rulemaking.

The period for comments closes on July 9, 2018, so if you’d like to submit a comment on the proposed change, you should do so soon.  According to the Regulations.gov page for the proposed rulemaking, only 8 comments have been submitted so far.   Note that the proposed standard would apply to IPR, post grant review, and covered business method review proceedings.

Guest post by Timothy Holbrook, Asa Griggs Candler Professor of Law at Emory University School of Law.  Professor Holbrook authored an amicus brief in WesternGeco v. Ion.

When the Supreme Court agreed to review WesternGeco LLC v. ION Geophysical Corp., it was unclear how sweeping the decision would be. The case had clear implications for patent law. It would be the first time the Supreme Court had addressed patent infringement damages under 35 U.S.C. § 284 since its 1984 decision General Motors Corp. v. Devex Corp. The briefing and oral argument suggested the Court had some interest in assessing proximate cause in patent damages, an issue that has not been addressed by the Supreme Court or revisited by the Federal Circuit since its seminal en banc decision in Rite Hite Corp. v. Kelly Company Inc. Finally, beyond patent law, this case had implications for the Court’s jurisprudence on the presumption against extraterritoriality, particularly as to whether the presumption applies to remedial provisions.

Ultimately, the Supreme Court wrote a narrow decision, expressly avoiding many of these broader issues. The opinion, however, does demonstrate a methodology for addressing these issues in the future. It also leaves open the question of the viability of the Federal Circuit’s decisions in two other cases, Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. and Carnegie Mellon University v. Marvell Technology Group, Ltd., although those cases appear to have used flawed methodologies.

WesternGeco involved infringement under 35 U.S.C. § 271(f)(2), a unique provision that defines infringement as the supplying from the United States of a component or components that have no substantial non-infringing uses, so long as the infringer knows that there are no other uses and intends to assemble the complete device overseas. The only issue in this case was one of damages: could the patentee receive lost profits for foregone sales of services using the patented invention on the high seas, outside of the United States.

The Federal Circuit had concluded the damages were not available by using the strict territorial limit on patent infringement damages it had embraced in Power Integrations and Carnegie Mellon. In all three cases, the Federal Circuit rejected damages awards for foreign activities, even though there was a predicate act of infringement.

The Federal Circuit in WesternGeco did not utilize the two-step framework for assessing the extraterritorial application of U.S. laws adopted by the Supreme Court in RJR Nabisco, Inc. European Community. Under RJR, a court at step one should determine whether the presumption against extraterritoriality has been rebutted, which occurs when “the statute gives a clear, affirmative indication that it applies extraterritorially.” If the presumption is not rebutted at step one, a court then goes to step two to assess if the focus of the statute to determine if, under the facts of the case, the statute is regulating domestic conduct, even if there may be some conduct that occurred abroad. Necessarily, an analysis of the focus of the statute is contingent on the particular facts of the case.

In WesternGeco, the Supreme Court utilized this framework, although it skipped step one and jumped straight to step two. The Court concluded that damages arising from foreign activity is permitted in this case. Noting that § 284 depends on the definition of infringement at issue, the Court turned to § 271(f)(2) to perform its focus analysis, concluding that § 271(f)(2)’s focus is exportation of components from the United States. These domestic acts thus resulted in the consequences for which damages are sought, so those damages should be available, contrary to the Federal Circuit’s holding.

What are some of the key implications and open questions after this decision?

The Court technically did not answer the question of whether the presumption against extraterritoriality applies to remedial provisions. The petitioner in this case argued that the presumption against extraterritoriality does not apply to remedial provisions at all. By skipping step one of the RJR analysis, the Court avoided answering this question. The Court was concerned that “resolving that question could implicate many other statutes besides the Patent Act.”

Interestingly, this move confirms that the presumption against extraterritoriality is really only found in step one of the RJR analysis. Step two is a distinct inquiry. Moreover, it is important that the Court did utilize the RJR framework at all, lending support for the view that this methodology is one of general application, even to remedial provisions. Future cases will have to determine the applicability of step one.

The analysis of remedies under step two depends on the nature of the provision defining liability. The Court also made clear that an analysis of the remedy provision of a statute will depend on the liability-creating portion of the statute at issue. Here, the Court turned to § 271(f)(2) to assess the focus of the statute; it did not simply focus on § 284 alone, which of course contains no territorial limits.

The Court thus rejected the approach urged by the petitioner and the Solicitor General that would have ignored the infringement provision at issue. Instead, they urged that only the compensatory nature of damages should be considered.

A proper step two analysis of § 284, therefore, depends on the relevant infringement provision. As acknowledged by Professor Stephen Yelderman of Notre Dame Law School, the Court “vindicated” the methodology I suggested both in an amici brief on behalf intellectual property law professors and in Boundaries, Extraterritoriality, and Patent Damages in the Notre Dame Law Review.

Moreover, the Court declined to overrule Power Integrations and Carnegie Mellon, notwithstanding the petitioner’s and Solicitor General’s arguments that these decisions were also wrong. Instead Court focused exclusively on § 271(f)(2), which means that the continued viability of Power Integrations and Carnegie Mellon remains an open question.

Issues of proximate cause may be coming down the pipeline, and maybe in this case. Some of the amicus briefs at the Court looked at the damages issue from the perspective of proximate cause. Professor Yelderman submitted an amicus brief that drew specific reference at oral argument, focusing extensively on proximate cause as it relates to damages. Similarly, the amici brief I submitted also raised issues of proximate cause, particularly in this case where the lost profits were for foregone services and not for lost sales of the invention.

Surprisingly, given the amount of discussion at oral argument on the subject, the Court relegated proximate cause to a footnote, noting “we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.” Aside from punting on the issue, this footnote does implicitly suggest that proximate cause and extraterritoriality concerns are properly viewed as distinct concerns.

Moreover, it is unclear whether the Court is signaling to the Federal Circuit that proximate cause could still be an issue in this case. The Court rejected the bright-line rule against these damages offered by the Federal Circuit, but one could read that footnote to say it is an open issue in this case itself. Of course, given the Federal Circuit’s capacious views of proximate cause, it seems unlikely the Federal Circuit would use the doctrine to limit the damages here.

Do Power Integrations and Carnegie Mellon survive WesternGeco? The Court did not address extraterritorial damages under § 271(a), leaving these cases untouched. But what are the implications of WesternGeco for such worldwide damages theories? Professor Tom Cotter of the University of Minnesota School of Law believes those cases are no longer good law and that such damages would be available.

I disagree, however. I specifically analyzed those two cases using the RJR framework in Boundaries, Extraterritoriality, and Patent Damages. In my view, the focus of § 271(a) is more dramatically circumscribed territorially. Although any analysis of a statute’s focus depends on the particular facts of a given case, § 271(a)’s expressly is limited to infringement within the United States. While some transnational acts could be ensnared in such a focus, such as uses of transnational systems as in NTP Inc. v. Research in Motion, Ltd. or transnational deals to sell inventions in the United States as in Transocean Offshore Deepwater Drilling, Inc. v. Maersk Contractors USA, Inc., damages for wholly domestic acts of infringement would seem to be limited to acts within the United States. Thus, while the reasoning is wrong, the outcomes in Power Integrations and Carnegie Mellon may actually be correct. The focus of the § 271(a) is infringement only within the United States and not focused on exportation, as was the case in WesternGeco. Nevertheless, this issue remains open after WesternGeco, though we now know a court should approach the issue through the RJR framework.

For a short decision, the Court does offer some important insights relevant to its broader efforts in addressing the presumption against extraterritoriality. Nevertheless, the narrowness of the decision leaves to future cases a variety of important issues. The opinion likely will work as a roadmap for future litigants to raise them.

By Jason Rantanen

WesternGeco LLC v. Ion Geophysical Corp. (2018), 2018 U.S. LEXIS 3842   Download Opinion
Majority: Thomas (author), Roberts, Kennedy, Ginsburg, Alito, Sotomayor, and Kagan. Dissent: Gorsuch, joined by Breyer.

In its final patent-related opinion of this term, the Supreme Court held that 35 U.S.C. § 284 permits the award of lost foreign profits.  In reaching its conclusion, the Court rejected the position of the Federal Circuit that the presumption against extraterritoriality precluded the award.  Full disclosure: I joined an amicus brief written by Emory Professor Timothy Holbrook that argued that the presumption against extraterritoriality applied here.

From pages 7-8 of the majority opinion:

In sum, the focus of §284, in a case involving infringement under §271(f)(2), is on the act of exporting components from the United States. In other words, the domestic infringement is “the objec[t] of the statute’s solicitude” in this context. Morrison, 561 U. S., at 267. The conduct in this case that is relevant to that focus clearly occurred in the United States, as it was ION’s domestic act of supplying the components that infringed WesternGeco’s patents. Thus, the lost-profits damages that were awarded to WesternGeco were a domestic application of §284.

The Court expressly declined to address the issue of proximate causality, which as Tom Cotter points out, would seem to provide an important limitation on the abilities of patent owners to obtain lost profits for § 271(f)(2) infringement. Slip Op. at 9, n. 3 (“In reaching this holding, we do not address the extent to which other doctrines, such as proximate cause, could limit or preclude damages in particular cases.”).  Given all this, I expect that parties will now focus heavily on proximate cause issues when arguing about remedies for § 271(f)(2) liability.

Tom Cotter has a detailed post about the decision on his Comparative Patent Remedies blog.

By Jason Rantanen

Oil States Energy Services v. Greene’s Energy Group: Inter partes review does not violate Article III or the 7th Amendment.  Patents are public rights for purposes of this question.  This holding is a self-proclaimed narrow one that “should not be misconstrued as suggesting that patents are not property for the purposes of the Due Process Clause or Takings Clause.” Thomas for the majority; Breyer with a concurring opinion (joined by Ginsburg and Sotomayor), Gorsuch dissenting (joined by Roberts).  Opinion here: Oil States v. Greene’s Energy

SAS Institute v. Iancu: When the USPTO institutes an inter partes review, it must decide the patentability of all of the claims the petitioner challenged, based on the plain text of § 318(a).  Gorsuch for the majority; Ginsburg dissenting (joined by Bryer, Sotomayor, and Kagan); Breyer dissenting (joined by Ginsburg and Sotomayor, and Kagan in part).  Opinion here: SAS v. Iancu

Off to teach Administrative Law, so more to come later.

Update: Prof. Tom Cotter has a longer summary on his Comparative Patent Remedies blog: http://comparativepatentremedies.blogspot.com/2018/04/us-supreme-court-upholds-inter-partes.html

By Jason Rantanen

The regional round of the AIPLA Giles S. Rich Patent Moot Court competition took place last weekend.  I know how much work goes into these competitions–merits briefs on both sides plus preparation to argue both sides–so kudos to all competitors.  Particular congratulations go to the winners and runners-up, who will be competing at the Federal Courts Building in Washington D.C. on April 18-20.  The final round will be heard by Judges Prost, Reyna and Chen.

Spoiler alert: the names of the competitors and schools are listed on the next page.

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Guest post by Christopher J. Walker, The Ohio State University Moritz College of Law and Melissa F. Wasserman, The University of Texas School of Law

In 2011, Congress created a series of novel proceedings for private parties to challenge issued patents before the newly formed Patent Trial and Appeal Board (PTAB). While the PTAB proceedings are immensely popular, they have also been controversial. A series of legal challenges to these new adjudicatory proceedings are working their way through the federal judiciary and up to the Supreme Court, and the latter is deciding this Term the constitutionality of PTAB adjudication. Yet to date, there has been no sustained comparison of these new adjudicatory proceedings with other agency adjudications. This comparison could be provide numerous payoffs, including highlighting the unique facets of PTAB adjudication that may serve for successful legal challenges as well as providing opportunities for improving the decisional processes of adjudicatory boards.

In The New World of Agency Adjudication, we seek to begin this endeavor by situating PTAB adjudication in the modern administrate state. Every administrative law student learns the basics of “formal” adjudication under the Administrative Procedure Act (APA). The paradigmatic APA-governed formal adjudication involves an evidentiary hearing held before an administrative law judge (ALJ) wherein parties are entitled to oral arguments, rebuttal, and cross-examination of witnesses. The ALJ’s decision is then reviewable by the agency head, who typically can reverse the decision for largely any reason. Thus, the critical difference between APA formal adjudication—also known as Type A adjudication—and the judicial model is that the agency head has final decision-making authority.

The vast majority of agency adjudications today, however, do not take the form of APA-governed formal adjudication. The new world of agency adjudication comprises agency actions that are adjudicated by non-ALJ agency personnel that have diverse titles, such as administrative judge, administrative appeals judge, hearing officer, immigration judge—just to name a few. These non-ALJ judges have less independence and protections than ALJs. A substantial portion of these proceedings are known as Type B adjudications which still require evidentiary hearings, and hence are relatively formal. In contrast to APA governed formal adjudication, however, the APA imposes virtually no requirements on these proceedings including agency head review. Yet similar to Type A adjudication, a common feature of Type B adjudication is that the agency head has final decision-making authority.

How do the PTAB proceedings fit within this modern world of agency adjudication? Although the new PTAB proceedings have many of the hallmarks of APA formal adjudication, they lack at least two features that suggest they should not receive a Type A classification. Perhaps most saliently, the Patent Act requires these proceedings to be presided over by administrative patent judges, not administrative law judges. The second critical difference is that the Director of the Patent Office does not have final decision-making authority over PTAB determinations. Although an aggrieved party to a PTAB proceeding can file a request for a rehearing by the Board, the Director does not have the authority to review PTAB determinations as a matter of right. As a result, we argue the best understanding of PTAB proceedings is that they are Type B rather than Type A adjudication. The more difficult question is how do the new PTAB proceedings stack up to its Type B adjudication peers? We conclude quite favorably. Drawing on a recent ACUS study that focuses on identifying the best practices of Type B adjudications, we find that PTAB meets the majority of these recommendations and scores as well as most Type B proceedings.

Our Article concludes by exploring one critical difference between PTAB proceedings and most Type B adjudications: the lack of agency-head review of PTAB determinations. The standard administrative model vests final decision-making authority with the agency head for a number of reasons, including providing the agency head with policy control and the ability to bring consistency to the adjudicatory board decisions. While the Director does not have the authority to directly review PTAB determinations, she does have the ability to influence PTAB outcomes. More specifically, the Director can assign APJs to a panel that share her policy views in hopes that they will vote in accordance with her preferences. This “panel-stacking” often occurs once a rehearing and an expanded panel has been granted, so that the expanded, stacked panel reverses the original three-member decision.

Although we conclude that the Director’s designation procedures are statutorily authorized, we argue this procedure raises a colorable due process violation. Case law on permissible agency-head designation procedures is relatively sparse. One exception is the Sixth Circuit’s opinion in Utica Packing Co. v. Block, in which the Secretary of Agriculture replaced an agency adjudicator with another when the initial adjudicator failed to rule as she wished. The appellate court refused to accept the argument that the Secretary, having delegated to the agency adjudicator the original authority to resolve certain matters, could reappropriate that power at will based on disagreement with the adjudicator’s conclusions. Instead, the court held, “[t]here is no guarantee of fairness when the one who appoints a judge has the power to remove the judge before the end of proceedings for rendering a decision which displeases the appointer.”

Under the reasoning set forth in Utica, there is at least a colorable argument that the Director’s designation procedures raise substantial due process violations. Similar to the Secretary of Agriculture in Utica, the Director in effect removes the original panel before the end of the proceedings when she designates an expanded panel that she hopes will arrive at a different substantive outcome. Although the Director does not technically replace any judge, the practical effect of adding a sufficient number of new members to reverse the original panel decision is functionally equivalent to the Secretary of Agriculture’s removal of the judicial officer in Utica.

Given this colorable due process concern, our Article concludes by examining alternative mechanisms the Director of the Patent Office could utilize to ensure that PTAB consistently applies the agency’s policy preferences. While a congressional grant of agency head review would be the most straightforward way to proceed, our Article also urges the Patent Office to consider an increased reliance on rulemaking and precedential PTAB decisions. With respect to the latter, our Article encourages the Patent Office to consider streamlining the process by which it designates PTAB decisions as precedential to provide the Director with more unilateral authority in making this determination.

The current draft of our article is available on SSRN here. It’s forthcoming in the California Law Review in 2019, so there’s plenty of time for us to incorporate any comments you may have.

By Jason Rantanen

It’s an exciting time for Iowa Law–we have some phenomenal junior faculty members who joined us this past fall and, as of Tuesday, we have a new dean.  Kevin Washburn, Regents Professor of Law and former dean of the University of New Mexico School of Law, will be joining the Iowa College of Law as its 18th dean in mid-June.

Dean Washburn has an amazing professional history, including serving as the Assistant Secretary of Indian Affairs from 2012-2016 (a position for which he was confirmed unanimously by the Senate), an AUSA in the violent crimes section of the Department of Justice, and General Counsel of the National Indian Gaming Commission.   I’m ecstatic about the provost’s selection of dean Washburn and am looking forward to seeing where he leads Iowa Law.

You can read more at the University’s press release: https://now.uiowa.edu/2018/03/university-iowa-names-new-dean-college-law

By Jason Rantanen

I’m thrilled to announce that this fall’s Iowa Law Review symposium will focus on one of the most significant issues of patent law today: the intersection of patents and administrative law.   The symposium, Administering Patent Law, is co-sponsored by the Iowa Law Review and the center I direct, the Iowa Innovation, Business and Law Center.  I’m looking forward to both serious debates about the impact of this term’s Supreme Court decisions (especially Oil States v. Greene’s Energy) and more wide-ranging discussions about the place of patents, the patent office and patent law itself within the broader context of administrative law.

We have a phenomenal lineup of scholars, including both Professor Chris Walker of The Ohio State University Moritz College of Law and Professor Melissa Wasserman of the University of Texas School of Law, whose post on their recent article Situating PTAB Adjudication Within the New World of Agency Adjudication, I’ll be running shortly.  You can read more about the October 5 symposium on the symposium website.  I’ll post about public registration as we get closer to the date.

By Jason Rantanen

Next week is PatCon, the largest annual gathering of patent law, economics, and business professors. This year’s conference takes place at University of San Diego on Friday & Saturday, March 2-3, and features Joe Matal, Carter Phillips, Patent Pilot Program judges, PTO economists, prominent local attorneys, and over 50 academics (providing up to 12.5 hours of CLE credit). I’ll be there, talking about the Compendium of Federal Circuit Decisions, one of my ongoing works in progress. More information on PatCon can be found here.

Guest post by Prof. Timothy Holbrook of Emory Law.  Professor Holbrook has written extensively on extraterritoriality and patents.  In the interest of full disclosure, he anticipates that this post will likely form the basis of an amicus brief.

Patent law remains hot at the Supreme Court.  The Court on January 14, 2018, agreed to review WesternGeco LLC v. ION Geophysical Corp.  WesternGeco joins two other patent cases at the Supreme Court (so far) for its October 2017 term.

WesternGeco is interesting because it is the third time in the since the October 2006 term that the Court has reviewed a fairly esoteric patent law provision, 35 U.S.C. § 271(f).  The Court addressed this provision in Microsoft Corp. v. AT & T Corp. and, just last term, in Life Technologies Corporation v. Promega Corporation. Section 271(f) creates a form of patent infringement that is extraterritorial in nature.  This provision makes a party liable for patent infringement when it exports all or a substantial portion of the components of the patented invention, or a component with no substantial non-infringing uses, where the party intends to assemble the invention outside of the United States.  Through the territorial nexus of supplying the components in the United States, the provision allows a patent owner to regulate foreign markets.

Given the extraterritorial nature of this provision, these cases fall into the line of cases at the Supreme Court addressing the extraterritorial reach of U.S. law generally, most recently in RJR Nabisco, Inc. v. European Community. The question in WesternGeco is different from all of these earlier patent and non-patent cases, however.  The issue is not liability but instead damages.  The question presented is “Whether the U.S. Court of Appeals for the Federal Circuit erred in holding that lost profits arising from prohibited combinations occurring outside of the United States are categorically unavailable in cases in which patent infringement is proven under 35 U.S.C. § 271(f)?”

WesternGeco is the third in a trilogy of cases from the Federal Circuit that grafted a strict territorial limit onto patent damages doctrine.  In two earlier cases, Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. and Carnegie Mellon University v. Marvell Technology Group, Ltd., the Federal Circuit denied lost profits and a reasonable royalty, respectively, for foreseeable, overseas damages that arose from an act of domestic infringement.  Power Integreations and Carnegie Mellon both involved damages for infringement under 35 U.S.C. § 271(a), which requires the acts of infringement to take place within the United States.  The result of these casesis that the Federal Circuit created a regime of strict territoriality for patent infringement damages.

WesternGeco, therefore, reflects a direct challenge to this territorial regime.  In fact, the Solicitor General’s brief that recommended the Supreme Court take the case focused on all three of these cases, and not merely WesternGeco.  Indeed, there is a bit of dispute over how to correctly frame the questions presented, as highlighted earlier on this blog.  As such, the issue in WesternGeco bears some deconstruction to see what is truly at issue here.

The issue in WesternGeco presents two distinct, if related, issues: (1) does the presumption against extraterritoriality apply to damages and other remedial provisions generally and (2) what is the relationship between the proximate cause aspect of damages and extraterritoriality? Each of these issues bear further exploration.

Does the presumption against extraterritoriality apply to damages and other remedial provisions?  A threshold issue the Court should address is whether the presumption against extraterritoriality should apply to remedial provisions in a statute at all.  The Supreme Court has articulated a two-step process for assessing the extraterritorial reach of U.S. laws.  In RJR Nabisco, Inc. v. European Community, the Supreme Court formalized a two-step methodology for assessing the extraterritoriality reach of a statute.  At step one, a court asks “whether the presumption against extraterritoriality has been rebutted—that is, whether the statute gives a clear, affirmative indication that it applies extraterritorially.”  If the presumption has not been rebutted, a court continues to step two, where it determines the focus of the statute.  “If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad….”

The focus on conduct suggests that the concern is with liability, not remedies.   One could argue that the presumption should simply be inapplicable to damages.  If one follows RJR Nabisco’s two step analysis with respect to liability, then by definition there is no concern with extraterritoriality as it comes to remedies and damages.  As the petition for certiorari argued, requiring two-passes through the RJR Nabisco framework – one for liability and one for damages – should be unnecessary.  The Solicitor General’s brief implicitly makes this argument when it argues that background principles of proximate cause should govern the damages inquiry and not the presumption, although the Solicitor General also views the RJR Nabisco framework with being consistent with permitting the award of damages for the lost profits in this case.

The Supreme Court has never addressed whether the presumption applies to remedial provisions.  In order to address the question presented, it needs to explicitly consider whether the presumption applies to damages provisions separately from the related liability provisions in a given statute.  As Sapna Kumar recognized in a forthcoming piece, Patent Damages Without Borders, the Court in RJR Nabisco did apply the presumption twice to the same statute for the same acts in the case, suggesting that the presumption may apply to both substantive and remedial provisions of a statute separately. Consequently, WesternGeco takes on far greater significance, beyond patent law.

As I’ve argued in Boundaries, Extraterritoriality, and Patent Damages in the Notre Dame Law Review, I think the presumption should apply both to liability and to damages provisions.  The reason can be seen in the patent statute itself.  Section 284, the damages provision of the Patent Act, is silent as to any territorial limits.  Instead it refers only to “damages adequate to compensate for the infringement,” which means the provision is inextricably tethered to § 271’s definitions of infringement.  For § 271(a), there is a strict territorial requirement that the acts take place within the United States.  Such language shows the presumption has not been rebutted at step one of RJR Nabisco.  It also suggests the focus of the statute are acts within the United States, meaning that damages should be tied to those acts.  In contrast, § 271(f) satisfies RJR Nabisco’s first step because it is extraterritorial in nature.  Thus, in my view, lost profits should generally be available for infringement under that provision.  If a court declined to apply the presumption to damages, this differentiated outcome could be missed.

For example, in Carnegie Mellon, the infringing use of the patented method undisputedly was within the United States. If the presumption were applied only as to liability, then the issue of extraterritoriality in the case would would never present itself. The court would find liability then shift directly to remedies without pausing to consider extraterritoriality of the damages. If we take seriously the concern of the extraterritoriall reach of U.S. law, we should recognize that an award of damages can have similar effects as a finding of liability based on extraterritorial activity. Ultimately, the patent holder is attempting to regulate activity outside of the United States.

What is the relationship between proximate cause and territoriality?  Even if one disagrees with me and considers the presumption to be inapplicable to damages, it still is an open question as to the relationship between proximate cause and territoriality.

The Federal Circuit treated the two concepts as distinct.  In other words, even though the damages in the trilogy of cases were seemingly all foreseeable, the court nevertheless rejected extraterritorial damages.  The court viewed territoriality as an exogenous limit on damages.

But that need not be the case: perhaps foreseeability and territoriality are both part of the complex analysis involved in proximate cause.  Foreseeability, of course, is not necessarily the sine qua non of proximate cause.  The Federal Circuit articulated the foreseeability principle in its seminal en banc decision, Rite Hite Corp. v. Kelley Co., which held that patentees could recover the profits for lost sales of devices not covered by the patent.  But the court recognized that proximate cause is flexible policy lever: “the question of legal compensability is one ‘to be determined on the facts of each case upon mixed considerations of logic, common sense, justice, policy and precedent.”  Simply because certain damages may be foreseeable in an economic sense does not mandate that they should be recoverable as a matter of proximate cause in all circumstances.

As I suggested in Boundaries, Extraterritoriality, and Patent Damages, the presumption against extraterritoriality in the damages context could be considered part of the proximate cause analysis, even if the presumption does not apply to damages formally.  The impact of awarding damages for activity outside of the United States could properly be considered part of the “mixed considerations” involved in evaluating whether domestic acts of infringement are the proximate cause of damages arising outside of the United States.

Indeed, WesternGeco presents a fairly unique question of damages.  The lost profits sought are not for the lost sales of the patented invention.  Instead, the patentee is seeking profits for lost sales of services that use the patented invention.  Thus, there is an interesting proximate cause even absent any possible territorial limits on damages.

WesternGeco to some may appear to be a relatively unimportant case, with the Supreme Court addressing a seemingly narrow patent provision of little import.  Within patent law, however, WesternGeco portends some important elaborations of U.S. patent law with respect to the territorial limits on damages generally and potentially on proximate cause.  Additionally, the case likely will have significant repercussions for the Court’s development of the presumption against extraterritoriality more broadly because the Court will have to answer the question of whether the presumption applies to remedies.