My University of Missouri Law School colleague Prof. Sam Halabi‘s new book is getting increased action – with a multi-part online symposium by the Yale Journal on Regulation.  The Cambridge University Press book is titled Intellectual Property and the New International Economic Order: Oligopoly, Regulation, and Wealth Redistribution in the Global Knowledge Economy.

The book expands upon Halabi’s prior work in the context of International Intellectual Property Shelters — these are exceptions to IP protection requirements found in a wide variety of international treaties and agreements.  In the book, Halabi extends his prior analysis and considers the basic questions of how to make intellectual property work well for the least developed nations.

The key contribution that Halibi puts forward here is the grouping together of the variety of exceptions and shelters; aggregating them as a whole canvas; and identifying them as a key aspect of transnational trade regulation.  His work is interesting because of its optimism in describing the success that developing nations have seen in establishing these shelters.  An important element of his analysis is in the recognition that, although international trade regulations might be negotiated at a nation-to-nation level, private firms play an important role in their outcome — and can also be substantially regulated by the outcomes.

Read more from the symposium:

• Introduction to the symposium by Patricia Judd
• Peter Conti-Brown,  The Logic of Institutional Change (considering how private “firms and nation-states alternate in supremacy in policymaking”).
• Katja Lindroos Weckström, Food For Thought (Halabi “creates a bridge between two polarized debates”)
• Jeffrey Pojanowski, Exploring the Regulatory World (“the web of legal actors and norms operating in international IP is bewildering in its complexity”)
• Daniel Hemel, Why do Nations Obey International Law (“it is doubtful that any one theory will fully explain the pattern of international IP shelters that Halabi has observed”)
• Patricia Judd, Duck, Duck, Goose: The Potential Perils of “Intellectual Property” Conglomeration (“I question the societal benefit of restricting [trademarks] through use of international intellectual property shelters.”)
• Chris Walker, International IP Shelters: A Regulatory or Deregulatory Move?
• J. Janewa Osei-Tutu, Basic Needs Approach to IP (“Halabi makes an important contribution by illustrating how international IP regulatory shelters have been effective in supporting human development and helping to achieve the NIEO [the New International Economic Order]”)
• Henning Grosse Ruse-Khan, Expanding Shelters into Protective Zones (noting that the new US-Mexico-Canada Agreement lacks some of the IP shelters)
• Peter Yu, Key Insights from Intellectual Property and the New International Economic Order  (“the book gives hope to those who work tirelessly on intellectual property reform but remain frustrated by the never-ending demands for higher standards from intellectual property industries and their supportive governments”)

The Federal Circuit has issued its R.36 Affirmance Without Opinion in the eligibility dispute: Product Association Tech. v. Clique Media Group (Fed. Cir. 2018).  In the case, C.D. Cal Judge Wu dismissed the case on the pleadings under R.12(b)(6) — finding that the claims of U.S. Patent 6,154,738 invalid as a matter of law on subject matter eligibility grounds.  In particular, the court found that the claims are directed to the abstract idea of “locating and sending product information in response to a request” and fail to include anything beyond the excluded idea sufficient to transform the claims into a patent-eligible invention.  I’ll note here that I believe the invention is the brain child of retired patent attorney Charles Call, and is part of a family of five patents.

Claim 1 is reproduced below

1. The method for disseminating product information via the Internet which comprises, in combination, the steps of:

establishing a cross-referencing resource connected to the Internet which includes a database containing a plurality of cross-references, each of said cross-references specifying the correspondence between a group of one or more universal product code values and the Internet address of a source of information which describes the products designated by said group of one or more code values,

transmitting via the Internet a Web page containing at least one hyperlink including a reference to separately stored information, said reference including a particular universal product code value that uniquely designates a selected product,

employing a Web browser program to receive said Web page and display said Web page to a user,

further employing said Web browser to respond to the activation of said hyperlink by said user by transmitting a first request message to said cross-referencing resource, said first request message containing at least a portion of said particular universal product code value,

processing said first request message at said cross-referencing resource by referring to said database to identify the particular Internet address which corresponds to said particular universal product code value and returning a redirection message to said Web browser which contains said particular Internet address;

employing said Web browser to automatically respond to said redirection message by transmitting a second request message to said particular Internet address;

employing a Web server connected to the Internet at said particular Internet address to respond to said second request message by returning product information describing said selected product to said Web browser, and

employing said Web browser program to automatically display said product information from said Web server to said user.

by Dennis Crouch

LG v. Iancu, stems from an obviousness determination by the PTAB in its IPR of LG’s U.S. Patent No. 7,664,971.  On appeal, LG argued that the PTAB had failed to explain its decision as required by the Administrative Procedures Act.  In a silent commentary on the current state of patent law, the Federal Circuit has affirmed the PTAB decision without issuing any opinion or explanation for judgment.

The ’971 patent claims both an apparatus and method for controlling power to the cores of a multi-core processor.  In its decision, the board gave an explanation for rejecting claim 1 (the apparatus), but not for the method claim 9.

In oral arguments, Judge Hughes Chen noted how the patentee had intentionally focused on procedure rather than merits — since LG doesn’t really have an argument for why claim 9 is different.  That merits conclusion may have driven the decision here.

In IPR cases, the duty is on the PTAB to justify its cancellation of each claim.  In Securus, the Federal Circuit actually faced a similar situation and came to the opposite conclusion.  In particular, in that case, the patentee did not independently argue patentability of several of the dependent claims, and so the Board simply held them invalid along with the rest. On appeal, the Federal Circuit reversed — holding that the Board must articulate a reason for every claim being cancelled.

Here, the Board failed to articulate any reasoning for reaching its decision as to these claims. While the Board need not expound upon its reasoning in great detail in all cases … it must provide some reasoned basis for finding the claims obvious in order to permit meaningful review by this court.

One difficulty for LG in this case is that that the Securus decision is nonprecedential — thus this new panel is not bound to follow that decision. And, perhaps the court is looking to preserve its internal stability by issuing this decision without judgment.  Of course, that is an improper use of R.36 no-opinion-judgments that are only permitted by Federal Circuit rule when an explanatory opinion “would have no precedential value.”  Here, rejecting or modifying the analysis of a prior Federal Circuit decision fits the bill of precedential value.

The following are really more notes for myself rather than an article or essay – DC

The pending appeal in ATHENA DIAGNOSTICS, INC. v. MAYO COLLABORATIVE SERVICES, LLC is quite interesting.  As in Mayo v. Prometheus, the district court dismissed Athena’s medical diagnostic methods as directed toward laws of nature.  The case is now on appeal, and Athena’s attorneys have argued that this case is different.  In addition to the party briefs, several amici have also filed.  Oral arguments were held on October 4, 2018 — and involved a thoughtful discussion by Judges Lourie, Newman, and Stoll as well as White & Case Fenwick attorney Adam Gahtan (representing Athena and Oxford) and Fish & Richardson attorney Jonathan E. Singer (representing Mayo). [mp3].   Judge Lourie’s comment about the technology here is that the claims cover “medical research rather than product development.”

Claim 7 is at issue in the case. The claim is directed to a diagnostic method :

1. A method for diagnosing neurotransmission … disorders related to muscle specific tyrosine kinase (MuSK) in a mammal comprising:

the step of detecting in a bodily fluid of said mammal autoantibodies to an epitope of MuSK.

7. A method according to claim 1, comprising:

contacting MuSK . . . having a suitable label thereon, with said bodily fluid,

immunoprecipitating any antibody/MuSK complex . . . from said bodily fluid and

monitoring for said label on any of said antibody/MuSK complex …

wherein the presence of said label is indicative of said mammal is suffering from said neurotransmission or developmental disorder related to MuSK.

• Oral Arguments MP3
• Party Briefs
• ATHENA.APPELLANTBRIEF
• ATHENA.RESPONSIVEBRIEF
• ATHENA.REPLYBRF
• ATHENA.APPX
• Amici
• ATHENA.AmicusBIO
• ATHENA.AmicusCIPA
• ATHENA.AmicusLawProfs
• ATHENA.AmicusSupportingDefendant

Note – Gahtan has jumped from White & Case to Fenwick.

by Dennis Crouch

Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018) is in my list of top-ten patent cases for 2018.  In the decision, Judge Moore vacated a lower court summary judgment ruling on eligibility — holding that a “genuine issue of material fact” as to whether the claims are directed toward a transformative inventive concept rather than merely a “well-understood, routine, and conventional” application of an abstract idea.  Thus, the decision gave some amount of respect to the traditional procedures associated with providing facts.  Practically, this means that is should be more difficult to challenge patent eligibility on the pleadings or on summary judgment. Likewise, it means that examiners must do a bit more work to ‘prove’ the lack of eligibility.

Now, HP has petitioned the United States Supreme Court on the fundamental law-fact divide:

Whether patent eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.

HP Inc., v. Steven E. Berkheimer, Supreme Court Docket No. 18-415 (2018).

A key claim of HP’s brief is that “patent eligibility does not change over time with the state of the art.”  The focus, according to HP is “analysis of the type of discovery sought to be patented.”  I totally agree that HP’s suggestion here should be the law — eligibility need not enter into the question of novelty and non-obviousness.  The difficulty is how to deal with the the Supreme Court’s focus on “whether the claims disclose an inventive concept” as step two of the eligibility analysis framework.

[Read the Petition]

An important aspect of this case is to consider whether HP is something of a wolf in sheep’s clothing. Although HP clearly does not want to be liable to Mr. Berkheimer, HP also may be examining its portfolio that includes tens-of-thousands of patents — many of which have questionable eligibility.

= = = =
In its decision, the Federal Circuit confirmed that claim 1-3 and 9 are ineligible, but that underlying facts are required to determine whether 4-7 are ineligible. U.S. Patent No. 7,447,713.

1. A method of archiving an item in a computer processing system comprising:

presenting the item to a parser;

parsing the item into a plurality of multi-part object structures wherein portions of the structures have searchable information tags associated therewith;

evaluating the object structures in accordance with object structures previously stored in an archive;

presenting an evaluated object structure for manual reconciliation at least where there is a predetermined variance between the object and at least one of a predetermined standard and a user defined rule.

2. The method as in claim 1 wherein the respective structure can be manually edited after being presented for reconciliation.

3. The method as in claim 1 which includes, before the parsing step, converting an input item to a standardized format for input to the parser.

4. The method as in claim 1 which includes storing a reconciled object structure in the archive without substantial redundancy. (more…)

by Dennis Crouch

Soarus L.L.C. v. Bolson Materials Int’l Corp., 2018 U.S. App. LEXIS 27802 (7th Cir. Oct 1, 2018).

This 7th Circuit decision stems a nondisclosure agreement – titled a “secrecy declaration — between Soarus and Bolson Materials.  Soarus was a G-Polymer distributer (for Nippon Synthetic) and Bolson was looking to begin acquiring and using G-Polymer in connection with developing a new 3D printing process.  Problems arose, though when Bolson filed for patent protection on a 3D printing process it developed using G-Polymer. The court explains:

Shortly after executing the NDA, Bolson filed a provisional patent for the 3D printing process it developed using G-Polymer. The filing resulted in Bolson receiving U.S. Patent No. 8,404,171 . . . Soarus later claimed that Bolson’s application for the ‘171 Patent revealed confidential information about G-Polymer, in violation of the NDA. Litigation ultimately ensued in the Northern District of Illinois.

The district court sided with the defendant on summary judgment — holding that the NDA authorized use of the confidential information for patent filings. On appeal, the Seventh Circuit has affirmed.

[Read the SecrecyAgreementAmended]

The two-page NDA includes broad restrictions against disclosure of confidential information.  However, there are two particular provisions relating to the filing of patent applications:

6. Bolson shall not file any application for a patent or other intellectual property using any piece of Confidential Information or the results of the Evaluation without prior written consent of Nippon.

10. Notwithstanding Article 6 hereof, Bolson is free to patent and protect any new applications using G-Polymer® in the specific area of Fused Deposition Method Rapid Prototyping Equipment and Methods.

In reading the provision here, the district court construed the language of paragraph 10 as an exception that gave Bolston the right to “freely patent and protect new applications of GPolymer in the specified 3D printing process” without being confined to the confidentiality restrictions of the NDA.

On appeal, the Seventh Circuit reviewed the contract interpretation de novo under Illinois law but arrived at the same result.

Soarus argued that paragraph 10 is simply making it possible for Bolson to patent its 3D printing inventions — but was not intended as also a blanket release of all confidentiality requirements associated with the filing.

Soarus contends that no reasonable company would seek to protect the confidentiality around a new product by entering into an agreement that permitted a counterparty to disclose those confidences in a public filing with the U.S. Patent Office.

The courts, disagreed with Soarus — finding that the language was clear.

[I]f Soarus was right about the meaning of paragraph 10, there was no reason to create an exception with respect to paragraph 6: the parties instead could (and should) have stated in clear and precise terms, as Soarus would now have it, that Bolson was free to patent and protect the new 3D printing method so long as doing so did not disclose confidential information without the consent of Soarus.

Since the language is clear, the standard contract interpretation process precludes the court from giving substantial or controlling weight to the commercial purposes of the agreement.

Affirmed.

by Dennis Crouch

The Supreme Court is now open for business for its 2018-2019 Calendar.  The only pending patent case before the court is Helsinn v. Teva, which focuses on the meaning of “on sale ” in the Section 102 of the Patent Act as revised by the 2011 America Invents Act.  When do pre-filing sales count as prior art — what level of public disclosure is necessary?

CVSG: On October 1, the Supreme Court asked for the views of the U.S. Government in the case of RPX v. ChanBond — Whether a party that asks for review of a patent has standing to appeal the U.S. Patent and Trademark Office’s final ruling on that review to the U.S. Court of Appeals for the Federal Circuit.

Early in the term, the court regularly denies a host of petitions that had accumulated over the summer as part of its “long conference.”  The court has now done that with about 16 patent case denials out of the gate, including a few cases that I found interesting, including:

• Smartflash LLC v. Samsung Electronics America, Inc. et al., No. 18-189 (PTAB judges as principal officers; retroactive CBM reviews)
• Regeneron Pharmaceuticals, Inc. v. Merus N.V., No. 17-1616 (litigation misconduct and inequitable conduct).
• Bombardier Recreational Products Inc., et al. v. Arctic Cat Inc., No. 17-1645 (does the “should have known” standard for willful infringement under Seagatemeet the “intentional or knowing” requirement set forth in Halo v. Pulse).
• Integrated Technological Systems, Inc. v. First Internet Bank of Indiana, No. 17-1590 (“Does 35 U.S.C. § 282 allow for challenges to a patent’s validity based on patent eligibility under 35 U.S.C. § 101?”).
• Leon Stambler v. Mastercard International Inc., No. 17-1140 (Whether the Federal Circuit’s issuance of Rule 36 judgments without opinions for the disposition of appeals from the Patent and Trademark Office violates 35 U.S.C. § 144’s requirement that the Federal Circuit “shall issue” its “mandate and opinion” for such appeals.).

Supreme Court 2018 — Pending Cases for September Conference

RPX (CVSG mentioned above) is the only case from the initial September conference that was not denied on the first round.

The next upcoming conference is October 5, 2018 and the court is scheduled to consider two cert petitions in patent cases:

• Advanced Audio Devices, LLC v. HTC Corporation, et al., No. 18-183 (Whether an IPR against patents filed before enactment of the AIA violates the Takings Clause of the 5th Amendment to the U.S. Constitution.?)
• Alexsam, Inc. v. Wildcard Systems, Inc., et al., No. 17-1483 (when does a breach of patent license case get to Federal Court?)

Both of these cases would interesting to see before the court.

By Dennis Crouch

Corning Optical Communications v. PPC Broadband (Supreme Court 2018) (on petition for writ of certiorari).

This new petition for writ of certiorari is focused on the same willfulness issues as another recent petition, Bombardier Recreational Products Inc., et al. v. Arctic Cat Inc., No. 17-1645 (cert denied, October 2, 2018).

Does a finding of willful infringement based on a “should have known” standard violate the requirement that willfulness be “intentional or knowing”?

The Patent Act is remarkably unhelpful in terms of spelling out the doctrine of willfulness and enhanced damages.  The statute simply states that “the court may increase the damages up to three times the amount found or assessed” without providing further guidance or limitation. 35 U.S.C. 284.  The Federal Circuit has taken this simple statutory text and layered over a multi-step analysis and multi-prong doctrine that must be met prior to increasing the damage award.  In Halo Electronics, Inc. v. Pulse Electronics, Inc., 136 S. Ct. 1923 (2016), the Supreme Court cut through a portion of the complexity — holding that an infringer’s “objective reasonableness” in its infringement decision does not bar an enhanced damages award.   Still, the doctrine continues to have muti-layers, including a first decision as to whether the infringer’s behavior was “willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate.” Halo. That factual inquiry (willfulness finding) is then followed by a judicial decision as to whether to actually enhance damages.

The question above focuses on the jury’s willfulness finding — are jury instructions sufficient if they include a “should have known that it likely infringed” standard?

The petition also asks a second question about the court’s process in determining whether to enhance damages (following a willfulness verdict).  Corning asks:

In determining whether to enhance damages for “egregious” infringement under §284, must courts consider all relevant circumstances, including evidence that the defendant’s position was objectively reasonable?

In Halo, the Supreme Court held that subjectively egregious behavior could be sanction by enhanced damages even if “objectively reasonable.”  That situation typically involves a defendant who recognized that they were likely infringing a patent but continued to infringe. Then, later in litigation, the attorneys came up with a credible non-infringement argument.  After being adjudged an infringer, the defendant finally argues that its after-developed attorney arguments should be considered as relevant to the willful infringement.

In the petition, Corning explains:

The District Court … joined a growing number of courts in concluding that a finding of willful infringement suffices to support enhanced damages, regardless of the reasonableness of the defendant’s conduct.

Rather, according to Corning, the court should have considered the objective evidence of non-infringement.

Here, I’ll note that the Corning’s objective evidence is pretty good — the US Court of International Trade (CIT) ruled that an ITC General Exclusion Order didn’t apply to the same products at issue here — since they weren’t covered by the patent at issue. U.S. Patent No. 6,558,194.  (Note that in that case the patent owner was not permitted to participate, even as an amicus).

by Dennis Crouch

I wrote earlier about a Natural Alternatives decision regarding priority.  A separate Natural Alternatives was also the subject of the annual patent law moot court competition in my 2017 Patent Law course at the University of Missouri.

In that case, Natural Alternatives v. Creative Compounds, the district court dismissed the lawsuit on the pleadings (12(b)(6)) — finding that the claims were improperly directed toward the natural phenomenon – beta alanine.  The amino acid is apparently useful in muscle building.

The case is now pending appeal before the Federal Circuit. As an example, Claim 1 of U.S. Pat. No. 7,825,084 is directed toward:

A human dietary supplement, comprising a beta-alanine in a unit dosage of between about 0.4 grams to 16 grams, wherein the supplement provides a unit dosage of beta-alanine.

In my judges’ brief, I suggest that this is likely the weakest of the patentee’s claims and provide the argument that: Beta-alanine is a product of nature and thus unpatentable; The specific dosage is associated with a law of nature because the amount is designed to be the effective amount to work on the human body; and Formulating it as a supplement at a proper treatment dosage does not add an inventive concept.  The other side might argue here that the claim is a supplement for treatment — not an underlying product of nature (Myriad), and the effective amount is far in excess of any supplementation relied upon in nature. I’ll note here that a high-meat diet might get up to 0.4 grams per day, but remember that this case was decided on the pleadings — so any plausible factual disputes must be sided in the patentee’s favor.

Claim 34 of the ‘947 Patent is one of the best claim for the patentees:

A human dietary supplement for increasing human muscle tissue strength comprising

a mixture of creatine, a carbohydrate and free amino acid beta-alanine that is not part of a dipeptide, polypeptide or an oligopeptide,

wherein the human dietary supplement does not contain a free amino acid L-histidine,

wherein the free amino acid beta-alanine is in an amount that is from 0.4 g to 16.0 g per daily dose,

wherein the amount increases the muscle tissue strength in the human, and

wherein the human dietary supplement is formulated for one or more doses per day for at least 14 days.

My judges brief explained the issue of importance on the patentee’s side is that the district court’s conclusions appear to be based upon a number of factual conclusions that were decided on the pleadings without any evidence in support. (Berkheimer). The pro-infringer argument: that creatine, carbs,, and beta-alanin are all naturally occurring, and their mixture is not patentable (Funk Bros); although the claims use beta-alanine that is separated from other peptides, that breakage of chemical bonds does not make it patent eligible (Myriad); and the claimed increase muscle mass is simply a law of nature (result of taking the supplement).

In my mind, this is not the type of case that should be dismissed on the pleadings.  But, Judge Huff disagree.

The now pending appeal is interesting and Natural Alternatives has garnered Amici support from both BIO and a group of leading patent law scholars  that include Chris Holman (Drake and UMKC), David Lund (GMU), Adam Mossoff (GMU), Kristen Osenga (Richmond), and David Taylor (SMU).   The law scholar brief was filed by Kevin Noonan of MBHB.  In addition to the legal arguments made by the parties, the Scholars provide their view:

Amici contend that Natural Alternatives’ claims represent precisely how the patent system should reward discovery of a therapeutic use of a natural compound, and thus their invention should be eligible for patent protection. The Supreme Court has repeatedly emphasized that patents claiming new uses of known drugs or new applications of laws of nature are patent eligible, and these teachings properly applied provide patent eligibility for the kinds of claims at issue in this case. Assoc. for Molec. Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 594 (2013); Mayo Collaborative Servs v. Prometheus Labs., Inc., 566 U.S. 66, 87 (2012). The district court’s decision to the contrary conflicts with the Patent Act as an integrated statutory framework for promoting and securing innovation in the life sciences, as construed by this court as well as by the Supreme Court.

The case is pending before the Federal Circuit, although I don’t believe oral arguments have been scheduled (because of an attorney schedule conflicts).

Briefs in the pending case:

• NA-AppellantOpen
• NA-Appellee
• NA-AppellantReply
• NA-BIO
• NA-Scholars

by Dennis Crouch

Federal Circuit R. 50 states that:

No employee of the court shall engage in the practice of law. No former employee of the court shall participate or assist, by way of representation, consultation, or otherwise, in any case pending in the court during the period of employment.

In a new order captioned In re Violation of Rule 50, Docket No. 2018-9001 (Fed. Cir. Sept 27, 2018), the Federal Circuit has rebuked an unnamed former law clerk and her law firm for violation of the rule.

The basic setup: When the clerk left the Federal Circuit, she handed over a list of no-no cases to her new law firm. (“No-no cases” are those that were pending during the clerk’s time at the Federal Circuit.)  Several years later, the firm stepped-in as new counsel to one of the no-no cases and the former clerk appeared as a lawyer in the lawsuit (though not lead counsel).  Some unidentified time later, the clerk realized the violation and immediately withdrew from the case.  The clerk and firm then notified the Federal Circuit of the breach — noting that the clerk never saw any briefs, discussed the case, or heard any discussion of the case during her time at the Federal Circuit.

In its decision here, the court noted that R. 50 “must be strictly followed” and that the facts as explained are “proof of the firm’s negligence.”  Still, the court decided not to impose discipline since this was a first offence for the clerk and firm and no harm was shown. I expect that it would be personally difficult for the court to actually impose discipline on its former clerks absent egregious factors.  However, the court concludes with a general warning:

We emphasize that discipline may be imposed on similar Rule 50 violations in the future.

The decision also cites a second R.50 violation decision from earlier in 2018. In re Violation of R. 50, 712 Fed. Appx. 1005 (Fed. Cir. Feb. 15, 2018)(unpublished).  In that proceeding, the court explained:

Soon after joining the firm, the former clerk was approached by a partner to review, and provide feedback on, a draft opening brief to be submitted in consolidated appeals that were (and remain) pending before this court. It appears that neither the former clerk, nor the partner, nor any other employee of the firm checked to see whether the appeals had been before this court during the former clerk’s employment. The former clerk accepted the assignment and billed 9.7 hours the next day.

After the brief was filed, it occurred to the former clerk that “it was possible that the appeals had been docketed before [his] clerkship ended.” After checking his Appeals Pending List and discovering the violation, the former clerk was immediately removed from the case, and the law firm promptly informed the opposing party and this court of the Rule 50 violation. The opposing party did not object to the filing of the brief in question or the law firm’s continued representation during the appeals.

In that case – like this one – the court did not impose discipline, but acted to “remind the former clerk and the firm that the must be more vigilant.”  In that case, the court particularly stated that the burden of compliance is held by both the former clerk and the law firm.

The Supreme Court has granted a writ of certiorari in the copyright case Rimini Street Inc. v. Oracle USA Inc. following a Ninth Circuit decision in the case. See Oracle USA, Inc. v. Rimini St., Inc., 879 F.3d 948 (9th Cir. 2018).  In the case, the district court sided with Oracle in its copyright suit against the DB service provider Rimini and awarded $50 million in damages, plus an additional $70 million in interest, costs, and fees.  The Supreme Court case here focuses on the meaning of “full costs” as used in the Copyright Act: “In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party. . . the court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.”  17 U.S.C. § 505.

The question presented asks whether this “full cost” provision is limited to “taxable costs” as defined by the general civil procedure statute, 28 U.S.C. §§ 1920 and 1821.

Issue Presented:

Whether the Copyright Act’s allowance of “full costs,” 17 U.S.C. § 505, to a prevailing party is limited to taxable costs under 28 U.S.C. §§ 1920 and 1821, as the U.S. Courts of Appeals for the 8th and 11th Circuits have held, or whether the Act also authorizes non-taxable costs, as the U.S. Court of Appeals for the 9th Circuit held.

In this case, $12 million of the “full costs” awarded were non-taxable.

by Dennis Crouch

Merck & Co., Inc. v.  Gilead Sciences, Inc., Docket No. 18-378 (Supreme Court 2018)

In its newly filed petition for writ of certiorari, Merck asks one simple question:

Whether the equitable defense of unclean hands precludes legal relief in the form of damages.

Getting to the answer though is a bit tricky and will take us back to the principles of equity in existence in the 1790s, the merger of law-and-equity, and the creation of the Federal Circuit.

In this case, a Jury sided with Merck with a $200 million for Gilead’s infringement of U.S. Patent Nos. 7,105,499 and 8,481,712.  However, the District Court judge rejected that verdict on grounds of unclean hands. In particular, the district court found that Merck had engaged in business and litigation misconduct sufficient to render the patents unenforceable.

Candor and honesty define the contours of the legal system. When a company allows and supports its own attorney to violate these principles, it shares the consequences of those actions. Here, Merck’s patent attorney, responsible for prosecuting the patents-in-suit, was dishonest and duplicitous in his actions with Pharmasset, with Gilead and with this Court, thus crossing the line to egregious misconduct. Merck is guilty of unclear hands and forfeits its right to prosecute this action against Gilead.

On appeal, the Federal Circuit affirmed in a decision that I originally noted had “a few substantial problems — most notably is the fact that unclean-hands traditionally only applies to block a party from seeking equitable relief (as opposed to legal relief).”  In its new petition for writ of certiorari, the patentee here seeks to piggy-back on the recent laches decisions that limited laches to issues in equity.

The pharma giant’s basic argument is that its unclean hands cannot bar the company from asserting its legal rights. As Dan Dobbs explains in his book on remedies: “If judges had the power to deny damages and other legal remedies because a plaintiff came into court with unclean hands, citizens would not have rights, only privileges.”

The patentee summarizes its case:

In Manufacturers’ Finance Co. v. McKey, 294 U.S. 442 (1935), this Court rejected the unclean-hands defense as “inapplicable” in damages actions. The plaintiff ’s legal rights were not “subject to denial or curtailment in virtue of equitable principles applicable only against one who affirmatively has sought equitable relief.”

The Federal Circuit has gone the opposite direction. Citing the Federal Rules of Civil Procedure’s 1938 merger of procedures for law and equity and the 1952 Patent Act, the Federal Circuit allows the equitable defense of unclean hands to bar legal actions for patent infringement. Thus, in the decision below, the Federal Circuit held that unclean hands could nullify a jury’s $200 million damages award. That mistaken expansion of unclean hands  beyond its equitable origins has profound impacts. And it reflects disarray on the issue throughout federal courts.