Tag Archives: Supreme Court

Supreme Court has Granted Cert in the Myriad Case, Question: Are Human Genes Patentable

by Dennis Crouch

From the get-go, case of AMP v. Myriad appeared to be on its way to the Supreme Court. That fate was furthered by District Court Judge Sweet’s sweeping 2010 ruling in the case. As written, that ruling would have invalidated essentially all gene patents. As predicted, the Federal Circuit reversed and followed its own prior precedent that isolated genes are patentable.

Now, the Supreme Court has granted the petition for writ of certiorari and will hear the case — limited to the single question: “Are human genes patentable?”

I’m sure there will be significant amicus support on both sides.  A decision will probably not arrive until the end of the spring term.

Read more on the case.

 

Federal-circuit-ism: Defining the relationship between the Federal Circuit and its Regional Sister Courts

By Dennis Crouch

Revision Military, Inc. v. Balboa Manufacturing Co. (Fed. Cir. 2012)

In the US, federalism is the term that we generally use to highlight the complex relationship between state governments and the federal government. In patent litigation we might use the expanded term federal-circuit-ism to describe the Federal Circuit's relationship with both state courts and the regional circuit courts of appeal. Here, the Federal Circuit applied its principles of federal-circuit-ism to hold that preliminary injunctions in patent cases are patent specific and therefore require application of Federal Circuit law rather than the law of the relevant regional circuit court of appeal.

The Case: Revision's design patents are directed toward protective eyewear for hunting and other gun sports. Patent Nos. D. 537,098 and D. 620,039. Revision sued Balboa and requested a preliminary injunction to stop the ongoing alleged infringement. After a hearing, the district court sided with Balboa – holding that Revision had not provided a "clear and substantial" likelihood of success on the merits as required under the Second Circuit law of preliminary injunctive relief. The Federal Circuit has an easier standard for approving preliminary relief in patent cases – requiring only a preponderance of the evidence – and the lower court erred in not applying that standard.

112912_0502_Federalcirc1 112912_0502_Federalcirc2

The district court found that the patentee's infringement case lacked sufficient merit to meet the "clear and substantial" standard. On remand, the lower court will be asked to decide whether it meets the Federal Circuit's lower standard.

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While the appellate court does a fine job of criticizing the district court judgment, one interesting optical mote in Judge Newman's written opinion is that it fails to mention the leading Supreme Court case on injunctive relief, eBay v. MercExchange. That case is important here. A major element of eBay is the Supreme Court's suggestion that the law of injunctive relief in patent cases should be the same law that is applied in other areas of law.

According to well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. . . . These familiar principles apply with equal force to disputes arising under the Patent Act. As this Court has long recognized, "a major departure from the long tradition of equity practice should not be lightly implied." Nothing in the Patent Act indicates that Congress intended such a departure.

Federal Circuit precedent on applying its own law to preliminary injunction standards reaches back at least to Hybritech Inc. v. Abbott Labs., 849 F.2d 1446 (Fed. Cir. 1988). In that case, the Federal Circuit held that its own law (rather than that of a regional circuit) controls the grant or denial preliminary injunctions. In my view, eBay places this notion in serious question.

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The second half of the opinion looks at the methodology for judging infringement. Here, the appellate court criticized the lower court's decision for unduly focusing on individual elements that "stand out as dissimilar" rather than how those differences would impact an ordinary observer considering the design as a whole and its similarity to the accused device and with reference to the closest prior art.

Canadian Supreme Court Voids Pfizer’s Viagra Patent – Focusing Disclosure Requirement on the Patent as a Whole

Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60 (Supreme Court of Canada 2012)

In a November 8, 2012 decision, the Supreme Court of Canada has ruled that Pfizer’s Viagra patent is void for failure to satisfy the disclosure requirement of § 27 of Canadian patent law. See, Canadian Patent 2,163,446. Apart from the major market impact, the case is doctrinally important in the way that the court treats the disclosure requirement as applying to the patented invention as a whole rather than focusing only on a claim-by-claim analysis.

The active ingredient in Viagra is sildenafil. However, the bulk of the patented claims are more broadly directed toward the use of classes of compounds that include sildenafil or sister compounds to treat erectile dysfunction (ED). Of course, of all of these potential and patented compounds, only sildenafil has been proven effective in treating ED. Further, the patent document does not particularly identify disclose that sildenafil is the compound that works.

The court found that the disclose was lacking because it did not particularly direct one skilled in the art to use the particularly important compound – sildenafil.

Considering the specification as a whole, the use of sildenafil and the other compounds for the treatment of ED comprise one inventive concept. Even though a skilled reader will know that, when a patent contains cascading claims, the useful claim will usually be at the end concerning an individual compound, the claims in the patent ended with two individually claimed compounds [only one of which is sildenafil]. There was no basis for a skilled person to determine which of Claim 6 and Claim 7 contained the useful compound, further testing would have been required to determine which of those two compounds was actually effective in treating ED.

. . .

Although s. 27 does not specify a remedy for insufficient disclosure, the quid pro quo underpinning the Act leads to the conclusion that deeming the patent invalid is the logical consequence of a failure to properly disclose the invention and how it works. If there is no quid — proper disclosure — then there can be no quo — exclusive monopoly rights.

Patent void and invalid.

Supreme Court on Patent Law 2013

The Supreme Court is scheduled to decide four intellectual property cases this term:

  • Bowman v. Monsanto (patent exhaustion in second generation of GM seeds)
  • Kirtsaeng v. John Wiley & Sons, Inc. (international copyright exhaustion)
  • Already, LLC v. Nike, Inc. (impact of limited covenant-not-to-sue on declaratory judgment jurisdiction in trademark law)
  • Gunn v. Minton (whether legal malpractice claims arising out of representation in a patent dispute should be heard by the Federal Circuit)

There are several more pending petitions for certiorari. The most notable of these is Association for Molecular Pathology (AMP) v. Myriad Genetics (patentability of isolated but naturally occurring human DNA). A second important pending petition is Retractable Technologies, Inc. v. Becton, Dickinson and Co. (de novo review of claim construction). More than a dozen other petitions have been filed or are likely within the next two months.

International Copyright Exhaustion: Supreme Court to Decide Whether Copyright Holders Can Block Imports

By Dennis Crouch

Kirtsaeng v. John Wiley & Sons, Inc. (Supreme Court 2012)

Oral arguments are being held this morning in the Kirtsaeng copyright case involving international exhaustion. The case has direct implications on international patent law considerations.

Kirstaeng purchased legitimate copies of Wiley textbooks in various foreign countries and then imported those into the US for resale. The international versions of the textbooks vary somewhat from the US version (e.g., the foreign version covers evolution and is printed on cheaper paper). However, Kirtsaeng was able to find a substantial US market for the books and used the revenue to fund his own education. Copyright includes the exclusive right of distribution, and resale of a product is typically seen as a form of distribution. 17 U.S.C. 106. A separate provision also bars importation of copyrighted works without permission of the copyright holder. 17 U.S.C. 602(a)(1). However, the copyright statute also includes an exception known as copyright exhaustion or the first sale doctrine. 17 U.S.C. 109. The statute provides:

[T]he owner of a particular copy … lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy.

Patent law has an equivalent doctrine. Notably, however, the patent law doctrine of exhaustion is not bound by any statute but does stem from parallel common law origins. The exhaustion doctrine allows for a robust secondary market for goods.

In this case, Wiley wants to use its US copyrights to block Kirtsaeng from reselling his books. Kirtsaeng argues that he purchased non-counterfeit authorized copies of the books and that Wiley’s copyrights are therefore exhausted. Wiley, in turn, focuses on the statute and argues that the US copyright is not exhausted because the foreign-made books were not “lawfully made under this title” where “this title” refers to the US Copyright Act. In its appellate decision, the Second Circuit agreed with Wiley and held that the foreign sale did not trigger the Section 109 exception. The decision supports a notion of country-by-country price discrimination of works protected by copyright (or patent). Unfortunately for US consumers, the price of these goods is typically higher in the US than abroad. In addition to price discrimination, the law is also being used to control access to goods in various countries. In many cases, these ideas have been implemented as mechanisms for preventing important of goods that do not – at first glance – appear to be protected by intellectual property. In the Supreme Court cases of Costco v. Omega and Quality King Distribs., Inc. v. L’anza Research Int’l, Inc., 523 U.S. 135 (1998), the asserted copyrights were unrelated to the value of the product being sold. In Costco, the protected copyright was a small symbol on the under-side of the watch while in Quality King, the protected copyright was the shampoo bottle label. (On remand, the district court dismissed Omega’s action on the ground of copyright misuse.)

The Supreme Court is hearing oral arguments in the case this morning. In 2010 the court heard Costco v. Omega. In that case, however, the court was deadlocked 4-4 (thus affirming the copyright holder’s position). The ninth justice that will sit on this case is Justice Kagen who had recused herself in 2010 – apparently after working on the case as Solicitor General. In her absence, the DOJ has supported the copyright holders in arguing against international exhaustion.

In my view, Wiley likely has the better argument based on a straight reading of the statute. However, the implementation of Section 109 was largely a codification of the 1908 Supreme Court decision in Bobbs-Merrill Co v. Straus. And, it appears that international copyright exhaustion was on the mind of Congress at that time. Further, we already know that if the text of the statute is construed as copyright holders suggest, then the statute does not entirely define the scope of exhaustion. For instance, authorized sales within the US are seen as exhausting the copyright even if the work was not “lawfully made” in the US. In my mind, this opens the door to a potential atextual expansion of the exhaustion doctrine.

There are several interesting briefs filed in the case. The IPO, AIPLA, ABA all support the copyright holders rights to block importation of goods that the copyright holder sold abroad. For the most part, these organizations say that their arguments are “limited to the Copyright Act” and should not be read into “other fields, such as trademark and patent law” which “involve distinct statutory schemes and implicate separate policy concerns.”

A group of law professors led by Jason Shultz filed an amicus brief and argues that the Wiley’s argument “runs contrary to the statutory context in which § 109(a) appears, the common-law backdrop against which Congress legislated, and analogous principles of patent law as well.” Federal Circuit precedent on the topic runs parallel to the Wiley decision finding no international exhaustion. See Jazz Photo Corp. v. Int’l Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001) and Fuji Photo Film Co. v. Jazz Photo Corp., 394 F.3d 1368 (Fed. Cir. 2005). Interestingly, the brief rejects the Jazz Photo cases as against the weight of past and present Supreme Court precedent on the topic.

Mark Lemley filed a brief on behalf of Powell Books, et al. that runs in parallel with a brief filed by a group of art museums. Both briefs argue that their respective operations (selling used books and showing artwork) have long relied upon international exhaustion. If copyrights are not so exhausted, both business models will suffer greatly.

Notes:

Supreme Court Questions Whether Patent Law Malpractice Claims “Arise Under” the US Patent Laws (And Thus Are Amenable to Federal Jurisdiction).

By Dennis Crouch

Gunn v. Minton (Supreme Court 2012)

Over the past few years we have seen an ongoing subject matter jurisdictional battle between state courts, regional federal circuit courts of appeal, and the Court of Appeals for the Federal Circuit. The issue as raised in various context is when a complaint stating a non-patent cause of action should be considered to “arise under” the patent laws so as to ensure that the case is heard by a federal district court and subsequently by the Court of Appeals for the Federal Circuit. These non-patent / patent cases can arise in a variety of disputes, including disputes over legal malpractice, contracts and licenses, employment disputes, bankruptcy, challenges to arbitrations, and antitrust disputes.

The issue in the present case is whether state courts in Texas properly have jurisdiction over legal malpractice claims against patent attorneys (or patent litigators). Legal malpractice is generally a state law tort claim, but the Federal Courts have jurisdiction over claims arising under the patent laws. Although there is Federal Circuit precedent on point, this case actually arises from a Texas state court dismissal of Mr. Minton’s malpractice claim based upon the state court’s interpretation of federal law.

Now, the Supreme Court has agreed offer its final view on the question of when the Federal Courts (and the Court of Appeals for the Federal Circuit) have jurisdiction here. Although nominally a patent case, the case could have much broader impact because it will essentially be interpreting the generic constitutional and statutory limitation of “arising under” jurisdiction.

Background on the Dispute: The case started several years ago when Mr. Vernon Minton developed a set of software that he leased to the Texas Int’l Stock Exchange (TISE). That lease to TISE occurred more than one year before he filed a provisional patent application on the invention embodied by the product. The USPTO granted Minton U.S. Patent No. 6,014,643. However, in a later lawsuit against NASDAQ, the patent was invalidated via the on-sale bar of 35 U.S.C. § 102(b) and that invalidity finding was upheld by the Federal Circuit on appeal. Minton v. Nat’l Ass’n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003). In that decision, the Federal Circuit confirmed that the lease to TISE constituted a “sale” for 102(b). In a post-judgment motion, Minton asked the district court to consider whether the use by TISE was an experimental use. However, the district court refused to consider that issue because of its untimely introduction.

The present lawsuit arose when Minton sued his patent litigation counsel (who have now joined the Fulbright & Jaworski firm). The crux of the malpractice claim is that the litigation counsel failed to timely plead the experimental use question. Minton filed the lawsuit in Texas state court and lost on a pretrial motion based upon the trial court’s judgment that Minton had failed to present “a scintilla of proof . . . to support his claims.” That no-damages judgment was affirmed by the Texas court of appeals. However, the Supreme Court of Texas took an orthogonal view and held that Texas courts actually lacked subject matter jurisdiction over case. In particular, the Texas Supreme Court held that Minton’s malpractice claim required resolution of a substantial question of patent law and therefore fell within the exclusive “arising under” jurisdiction of the federal courts and, eventually, the Court of Appeals for the Federal Circuit. This ruling gives Minton another shot at winning the case – this time in federal district court. The Texas court wrote:

This case arises out of patent infringement litigation. We consider whether federal courts possess exclusive subject-matter jurisdiction over state-based legal malpractice claims that require the application of federal patent law. The federal patent issue presented here is necessary, disputed, and substantial within the context of the overlying state legal malpractice lawsuit. Additionally, the patent issue may be determined without creating a jurisdictional imbalance between state and federal courts. We conclude that exclusive federal jurisdiction exists in this case. Accordingly, without reaching the merits of the legal malpractice claim, we reverse the court of appeals’ judgment and dismiss this case.

The 5-3 Texas Supreme Court decision follows the lead set by the Court of Appeals for the Federal Circuit in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007). In those cases the Federal Circuit gave a broad interpretation to arising under jurisdiction based upon the court’s congressionally mandated goal of national uniformity in the patent system. Both the Akin Gump and the Fulbright Jaworski cases were decided on the same day by the same panel and both penned by then Chief Judge Paul Michel. (Judges Lourie and Rader joined). Although the Texas court did not treat the Federal Circuit decisions as binding precedent, the Court chose to adopt the logic of those decisions. The dissent argued that the State of Texas has a strong interest in (and a regulatory scheme in place for) ensuring that Texas attorneys maintain a high level of quality and that federalism concerns suggest that many of these cases should be adjudged at the state court level. In a non-patent case, the Supreme Court approved of this more nuanced analysis of arising under jurisdiction in the case of Grable & Sons Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005). In 2012, the Federal Circuit has decided at least three other jurisdictional disputes over attorney malpractice. In each case, Judge O’Malley argued against federal circuit jurisdiction based upon her reading of Grable. See Landmark Screens, LLC v. Morgan Lewis & Bockius, LLP (Fed. Cir. 2012)(O’Malley, J., concurring); Byrne v. Wood, Herron & Evans, LLP (Fed. Cir. 2012)(O’Malley, J., joined by Wallach, J., dissenting from denial of the petition for en banc rehearing); and USPPS, Ltd. v. Avery Dennison Corp. (Fed. Cir. 2012)(O’Malley, J., joined by Mayer, J., concurring).

Question Presented: The attorneys challenging federal jurisdiction raised the following questions:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), for “arising under” jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit’s mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims – which involve no actual patents and have no impact on actual patent rights – into the federal courts?

In his responsive brief, Minton reframed the question as follows:

Minton filed a legal malpractice claim against the Attorneys arising from a patent infringement lawsuit. Do federal courts have exclusive “arising under” jurisdiction where the sole substantive issue is the application of a patent law doctrine which is an essential element of Minton’s malpractice claim?

Underlying Law: As suggested by both questions presented, the underlying law on federal court jurisdiction over patent cases begins with the federal statute – 28 U.S.C. § 1338(a).

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.

28 U.S.C. § 1338(a). There are two key phrases here. First, federal jurisdiction only exists when the civil action is considered to be “arising under [an] Act of Congress relating to patents.” Second, if federal circuit exists then it is exclusive of state jurisdiction.

Not a Constitutional Question: The statutory “arising under” language is intended to reflect the parallel language found in Article III, Section 2 of the U.S. Constitution that limits federal judicial power to cases “arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority…” However, the two sources have been interpreted somewhat differently. The constitutional “arising under” limits have been broadly interpreted to allow courts to hear cases even when the federal claim is only raised in a defense or counterclaim. See Osborn v. Bank of the United States, 22 U.S. 738 (1824). On the other hand, the “arising under” language in sections 1338 and 1331 have been more narrowly interpreted under the well pleaded complaint rule. In his 2004 article on Holmes Group, Professor Cotropia writes:

The phrase “arising under” originated from Article III of the Constitution, defining the jurisdiction of the federal court system. The Supreme Court interpreted this phrase, as it appears in Article III, to extend the constitutional grant of federal judiciary power to every case where federal law potentially forms an ingredient of a claim. Article III allowed “[t]he mere existence of a latent federal ‘ingredient’ that might in theory be dispositive of the outcome of a case . . . to bring the entire case, including ancillary nonfederal issues, within the jurisdiction of the federal courts.” An implementing statute is needed, however, for lower federal courts to exercise the powers conferred by Article III. With such an implementing statute, lower federal courts could enjoy some or all of the constitutional “arising under” grant of jurisdiction.

Christopher Cotropia, Counterclaims, the Well-Pleaded Complaint, and Federal Jurisdiction, 33 Hofstra L. Rev. 1 (Fall 2004); See also Donald L. Doernberg, There’s No Reason for It; It’s Just Our Policy: Why the Well-Pleaded Complaint Rule Sabotages the Purposes of Federal Question Jurisdiction, 38 Hastings L.J. 597 (1987).Because the Constitutional limitation has been so broadly interpreted, all of the practical discussion is focused on the meaning of “arising under” as it is found in the statutory context.

In Grable (following a long line of precedent), the Supreme Court confirmed that – under the statute – a case may “arise under” federal law even when the cause of action is purely a non-federal state-law claim. However, when the cause of action is not based on a federal claim, Grable requires (1) a substantial underlying contested federal issue and (2) that federal jurisdiction over the case “be consistent with congressional judgment about the sound division of labor between state and federal courts.” Grable interpreted the “arising under” language of 28 U.S.C. § 1331 rather than the patent jurisdictional statute of section 1338. However, in Christianson v. Colt Industries Operating Corp., 486 U.S. 800 (1988), the Supreme Court recognized that those two statutes should be interpreted in parallel.

Is Patent Law Different?: Although I wrote above that the case has non-patent implications, patent law presents some particulars that might not exist in other areas of law. These involve the particular exclusive jurisdictional statute for patent law. Thus, although state courts have jurisdiction to also decide most federal claims, they cannot decide patent claims. In addition, Congress has spoken regarding its desire for uniformity in the application of the patent laws. These stated federal interests could be sufficient to explain a difference between federal jurisdiction over patent law malpractice claims and not over say trademark law malpractice claims. The malpractice is a relatively minor question compared with jurisdiction over contract claims that involve patent rights (such as a patent license or sale). It would be a big deal if the Supreme Court opened the door to greater federal jurisdiction over these claims. As I explain in the next paragraph, I think it is unlikely that this case would be a vehicle for expanding federal jurisdiction and instead will more likely be a vehicle for contracting federal jurisdiction – at least when compared with the holdings in Akin Gump and Fulbright jurisdictional decisions discussed above.

Grable is the Supreme Court’s most recent pronouncement on this issue and that case the court tempered federal arising under jurisdiction by requiring courts to be mindful of the appropriate balance of power between state and federal courts. Despite Grable, both the Federal Circuit and now the Texas Supreme Court have continued to maintain broad jurisdictional reach over these malpractice cases. In these cases, the minority dissenting viewpoint has argued for less expansive jurisdiction. In this setup, the Supreme Court is more likely to resolve the conflict between these ranges than it is to identify a result to the extreme. In addition, in the years since Grable, there has been a continued focus and recognition of legitimizing State’s rights. This notion of the importance of State’s rights places an additional thumb the scale of reduced federal jurisdiction over these types of cases.

AIA Expands Arising Under Jurisdiction: Although not applicable for this case, the Leahy-Smith America Invents Act (AIA) has altered federal court jurisdiction in a way that overrules the Supreme Court decision in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002). In that case, the Supreme Court interpreted the applied the well pleaded complaint rule to the Federal Circuit appellate jurisdiction statute (28 U.S.C. § 1295) in holding that patent issues raised only in counterclaims do not “arise under” the patent law in a way that creates Federal Circuit jurisdiction. The AIA amends the statute to clarify that Federal Circuit jurisdiction includes cases where the patent issue is first raised in a compulsory counterclaim. In addition, the new law indicates that “No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents” and also provides a right of removal from state court if either party raises a claim for relief “arising under any Act of Congress relating to patents.”

Self Replicating (and Alive) Inventions: Supreme Court Grants Certiorari in Monsanto v. Bowman

By Dennis Crouch

Mr. Bowman v. Monsanto Co., Docket No. 11-796 (Supreme Court 2012)

Beginning its 2013 term with a bang, the Supreme Court has granted Vernon Bowman’s petition for a writ of certiorari in the Indiana farmer’s longstanding battle against Monsanto Co. The patents at issue cover Monsanto’s genetically modified seed technology that protects broadleaf plants such as soybeans from being damaged by the application of the popular broadleaf herbicide glyphosate (another Monsanto invention known as RoundUp).

After losing at the Federal Circuit, Bowman presented the following questions to the Supreme Court:

Patent exhaustion delimits rights of patent holders by eliminating the right to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose – namely, for planting. The question presented is:

Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

In its brief-in-opposition, Monsanto reformulated the question as follows:

Whether the Federal Circuit correctly ruled that Monsanto’s patent rights in biotechnology related to genetically modified plants (here, patented technologies that make soybeans resistant to glyphosate-based herbicides) are independently applicable to each generation of soybeans embodying the invention, such that a grower who, without authorization from Monsanto, creates a new generation of genetically modified soybeans infringes Monsanto’s patents.

When asked for commentary on the case, the Solicitor General advised the Supreme Court to deny certiorari. In doing so, however, the Solicitor was harshly critical of the Federal Circuit’s precedent on exhaustion – stating flatly that the Federal Circuit’s “conditional sale” doctrine is inconsistent with Supreme Court precedent.

Solvay v. Honeywell and an Alternative Route to a Central Patent Court in Europe

Guest post by Professor Marketa Trimble (UNLV)

When in 2006 the Court of Justice of the European Communities ("ECJ") clarified the rules of jurisdiction in the European Union ("EU") as they pertained to patent litigation, it left some crucial questions unanswered. The recent judgment of the ECJ in Solvay v. Honeywell (C-616/10, July 12, 2012) provides some additional answers and, most importantly, suggests that there could be a new route open for a central patent court in Europe. A possibility that such a court could informally emerge deserves attention, particularly because of the protracted and complicated negotiations surrounding the creation of a centralized patent court system in Europe, which have generated significant skepticism about the viability of the project as presented by the EU institutions.

In the 2006 judgment GAT v. LuK (Gesellschaft für Antriebstechnik mbH & Co. KG v. Lamellen und Kupplungsbau Beteiligungs KG, C-4/03, July 13, 2006) the ECJ explained that the provision in the Brussels Convention on Jurisdiction (which was replaced by the Brussels I Regulation, Article 22.4, after the original suit), which gives exclusive jurisdiction to decide patent validity to the courts in the country where a patent was granted, applies not only to declaratory judgment suits but to any decisions by a court on patent validity, regardless of how the issue of validity is raised before the court. Commentators concluded that the decision prevented de facto the centralization of litigation of multiple parallel patents in one national court; any time an alleged infringer attacks the validity of foreign patents in suit, the national court has to either dismiss the case or, at a minimum, stay the infringement proceedings until the issue of validity is decided in foreign courts or patent offices.

The problem is that not all court decisions on patent validity are equal; not all result in a final resolution of the question of validity of a patent with erga omnes effects that translate into a cancellation of the patent by the national patent office. The Solvay v. Honeywell case concerned a decision by a Dutch court in which the Dutch court considered the validity of a foreign patent as a preliminary matter to determine whether it could issue a provisional measure, such as a preliminary injunction. In other words, the Dutch court assessed the validity of foreign patents, but its decision in the interim proceedings did not result in the cancellation of those patents by the national patent offices. In Solvay v. Honeywell the ECJ held that Dutch interim proceedings that result in the issuance of provisional measures fall within the scope of Article 31 of the Brussels I Regulation, which establishes a special jurisdictional regime for provisional measures – a regime that does not yield to the exclusive jurisdiction provision. Therefore, as long as proceedings fall within the scope of Article 31, courts may grant provisional measures concerning foreign patents, even if a defendant questions foreign patent validity.

Dutch courts are not the only European courts that make preliminary assessments of patent validity; German courts that decide patent infringement cases regularly assess patent validity as a preliminary question in patent infringement litigation. German court decisions on patent validity made within infringement proceedings also have limited effects, and do not result in the cancellation of patents by the German Patent Office. In the German bifurcated system, where infringement and validity decisions are made by different courts (until the issues meet in the German Supreme Court, if they both proceed that far), infringement courts exercise their discretion to decide whether to stay or continue infringement proceedings based on their assessment of the likelihood of the success of the patent invalidity claim.

The question following Solvay is whether the preliminary assessments by German courts in infringement proceedings should be viewed as being different from the preliminary validity assessments by Dutch courts in interim proceedings. At first glance the Solvay decision seems to suggest that they should be viewed differently; in interim proceedings Dutch courts assert jurisdiction based on Article 31 of the Brussels I Regulation, which does not succumb to the exclusive jurisdiction provision of Article 22.4, while the jurisdiction of German courts in infringement proceedings is based on other provisions of the Brussels I Regulation (Articles 2, 5.3, 6.1), which in cases involving decisions on patent validity must yield to the exclusive jurisdiction of the court of the country in which the patent was granted.

However, there is something in the ECJ decision that suggests that the two types of assessments of patent validity might be viewed similarly. While the ECJ could have stopped at its reference to the structure of the Brussels I Regulation, it continued in paragraphs 49 and 50 of the Solvay decision to analyze the nature of the assessment of validity in Dutch interim proceedings. The ECJ noted that when a preliminary assessment of validity is made, such as the Dutch court's assessment, "there is no risk of conflicting decisions … since the provisional decision … will not in any way prejudice the decision to be taken on the substance" by the court that has exclusive jurisdiction to decide patent validity.

If the application of the exclusive jurisdiction provision in Article 22.4 is to be guided by its primary objective – and if the primary objective is the avoidance of conflicting decisions concerning patent validity (Solvay, par. 47, and GAT, par. 29, but see GAT, par. 21) – and if preliminary assessments of patent validity, such as the ones made by Dutch courts in interim proceedings, cannot, by definition, conflict with any future final decisions on patent validity, then it appears that Article 22.4 should also not apply to German courts' assessments of patent validity in infringement proceedings.

Whether the Solvay judgment supports this interpretation of the applicability of Article 22.4 will have to be tested; although it would seem that the interpretation contradicts the 2006 GAT judgment, a close reading of GAT in light of Solvay suggests that the interpretation might stand a slight chance of success. If provisional assessments of patent validity are held not to be the kinds of decisions on patent validity that can be made only by the courts of the country in which a patent was granted, nothing should prevent German courts from deciding patent infringement cases involving patents granted in foreign countries. Naturally, such infringement cases would proceed only if courts determined that it is likely that the patents will be upheld if their validity is challenged in the countries where the patents were granted. But a patent holder with a strong patent could benefit from centralized patent litigation before the German courts (assuming the courts have jurisdiction over the defendant), and given the extensive expertise of some German courts and some procedural advantages, this possibility could be an attractive, albeit partial, solution to the problem of fragmented patent litigation in Europe.

(For more discussion of patent law and litigation in Germany, particularly in comparison with U.S. patent law and litigation, see Marketa Trimble, Global Patents: Limits of Transnational Enforcement, Oxford University Press, 2012. Chapter 3 from the book is also available at http://ssrn.com/abstract=2130268.)

Supreme Court Grants Cert in Already v. Nike

By Jason Rantanen

This morning the Supreme Court granted certiorari in Already, LLC dba Yums v. Nike, Inc., No. 11-982, an appeal carrying the potential for profound implications for patent law.  The question presented asks:

Whether a federal district court is divested of Article III jurisdiction over a party’s challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party’s then-existing commercial activities.

The Petition focused on a split between the Second and Ninth Circuit, but similar disagreements have simmered in the Federal Circuit.  Under controlling Federal Circuit precedent, it has long been the law that a patent holder can divest a federal court of Article III jurisdiction over the defendant's counterclaim for a declaratory judgment of patent invalidity by promising not to sue.  See Super Sack Mfg. Corp. v. Chase Packaging Corp., 57 F.3d 1054, 1059-60 (Fed. Cir. 1995).  A subsequent dissent by Judge Dyk, however, urged the abandonment of the Super Sack rule.  See Benitec Australia, Ltd. v. Nucleonics, Inc., 497 F.3d 1340, 1350-55 (Fed. Cir. 2007) (Dyk, J., dissenting). 

Should the Court agree with Petitioners, it thus would very likely spell the end of the so-called Super Sack covenant, making it harder for patent holders to withdraw their patents once placed into litigation. 

Notes:

Racing Procedures: Federal Circuit Refuses to Stay Reexam Appeal to Wait for Parallel District Court Appeal

by Dennis Crouch

Bunzl Processor Distribution v. Kappos (Fed. Cir. 2012) (nonprecedential order)

Bunzl and Bettcher are in a longstanding battle over the exclusive rights to make and sell a rotary knife blade used in meat processing. The patents include Bettcher’s Patent Nos. 7,000,325 and 8,074,363 and the pending lawsuits include three district court cases and an inter partes reexamination.

The ‘325 infringement lawsuit and the parallel inter partes reexamination were filed in 2008.  Bunzl recently filed a declaratory judgment action on the newly issued ‘363 patent.

Bettcher is winning the reexamination.  The USPTO Board of Appeals recently reaffirmed the examiner’s decision to confirm the patentability of the pending claims. Bunzl initially won the infringement lawsuit, but after being partially reversed on appeal, that case appears to be headed for a new trial in the near future. 

In light of the pending infringement trial, Bunzl asked the Federal Circuit to stay the reexamination appeal proceedings so that the whole case could be appealed at once.  In a short non-precedential opinion, Judge Newman has rejected that plea. She writes:

The power of the Court to stay proceedings is incidental to its inherent power to control the disposition of the cases on its docket. See Landis v. North Am. Co., 299 U.S. 248, 254 (1936). Here, we cannot say Bunzl has shown that staying proceedings for such a lengthy period of time is warranted.

Thus, the cases will continue in parallel. The appellate briefs will likely be due before the trial and jury verdict.  The appellate decision will then likely issue around the same time as the judge’s post-verdict order on the inevitable motions. There is a likelihood that the results from the two bodies will be inconsistent.  However, our system has a fairly consistent approach to determining the hierarchy of decision in patent cases.  

Parallel patent proceedings within the US have created a whole new set of litigation strategies and difficulties.  Of course, those strategies will change once again in the coming years as we implement the new post grant review proceedings of the AIA.

Note: In this order, Judge Newman was the sole decision maker acting in her role as motions judge for the month.

Patentable Subject Matter: Supreme Court Challenges Chief Judge Rader’s Broad Notion of Software Patentability

by Dennis Crouch

WIldTangent v. Ultramercial (Supreme Court 2012) Docket No 11-962

The Supreme Court has rejected another Federal Circuit patentable subject matter decision with a GVR and has ordered the appellate court to review its patentability decision with further consideration of Mayo Collaborative Services v.Prometheus Laboratories, Inc., 566 U.S. ___ (2012). In its standard GVR language, the Supreme Court wrote:

The petition for a writ of certiorari is granted [G]. The judgment is vacated [V], and the case is remanded [R] to the United States Court of Appeals for the Federal Circuit for further consideration in light of Mayo Collaborative Services v. Prometheus Laboratories, Inc., 566 U.S. ___ (2012).

The patent at issue in this case claims a particular method for distributing copyrighted products over the Internet. Patent No. 7,346,545. The basic gist of the invention is that the consumer receives a copyrighted product in exchange for viewing an advertisement — and it all takes place over the internet and with a particular monetization scheme.

In its broadly written opinion, the Federal Circuit (Rader, C.J.) found the claimed invention patentable under Section 101 based upon the requirement that a computer be used to perform the method and the programming complexity required to carry out the claimed elements. The court wrote that while “the mere idea that advertising can be used as a form of currency is abstract, just as the vague, unapplied concept of hedging proved patent-ineligible in Bilski,…the ‘545 patent does not simply claim the age-old idea that advertising can serve as a currency. Instead, the ‘545 patent discloses a practical application of this idea.”

Following the Federal Circuit decision in Ultramercial, the Supreme Court decided Mayo v. Prometheus. In that case, the Supreme Court rejected the Prometheus patent as effectively encompassing an unpatentable law of nature. That revives the historic notion that the scope of knowledge held in the prior art is an important aspect of the Section 101 analysis.

The Supreme Court issued a parallel GVR in the gene-patent case of Myriad Genetics. Other pending 101 appeals include Fort Properties v. American Master Lease (en banc petition); Accenture Global v. Guidewire; Bancorp Services v. Sun Life; and others.

Claim one the ‘545 patent reads as follows:

1. A method for distribution of products over the Internet via a facilitator, said method comprising the steps of:

a first step of receiving, from a content provider, media products that are covered by intellectual-property rights protection and are available for purchase, wherein each said media product being comprised of at least one of text data, music data, and video data;

a second step of selecting a sponsor message to be associated with the media product, said sponsor message being selected from a plurality of sponsor messages, said second step including accessing an activity log to verify that the total number of times which the sponsor message has been previously presented is less than the number of transaction cycles contracted by the sponsor of the sponsor message;

a third step of providing the media product for sale at an Internet website;

a fourth step of restricting general public access to said media product;

a fifth step of offering to a consumer access to the media product without charge to the consumer on the precondition that the consumer views the sponsor message;

a sixth step of receiving from the consumer a request to view the sponsor message, wherein the consumer submits said request in response to being offered access to the media product;

a seventh step of, in response to receiving the request from the consumer, facilitating the display of a sponsor message to the consumer;

an eighth step of, if the sponsor message is not an interactive message, allowing said consumer access to said media product after said step of facilitating the display of said sponsor message;

a ninth step of, if the sponsor message is an interactive message, presenting at least one query to the consumer and allowing said consumer access to said media product after receiving a response to said at least one query;

a tenth step of recording the transaction event to the activity log, said tenth step including updating the total number of times the sponsor message has been presented; and

an eleventh step of receiving payment from the sponsor of the sponsor message displayed.

Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton

By Dennis Crouch

Gunn v. Minton, (on petition for Writ of Certiorari at the U.S. Supreme Court)

Vernon Minton developed a set of software that he leased to the Texas Int'l Stock Exchange (TISE) more than one year before filing a provisional patent application on the invention embodied by the product. The USPTO granted Minton U.S. Patent No. 6,014,643. However, in a later lawsuit against NASDAQ, the patent was invalidated via the on-sale bar of 35 U.S.C. § 102(b) and that invalidity finding was upheld on appeal. Minton v. Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373 (Fed. Cir. 2003). In that decision, the Federal Circuit confirmed that the lease constituted a sale for 102(b). In a post-judgment motion, Minton asked the district court to consider whether the use by TISE was an experimental use. However, the court refused to consider that issue because of its untimely introduction.

The present lawsuit arose when Minton then sued his patent litigation counsel (who have now joined the Fulbright & Jaworski firm). The crux of the malpractice claim is that the litigation counsel failed to timely plead the experimental use question. Minton sued in Texas state court and lost on a pretrial motion based upon the trial court's judgment that Minton had failed to present "a scintilla of proof . . . to support his claims." That no-damages judgment was affirmed by the Texas court of appeals. However, the Supreme Court of Texas took an orthogonal view and held that Texas courts lacked subject matter jurisdiction over case. In particular, the Texas Supreme Court held that Minton's malpractice claim required resolution of a substantial question of patent law and therefore fell within the exclusive "arising under" jurisdiction of the federal courts and, eventually, the Court of Appeals for the Federal Circuit. This ruling gives Minton another shot at winning the case – this time in federal district court.

The 5-3 Texas Supreme Court decision followed the lead set by the Federal Circuit in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007). In those cases the Federal Circuit gave a broad interpretation to arising under jurisdiction based upon the court's congressionally mandated goal of national uniformity in the patent system. Both the Akin Gump and the Fulbright Jaworski cases were decided on the same day by the same panel and both penned by then Chief Judge Paul Michel. (Judges Lourie and Rader joined the panels). Although the Texas court did not treat the Federal Circuit decisions as binding precedent, the court chose to adopt the logic of those decisions. The dissent argued that the State of Texas has a strong interest in (and a regulatory scheme in place for) ensuring that Texas attorneys maintain a high level of quality and that federalism concerns suggest that many of these cases should be adjudged at the state court level. In a non-patent case, the Supreme Court approved of this more nuanced analysis of arising under jurisdiction in the case of Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005).

The lawyer defendants have now appealed to the U.S. Supreme Court – asking that court to provide its verdict on the breadth of arising under jurisdiction for non-patent cases that require interpretation of a patent law issue. Gunn presents the following question:

Did the Federal Circuit depart from the standard this Court articulated in Grable & Sons Metal Products, Inc. v. Darue Eng'g & Mfg., 545 U.S. 308 (2005), for "arising under" jurisdiction of the federal courts under 28 U.S.C. § 1338, when it held that state law legal malpractice claims against trial lawyers for their handling of underlying patent matters come within the exclusive jurisdiction of the federal courts? Because the Federal Circuit has exclusive jurisdiction over appeals involving patents, are state courts and federal courts strictly following the Federal Circuit's mistaken standard, thereby magnifying its jurisdictional error and sweeping broad swaths of state law claims – which involve no actual patents and have no impact on actual patent rights – into the federal courts?

This may be surprising to some, but in most cases the respondent does not actually file any response to a Supreme Court petition for writ of certiorari. The Supreme Court tends to only hear important cases that are well represented on both sides. The lack of response is intended to suggest that the case should not rise to that threshold level of importance. Here, Minton declined to respond to the petition. However, in a recent order, the Supreme Court has asked for Minton's response. This judicial action suggests interest in the case, and that interest may be prompted that may be further spurred by the recent spate of decisions showing some disagreement within the Federal Circuit on the very issue. In a supplemental filing in support of its petition, Gunn argued that "[t]he Federal Circuit, which created the jurisdictional morass at issue in this case, is thus split within itself regarding whether to abandon the misguided and overly-broad jurisdictional standard it articulated in Air Measurement Tech., Inc. v. Akin Gump Strauss Hauer & Feld, L.L.P., 504 F.3d 1262 (Fed. Cir. 2007) and Immunocept, L.L.C. v. Fulbright & Jaworski, L.L.P., 504 F.3d 1281 (Fed. Cir. 2007)."

If the Supreme Court takes the case, argument will likely be scheduled for late 2012.

Federalism and Patent Law: Courts Split on Scope of Federal Circuit Arising Under Jurisdiction

In a trio of decisions, the several members of the Federal Circuit have expressed their disagreement with the court’s expansion of appellate jurisdiction to cover attorney malpractice cases that involve patent law issues.

  • Landmark Screens, LLC v. Morgan Lewis & Bockius, LLP (Fed. Cir. 2012)(O’Malley, J., concurring);
  • Byrne v. Wood, Herron & Evans, LLP (Fed. Cir. 2012)(O’Malley, J., joined by Wallach, J., dissenting from denial of the petition for en banc rehearing); and
  • USPPS, Ltd. v. Avery Dennison Corp. (Fed. Cir. 2012)(O’Malley, J., joined by Mayer, J., concurring).

Attorney malpractice is a state law claim, but the Federal Circuit has (and thus the Federal Courts have) claimed exclusive jurisdiction over many patent prosecution related malpractice claims if the well-pled complaint requires the determination of a substantial issue of patent law.

In Minton v. Gunn, 355 S.W.3d 634 (Tex.2011), the Texas Supreme Court agreed with the Federal Circuit’s extension of jurisdiction, but made an interesting and important statement that Texas courts “are not bound by the holdings of the Federal Circuit.” This situation sets up the need for Supreme Court review. Minton was a 5-3 decision. The dissenting justices argued that state courts should maintain jurisdiction over the case based on its application of the 2005 US Supreme Court case of Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005). In that case, the US Supreme Court held that federalism principles require a cautious and balanced approach to the removal of traditional state court claims to federal court.

The dissent in Minton wrote:

The Federal Circuit’s focus on this mandate [of uniformity] is understandable, but uniformity in patent law is not the be-all and end-all of jurisprudence. It must give way to the contours of federal question jurisdiction provided by the Supreme Court. See Grable. In turn, this Court has its own mandate, of at least equal importance to that of the Federal Circuit. We owe a duty to the people of this state to exercise the judicial power, see Tex. Const. art. V, §§ 1, 3, and that duty includes vital matters such as ensuring consistency and certainty in the civil law of the state, see Tex. Gov’t Code § 22.001, and regulating the practice of law, id. § 81.011(c). Accordingly, we should not risk the confusion and inconsistency that will result from having two sets of binding precedent in Texas legal malpractice law—one stemming from this Court and the other courts of this state, and another, entirely outside of our control after today’s opinion, developing under the direction of the Federal Circuit, largely uninformed by the deep roots of Texas jurisprudence and the requirements of the Texas Constitution.

This Court should not be quick to follow Federal Circuit case law that fails to follow the test set forth by the Supreme Court. Because this case fails to meet three of the four elements required by the Supreme Court for federal-element “arising under” jurisdiction, the court of appeals was correct when it held that exclusive federal patent jurisdiction does not lie here. I therefore respectfully dissent.

In a parallel 2011 case, an Illinois state appellate court held that Magnetek’s claim against Kirkland & Ellis for deficient representation in a patent litigation lawsuit did not arise under patent law. In that case, the court wrote that the largest patent law issue – whether the patent was enforceable or not – had already been decided by a separate court and therefore was not at issue in the case. Magnetek, Inc. v. Kirkland and Ellis, LLP, 954 N.E.2d 803 (Ill.App. 2011).

A petition to the Supreme Court is likely in at least one of these cases.

Supreme Court: District Courts must Review PTO Factual Findings De Novo in Cases Challenging Board Decisions

By Dennis Crouch

Kappos v. Hyatt (Supreme Court 2012)

This case involves a patentee’s right to a file a civil action in district court challenging the USPTO’s refusal to grant a patent. 35 U.S.C. § 145. In a unanimous decision, the Supreme Court has affirmed the Federal Circuit ruling that the patent applicant’s presentation of new evidence to the district court requires that court to make de novo factual findings that consider both the new evidence and the administrative record. The USPTO had asked that the court to apply a higher standard of deference to agency factual findings.

This ruling has two major caveats:

  • Deference will be given to PTO factual findings if the applicant fails to present any new contradictory evidence at the trial.
  • Although it must undertake a de novo review, a court can give less weight to newly presented evidence based upon its consideration of “the proceedings before and findings of the Patent Office.”

In its brief, the USPTO argued that the standard employed here would “encourage patent applicants to withhold evidence from the PTO intentionally with the goal of presenting that evidence for the first time to a nonexpert judge.” The Supreme Court rightfully rejected that scenario as “unlikely” in most cases. There are two reasons for this: (1) as the Court notes, this strategy would serve to undermine their chances of directly obtaining a patent from the USPTO based upon the speculative strategy of having a court find the invention patentable; and (2) in my estimation, some amount of new evidence (such as expert testimony and test results) can always be obtained after trial. This is especially true because of the limited manner in which testimony can be presented to an examiner or in an ex parte appeal to the Board.

In this particular case, however, Hyatt has some reason to sandbag because his application was filed pre-1995 and covers basic building blocks of the modern computer. The delay in issuance likely means additional revenue sources that may persist for 17 years from the issue date.

This result here is appropriate in our current world where ex parte appeals to the PTO Board have become a standard and regular aspect of patent prosecution. Those appeals have become somewhat commodified and many firms offer a fixed price. This makes business sense under Hyatt because the applicant still has a chance to fully press its case and present additional evidence after losing at the Board.

Justice Thomas penned the majority opinion.

In a concurring opinion, Justice Sotomayor (joined by Justice Breyer) offered some thought as to particular times when a district court may offer less weight to evidence presented only at trial. Justice Sotomayor primarily discussed the 1927 deliberate suppression case of Barrett Co. v. Koppers Co., 22 F. 2d 395, 396 (3rd Cir. 1927). In that case, the patent applicant refused to allow their witnesses to answer questions from the chief examiners. The appellate court in that case ruled that the applicant was estopped from later introducing evidence that it had purposely withheld. Learned Hand wrote in a later case that estoppel should not apply when the suppression was merely negligent. Relying on these cases, Justice Sotomayor wrote her suggestion that

when a patent applicant fails to present evidence to the PTO due to ordinary negligence, a lack of foresight, or simple attorney error, the applicant should not be estopped from presenting the evidence for the first time in a §145 proceedings.

Although not expressly stated, I suspect that the purpose of “keeping costs low” would fall within Justice Sotomayor’s category of permissible suppression. Of course, these suggestions from Sotomayor are not part of the majority opinion, which did not cite Barrett or the Learned Hand decision of Dowling v. Jones, 67 F. 2d 537 (2nd Cir. 1933).

In application of this rule to the facts here, Justice Sotomayor began with the presumption that new evidence should be allowed and found that the USPTO had not (yet) met its burden to show wrongful suppression.

Supreme Court: Generic Pharma Manufacturer Has Standing to Pursue FDA Mis-Label Claim against Patentee

By Dennis Crouch

Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, (Supreme Court 2012)

This decision only slightly shifts balance of power in the pharmaceutical industry away from patentees toward generic manufacturers. The case may serve as a good example a complex issue that the Supreme Court appears to understand and deal with in a nuanced fashion.

The FDA maintains a listing of approved drug treatments and any patents that cover the treatment. The listing – known as the Orange Book – is essentially managed by the individual patentee-manufacturers who regularly provide the FDA with updated information of new listings and de-listings. Patentees receive a number of benefits from listing patents in the Orange Book, including constructive standing to sue based upon a generic company's filing of an abbreviated new drug agreement (ANDA) as well as an up-to-30-month stay of FDA approval of any generic versions.

Although the diabetes drug repaglinide has three FDA approved uses, Novo's listed patent covers only one of those methods of use. Relying upon that limitation of coverage, Caraco filed an ANDA application requesting permission to sell the drug for the other two uses but carving out the patented use from its application. Novo then changed its Orange Book listing to indicate that its patent actually covered all three approved uses.

In the ensuing litigation, Caraco filed a counterclaim seeking an order to force Novo to amend its use-code listings. The Federal Circuit, however refused to allow the counterclaim.

In a unanimous decision penned by Justice Kagen, the Supreme Court has reversed, holding that a generic drug manufacturer may employ the counterclaim provision of the Hatch-Waxman Act to force correction of a use code that inaccurately describes the brand's patent as covering a particular method of using a drug.

The Federal Circuit had given the statute a highly technical reading – noting that such a counterclaim for correction was only available if "the patent does not claim … an approved method of using the drug." 21 U. S. C. §355(j)(5)(C)(ii)(I). Since the patent did cover one approved method, the appellate panel majority reasoned that there was no standing to correct the two incorrect listings.

The Supreme Court rejected that analysis as counter to the context surrounding the provision in the law.

The statutory counterclaim we have considered enables courts to resolve patent disputes so that the FDA canfulfill its statutory duty to approve generic drugs that do not infringe patent rights. The text and context of the provision demonstrate that a generic company can employthe counterclaim to challenge a brand's overbroad use code. We accordingly hold that Caraco may bring a counterclaim seeking to "correct" Novo's use code "on the ground that" the '358 patent "does not claim . . . an approved method of using the drug"—indeed, does not claim two.

Reversed.

Justice Sotomayor penned a short concurring opinion calling for further reform to the statute and within the FDA to better ensure that generic drugs can become quickly available for uses that are not covered by any valid patent. The concurring opinion calls the agency to task for failing to exercise its authority in regulating listings in the Orange Book.

Supreme Court to Hear International Copyright Exhaustion Case

By Dennis Crouch

Kirtsaeng v. John Wiley & Sons, Inc. (Supreme Court 2012)

The Supreme Court has granted certiorari in another international copyright exhaustion case. Previously, in Omega v. Costco, the court stalled in a 4-4 tie and left the case without an opinion. Copyright exhaustion – also known as the “first sale doctrine” – is codified under 17 U.S.C. § 109(a) and allows the holder of a copy of a work “lawfully made under this title” to sell or otherwise dispose of the copy without the copyright holder’s permission. Without this doctrine, such a sale could be considered a violation of the copyright holder’s exclusive distribution rights under section 106(3). The question in this case is whether the exhaustion doctrine applies to authorized copies manufactured outside of the US and then imported. Copyright holders argue that exhaustion does not apply because the foreign copies were not “lawfully made under this title,” but instead were lawfully made in a region not subject to US copyright law. A win for the copyright holders would support a system of price discrimination that would allow a rights-holder to block third-party imports of legitimate (non-counterfeit) products into the US. The rule would also tend to encourage foreign manufacture.

The question presented:

How do Section 602(a)(1) of the Copyright Act, which prohibits the importation of a work without the authority of the copyright’s owner, and Section 109(a) of the Copyright Act, which allows the owner of a copy “lawfully made under this title” to sell or otherwise dispose of the copy without the copyright owner’s permission, apply to a copy that was made and legally acquired abroad and then imported into the United States?

The case is expected to be argued this fall.

Exclusive Rights of Importation: The particular facts of the case are interesting. John Wiley sells textbooks at a reduced rate in Thailand. Kirtsaeng imported eight Wiley books and resold them in the US. Although Wiley had profited from the original sale in Thailand, the company argued that the importation also violated US law because the foreign sale did not exhaust the copyright and that, therefore, Wiley maintained exclusive rights of importation and distribution. A jury awarded Wiley statutory damages of $75,000 per copy for a total of $600,000 for the eight books. The Second Circuit affirmed that judgment.

Patent Law: Patent law’s exhaustion doctrine is not based upon a statute but does run roughly parallel to the copyright law as outlined above. In the Jazz Photo cases, the Federal Circuit ruled that international sale does not exhaust US patent rights. If the Supreme Court reverses in Kirtsaeng, this will likely be seen as an implicit reversal of Jazz Photo and its progeny. Thus, the case will obviously impact patent law. The AIPLA filed a brief in support of the petition – focusing on the need for resolving the circuit split.

John Wiley’s cases are still pending against various patent law firms for failing to obtain a license to make copies of prior art documents before making copies and submitting those to the USPTO as required by law. The defendant law firms are expected to file their answers later this month.

Supreme Court Looks to Take Trademark Standing Case Following Covenant-not-to-Sue

by Dennis Crouch

Already (YUMS) v. Nike (SCT 2012)

Nike sued YUMS back in 2009 alleging trademark infringement, unfair competition, and dilution under both federal and NY state law.  The complaint included the image below comparing YUMS brand shoes with Nike’s federal trademark registration number 3,451,905.  The design is related to Nike’s Air Force 1 shoe that was first released in 1982. The Yums intentionally retro look is apparently fashionable for skaters and freestyle BMX riders. [Buy the shoes here] (The image does not show the shoes’ creative soles.)

PatentlyO136

After being sued, YUMS counterclaimed — seeking to cancel the registration.  However, before the court could reach a decision on the merits, Nike’s attorneys at Banner & Witcoff provided YUMS with a covenant-not-to-sue on the AF1 design rights. In the document, Nike wrote that YUMS brand “no longer infringe or dilute the Nike Mark at a level sufficient to warrant the substantial time and expense of continued litigation."

The covenant was limited to YUMS current shoes as well as ‘colorable imitations’ of current lines. In particular, Nike promised to:

refrain from making any claim(s) or demand(s), or from commencing, causing, or permitting to be prosecuted any action in law or equity, against [Yums] or any of its [successors or customers], on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law in the United States relating to the [Nike eAir Force 1 Mark] based on the appearance of any of [Yums]’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced, distributed, offered for sale, advertised, sold, or otherwise used in commerce before or after the Effective Date of this Covenant.

YUMS was apparently happy with the document, but not fully satiated.  Rather, YUMS maintained its declaratory judgment lawsuit — arguing that the Nike Mark continued to improperly chill its innovative marketing efforts.  However, the district court dismissed the case — finding that it lacked subject matter jurisdiction because there was no ongoing case or controversy.  Important for its ruling, YUMS had not taken any “meaninful steps” toward developing a new potentially infringing product not covered by the covenant-not-to-sue.

On appeal, the Second Circuit affirmed, holding specifically that the cancelation power under 15 U.S.C. § 1119 does not provide federal courts with an independent basis for jurisdiction absent an actual case-or-controversy between the parties.

Supreme Court: Now, YUMS has appealed to the US Supreme Court — relying upon the expertise of Jim Dabney and Prof John Duffy (of KSR fame) to bring their case. They raise the simple question: “Whether a federal district court is divested of Article III jurisdiction over a party's challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party's then-existing commercial activities.”  The complaint raises a circuit split between the Second Circuit here and the Ninth Circuit, which is much more friendly to DJ trademark actions in this type of situation. In addition, the petition highlights Supreme Court precedent that suggest broad jurisdiction should be available to challenge the validity of suspect intellectual property rights. See Lear, Inc. v. Adkins, 395 U.S. 653 (1969), MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007), Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83 (1993), and Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249 (1945).

The Supreme Court has now asked Nike to respond to the petition – due May 4.  This move greatly increases the odds that the petition will eventually be granted.

Of interest, a key element of the Myriad gene patent case is whether the ACLU and AMP have standing to sue.  This case may shed further light on that outcome.

Self-Replicating Inventions: Supreme Court asks for Government’s Views in Monsanto Patent Exhaustion Case

By Dennis Crouch

Bowman v. Monsanto (Supreme Court Docket No. 11-796, 2012)

In 2011, the Federal Circuit again affirmed that Monsanto’s genetically modified seeds patents can be used to stop farmers from saving and replanting the GM seeds. The farmer, Vernon Bowman, then petitioned the Supreme Court asking for a writ of certiorari – presenting the following question:

Patent exhaustion delimits rights of patent holders by eliminating the right to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose – namely, for planting. The question presented is:

Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?

In its brief-in-opposition, Monsanto reformulated the question as follows:

Whether the Federal Circuit correctly ruled that Monsanto’s patent rights in biotechnology related to genetically modified plants (here, patented technologies that make soybeans resistant to glyphosate-based herbicides) are independently applicable to each generation of soybeans embodying the invention, such that a grower who, without authorization from Monsanto, creates a new generation of genetically modified soybeans infringes Monsanto’s patents.

CVSG: Now, the Supreme Court has invited the Solicitor General to file briefs expressing the views of the United States in the case. This is a significant step toward grant because it shows some interest in the case. Typically a call for the views of the Solicitor General (CVSG) requires the vote of at least four justices. However, those votes appear to be easier to obtain than a vote to grant certiorari or a vote to reverse the lower court. A study of 30,000 petitions reported that a petition on the paid docket is four times more likely to be granted once the Court calls for a response. Thompson and Wachtell, An Empirical Analysis of Supreme Court Certiorari Petition Procedures: The Call for Response and the Call for the Views of the Solicitor General, 16 George Mason L. Rev. 237 (2009). In his study of patent cases, Professor Duffy found that the SG’s opinion is extremely important in predicting whether the Supreme Court decides to hear a case on the merits. John F. Duffy, The Federal Circuit in the Shadow of the Solicitor General, 78 Geo. Wash. L. Rev. 518 (2010).

DOJ – USPTO – FTC – ETC.: The USPTO would almost certainly agree with the Federal Circuit’s opinion and recommend against a grant of certiorari. Of course, the Supreme Court is not asking the opinion of Raymond Chen (USPTO Solicitor General), but rather the opinion of Solicitor General of the United States (acting on behalf of the US). In the power struggle, the USPTO is only one voice and may well lose-out here to other interests (as it has in other recent cases). In 2005, the SG (then Paul Clement) filed a brief in the parallel case of McFarling v. Monsanto recommending that the petition be denied. The McFarling petition did not focus on exhaustion. However, in a footnote the SG brief noted that “whether (and, if so, to what extent) the patent-exhaustion doctrine applies to restrictions on the use of a materially identical patented product that was produced by the patented product sold by the patentee” is “novel.”

Mark Walters of Frommer Lawrence & Haug is lead counsel for Bowman. Seth Waxman is counsel of record for Monsanto.

Supreme Court: Solving Claim Construction?

032312_0335_ClaimConstr1
by Dennis Crouch

Retractable Techs., Inc. v. Becton, Dickinson & Co. (on petition for certiorari 2012)

As its company name suggests, Retractable Technologies makes safety syringes that retract after completing a drug injection. Retractable sued BD for patent infringement and won $5 million in damages and permanent injunctive relief. This was the second time that Retractable had filed a lawsuit to enforce its patent. In both cases, the district court interpreted the claim term syringe "body" as encompassing a body "composed of one or multiple pieces." (In the first case, the accused infringer agreed to stop making its product and to pay a $1 million settlement).

On appeal here, BD was able to convince a two-member majority of its Federal Circuit panel to modify the claim construction in a way that limits the "body" element to a "one-piece body." (Majority opinion by Judges Lourie and Plager). The appellate panel narrowly construed the term based upon its reading of the patent specification and the notion that the claims should be limited to what "the inventor actually invented." In dissent, Chief Judge Rader argued that the majority had improperly confined claim scope to the specific embodiments of the invention." Chief Judge Rader also argued in favor of giving more weight to the doctrine of claim differentiation. Here, some of the non-asserted claims in the patent included an explicit "one-piece body" limitation – suggesting that the asserted claim without the "one-piece" limitation must be broader.

After losing the appeal, Retractable filed a petition for rehearing and rehearing en banc. The petition was denied, but Judges Moore and O'Malley each filed dissents.

Supreme Court Petition: Retractable has now filed a petition for writ of certiorari to the United States Supreme Court. The petition raises two questions:

1. Whether a court may depart from the plain and ordinary meaning of a term in a patent claim based on language in the patent specification, where the patentee has neither expressly disavowed the plain meaning of the claim term nor expressly defined the term in a way that differs from its plain meaning.

2. Whether claim construction, including underlying factual issues that are integral to claim construction, is a purely legal question subject to de novo review on appeal.

First Question Goes Nowhere: In my view, the first question presented is not well stated. Of course a court can use context to provide meaning to claim language. A formalistic and restrictive view of patent doctrine was rejected by the Supreme Court in virtually every recent decision, including Mayo, Bilski, KSR, eBay, and MedImmune. Further, many members of the Supreme Court have identified a problem with vague and over-broad claim limitations, and the majority opinion here provides a simple tool for limiting scope: interpret the claims within the context of what was demonstrably understood by the inventor and the examiner and by what would have been known by a reasonably skilled artisan.

Use Specification to Narrow (or Broaden): There are times when the context of the specification is used to broaden the scope of a claim term beyond its ordinary meaning. However, the Federal Circuit judges appear to believe that greater reliance on the specification will usually result in a narrowing of claim scope. Thus, the debate on the role of the specification in claim construction is at least partially a proxy for the debate on whether patents should be given a broad scope or narrow scope. I would again criticize the petition – this time for wholly agreeing that reliance on the specification results in a narrowed scope. Retractable frames the debate on trying to understand "the circumstances in which the language of the specification should narrow the plain meaning of a claim term."

The Second Question is more well framed, although I would have tweaked it slightly to ask: "Whether claim construction, including underlying factual issues that are integral to claim construction, is a purely legal question [that is therefore] subject to de novo review on appeal." The tweak here is important because Retractable is not challenging the Supreme Court's Markman decision but rather challenging the Federal Circuit's Cybor decision. In Markman, the Supreme Court recognized the reality that claim construction includes a number of factual determinations – calling the process a "mongrel" of fact and law. However, the court ruled that claim construction should be treated as an issue of law to be decided by a judge. In Cybor, the Federal Circuit applied its usual formalistic if-then approach to rule that appellate review must be de novo because claim construction is an issue of law. From the petition:

In Markman, this Court held that, for purposes of the Seventh Amendment, the task of construing patent claims falls to trial judges rather than juries. Markman did not decide the standard of review that an appellate court should apply to a district court's claim construction. The Court noted, however, that the process of construing a claim is a "mongrel practice," that "falls somewhere between a pristine legal standard and a simple historical fact." In holding that trial judges are "better suited" for this task than juries, the Court recognized that claim construction requires trial judges to exercise a "trained ability to evaluate the testimony in relation to the overall structure of the patent." Accordingly, the Court held that "there is sufficient reason to treat construction of terms of art like many other responsibilities that we cede to a judge in the normal course of trial, notwithstanding its evidentiary underpinnings." Thus, Markman recognized that claim construction involves underlying factual questions, and said nothing to indicate that the Federal Circuit should displace the district court's resolution of those questions.

There are lots of doctrines that receive de novo review that do not have a reversal rate anywhere near that of claim construction. I think that everyone agrees that claim construction is inherently difficult. Claim construction rulings do not provide a yes-no answer like you might find in an obviousness judgment. Rather, a judge is required to identify the best interpretation of all possible interpretations of each contested claim term. And, unlike statutory interpretation, we do not have the benefit of the scope being developed over time through a series of cases. Rather, in most instances, a court's construction is in the first instance. In addition to the inherent difficulty, claim construction is made more difficult because of the open panel dependence of claim construction decisions. For many years the Federal Circuit refused to admit any panel dependence in its decision making, that has changed.

Where to Focus Assurances?: District court judges complain about claim construction because of the high likelihood that their decisions will be reversed on appeal. Giving deference to district court judgments would likely mean fewer reversals. This approach gives us certainty earlier in the process, but only once the district court issues a final claim construction. That date still seems very late. The scope of patent claims is of critical importance to almost all patent monetization transactions. However, very few of those transactions take place in conjunction with a district court claim construction decision. We need a process for substantially understanding claim scope at a much earlier stage and without relying on a federal court.

One answer for an early understanding of claim scope: Define terms during prosecution. If applicants fail to define terms, examiners should provide their own definitions as part of the office action. In the short-term, the focus should be on terms that are (1) frequently debated in court (such as "server" or "coupled to"; (2) used in the specification in a way that is in tension with the ordinary meaning of a term; or (3) inherently imprecise (such as "about").

Notes

Punishing Prometheus: The Supreme Court’s Blunders in Mayo v. Prometheus

Guest Post by Robert R. Sachs of Fenwick & West LLP

“Not even wrong.” So said Wolfgang Pauli about a proposed analysis by a young physicist, meaning that the arguments were not subject to falsification, the basic tool of scientific analysis. So too it can be said about the Supreme Court’s decision in Mayo v. Prometheus. The Court’s analysis creates a framework for patent eligibility in which almost any method claim can be invalidated. Like so many pseudo-sciences in which every phenomenon can be rationalized and in which there is no test that can show the theory to be incorrect, under Prometheus seemingly anything can be “explained” as being unpatentable subject matter.

Let me say at the outset that I’ve been a student of patent law, and patent eligibility in particular, since 1993. My clients have frequently been those whose inventions bumped up against the boundaries of patentable subject matter—in software, e-commerce, finance, business operations, user interfaces, and bio-informatics to name a few—so I have become intimately acquainted with both the legal and practical implications of this question. As such my personal reaction to this decision is very strong, and I will be quite blunt in what follows.

Over the next several days I will address just some of the logical and legal errors in the Court’s decision.

What’s a Law of Nature?

The first critical mistake is the Court’s assumption that Prometheus’ claims recited a “law of nature:” “The claims purport to apply natural laws describing the relationships between the concentration in the blood of certain thiopurine metabolites and the likelihood that the drug dosage will be ineffective or induce harmful side-effects.” The facile assumption that this relationship is a “law of nature” is incorrect, and potentially the most damaging misstep by the Court.

First, let us assume for the moment that there are in fact such things as “laws of nature.” What would their characteristics be? A first approximation would suggest that a law of nature is immutable and universal, that it is not subject to change, and it applies in all circumstances. See, Evidence Based Science. Thus, gravity and the speed light apply to you and me equally, and under all conditions. (I’m purposely using these two examples, for reasons that will become clear.)  However, this is not the case with the toxicity of any drug, including thiopurines, as acknowledged by the Court: the amount of a toxic dose varies between individuals for two reasons. First, different people metabolize at different rates, thereby producing different metabolite levels for a given dose. Second, individuals have differential responses to a given amount of the metabolites; a given level of the metabolites may be toxic in one person and not toxic in another. Thus, while the patent sets forth metabolite levels for toxicity and effectiveness, these levels are necessarily probabilistic, as some patients could experience toxicity at levels below or above those specified in the patent claims. This is inherent in the way toxicity is determined using a median lethal dose, LD50. This is exactly the same reason that one person can be drop dead drunk after five drinks and another can be stone cold sober at the same level. Indeed, Mayo’s test used a higher threshold for toxicity—evidence that there is no “law of nature” as to what is a toxic dose of thiopurine in all humans.

The “natural relation” that Prometheus claims is, itself, not immutable in an even deeper sense. This relationship is a byproduct of human (or perhaps more generally mammalian) biology, which from a logical point of view is a contingent relationship that could have been otherwise: we could have evolved in such a way that the toxicity range was higher or lower, or the drug was entirely ineffective. That is, it’s an arbitrary and contingent fact that humans evolved so that thiopurine drugs were effective at all for treating immune-mediated gastrointestinal disorders, or that we metabolize them in a manner that makes them toxic at specific dosing ranges. Indeed, given that humans are not exposed to thiopurine in nature, it is hard to understand how it can even be argued that it is a “natural law” that these drugs have a specific range of toxic or effective dosages at all. That these drugs are effective (or toxic) is a classic discovery in the truest sense of the term.

At best, the relationship between the dosage and toxicity level may be a “natural phenomenon.” Let us assume that is the case. Natural phenomena are a different class of things than laws of nature. Lightning, mirages, tornadoes, superconductivity, rainbows, these are natural phenomena: events that take place in nature (or in the lab) under specific and contingent conditions. While these events are of course dependent on the laws of nature, they are different from them in kind. The prohibition of patent claims in this regard is for claims on the phenomenon itself, not on the specific application of a phenomenon. Indeed, most patents in the chemical, biological, and electrical arts are based precisely on this distinction, being able to induce, apply, or control a natural phenomenon for a particular purpose. For example, there are thousands of patents that expressly claim a particular use of the Hall effect, natural phenomena discovered in 1879. The Court’s failure to appreciate this distinction puts many patents that harness natural phenomena at risk.

In short, the relationship of thiopurine dosage to toxicity is a contingent, empirical fact and subject to discovery. Like other empirical facts, it is precisely the type of subject matter that has been patented in this country since the very first patent issued by the USPTO: Samuel Hopkins’ patent on an improved method for making potash, based on the discovery that burning the raw ashes a second time increased their carbonate production. Hopkins’ discovery is no different in kind from Prometheus’ discovery: in both cases empirical “scientific” facts about the world.

But let us return to the core assumption: that there are laws of nature in the first instance. The Court makes the obvious reference to Einstein’s E=mc2 equation as an example. But the great scientist would have readily dismissed this appellation, knowing full well that what he set forth was a theory, a model, a description that was subject to falsification. Indeed, Einstein’s work has been criticized as being incomplete, or valid only in limited circumstances.

The view that there are laws of nature reflects an 18th century view of the world, based no doubt upon the classical, Newtonian view of a reality of absolute space and time governed by the three “laws of motion”—laws that were thought to be immutable and universal—and which Einstein among others showed not to be “laws” at all.

Most modern scientists do not view reality as defined by “laws”—indeed, the very idea that we could “know” what the “laws” are itself begs the very questions that philosophers since Plato have struggled with, the questions of epistemology (what is knowledge, what can we know) and ontology (what exists).

In several places, the Court lumps laws of nature together with “abstract ideas,” for example by leaning on the analysis in Bilski and Benson. But again, this is a category error: abstract ideas are very different from laws of nature, and must be treated separately. “Ideas,” classically speaking, are the “impressions in your head” when you think about something—the thing you think about is a “concept.” When you think about concepts that have instances in the world—cats, dogs, and thiopurine—you are thinking of “concrete” concepts, and your ideas are “concrete.”  Even when you think of a unicorn or a flying purple people eater, you are thinking of a concrete concept because it could have an instance in the world. However, when you think about concepts that do not (or could not) have instances in the world—justice, eternity, infinitesimal, invisible green four sided triangles—or metaphors—All the world’s a stage, and all the men and women merely players—the “idea” in your head is “abstract.” (Of course, I know that this is (1) a gloss, and (2) subject to debate as much as anything else in philosophy. Arguably, there are no “abstract” concepts at all. I’ll leave that debate for another day).

To wit: the abstract idea of say, immortality, is clearly not a “law of nature,” describing something that by definition cannot have examples in the world, since nothing can be immortal (there could be unicorns however, thus the concept of “unicorn” is concrete). Conversely, Ohm’s Law—that the current through a conductor between two points is directly proportional to the potential difference across the two points—describes something inherently and entirely physical and real. Ohm’s Law is a description of the world (and it turns out, not always correct). That the Court attempts to put these two square pegs in the same round hole reveals just how little the Court understands the nuances of science, philosophy and language—let alone the patent law itself.

Tomorrow:  What’s a Claim? and Patent-Eligibility vs. Patentability