Tag Archives: Supreme Court

Supreme Court Declines to Overrule Brulotte

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By Jason Rantanen

Kimble v. Marvel Entertainment, LLC (2015) Download Opinion

Opinion by Justice Kagan.  Justice Alito filed a dissenting opinion joined by Chief Justice Roberts and Justice Thomas.

Drawing heavily on stare decisis, the  Supreme Court has declined to overrule the rule in Brulotte v. Thys that a patentee cannot continue to receive royalties for sales made after the expiration of the patent based on principles of stare decisis.  However, the Court leaves open the possibility of creative license drafting.  From the opinion:

Patents endow their holders with certain superpowers, but only for a limited time. In crafting the patent laws, Congress struck a balance between fostering innovation and ensuring public access to discoveries. While a patent lasts, the patentee possesses exclusive rights to the patented article—rights he may sell or license for royalty payments if he so chooses. See 35 U. S. C. §154(a)(1). But a patent typically expires 20 years from the day the application for it was filed. See §154(a)(2). And when the patent expires, the patentee’s prerogatives expire too, and the right to make or use the article, free from all restriction, passes to the public. See Sears, Roebuck & Co. v. Stiffel Co., 376 U. S. 225, 230 (1964).  This Court has carefully guarded that cut-off date, just as it has the patent laws’ subject-matter limits: In case after case, the Court has construed those laws to preclude measures that restrict free access to formerly patented, as well as unpatentable, inventions.

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Brulotte was brewed in the same barrel. There, an inventor licensed his patented hop-picking machine to farmers in exchange for royalties from hop crops harvested both before and after his patents’ expiration dates. The Court (by an 8-1 vote) held the agreement unenforceable—“unlawful per se”—to the extent it provided for the payment of royalties “accru[ing] after the last of the patents incorporated into the machines had expired.” 379 U. S., at 30, 32. To arrive at that conclusion, the Court began with the statutory provision setting the length of a patent term. See id., at 30 (quoting the then-current version of §154). Emphasizing that a patented invention “become[s] public property once [that term] expires,” the Court then quoted from Scott Paper: Any attempt to limit a licensee’s post-expiration use of the invention, “whatever the legal device employed, runs counter to the policy and purpose of the patent laws.” 379 U. S., at 31 (quoting 326 U. S., at 256).

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As against this superpowered form of stare decisis, we would need a superspecial justification to warrant reversing Brulotte. But the kinds of reasons we have most often held sufficient in the past do not help Kimble here. If anything, they reinforce our unwillingness to do what he asks.

Slip Op. at 3-4, 6, 10.  Nonetheless, wary license drafters can work around Brulotte:

Yet parties can often find ways around Brulotte, enabling them to achieve those same ends. To start, Brulotte allows a licensee to defer payments for pre-expiration use of a patent into the post-expiration period; all the decision bars are royalties for using an invention after it has moved into the public domain. See 379 U. S., at 31; Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U. S. 100, 136 (1969). A licensee could agree, for example, to pay the licensor a sum equal to 10% of sales during the 20-yearpatent term, but to amortize that amount over 40 years.That arrangement would at least bring down early outlays, even if it would not do everything the parties might want to allocate risk over a long time frame. And parties have still more options when a licensing agreement covers either multiple patents or additional non-patent rights. Under Brulotte, royalties may run until the latest-running patent covered in the parties’ agreement expires. See 379 U. S., at 30. Too, post-expiration royalties are allowable so long as tied to a non-patent right—even when closely related to a patent. See, e.g., 3 Milgrim on Licensing §18.07, at 18–16 to 18–17. That means, for example, thata license involving both a patent and a trade secret can set a 5% royalty during the patent period (as compensation for the two combined) and a 4% royalty afterward (as payment for the trade secret alone). Finally and most broadly, Brulotte poses no bar to business arrangements other than royalties—all kinds of joint ventures, for example—that enable parties to share the risks and rewards of commercializing an invention.

Slip Op. at 6. Tom Cotter has already provided his own insightful commentary on the opinion over on ComparativePatentRemedies.

Side note: this may be the only judicial opinion ever to quote both my colleague Herb Hovenkamp and Stan Lee & Steve Ditko.

PTO vs the Courts

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Automated Merchandising v. Michelle Lee raises yet another separation of powers issue between the courts and the patent office.  Originally AMS sued Crane for infringing its U.S. Patent Nos. 6,384,402, 6,794,634, 7,191,915, and 7,343,220.  In response, Crane filed (pre-AIA) inter partes reexamination requests against the patents.  Then the lawsuit settled and the court issued a consent decree (final judgment) dismissing the case with prejudice and stating that the parties stipulate that the patent claims are valid.  AMS took that decree to the USPTO who refused to terminate the reexamination because the final judgment was not a “decision” on the merits of validity.  In response, AMS filed suit in the Eastern District of Virginia alleging violations of the Administrative Procedures Act (APA).  Section 704 of the APA provides for review of agency actions:

Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review.

However, the statute is clear that a non-final agency action is not reviewable.

According to the court’s judgment here the PTO’s refusal-to-terminate was an interlocutory order.  Even though the PTO originally identified it as “final,” that designation alone is insufficient to meet the final action requirement of the statute.  On remand, the inter partes review will continue and, if the patentee loses on the merits, may then have a chance to appeal the refusal-to-terminate.

This case adds further weight to the argument that we need a more comprehensive approach to the various pathways for enforcing and challenging patent rights.

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In B&B, the Supreme Court held that decisions by the PTO can have preclusive effect when the same issue is raised in a parallel litigation. In dicta, the court also indicated that preclusion also operates in the opposite direction — federal court decisions also have preclusive impact on PTO decision making.  B&B is focused on the doctrine of issue preclusion that is also known as collateral estoppel.

Because issue preclusion requires that the issue be actually litigated, it does not apply to the AMS. However, the parallel doctrine of claim preclusion (res judicata) may indeed apply – that doctrine typically applies when a second dispute involves a a prior final judgment of a claim sharing a “common nucleus of operative fact” and (roughly) identical parties.

A complicating factor here is that – as to inter partes reexaminations – the Patent Act had a particular statute that could be seen as redefining the scope of issue and claim preclusion for patent cases.

Once a final decision has been entered against a party in a civil action arising in whole or in part under section 1338 of title 28, that the party has not sustained its burden of proving the invalidity of any patent claim in suit . . . , then neither that party nor its privies may thereafter request an inter partes reexamination of any such patent claim on the basis of issues which that party or its privies raised or could have raised in such civil action . . . , and an inter partes reexamination requested by that party or its privies on the basis of such issues may not thereafter be maintained by the Office . . . .

35 U.S.C. 317(b).  The major question for this statute is whether it reflects an alteration of traditional rules of preclusion or instead offer an additional layer of preclusion when the traditional rules do not apply.

 

Patent Law Moot Court: Disembodied Genetic Information as an Abstract Idea

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In our Fourth Annual Patent Law Moot Court here at Mizzou Law, the students are grappling another Myriad lawsuit asserting its BRCA1 gene patents.  The question presented is whether the cDNA claims that the Supreme Court suggested are patent eligible could be voided as improperly claiming an abstract idea.

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Order: Presently before the Court is Defendant’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).  In its oral motion, Defendants’ asserted that Claims 2 and 6 of Myriad’s U.S. Patent No. 5,747,282 are directed toward unpatentable subject matter under 35 U.S.C. § 101 as improperly claiming an abstract idea.[1]  Plaintiffs disagreed and further responded that the issue had been foreclosed in its favor by the Supreme Court’s recent decision regarding the claim and patent at issue and that the issue was not the proper subject of a motion to dismiss.

Parties will brief the issue and particularly address the following:

  • Whether the asserted claims of the patent-in-suit are directed toward an unpatentable abstract idea in violation of the requirements of 35 U.S.C. § 101.
  • The direct impact of Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013) on this motion.
  • Whether a challenge to subject matter eligibility is the proper subject of a motion to dismiss.

Briefs will be submitted simultaneously by 5:00 pm on April 6, 2015 and will otherwise follow the requirements set out in Local Rule 4.3.  The Court will entertain oral arguments on April 10, 2015 at 3:30 pm. Each party will be given up to 20 minutes to present its case.

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[1] The parties have stipulated that Claim 2 is directed toward a cDNA version of the naturally occurring BRCA gene and that Claim 6 is a fragment of the cDNA sequence defined by Claim 2.

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Should be interesting.  How would you argue the case for/against?

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SPONSOR US: I’m looking for a sponsor for the event so that I can give the winner a cash prize.  A tax-deductable donation of $5,000 will fund the system for the next four years and get your name mentioned in Patently-O each year!

Dennis

 

Supreme Court: TTAB Decisions Create Issue Preclusion for Later Litigation

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by Dennis Crouch

In B&B Hardware v. Hargis Indus. (2015), the U.S. Supreme Court involved a trademark opposition running in parallel with a trademark infringement lawsuit over the mark SEALTITE/SEALTIGHT.  The general holding is that a final decision by the US Patent & Trademark Office’s Trademark Trial and Appeal Board (TTAB) can serve as issue preclusion to collaterally estop a court from re-judging already-decided issues.  The particular issue being precluded here is the likelihood-of-confusion between the two marks, and the Supreme Court held that the TTAB’s final decision on likelihood-of-confusion could preclude that issue from being later litigated in the collateral action between the parties.

A court should give preclusive effect to TTAB decisions if the ordinary elements of issue preclusion are met.

Here, the “ordinary elements” of issue preclusion are that “[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” Restatement (Second) of Judgments §27.

In its decision, the Supreme Court recognized (1) that the TTAB is an administrative agency and not an Article III court; (2) that a right to a jury trial would exist in the infringement action absent preclusion; (3) that the details and procedures associated with the TTAB judging likelihood-of-confusion were somewhat different (but not fundamentally different) than that applied in the 8th Circuit; and (4) that – had the TTAB decision been challenged – it was not appealed.

And it is undisputed that a civil action in district court would entail de novo review of the TTAB’s decision. Ante, at 5.

Going forward, the court is clear that many TTAB decisions will not have preclusive effective — but that is because they fail the ordinary elements of preclusion and not simply because the TTAB is an administrative agency or because the TTAB usually decides cases in a certain way.

The 7-2 decision was penned by Justice Alito with a concurring opinion by Justice Ginsburg.  Justice Thomas wrote in dissent and was joined by Justice Scalia.  The dissent argued that the court should not simply presume that Congress intended agency decision to have preclusive effect.

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For patent attorneys, the case will have an obvious impact on the interplay between the Patent Trial and Appeal Board (PTAB) and parallel district court litigation.  The same reasoning that led the Supreme Court to its decision in B&B will apply equally with determinations made during inter partes and post grant review proceedings.  Importantly, issue preclusion applies to individual decisions of fact or law and thus may be important for sub-issues such as claim construction, scope and content of the prior art, level of skill in the art, etc.

Although B&B focused on traditional mutual issue preclusion, there is should also apply to defensive non-mutual issue preclusion that might arise when the defendant in an infringement action was not one of the parties in the IPR/PGR.

An important caveat: The Supreme Court recognized that issue preclusion won’t apply to agency decision when Congress so indicates. Here, there is an argument that the estoppel provisions in the IPR/PGR statutes suggest that Congress has opted out of the issue preclusion arena for these decisions.

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One of the most interesting lines from the opinion: “federal law does not create trademarks.” For that line, the court cited Trade-Mark Cases, 100 U. S. 82, 92 (1879) (“This exclusive right was not created by the act of Congress, and does not now depend upon it for its enforcement. The whole system of trade-mark property and the civil remedies for its protection existed long anterior to that act, and have remained in full force since its passage.”).

 

Reexamined Patent Still Obvious According to the Court

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by Dennis Crouch

Senju v. Lupin (Fed. Cir. 2015)

In a split decision, the Federal Circuit has affirmed a district court judgment that Senju’sU.S. Patent No. 6,333,045 is invalid as obvious. The patent covers an eye-drop formulation that is mixture gatifloxacin and EDTA (sold as Zymar) and has an interesting litigation history. In particular, this case represents the fourth time that the patent has been asserted in a lawsuit before Judge Sue Robinson (D.Del.). That history includes a prior finding by Judge Robinson that the claims were invalid as obvious. Following that original obviousness decision, Senju successfully shepherded the claims through an ex parte reexamination.  In that process, the PTO confirmed the patentability of the claims once amended to include a specified concentrations of the aforementioned ingredients (e.g., “about 0.3 to about 0.8 w/v%” of gatifloxacin and “about 0.01 w/v%” of EDTA).  Following reexamination, the court blocked Senju from asserting the reexamined claims against the same party (Apotex) who won the first obviousness decision — finding that claim to be precluded. However, the court did allow assertion of the new claims against new parties – here Lupin and Hi-Tech Pharma.  However, after considering the same prior art as the USPTO, Judge Robinson found the revised claims still obvious based upon -again – the same prior art.

On appeal, the Federal Circuit affirms – holding that the district court’s conclusion of obviousness was correct. In the process the Federal Circuit appeared to give no deference to the USPTO reexamination determinations other than to require clear and convincing proof of the factual underpinnings of the obviousness determination. See Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 1260 (Fed. Cir. 2012) (“Whether a reference was previously considered by the PTO, the burden is the same: clear and convincing evidence of invalidity.”). The appellate court did agree that the amendments during reexamination did refresh the patent claims so as to reestablish the presumption of validity in the face of the prior invalidity ruling.

Regarding the added concentration limitation of “0.01 w/v% EDTA,” the two sides fought over whether that concentration level was suggested by the prior art studies.  The court writes:

At bottom, the district court’s analysis rests largely on a determination that Lupin’s experts were more credible than Senju’s experts. Based on this determination, the district court found that [the Prior Art] Grass 1988-I, along with the other cited references, taught that 0.01 w/v% EDTA would be effective to increase corneal permeability. On the evidence before us, that determination by the district court falls well within the wide discretion the court has to weigh expert credibility. Ordinarily, and absent compelling reason otherwise, an appellate court defers to such credibility determinations.

With that (and some further analysis), the court affirmed the obviousness finding.

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Judge Plager drafted the majority opinion that was joined by Judge Moore.  Writing in  dissent, Judge Newman argued that the courts should “give deference” to the PTO’s review of the narrowed claim scope and its conclusions regarding the unexpected results associated with the newly narrowed claims.  Judge Newman further writes:

The prior art is crowded. . . . However, no combination of prior art references shows or suggests the use of very low concentrations of EDTA to enhance the corneal permeability of antibiotic formulations of gatifloxacin, or of any other quinolone. . . . The panel majority relies on the unsupported opinion of Lupin’s expert witness, and gives that unsupported opinion greater weight than the experimental data.

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Although PTO reexamination decisions are not given deference in this type of third-party challenge, there are some reasons to think that IPR/PGR decisions should be given deference under the APA.  However, it is unlikely that the Federal Circuit would come to that conclusion without first being led by either Congress or the Supreme Court.

Most Cited Supreme Court Patent Decisions (2005-2015)

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by Dennis Crouch

The list below considers all of the U.S. Supreme Court patent cases decided during the past decade (Since January 2005) and ranks them according to the number of citations.  Citation offers some insight into the influence of decisions, but is obviously limited for a number of reasons. Cases may be cited because of their importance in changing the doctrine (KSR, eBay) or simply as the court’s most recent statement of the law on an important issue (Microsoft v. i4i and KSR) or for a narrow procedural issue that applies in many cases (Unitherm).   EBay’s high citation rate is also boosted because its principles have been applied broadly to injunctive relief across many areas of law. Some cases with low citation counts may also have major impacts. They may, for instance impact a small number of very important cases (Caraco) or perhaps they cause folks to change behavior so that the issue stops arising.

With this list we also have the timeline problem where older cases are more likely to be highly cited since there has been more opportunity for those cites.  I Alice Corp to rise in the ranks Nautilus and Teva, on the other hand,  may well flounder (based upon the Federal Circuit’s treatment of those cases thus far).

  1. KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398 (2007) (obviousness)
  2. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) (injunctive relief)
  3. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) (challenging licensed patents)
  4. Global-Tech Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060 (2011) (inducing infringement)
  5. Bilski v. Kappos, 561 U.S. 593 (2010) (subject matter eligibility)
  6. Microsoft Corp. v. i4i Ltd. Partnership, 131 S.Ct. 2238 (2011) (presumption of validity)
  7. Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006) (tying)
  8. Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008) (exhaustion)
  9. Microsoft Corp. v. AT & T Corp., 550 U.S. 437 (2007) (infringement by export of components)
  10. Unitherm Food Systems, Inc. v. Swift-Eckrich, Inc., 546 U.S. 394 (2006) (post-verdict civil procedure requirements)
  11. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (2012) (patent eligibility)
  12. Carlsbad Technology, Inc. v. HIF Bio, Inc., 556 U.S. 635 (2009) (appellate jurisdiction)
  13. Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005) (research exception to infringement)
  14. F.T.C. v. Actavis, Inc., 133 S.Ct. 2223 (2013) (competition law – drug settlements)
  15. Gunn v. Minton, 133 S.Ct. 1059 (2013) (federal jurisdiction over cases involving patent law)
  16. Lexmark Intern., Inc. v. Static Control Components, Inc., 134 S.Ct. 1377 (2014) (unfair competition based upon false infringement allegations)
  17. Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120 (2014) (indefiniteness)
  18. Already, LLC v. Nike, Inc., 133 S.Ct. 721 (2013) (standing after covenant not-to-sue)
  19. Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc., 131 S.Ct. 2188 (2011) (ownership under Bayh-Dole)
  20. Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S.Ct. 2107 (2013) (subject matter eligibility)
  21. Alice Corp. Pty. Ltd. v. CLS Bank Intern., 134 S.Ct. 2347 (2014) (subject matter eligibility)
  22. Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S.Ct. 2111 (2014) (divided infringement)
  23. Caraco Pharmaceutical Laboratories, Ltd. v. Novo Nordisk A/S, 132 S.Ct. 1670 (2012) (forcing correction of Orange Book listings)

KSR has actually rocketed to the position of most-cited Supreme Court patent case of all time followed by Markman (1996); U.S. Gypsom (1948) (antitrust-patent); Graham v. Deere (1966); and Warner-Jenkinson (1997).

Supreme Court Denies Appeal on Constitutionality of First-to-File Patent System

Patent

by Dennis Crouch

The Supreme Court has denied MadStad Engineering’s petition for writ of certiorari in its case arguing that the first-to-file patent system is unconstitutional because the new law awards rights for the filing of a patent application and no longer requires invention.

Rather than reaching the merits, the district court found that MadStad lacked standing to file the lawsuit because the plaintiff could not prove any particular injury due to the law’s enactment. That decision was then affirmed by the Federal Circuit.  The denial of certiorari here appears to end this particular lawsuit. However, I expect that another party – perhaps one whose patent application has been rejected under the new law – will take-up the mantle and force a court to address the real issue.

Giving Deference to the Supreme Court in Teva v. Sandoz

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by Dennis Crouch

In Teva v. Sandoz, the Supreme Court raised the standard of appellate review of a district court’s factual conclusions regarding extrinsic evidence relied upon during claim construction proceedings.  Although the decision represents a relatively small change in procedural law, it is important, both because claim construction has become such a major element of patent litigation and because the Court of Appeals for the Federal Circuit has a history of reversing a high percentage of claim construction decisions.

I asked a handful of patent law experts for their instant thoughts on the decision (and gave them strict word limits). Douglas Kline, Chair of Goodwin Procter’s IP Litigation Group spells out the basic first-order result of the case:

From now on, when a district court resolves factual disputes concerning extrinsic evidence bearing on patent claim construction, the Federal Circuit will review those subsidiary factual findings for clear error.  This should result in the Federal Circuit affirming some claim construction decisions it might have overturned under the old standard.

Thinking forward about how parties will react, MBHB Partners Joshua Rich and Andrew Williams suggest higher reliance on expert testimony and thus higher litigation costs:

Today’s decision is likely to increase the cost and complexity of claim construction because it encourages parties to introduce extrinsic evidence, especially expert testimony, in an attempt to maximize deference to a favorable decision.  And some trial courts may end up relying on that extrinsic evidence to insulate their decisions.

Joshua Rich & Andrew Williams, partners at McDonnell Boehnen Hulbert & Berghoff.  “At the district court level, the new standard of review will likely mean more reliance on experts in interpreting the claims.” Dominick Conde, partner at Fitzpatrick, Cella, Harper & Scinto LLP.

Providing Guidance: The decision itself does a nice job of detailing the level of review for each different aspect of a claim construction ruling.  Paul Hughes from Mayer Brown LLP comments that “the Court provided unusually robust prospective guidance to aid the Federal Circuit in distinguishing questions of fact from questions of law.”

As usual, Professor Lefstin’s comments are both insightful and linked to historic evidence. Here, Lefstin disagrees slightly with Hughes in that some surprising aspects of claim construction should also be considered extrinsic evidence.

As Justice Traynor pointed out long ago, sources of meaning such as dictionaries and the judge’s personal linguistic experience are ‘extrinsic.’ Under Justice Breyer’s holding, the act of consulting a dictionary – which is how a court might determine “the meaning of a term in the relevant art during the relevant time period” – seems entitled to deference.

Jeffrey A. Lefstin, Professor of Law, UC Hastings College of Law.  However, Lefstin – along with others – believes that the ultimate change in the law is too slight to make much difference. Or, perhaps more pointedly, Lefstin’s argument is that the Teva decision leaves the Federal Circuit with power to continue reviewing claim construction without deference.

Ultimately it will make no difference, since the CAFC can review without deference the district court’s assignment of that meaning “in the context of the specific patent claim under review.”  The opportunities for the CAFC to frame construction as a contextual inquiry are so pervasive that Teva will serve only to generate pointless disputes over the extrinsic/intrinsic and isolated/contextual boundaries.

Lefstin. Recognizing this same point, Professor Liivak explains that a legal analysis is still required for claim construction which will be reviewed de novo.

There is still ample room for de facto de novo review.  The district court “must” conduct a “legal analysis” on whether the factual determination is relevant in the “context of the specific patent claim under review.”  This is where all the maneuvering will be.

Oskar Liivak, Professor of Law, Cornell Law School.  With reference to the disputed “molecular weight” claim term in this case, Liivak foresees that the Federal Circuit could fairly easily modify its opinion to satisfy the Supreme Court without changing its ultimate determination.

On remand as to this claim term, a very few words have to change but the outcome need not:  the factual determination about SEC is quite plausibly irrelevant to interpretation of the intrinsic evidence in Fig. 1.

Liivak.  The question – in Professor David Berry’s mind is whether the CAFC will “flex its muscles” on the issue.  If not, we can “look for more expert testimony, especially on the crucial question of what the claim meant to those in the art. That finding frequently will be dispositive, and may insulate the whole construction from de novo review.”  Professor David C. Berry, Western Michigan University – Cooley Law School.

Fallacy of Predictability: One of the key policy goals of deference is to provide predictability – at least once the district court construes the claims.  Professor Mark Janis sees the potential that this particular outcome will, unfortunately, not aid that goal. Still, Janis has some optimism. He writes:

A long-overdue ruling.  But it’s one that leaves CAFC judges ample room to defer (or not) in any given case.   The CAFC’s challenge is to demonstrate that it can implement Teva in the service of better predictability – which may require some CAFC judges to set aside cherished views about who really gets to call the shots in claim construction.

Mark D. Janis, Robert A. Lucas Chair of Law, Center for Intellectual Property Research, Indiana Univ. Maurer School of Law.  I agree with the fallacy of predictability given by deference, but at an even deeper level.  If I may quote myself:

My problem with the decision is that giving deference on review only masks the major problem that claim scope is not well understood until decided by a court.  Claim scope should be clearly understood at the time of issuance.

Dennis Crouch, Professor at the University of Missouri School of Law.

Who Benefits?: Erich Spangenberg is the CEO of nXn Partners and founder and former CEO of IPNav. He has been on the patent-owner side of a very large number of patent lawsuits and he tends to provide insight that is spot on. In my prior article on Teva, I suggested that patentees will prefer the new rule and Spangenberg agrees, with caveats:

The appellate reversal rate was too high and created far too much uncertainty.  If what Teva means is that we are going to have greater certainty, faster resolution as a result of fewer reversals and the occasional district court decision that gets it wrong—I am in favor.  My enthusiasm is tempered by the likelihood that there are a few years of disputes as the new boundaries are defined—but longer term, this is a positive.

Erich Spangenberg.

Professor Roger Ford recognizes that “who benefits” may well depend upon the case:

How [Teva] will play out is unclear, since litigants don’t always know, before construction, what review standard they’d prefer. Optimistic parties may prefer deferential review, assuming they’ll win; risk-averse ones may prefer having two chances to win.

Roger Ford is Assistant Professor of Law at the University of New Hampshire School of Law.

Evidentiary Hearings: Few courts conduct evidentiary hearings as part of claim construction. Going against the tide, Michael Risch doesn’t foresee any change in that reality:

A key question after Teva will be whether District Courts are more likely to hear extrinsic evidence just because findings get deference. Given likely reversal if the intrinsic evidence is clear, I don’t see why they would waste their time that way.

Michael Risch, Professor of Law, Villanova University School of Law.  Implicit in Professor Risch’s remarks is the conclusion that the Phillips “intrinsic first” approach continues to reign. Dean Holbrook believes that conclusion is correct:

The Federal Circuit will continue to use the Phillips hierarchy, turning to extrinsic evidence only when the intrinsic evidence is ambiguous. I think, in the main, the Federal Circuit will view the intrinsic evidence as determinative, retaining de novo review in the vast majority of cases.

Timothy R. Holbrook, Associate Dean of Faculty and Professor of Law, Emory University School of Law.

Changing Claim Construction: Dean Holbrook’s conclusion is not universally supported.  Professor Jason Rantanen argues instead that Teva may have more generally changed the nature of claim construction:

As I read Teva, the Court endorses a claim construction process where the judge begins with the extrinisic evidence about a claim term, decides what the extrinsic evidence establishes for that term and then determines whether the way the patent uses the term is inconsistent with the established ordinary meaning of the term.  This approach is more consistent with Texas Digital than Phillips.

Jason Rantanen, Associate Professor of Law, University of Iowa College of Law.  Rantanen does fully agree with others that significant power is now in the Federal Circuit’s hands — in particular, he “fully expects the Federal Circuit to disagree with [his] reading” of the case.  Eileen M. Herlihy, a da Vinci Fellow at George Mason CPIP, recognizes a particular evidentiary focus here – the person having ordinary skill in the art. She notes that the court once again “reemphasizes the patent law specific importance of the PHOSITA, thereby adds to recent Supreme Court cases asserting this perspective.”

Although Rantanen in his claim-construction-shift compares precedent, Professor Shubha Ghosh encourages creative lawyering in suggesting alternative “styles of claim construction”

Teva teaches that patent claims consist of law, reviewed de novo, and evidence, reviewed for clear error.  Unanswered is what mix of law and evidence forms the basis for claim construction.  The Federal Circuit’s and rulings favored strict constuction.  The Court’s decision here opens the floodgates for experimentation by advocates and judges  in different styles of claim construction.

Shubha Ghosh, Vilas Research Fellow and George Young Bascom Professor
of Intellectual Property and Business Law, University of Wisconsin,
Madison, Law School.

Exceptionality: One theme of Supreme Court patent cases over the past decade is that patent law need not always be so exceptional – i.e., different from other areas of law.  Rather, when traditional principles apply across doctrines, then they should apply to patent law as well. Referencing eBay, an early case in this trend, Professor Clifford writes:

Patent law is not unique when balancing must be done before granting equitable relief. Now, as is required for other legal documents such as contracts, we must separate interpretation of the words used (a matter of fact) from the meaning and effect they have (a matter of law).

Ralph D. Clifford, Prof., Univ. of Massachusetts School of Law. Similarly, Professor Landers writes that “Teva underscores the Supreme Court’s view that (like eBay and Holmes v. Vorando) the procedural aspects of patent cases are not exceptional.” Prof. Amy Landers, Drexel University Kline School of Law.  “Teva has broad significance because it … conforms patent law to other areas of the law on a matter of proper appellate function.”  Eileen M. Herlihy, da Vinci Fellow at George Mason CPIP.

Indefiniteness and ambiguity have been important topics in recent patent law cases.  Profesor Laakmann reminds us that the setup for the Teva case is not so-much claim construction but instead the lower court determination that the claim was unduly ambiguous and therefore invalid as indefinite.

The case turns on whether there is cognizable distinction between a claim term being factually ambiguous (and thus amenable to extrinsic evidence under a “clearly erroneous” standard of review) and legally indefinite (and thus invalid under 112 under a de novo standard of review).  This is the crux of the disagreement between the majority and the dissent – the majority says “yes” and the dissent says “no.”

Anna Laakmann is an Assistant Professor at Lewis and Clark Law School.  On remand, an important feature of the case is that the lower courts will also now need to work-in the new standard of indefiniteness from Nautilus.

At the PTO: For the most part, we’re talking about patent litigation.  However, Professor Joe Miller thinks that there may be a broader impact on USPTO practice as well:

Justice Breyer, speaking for a split Court’s majority, set aside a Federal Circuit patent validity determination. According to the Court, the Federal Circuit had not reviewed the lower tribunal’s key factual findings with the greater deference the controlling rule requires. Today’s decision in Teva v. Sandoz? Sure. But also 1999’s Dickinson v. Zurko, 527 U.S. 150 (1999). Teva’s main effects may well be felt at the PTO.

Joe Miller, Professor, University of Georgia Law School.

Although there are differing perspectives here, the overarching thought is that we’ll have to wait to see what the Federal Circuit does — which is exactly the result deference is supposed to avoid.

– Dennis

* Thanks to my colleagues for providing their interesting input on this article.

 

Federal Circuit Gives Malpractice Case New Hope by Remanding to State Court

Patent

In NeuroRepair v. Nath Law Group (Fed. Cir. 2015), the Federal Circuit has dismissed NuroRepair’s malpractice case against its patent prosecution attorneys – holding that the Federal Courts lack subject matter jurisdiction because the case does not arise under the patent law.  Citing Gunn v. Minton, 133 S. Ct. 1059 (2013).  The basics of the case here appear to be that the client was upset with the defendants alleged (1) lack of communication; (2) ineffective pursuit of the patent application; and (3) failure to accurately record and bill time. However, the district court had sided with the attorneys – finding no malpractice.

Although patent attorneys are regulated by the USPTO’s Office of Enrollment and Discipline (OED), malpractice cases are generally based upon state law – here, the plaintiff alleged “professional negligence, breach of fiduciary duty, breach of written contract, breach of oral contract, breach of implied covenant of good faith and fair dealing, negligent misrepresentation, and false promise” – all of which are protected by California law rather than Federal Law.  The lawsuit was originally filed in California State Court (Superior Court) but then removed by the defendants to Federal Court on the grounds that the case “related to patents.”

All of that occurred prior to the Supreme Court’s decision in Gunn v. Minton. And, as in the Gunn case, the plaintiff has appealed – asking that the entire case be set aside because of a lack of subject matter jurisdiction.

Federal Law provides for exclusive federal jurisdiction over patent cases – this means that state courts cannot decide patent infringement cases.  However, there exists a large grey area of cases that arise under a state cause of action (such as breach of contract or legal malpractice) but that turn on an interpretation of either a patent or the Patent Act.  Are those “patent cases?”

In Gunn v. Minton, the Supreme Court released most of this grey-area to state court jurisdiction — holding that a state law claim relating to patents creates arising under jurisdiction if it “necessarily raise[s] a stated federal [patent] issue, [2] actually disputed and [3] substantial, [4] which a federal forum may entertain without disturbing any Congressionally approved balance of federal and state judicial responsibilities.”  Quoting Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005).  The Court went on to note that malpractice cases will “rarely, if ever, arise under federal patent law” because their resolution will not substantially impact the patent laws.

The Nath case here was fairly easy to decide because the court found only one patent law issue necessary for decision — whether the patent could have issued earlier and with broader claims.  As in Gunn, the appellate court here found that issue not of substantial importance to the patent system and that relegating cases such as this to Federal Court would “disrupt the federal-state balance.”

The case ends with an order to the district court to remand the case back to California state court where the plaintiff will get another shot at proving malpractice.

Google Looks to Narrow both Copyrights and Patents through Supreme Court Action

Patent

by Dennis Crouch

Two pending Supreme Court now have higher profiles with the Supreme Court’s invitation to the Solicitor General to provide views of the administration.  In both cases, the petitioners have set-up the Federal Circuit as a misguided court.

The focus of Google v. Oracle (Sct. Docket No. 14-410) is the extent that software is eligible for copyright protection. The petition asks:

Whether copyright protection extends to all elements of an original work of computer software, including a system or method of operation, that an author could have written in more than one way.

Unlike patent law, the copyright eligibility statute includes a set of express exclusions. In particular, although “original works of authorship” are generally eligible for copyright protection, “[i]n no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.” 17 U.S.C. § 102(b).  In its decision the Federal Circuit found Oracle’s Java API taxonomy copyrightable as a whole. In particular, the appellate panel led by Judge O’Malley rejected the idea/expression merger doctrine since there are many other ways that functionally equivalent method-calls could have been constructed besides those found in Java.  “Merger cannot bar copyright protection for any lines of declaring source code unless Sun/Oracle had only one way, or a limited number of ways, to write them.” [Read my prior discussion here and here]

 

The second case – also involving Google – is Google v. Vederi (Sct. Docket No. 14-448).  In that case, the Google raises the following question:

Whether, when an applicant for a patent amends a claim to overcome the PTOs earlier disallowance of the claim, a court should (i) presume that the amendment narrowed the claim and strictly construe the amended claim language against the applicant, as this Court has held; or (ii) presume that the claim scope remained the same and require that any narrowing be clear and unmistakable, as the Federal Circuit has held.

Although the first part of the question is interesting, the second part appears quite misguided as Federal Circuit law does not presume that claims maintain the identical scope following an amendment to overcome a rejection by the PTO.  That said, the Federal Circuit has strayed significantly from Pre-1952 disclaimer law exemplified by cases such as Supply Co. v. Ace Patents Corp., 315 U.S. 126, 137 (1942); Keystone Driller Co. v. Nw. Eng’g Corp., 294 U.S. 42, 48 (1935); Smith v. Magic City Kennel Club, Inc., 282 U.S. 784, 789–90 (1931); I.T.S. Rubber Co. v. Essex Rubber Co., 272 U.S. 429, 443–44 (1926); and Hubbell v. United States, 179 U.S. 77, 84 (1900).

 

Supreme Court: Problem of Divided Ownership

Patent, ,

by Dennis Crouch

The general rule is that all co-owners of a patent must join together as plaintiffs less the case be dismissed.  In STC.UNM v. Intel, the Federal Circuit ruled that, while co-owners are necessary parties, they may not be involuntarily joined.  That decision is in some tension with Fed. R. Civ. Pro. Rule 19 that empowers a court to order the joinder of a necessary party.  In the case, STC and Sandia National Labs co-own U.S. Patent No. 6,042,998, but Sandia refused to participate in the case.

In a new filing, STC has petitioned the Supreme Court for a writ of certiorari with the following question:

Rule 19 of the Federal Rules of Civil Procedure provides that where a necessary party to a lawsuit has not been joined, “the court must order that the person be made a party.” The Court of Appeals for the Federal Circuit ruled below that Rule 19 is “trumped” by a purported “substantive rule” that a co-owner of a patent can “impede an infringement suit brought by another co-owner.” The majority opinion below stands in stark contrast to this Court’s precedents. For over seventy years, this Court has rejected every statutory challenge to a Federal Rule that has come before it.

The petition particularly argues that the Federal Circuit decision is in conflict with Sibbach v. Wilson, 312 U.S. 1 (1941) and its progeny.

The original decision was authored by Judge Rader (joined by Dyk) with Judge Newman in dissent.  In its 6-4 en banc denial, Judge Dyk authored an opinion concurring with the denial (joined by Moore and Taranto) while both Judges Newman (joined by Lourie, O’Malley, and Wallach) and O’Malley (joined by Newman, Lourie and Wallach) dissented from the en banc denial.

I give the case a better-than-average odds for certiorari and, if granted, the court would likely reverse.

= = = = =

The ownership-tale of the case is a seeming malpractice nightmare.  Briefly, the invention stems out a joint research project between employees at UNM and Sandia.  Three of the named inventors were UNM employees while the fourth (Draper) worked at Sandia.  In 1996, Draper signed an assignment of his rights in the first patent to UNM but then a few months later assigned his rights to Sandia and the new assignment was filed as correction being “made in error” since it had erroneously identified Draper as an employee of UNM.  UNM did not challenge this new filing, but at times in the subsequent decade made several statements regarding its sole ownership of the first patent.

The patent in suit is is based upon the first patent but excludes Draper as an inventor.  (UNM later filed a certificate of correction to formalize the relationship as a continuation in part).  Because of the difference in inventor-employer rights, it would seem that UNM would have full rights to the continuation.  However, in order to overcome an obviousness-type-double-patenting rejection, UNM filed a terminal disclaimer in the second case, linking its term and ownership to that of the first patent. Of course, at the time, the two patents seemingly did not have the same ownership structure and UNM indicated to the USPTO that it was “the owner of record of a 100 percent interest” in the second patent.  In the present lawsuit, however, STC eventually admitted that the corrected Draper assignment was effective to give Sandia ownership rights in both the first patent and the second.  And that admission appears to be treated as an assignment of rights to Sandia if such is necessary.

= = = = =

Wegner recognized the case in his final top-ten:

Supreme Court to test its Spidey-Sense in Patent-Antitrust Case

Patent,

The Supreme Court has granted certiorari in the patent licensing case of Kimble v. Marvel Enterprises (13-720) with the following question:

Whether the Court should overrule Brulotte v. Thys Co., which held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se.”

The policy goal behind the 1964 Brulotte decision is to avoid the potential antitrust harm associated with an ongoing patent monopoly beyond the 20-year term.  However, antitrust law has generally moved away from this sort of per se rule – especially as to freedom-of-contract.

In this case, the patentee’s patent has expired, but the license agreement seemingly calls for ongoing payments even beyond expiration.  The Ninth Circuit held that, under Brulotte, Marvel is no longer required to pay royalties on its sales of the Spider-man toy.  The Solicitor General recommend that the Supreme Court not take the case — a move that I called “somewhat surprising” since the government had previously noted that Brulotte does not mesh well with contemporary antitrust practice.

With Brulotte on the chopping block, we can also expect that the holding in Lear v. Adkins, 395 U.S. 653 (1969). In that case, the court held that a contractual promise not to challenge a patent’s invalidity is unenforceable.

Supreme Court Sanctions for Faulty Brief

Patent,

Anyone who read Sigram Schindler’s petition for writ of certiorari would have walked away confused.  To say that the petition makes little sense is perhaps over stating its value.  The question presented by Schindler was as follows:

Does the US Constitution, in legal decisions based on 35 USC §§ 101/102/103/112, require instantly avoiding the inevitable legal errors in construing incomplete and vague classical claim constructions – especially for “emerging technology claim(ed invention)s, ET CIs” – by construing for them the complete/concise refined claim constructions of the Supreme Court’s KSR/Bilski/Mayo/Myriad/Biosig/Alice line of unanimous precedents framework, or does the US Constitution for such decisions entitle any public institution to refrain, for ET CIs, for a time it feels feasible, from proceeding as these Supreme Court precedents require – or meeting its requirements just by some lip-service – and in the meantime to construe incomplete classical claim constructions, notwithstanding their implied legal errors?”

The Supreme Court has now – as expected – denied the petition.  However, the court took a major step further — ordering Schindler’s Supreme Court attorney to “show cause … why he should not be sanctioned”:

D-2827 IN THE MATTER OF DISCIPLINE OF HOWARD NEIL SHIPLEY

Howard Neil Shipley, of Washington, D.C., is ordered to show cause, within 40 days, why he should not be sanctioned for his conduct as a member of the Bar of this Court in connection with the petition for a writ of certiorari in No. 14-424, Sigram Schindler Beteiligungsgesellschaft MBH v. Lee.

The brief was filed by Howard Shipley of the Foley firm along with his partner George Quillen.  Although I do not know, I suspect that the Foley firm agreed to file the brief as drafted by Dr. Schindler and without providing any substantive input or editing.

Tony Mauro has more.

This case is unlikely to help shift the Supreme Court’s perspective on the Federal Circuit and the current state of patent law doctrine.

 

Supreme Court: A Web of Post-Issuance Licensing Restrictions

Patent, , ,

by Dennis Crouch

Last year I wrote about the patent licensing decision captioned Kimble v. Marvel Enterprises Inc. (9th Circuit 2013). Kimble involved a patent license agreement tied to Marvel’s web-shooter toy sales. On its face, the agreement appears to remain in force so long as Marvel sold the toys.  However, the 9th Circuit held that the license ended once the patent term lapsed.  The 9th Circuit decision was easy because there is a Supreme Court case on point: Brulotte v. Thys Co., 379 U.S. 29 (1964) (licensing agreement unenforceable because it required royalty payments beyond the expiration date of the underlying patent).

Kimble has now pushed the case to the Supreme Court and presents a straightforward petition:

The question presented is: Whether this Court should overrule Brulotte v. Thys Co., 379 U.S. 29 (1964).

SCOTUS-Blog Link.

The basic argument is that the Brulotte improperly imposes a per se limit on contract structure and forces any royalty payments to be amortized only within the term of the patent.  Often, that result does not make business sense. Kimble suggests that the court do-away with the per se rule and replace it with a rule of reason as it has done in other cases – most notably in the area of patent-tying.  See Illinois Tool Works v. Independent Ink, 547 U.S. 28 (2006).

The petition also characterizes Brulotte as “the most widely criticized of [the Supreme] Court’s intellectual property and competition law decisions.”

Three panels of the courts of appeals (including the panel below), the Justice Department, the Federal Trade Commission, and virtually every treatise and article in the field have called on this Court to reconsider Brulotte, and to replace its rigid per se prohibition on post-expiration patent royalties with a contextualized rule of reason analysis.

The Supreme Court requested that the Solicitor General file the views of the US Government and those have just been filed – with a somewhat surprising recommendation against a grant of certiorari.  The SG’s position is that stare decisis should prevail. Hal Wegner writes about the case in his review of top pending patent cases: See Wegner’s Top Ten.

Unduly Extending Patent Term: An important element of the analysis here is whether overturning Brulotte would somehow allows the patentee to extend its patent term and thereby prevent the public from taking advantage of the invention.  Kimble argues “no” — all that the longterm license agreement did was amortize the license value over the life of the product rather than the life of the patent.  Certainly, once the patent expires then no-one can be liable for infringement and any generic (or branded) company can make, use, and sell the invention as it wishes. However, if we look at this case in particular, all of the products on the market using the patented invention are Kimble-licensed products — even though the patent has been expired now for years.  This suggests to me that the post-expiry-license is having a market impact that is reducing the potential customer surplus.  I suspect that in most situations, the most likely post-patent-expiry suppliers of a product are the companies who were supplying that product pre-patent-expiry.  If those entities are required to continue to pay license post-patent-expiry then consumers may never see the benefits typically associated with patent expirations.

= = = = =

One factor pushing toward grant of certiorari is the underlying subject-matter.  The patent at issue covers a nifty web-shooting toy designed to mimic (in toy form) spider-man’s super powers. See U.S. Patent No. 5,072,856.

Spidey

Supreme Court: A Good-Faith-But-Incorrect-Belief that the Patent is Invalid

Patent

by Dennis Crouch

Someone who induces infringement is just as liable for infringement as the one who actually commits the underlying act of direct infringement. 35 U.S.C. § 271(b).  However, unlike direct infringement, inducement has a substantial mens rea or scienter requirement that the inducer knew at-the-time that the induced conduct would infringe the particular patent. In Global Tech (2011), the Supreme Court held that the knowledge element can be satisfied by proof that the inducer was willfully blind to the risk of infringement.

In Commil v. Cisco, the Federal Circuit addressed a slightly different question — and that question is now pending before the US Supreme Court:

Does an inducer’s good faith belief that a patent is invalid negate inducement liability?

One way to think about this is to go back to Global Tech and ask what the Supreme Court meant when it said “infringement.”  Was the Court referring only to the elements of proving direct infringement under 271(a) or instead was the Court referring more generally to infringement liability.  While 271(a) is a narrower concept that generally ignores validity issues, the broader concept of infringement liability draws-in defenses that may be available such as invalidity or unenforceability.

An important consideration here is that this good-faith-belief of invalidity is only critical for the discussion if it turns out that the asserted claims are actually valid and enforceable. So, we’re really talking about a good-faith-but-incorrect-belief that the claims are invalid. In this type of situation, I worry about the generation of self serving evidence that fall under the CYA/BS classification.

In any event, the Federal Circuit panel here ruled that “evidence of an accused inducer’s good-faith belief of invalidity may negate the requisite intent for induced infringement.”  [See Rantanen on Commil]. The patentee (Commil) then petitioned for Supreme Court review and the Court asked for the views of the US Government.

In its newly filed amicus brief, the US Goverment (through the Solicitor General) has agreed with the patentee that the Federal Circuit is wrong and that the accused’s invalidity belief is irrelevant to the question of inducement liability.

This Court should grant Commil’s petition for certiorari (No. 13-896) with respect to the first question presented. The court of appeals erred in holding that a person who knowingly induces another to engage in infringing conduct may avoid liability under Section 271(b) by demonstrating that it had a good-faith belief that the infringed patent was invalid. This Court’s review is warranted to prevent defendants from avoiding inducement liability on a ground that is inconsistent with the text, structure, and purposes of the relevant Patent Act provisions.

In its analysis, the SG basically walks through the statute (that separates the notion of infringement from invalidity defenses) and the key cases of Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476 (1964) (Aro II) and Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 (2011).  In particular, with Aro II, the patentee had mailed a pre-suit notice letter to the defendant and the Supreme Court in that case seems to have treated that communication as conclusively satisfying the mens rea requirement.

Commil’s petition included a second question and Cisco also submitted its own question – both of these involved the necessity and propriety of ordering a new trial.  The US Government amicus brief recommend that neither of those questions be reviewed.

Read the USG amicus brief here.

 

Federal Circuit Defies Supreme Court in Laches Holding

Patent, , , , ,

by Dennis Crouch

SCA Hygiene v. First Quality (Fed. Cir. 2014)

Rather than focusing on a single event, allegations of patent infringement generally involve a series of actions that each constitute an infringement.  Courts identify each act (making, using, selling, …) as a separate and actionable infringement of the patent.  This notion of repeated acts of infringement (the “separate-accrual rule”) is only occasionally important, but comes up most often in the context of the impact of delays in pursuing court action with the effect of making delays look less egregious.

The Patent Act includes a six-year limitation on collecting back-damages. 35 U.S.C. 286. The old equitable doctrine of laches has also traditionally been available to cut-off damages when the patentee unreasonably and inexcusably delayed in bringing suit.  Under the Federal Circuit’s 1992 en banc Aukerman decision, courts generally apply the same six-year timeline for laches – finding that a six-year delay in filing suit creates a presumption of unreasonable delay that, when coupled with detrimental reliance leads to a laches finding.  Although it only creates a presumption of unreasonableness, in my experience, this six-year delay makes laches much much more likely to be found. Laches then has the ordinary result of cutting-off all pre-suit damages. However, based on the aformentioned theory of individualized acts of infringement, a remedy remains available for infringement that occurs after the lawsuit is filed as well as the potential for further equitable relief to stop future infringement.

Laches is based on a tradition of equity and has no direct tie-in to the patent statute itself. Likewise, Laches is not found in the list of defenses under Section 282 nor identified as an aspect of the statutory limitation on damages. Of course, that is the tradition of equity — existing for times when the law fails.

Putting this entire area somewhat astir is the Supreme Court’s 2014 copyright laches decision in Petrella v. Metro-Goldwyn-Mayer, 134 S.Ct. 1962 (2014).  In similar manner to patent law, the copyright statute has a three-year statute of limitations on filing suit.  In the case, the (alleged) copyright holder had delayed for 18-years in filing suit.  The statute-of-limitations cut-off all but the last three years of recovery and the lower court found that laches blocked recovery for those remaining three years.  However, in Petrella the Supreme Court revived the copyright claim and held instead that laches should not apply because Congress has taken fully spoken on the issue with its statute.

Laches, we hold, cannot be invoked to preclude adjudication of a claim for damages brought within the three-year window. . . .  [L]aches is a defense developed by courts of equity; its principal application was, and remains, to claims of an equitable cast for which the Legislature has provided no fixed time limitation. See 1 D. Dobbs, Law of Remedies 104 (1993) (“laches . . . may have originated in equity because no statute of limitations applied, . . . suggest[ing] that laches should be limited to cases in which no statute of limitations applies”). Both before and after the merger of law and equity in 1938, this Court has cautioned against invoking laches to bar legal relief. See Holmberg v. Armbrecht, 327 U. S. 392 (1946) (in actions at law, “[i]f Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter,” but “[t]raditionally . . . , statutes of limitation are not controlling measures of equitable relief “); Merck & Co. v.Reynolds, 559 U. S. 633 (2010) (quoting, for its current relevance, statement in United States v. Mack, 295 U. S. 480 (1935), that “[l]aches within the term of the statute of limitations is no defense [to an action] at law”); County of Oneida v. Oneida Indian Nation of N. Y., 470 U. S. 226, n. 16 (1985) (“[A]pplication of the equitable defense of laches in an action at law would be novel indeed.”).

An important element of the holding is the ongoing separation of legal and equitable remedies — with the notion that laches may still be obtained to block equitable remedies, but not to bar a traditional legal remedy such as past-damages.

In Petrella, the Supreme Court limited its particularly holding to copyright law and noted that “[w]e have not had occasion to review the Federal Circuit’s position” on laches in patent cases. Of course, the parallels between copyright and patent are strong in this situation and so we would expect the Federal Circuit to seriously consider whether Petrella should be applied to overrule Aukerman.

SCA v. First Quality: In 2003, SCA sent a C&D letter to First Quality in 2003 regarding patented adult diapers. However, in 2004, SCA filed for ex parte reexamination that was completed in 2007 with a confirmation of patentability. Finally, in 2010, SCA filed the lawsuit against First Quality.  By that time (beginning in 2006) First Quality had greatly expanded its use of the underlying concepts of the invention (it doesn’t leak).  Rather than deciding the lawsuit, the district court dismissed the case based upon the delay finding both laches and equitable estoppel.

On appeal, the Federal Circuit has affirmed – most notably holding that the Petrella decision has no impact on the adjudication of laches in patent cases.  However, rather than addressing the clear and obvious tension, the court simply wrote:

Petrella notably left Aukerman intact. See id. at
1974 n.15 (“We have not had occasion to review the Federal Circuit’s position.”). Because Aukerman may only be overruled by the Supreme Court or an en banc panel of this court, Aukerman remains controlling precedent.

While clinging to the Aukerman approach, affirmance was easy because the six-year delay creates a strong presumption of unreasonable delay.  However, the court did reverse the summary judgment of equitable estoppel because there was no evidence of the required affirmative act such as a misleading communication leading to detrimental reliance on the notion that the defendant’s infringement would be permissible.

The decision here is notable for its glaring reticence. The panel of Judges Reyna, Wallach, and Hughes are all relatively new and perhaps expect en banc review of this issue.  Many (perhaps most) other judges on the court would have made their mark rather than simply passing.

Although I believe, on balance, that Petrella controls here, the case is not open-and-shut because there are important distinctions as you move from copyright to patent. Notably, the copyright statute of limitations is a more direct and total limit on filing suit while in patent law the statute only limits the collection of too-far-back damages. Thus, in this situation, Congress seems to have spoken more fully in the copyright realm. Additionally, the three versus six year limit appears important because, in the time-scale of lawsuits and three years is a relatively short time while six-years begins to allow for much more unreasonableness and detrimental reliance.  That time differential is further compounded by the fact that three years is quite a small bit of the copyright term (5%) while six-years is often more than 1/3 of the patent term — suggesting that a patentee’s should move more quickly.

If anything, this issue will be interesting to watch.

Federal Circuit Reminds Courts of Discretion on Fee Awards

Patent

By Jason Rantanen

Icon Health & Fitness, Inc. v. Octane Fitness, LLC (Fed. Cir. 2014) (nonprecedential) Octane Fitness Remand
Panel: Newman, Mayer, and Lourie

In Octane Fitness v. Icon the Supreme Court rejected the “objectively baseless” legal standard that the Federal Circuit had been applying in exceptional case determinations.  Procedurally, the appeal was of the district court’s ruling that this case was not exceptional under 35 U.S.C. § 285, which the Federal Circuit had affirmed under its then-authoritative standard.  Following remand by the Supreme Court, the Federal Circuit has itself now remanded the case back to the district court for further proceedings consistent with the new legal standard.

Most of the nonprecedential opinion involves a straightforward recitation of portions of the Court’s holding:

The Supreme Court abrogated both the clear and convincing evidence standard and the two-part test for objective baselessness and subjective bad faith of Brooks Furniture. Octane, 134 S. Ct. at 1757–58. The Court held that within the context of § 285 “an ‘exceptional’ case is simply one that stands out from others with respect to the substantive strength of a party’s litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated.” Id. at 1756. The Court further concluded that “[d]istrict courts may determine whether a case is ‘exceptional’ in the case-by-case exercise of their discretion, considering the totality of the circumstances.” Id. The Court explained that there is no precise rule or formula for making those determinations and noted that district courts should exercise “equitable discretion” in considering a nonexclusive list of factors that could include “‘frivolousness, motivation, objective unreasonableness (both in the factual and legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence.’” Id. at 1756 n.6 (quoting Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 n.19 (1994)). The Supreme Court also observed that “a case presenting either subjective bad faith or exceptionally meritless claims may sufficiently set itself apart from mine-run cases to warrant a fee award.” Id. at 1757.

Slip Op. at 5-6. However, the Federal Circuit also took the opportunity to remind district court judges that the inquiry does not end with the exceptional case determination.  Specifically, under earlier Federal Circuit precedent, the court held that district courts can continue to apply their discretion even after a case is determined to be exceptional:

The Supreme Court’s decision in Octane did not, however, revoke the discretion of a district court to deny fee awards even in exceptional cases. Long before Brooks Furniture, we held that “an exceptional case does not require in all circumstances the award of attorney fees.” S.C. Johnson & Son, Inc. v. Carter-Wallace, Inc., 781 F.2d 198, 201 (Fed. Cir. 1986); see also Gardco Mfg., Inc. v.
Herst Lighting Co., 820 F.2d 1209, 1215 (Fed. Cir. 1987) (“After the district court determines that a case is exceptional, there remains in every case its freedom to exercise its discretion informed by the court’s familiarity with the matter in the litigation and the interest of justice.” (internal quotations omitted)). Indeed, in the companion case Highmark, the Court held that “[b]ecause § 285 commits
the determination whether a case is ‘exceptional’ to the discretion of the district court, that decision is to be reviewed on appeal for abuse of discretion” and that
district courts should have discretion in “all aspects of [the] § 285 determination.” Highmark, 134 S. Ct. at 1748–49.

Slip Op. at 6.  The court goes on to remand the whole mess back to the district court to apply its discretion under the new standard (and presumably, to also apply its discretion to the award of fees).

What I find particularly fascinating about this whole area of law is that there is a substantial line of intertwined Section 284 and 285 cases that deal with the district court’s discretion on fee awards after a finding of willful infringement or that a case is exceptional.  These cases (which often involve an analysis under the factors set out in Read Corp. v. Portec, Inc., 970 F.2d 816, 826–27 (Fed.Cir.1992) are essentially a totality of the circumstances analysis.  This produces two interesting results.  First, although I haven’t fully thought through whether two issues are sufficiently parallel, it seems that there’s a relevant body of law on totality of the circumstances analyses in this context that already exists that courts will be able to draw upon when applying the Court’s new standard for exceptional case determinations.  Second, how should the analysis play out if both the exceptional case determination and the decision to award fees (and how much those fees should be) involve essentially the same totality of the circumstances inquiry?  Does it make sense to retain a formal distinction between the exceptional case determination and the amount of the fee award?  My sense is that the answer is yes, particularly since there will inevitably be factors in the amount-of-fee determination that are not relevant in the is-the-case-exceptional determination (for example, I have seen a district judge apportion fees based on what happened with which patents, with fees being granted for attorney activity in connection with one patent but not when the activity was solely related to other patents involved in the litigation).

Court Finds Patent Invalid; Then Orders Defendant to Stop Infringing

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By Dennis Crouch

Following the Supreme Court’s equitable relief decision in eBay, many patentees have found it difficult to obtain injunctive relief to stop ongoing infringement – even after final judgment that the patent is both valid and infringed.

In a recent decision, the District Court Judge Blake (D.Md.) seemingly flipped eBay on its head by enjoining TWi Pharma from making or selling a generic version of Par’s patented Megace ES formulary. The upside-down element of the decision is that the order granting the injunction issued only after the court found the patent claims invalid as obvious. Par Pharma v. TWi Pharma, 1-11-cv-02466 (MDD August 12, 2014, Order). To be clear, the order here is not for permanent relief, but only relates to injunction pending appeal.

The doctrine involving the grant of equitable relief pending appeal is a bit squirrelly – especially at the district court level because the general setup involves the court deciding that its decisions are likely wrong. Recognizing that, the law does not require the moving party to show that its case is a likely winner but only a substantial likelihood that the requested equitable relief will be entered as a result of the appeal. Applying this standard, the district court writes:

Par claims that it will succeed on the merits because this court erred in its application of the law with respect to motivations to combine the prior art and inherency. Although the court stands by its judgment, it recognizes that the case presents a close call. Further, the Federal Circuit will conduct a de novo review of whether the ‘576 patent is obvious, including whether this court properly interpreted the law regarding motivation and inherency. . . . The court is not persuaded Par has demonstrated a “strong” likelihood of success on appeal—especially given that most of its dispute with this court’s earlier decision is only rehashing the legal arguments it has already made. Par has, however, made a showing of a substantial case.

The district court joined this “substantial case” on appeal with strong evidence of irreparable harm absent relief in its decision to grant the injunction pendente lite.

Regarding the ‘public interest’ element of equitable relief, the court found that element neutral.

The court recognizes that the public is served by the availability of low-cost generic medications, especially where an invalid patent has previously barred their entry into the market. On the other hand, the public also has an interest in the protection of valid patents because it promotes innovation. This factor, therefore, is neutral.

An interesting and problematic element of the court’s decision here is that the doctrinal approach makes it easier for a patentee to obtain temporary relief following an adverse final judgment (of invalidity) than prior to such a judgment. The doctrinal difference highlighted by the court between preliminary injunctive relief pending final judgment and post-decision relief pending appeal is simply that the proof of likelihood-of-success is reduced for relief pending appeal. This is obviously problematic because in the second case, the court will have already reached a final judgment that the patentee loses.

In making its decision, the district court applied Federal Circuit precedent regarding relief pending appeal. However, those cases relate generally to the asymmetrical situation of staying-injunctive relief pending appeal rather than, as here, granting injunctive relief pending appeal.

There is a better approach that still recognizes the potential need for injunctive relief pending appeal and that is simply requiring a greater showing of need for relief (irreparable harm; balance of hardships; public interest) when the likelihood-of-success element is reduced.

Supreme Court Patent Cases Per Decade

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The Chart below is an update of one I published earlier this year. The new chart adds in a couple of extra cases that I had previously not included and also takes account of the Supreme Court’s spate of decisions this term, including Alice v. CLS Bank (subject matter eligibility); Nautilus v. Biosig (indefiniteness); Limelight v. Akamai (divided infringement for inducement); Highmark v. Allcare (attorney fee awards in exceptional cases); Octane Fitness v. Icon Health & Fitness (attorney fee awards in exceptional cases); and Medtronic v. Boston Scientific (burden of proving infringement always falls on patentee even in licensee DJ actions). Readers should also note that the decade of 2010’s is not yet ½ completed and the Court has already granted writ of certiorari in one pending action: Teva v. Sandoz (standard of appellate review for factual findings that serve as the underpinnings for claim construction). We can expect that the trend will continue over the next several years with special focus on the new rules and procedures stemming from the America Invents Act of 2011. Note – my list largely agrees with Prof Ouellette’s