Tag Archives: Supreme Court

Supreme Court Looks More Closely at Reviewing Therasense

Patent, ,

By Dennis Crouch

Sony Computer v. 1st Media LLC, Docket No 12-1086 (on petition for writ of certiorari 2013)

In a recent order, the Supreme Court has asked the Solicitor General to file a brief in this expressing the views of the United States in this pending inequitable conduct case. (CVSG). The case is essentially a challenge of the Federal Circuit’s en banc decision in Therasense that strongly cabined-in the doctrine of inequitable conduct. In this case, the Federal Circuit rejected a district court holding of inequitable conduct in a failure-to-submit case. According to the lower court, three references used to reject the equivalent foreign cases were never submitted for consideration by the US examiners. Nevada district court Judge Mahan found that both the patent attorney and the listed inventor were at fault for failing to submit the references and consequently held the patent unenforceable due to inequitable conduct.

On appeal, the Federal Circuit reversed – making clear (again) that in a failure-to-disclose situation, the defendant must prove that individuals with a Rule 56 duty “made a deliberate decision to withhold” the references. Further, that deliberate decision element must be proven with clear and convincing evidence and that proof of intent cannot be inferred merely from the fact that the individuals had knowledge of the references and their materiality. The Federal Circuit wrote:

A court can no longer infer intent to deceive from non-disclosure of a reference solely because that reference was known and material. Moreover, a patentee need not offer any good faith explanation for his conduct unless and until an accused infringer has met his burden to prove an intent to deceive by clear and convincing evidence. . . . Moreover, it is not enough to argue carelessness, lack of attention, poor docketing or cross-referencing, or anything else that might be considered negligent or even grossly negligent. To sustain a charge of inequitable conduct, clear and convincing evidence must show that the applicant made a deliberate decision to withhold a known material reference. Whatever one might conclude about Lewis’s and Sawyer’s conduct and interactions relating to the Bush reference, and the nature of Sawyer’s practice at the relevant time, the record does not support the inference that Lewis and Sawyer deliberately chose to withhold Bush.

Because one element of the inequitable conduct charge is missing, the court concluded that the charge cannot be proven. Of course, “carelessness, lack of attention, [or] poor docketing” will still lead to malpractice claims.

In the petition for writ of certiorari, the accused infringer asks the following question:

Did the Court of Appeals for the Federal Circuit err in restricting district courts’ equitable discretion in evaluating patent unenforceability, contrary to this Court’s precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO’s duty of candor.

In Therasense, the Federal Circuit added some flexibility to its analysis in cases involving sufficiently egregious misconduct. Sony responds that the limited carve-out “is flawed because it creates a rigid threshold [of an egregious affirmative act of misconduct] as a prerequisite to the equitable discretion called for by this Court’s precedent. The flexibility embodied in this Court’s precedent should apply in all cases, not just those involving affirmative egregious misconduct.”

Supreme Court has a history of hearing fraud cases and this CVSG adds to the likelihood that it will hear this case.

Supreme Court: Patent Rights Block Farmers from Saving and Re-Planting Patented Seeds

Patent, , , , , ,

by Dennis Crouch

Bowman v. Monsanto Company (Supreme Court 2013)

In a short opinion a unanimous Supreme Court has sided with Monsanto in holding that the doctrine of patent exhaustion “does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.” 

Read the decision below:

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Bowman v. Monsanto Company, 569 U. S. ____ (2013)

JUSTICE KAGAN delivered the opinion of the Court

Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention. The question in this case is whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission. We hold that he may not.< ?xml:namespace prefix ="" o />

I

Respondent Monsanto invented a genetic modification that enables soybean plants to survive exposure to glyphosate, the active ingredient in many herbicides (including Monsanto’s own Roundup). Monsanto markets soybean seed containing this altered genetic material as Roundup Ready seed. Farmers planting that seed can use a glyphosate based herbicide to kill weeds without damaging their crops. Two patents issued to Monsanto cover various aspects of its Roundup Ready technology, including a seed incorporating the genetic alteration. See Supp. App. SA1–21 (U. S. Patent Nos. 5,352,605 and RE39,247E); see also 657 F. 3d 1341, 1343–1344 (CA Fed. 2011).

Monsanto sells, and allows other companies to sell, Roundup Ready soybean seeds to growers who assent to a special licensing agreement. See App. 27a. That agreement permits a grower to plant the purchased seeds in one (and only one) season. He can then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. See 657 F. 3d, at 1344–1345. But under the agreement, the farmer may not save any of the harvested soybeans for replanting, nor may he supply them to anyone else for that purpose. These restrictions reflect the ease of producing new generations of Roundup Ready seed. Because glyphosate resistance comes from the seed’s genetic material, that trait is passed on from the planted seed to the harvested soybeans: Indeed, a single Roundup Ready seed can grow a plant containing dozens of genetically identical beans, each of which, if replanted, can grow another such plant—and so on and so on. See App. 100a. The agreement’s terms prevent the farmer from co-opting that process to produce his own Roundup Ready seeds, forcing him instead to buy from Monsanto each season.

Petitioner Vernon Bowman is a farmer in Indiana who, it is fair to say, appreciates Roundup Ready soybean seed. He purchased Roundup Ready each year, from a company affiliated with Monsanto, for his first crop of the season. In accord with the agreement just described, he used all ofthat seed for planting, and sold his entire crop to a grain elevator (which typically would resell it to an agricultural processor for human or animal consumption).

Bowman, however, devised a less orthodox approach for his second crop of each season. Because he thought such late-season planting “risky,” he did not want to pay the premium price that Monsanto charges for Roundup Ready seed. Id., at 78a; see Brief for Petitioner 6. He therefore went to a grain elevator; purchased “commodity soybeans” intended for human or animal consumption; and planted them in his fields.[1] Those soybeans came from prior harvests of other local farmers. And because most of those farmers also used Roundup Ready seed, Bowman could anticipate that many of the purchased soybeans would contain Monsanto’s patented technology. When he applied a glyphosate-based herbicide to his fields, he confirmed that this was so; a significant proportion of the new plants survived the treatment, and produced in their turn a new crop of soybeans with the Roundup Ready trait. Bowman saved seed from that crop to use in his late-season planting the next year—and then the next, and the next, until he had harvested eight crops in that way. Each year, that is, he planted saved seed from the year before (sometimes adding more soybeans bought from the grain elevator),sprayed his fields with glyphosate to kill weeds (and any non-resistant plants), and produced a new crop of glyphosate resistant—i.e., Roundup Ready—soybeans.

After discovering this practice, Monsanto sued Bowman for infringing its patents on Roundup Ready seed. Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale (from local farmers to the grain elevator). The District Court rejected that argument, and awarded damages to Monsanto of $84,456. The Federal Circuit affirmed. It reasoned that patent exhaustion did not protect Bowman because he had “created a newly infringing article.” 657 F. 3d, at 1348. The “right to use” a patented article following an authorized sale, the court explained, “does not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee.” Ibid. (brackets and internal quotation marks omitted). Accordingly, Bowman could not “‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.” Ibid.

We granted certiorari to consider the important question of patent law raised in this case, 568 U. S. ___ (2012), and now affirm.

II

The doctrine of patent exhaustion limits a patentee’s right to control what others can do with an article embodying or containing an invention.[2] Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625 (2008). And by “exhaust[ing] the [patentee’s] monopoly” in that item, the sale confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit. United States v. Univis Lens Co., 316 U. S. 241, 249–250 (1942). We have explained the basis for the doctrine as follows:“[T]he purpose of the patent law is fulfilled with respect to any particular article when the patentee has received his reward . . . by the sale of the article”; once that “purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold.” Id., at 251. Consistent with that rationale, the doctrine restricts a patentee’s rights only as to the “particular article” sold, ibid.; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine . . . does not acquire any right to construct another machine either forhis own use or to be vended to another.” Mitchell v. Hawley, 16 Wall. 544, 548 (1873); see Wilbur-Ellis Co. v. Kuther, 377 U. S. 422, 424 (1964) (holding that a purchaser’s “reconstruction” of a patented machine “would impinge on the patentee’s right ‘to exclude others from making’ . . . the article” (quoting 35 U. S. C. §154 (1964 ed.))). Rather, “a second creation” of the patented item “call[s] the monopoly, conferred by the patent grant, into play for a second time.” Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U. S. 336, 346 (1961). That is because the patent holder has “received his reward” only for the actual article sold, and not for subsequent recreations of it. Univis, 316 U. S., at 251. If the purchaser of that article could make and sell endless copies, the patent would effectively protect the invention for just a single sale. Bowman himself disputes none of this analysis as a general matter: He forthrightly acknowledges the “well settled” principle “that the exhaustion doctrine does not extend to the right to ‘make’ a new product.” Brief for Petitioner 37 (citing Aro, 365 U. S., at 346).

Unfortunately for Bowman, that principle decides this case against him. Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did. He took the soybeans he purchased home; planted them in his fields at the time he thought best; applied glyphosate to kill weeds (as well as any soy plants lacking the Roundup Ready trait); and finally harvested more (many more) beans than he started with. That is how “to ‘make’ a new product,” to use Bowman’s words, when the original product is a seed. Brief for Petitioner 37; see Webster’s Third New International Dictionary 1363 (1961) (“make” means “cause to exist, occur, or appear,” or more specifically, “plant and raise (a crop)”). Because Bowman thus reproduced Monsanto’s patented invention, the exhaustion doctrine does not protect him.[3]

Were the matter otherwise, Monsanto’s patent would provide scant benefit. After inventing the Roundup Ready trait, Monsanto would, to be sure, “receiv[e] [its] reward” for the first seeds it sells. Univis, 316 U. S., at 251. But in short order, other seed companies could reproduce the product and market it to growers, thus depriving Monsanto of its monopoly. And farmers themselves need only buy the seed once, whether from Monsanto, a competitor, or (as here) a grain elevator. The grower could multiply his initial purchase, and then multiply that new creation, ad infinitum—each time profiting from the patented seed without compensating its inventor. Bowman’s late-season plantings offer a prime illustration. After buying beans for a single harvest, Bowman saved enough seed each year to reduce or eliminate the need for additional purchases.

Monsanto still held its patent, but received no gain from Bowman’s annual production and sale of Roundup Ready soybeans. The exhaustion doctrine is limited to the “particular item” sold to avoid just such a mismatch between invention and reward.

Our holding today also follows from J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U. S. 124 (2001). We considered there whether an inventor could get a patent on a seed or plant, or only a certificate issued under the Plant Variety Protection Act (PVPA), 7 U. S. C. §2321 et seq. We decided a patent was available, rejecting the claim that the PVPA implicitly repealed the Patent Act’s coverage of seeds and plants. On our view, the two statutes established different, but not conflicting schemes: The requirements for getting a patent “are more stringent than those for obtaining a PVP certificate, and the protections afforded” by a patent are correspondingly greater.

J. E. M., 534 U. S., at 142. Most notable here, we explained that only a patent holder (not a certificate holder) could prohibit “[a] farmer who legally purchases and plants” a protected seed from saving harvested seed “for replanting.” Id., at 140; see id., at 143 (noting that the Patent Act, unlike the PVPA, contains “no exemptio[n]” for “saving seed”). That statement is inconsistent with applying exhaustion to protect conduct like Bowman’s. If a sale cut off the right to control a patented seed’s progeny, then (contrary to J. E. M.) the patentee could not prevent the buyer from saving harvested seed. Indeed, the patentee could not stop the buyer from selling such seed, which even a PVP certificate owner (who, recall, is supposed to have fewer rights) can usually accomplish. See 7 U. S. C. §§2541, 2543. Those limitations would turn upside-down the statutory scheme J. E. M. described.

Bowman principally argues that exhaustion should apply here because seeds are meant to be planted. The exhaustion doctrine, he reminds us, typically prevents a patentee from controlling the use of a patented product following an authorized sale. And in planting Roundup Ready seeds, Bowman continues, he is merely using them in the normal way farmers do. Bowman thus concludes that allowing Monsanto to interfere with that use would “creat[e] an impermissible exception to the exhaustion doctrine” for patented seeds and other “self-replicating technologies.” Brief for Petitioner 16.

But it is really Bowman who is asking for an unprecedented exception—to what he concedes is the “well settled” rule that “the exhaustion doctrine does not extend to the right to ‘make’ a new product.” See supra, at 5. Reproducing a patented article no doubt “uses” it after a fashion. But as already explained, we have always drawn the boundaries of the exhaustion doctrine to exclude that activity, so that the patentee retains an undiminished right to prohibit others from making the thing his patent protects. See, e.g., Cotton-Tie Co. v. Simmons, 106 U. S. 89, 93–94 (1882) (holding that a purchaser could not “use” the buckle from a patented cotton-bale tie to “make” a new tie). That is because, once again, if simple copying were a protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.

Nor do we think that rule will prevent farmers from making appropriate use of the Roundup Ready seed they buy. Bowman himself stands in a peculiarly poor position to assert such a claim. As noted earlier, the commodity soybeans he purchased were intended not for planting, but for consumption. See supra, at 2–3. Indeed, Bowman conceded in deposition testimony that he knew of no other farmer who employed beans bought from a grain elevator to grow a new crop. See App. 84a. So a non-replicating use of the commodity beans at issue here was not just available, but standard fare. And in the more ordinary case, when a farmer purchases Roundup Ready seed qua seed—that is, seed intended to grow a crop—he will be able to plant it. Monsanto, to be sure, conditions the farmer’s ability to reproduce Roundup Ready; but it does not—could not realistically—preclude all planting. No sane farmer, after all, would buy the product without some ability to grow soybeans from it. And so Monsanto, predictably enough, sells Roundup Ready seed to farmers with a license to use it to make a crop. See supra, at 2, 6, n. 3. Applying our usual rule in this context therefore will allow farmers to benefit from Roundup Ready, even as it rewards Monsanto for its innovation.

Still, Bowman has another seeds-are-special argument: that soybeans naturally “self-replicate or ‘sprout’ unless stored in a controlled manner,” and thus “it was the planted soybean, not Bowman” himself, that made replicas of Monsanto’s patented invention. Brief for Petitioner 42; see Tr. of Oral Arg. 14 (“[F]armers, when they plant seeds, they don’t exercise any control . . . over their crop” or “over the creative process”). But we think that blame-the-bean defense tough to credit. Bowman was not a passive observer of his soybeans’ multiplication; or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained, supra at 2–3, Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. He purchased beans from a grain elevator anticipating that many would be Roundup Ready; applied a glyphosate-based herbicide in a way that culled any plants without the patented trait; and saved beans from the rest for the next season. He then planted those Roundup Ready beans at a chosen time; tended and treated them, including by exploiting their patented glyphosate resistance; and harvested many more seeds, which he either marketed or saved to begin the next cycle. In all this, the bean surely figured. But it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.

Our holding today is limited—addressing the situation before us, rather than every one involving a self replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. Cf. 17 U. S. C. §117(a)(1) (“[I]t is not [a copyright] infringement for the owner of a copy of a computer program to make . . . another copy or adaptation of that computer program provide[d] that such a new copy or adaptation is created as an essential step in the utilization of the computer program”). We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances. In the case at hand, Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. Patent exhaustion provides no haven for that conduct. We accordingly affirm the judgment of the Court of Appeals for the Federal Circuit.

[1] Grain elevators, as indicated above, purchase grain from farmers and sell it for consumption; under federal and state law, they generally cannot package or market their grain for use as agricultural seed. See 7 U. S. C. §1571; Ind. Code §15–15–1–32 (2012). But because soybeans are themselves seeds, nothing (except, as we shall see, the law) prevented Bowman from planting, rather than consuming, the product he bought from the grain elevator.

 

[2] 2The Patent Act grants a patentee the “right to exclude others from making, using, offering for sale, or selling the invention.” 35 U. S. C. §154(a)(1); see §271(a) (“[W]hoever without authority makes, uses, offers to sell, or sells any patented invention . . . infringes the patent”).

[3] This conclusion applies however Bowman acquired Roundup Readyseed: The doctrine of patent exhaustion no more protected Bowman’sreproduction of the seed he purchased for his first crop (from a Monsantoaffiliated seed company) than the beans he bought for his second (from a grain elevator). The difference between the two purchases wasthat the first—but not the second—came with a license from Monsanto to plant the seed and then harvest and market one crop of beans. We do not here confront a case in which Monsanto (or an affiliated seed company) sold Roundup Ready to a farmer without an express license agreement. For reasons we explain below, we think that case unlikely to arise. See infra, at 9. And in the event it did, the farmer might reasonably claim that the sale came with an implied license to plantand harvest one soybean crop.

CLS Bank v. Alice Corp: Court Finds Many Software Patents Ineligible

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by Dennis Crouch

CLS Bank v. Alice Corp. (Fed. Cir. 2013) (en banc)

In a much awaited en banc decision, the Federal Circuit has affirmed the patent ineligibility of Alice Corp’s claims to a computerized method, a computer-readable medium containing computer instructions, and a computer system that implements those instructions.  The ten-member en banc panel released seven different decisions. While none of the opinions garnered majority support, seven of the ten judges agreed that the method and computer-readable medium claims lack subject matter eligibility.  And, eight of the ten concluded that the claims should rise and fall together regardless of their claim type.

All of the judges recognized that the test for patent eligibility under section 101 should be “a consistent, cohesive, and accessible approach” that provides “guidance and predictability for patent applicants and examiners, litigants, and the courts.”  However, the judges hotly disagree as to the pathway that will lead to that result.

The leading five-member opinion written by Judge Lourie provides three guideposts for its analysis:

  • First and foremost is an abiding concern that patents should not be allowed to preempt the fundamental tools of discovery—those must remain “free to all . . . and reserved exclusively to none.” . . . [T]he animating concern is that claims should not be coextensive with a natural law, natural phenomenon, or abstract idea; a patent-eligible claim must include one or more substantive limitations that, in the words of the Supreme Court, add “significantly more” to the basic principle, with the result that the claim covers significantly less. Thus, broad claims do not necessarily raise § 101 preemption concerns, and seemingly narrower claims are not necessarily exempt. What matters is whether a claim threatens to subsume the full scope of a fundamental concept, and when those concerns arise, we must look for meaningful limitations that prevent the claim as a whole from covering the concept’s every practical application.
  • Next, the cases repeatedly caution against overly formalistic approaches to subject-matter eligibility that invite manipulation by patent applicants. . . . Thus, claim drafting strategies that attempt to circumvent the basic exceptions to § 101 using, for example, highly stylized language, hollow field-of-use limitations, or the recitation of token post-solution activity should not be credited.
  • Finally, the cases urge a flexible, claim-by-claim approach to subject-matter eligibility that avoids rigid line drawing.

Abstract Ideas are Disembodied Concepts: Alice Corp’s claims are drawn to methods of reducing settlement risk by effecting trades through a third party intermediary (a supervisory institution) empowered to verify that both parties can fulfill their obligations before allowing the exchange to be completed.  This essence, the method is a form of third-party escrow that helps overcome the risk of fraud and non-payment. In thinking about that method, the court determined that it is an abstract idea because it is a “disembodied” concept that is a basic building block of human ingenuity and untethered from any real-world application.  Lourie writes:

CLS describes that concept as “fundamental and ancient,” but the latter is not determinative of the question of abstractness. Even venerable concepts, such as risk hedging in commodity transactions, see Bilski, 130 S. Ct. at 3231, were once unfamiliar, just like the concepts inventors are unlocking at the leading edges of technology today. But whether long in use or just recognized, abstract ideas remain abstract. The concept of reducing settlement risk by facilitating a trade through third-party intermediation is an abstract idea because it is a “disembodied” concept, In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc), a basic building block of human ingenuity, untethered from any real-world application. Standing alone, that abstract idea is not patent-eligible subject matter.

After identifying the portion of the claim directed to an abstract idea, Judge Lourie then looked to see whether “the balance of the claim adds ‘significantly more.’” Answering that question in the negative, the court found the claims lack eligibility.

Writing in Dissent, Chief Judge Rader disagreed with the court’s decision. He writes:

I enjoy good writing and a good mystery, but I doubt that innovation is promoted when subjective and empty words like “contribution” or “inventiveness” are offered up by the courts to determine investment, resource allocation, and business decisions. Again, it is almost . . . well, “obvious” . . . to note that when all else fails, it makes sense to consult the simplicity, clarity, and directness of the statute.

As I start my next quarter century of judicial experience, I am sure that one day I will reflect on this moment as well. I can only hope it is a brighter reflection than I encounter today.

 


 

 

Guest Post: Nine Reasons why the Supreme Court Should Side with Myriad and Affirm the Patenting of Isolated Human Genes

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Guest Post by Benjamin Jackson, Senior Director of Legal Affairs at Myriad Genetics, Inc.

The Myriad Case: A Golden Opportunity to Bring Clarity and Fairness to Subject-Matter Eligibility

Two weeks ago the US Supreme Court heard oral argument in the landmark case of AMP v. Myriad Genetics. The Justices appeared engaged in the argument and seemed to be genuinely seeking understanding of the science and the potential impact of any decision they might take. Several specific points emerged from the argument that warrant further discussion:

1. What Does "Isolation" Really Mean? Some Justices seemed to struggle with what is involved in "isolation" under the patents. This is the most critical issue in the case as a correct understanding of this word leads to the inescapable conclusion that the claims are directed to human-made inventions rather than what exists in nature. Regardless of any meaning used in the Petitioner's arguments and those of prominent amici such as Dr. Lander, "isolation" as defined by the patents requires that a new chemical entity be created either synthetically from scratch or by chemically/structurally modifying an existing molecule. The patents explicitly define "isolated" DNA as removed from its natural environment, whether that environment be in the nucleus or, as the Lander brief emphasizes, floating around outside the cell in someone's blood. But isolation under the patents is not just "snipping" molecules as they sit in their natural environment. Isolation under the patents also requires purification (i.e., concentration) of the newly created molecule out of the interfering milieu.

What is ignored in ACLU's arguments is that purification is a critical element of what it means to "isolate" something under the patents. The Lander brief calls purification of DNA routine, but only in the context of randomly purifying all nucleic acids out of a sample. "Isolation" under the patents requires specific, targeted purification/enrichment of BRCA1– or BRCA2-related molecules, which was not routine or even possible before Myriad's invention. Under this proper understanding of everything that "isolation" under the patent requires, ACLU made Myriad's case by conceding in their reply brief and in oral argument that purification to yield a significant new utility is sufficient to warrant a patent. Some Justices seemed to agree: A molecule sitting in a leaf of an Amazonian plant is not "new" or patent-eligible, but it becomes both once it is purified and concentrated into a useful form. Similarly, DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while a DNA molecule chemically modified and purified by man is both.

2. Splitting the Baby Doesn't Work Out Well for the Baby. Some see patent-eligibility for cDNA and not isolated genomic DNA, advocated by the Department of Justice, as a compromise position that the Court is seriously considering. I am hopeful that instead the Court has merely recognized that cDNA is so clearly patent-eligible that it needs no serious discussion and has efficiently moved on to the marginally closer question of isolated genomic DNA. While this may superficially seem like a nice, neat compromise, it quickly falls apart under scrutiny. In the area where the Myriad case has the most potential impact, because new isolated DNA patents are common and thus incentivizing new discoveries is most important today, there is no distinction between genomic DNA and cDNA. Bacteria, for example, have no introns, which means the reverse transcription product of mRNA (i.e., what you might call a cDNA) has a sequence identical to genomic DNA. In essence, there is no such thing as cDNA in bacteria. DOJ's position would make all isolated DNA claims patent-ineligible in any organism without introns. The wisdom of Solomon was not in splitting the baby, but in finding a course that meant he didn't need to.

3. Methods v. Compositions. Much of the Myriad oral argument centered on whether method of use claims would be enough to incentivize innovation in the life sciences. Some Justices seemed to be trying to weigh whether an entire category of composition claims could be invalidated without negative effect on innovation because method of use claims would remain. With respect, the Court is not the body that can or should attempt these kinds of determinations where in-depth investigation and careful balancing of competing interests is needed to strike the right balance between what is or is not needed for innovation. For example, the Court is not well-positioned to survey in detail the international legal landscape to, e.g., evaluate statements such as those from DOJ on DNA use versus composition patents in Europe. Congress, not the Court, is practically equipped and Constitutionally-tasked with precisely this type of determination.

4. Analogies. The Court seemed to grapple with several analogies in trying to probe the outer reaches of patent-eligibility. Any analogy that overly simplifies complex science falls apart under close scrutiny. But more importantly, the Court need not agonize over patenting livers cut out of bodies or whole plants uprooted from the Amazon. The patented molecules in Myriad are far closer and vastly more analogous to the chemical compound purified and concentrated from the Amazonian plant than the uprooted whole plant. Indeed, Myriad's claims present an even stronger case because there has been a modification of the chemical structure in addition to the purification. We must not confuse the analogy for the thing actually at issue or let hypothetical future implications of questionable likelihood cloud what was actually patented in this case. Concerns over allowing patenting of extracted livers should not distract the Court from the simple fact that what is before it in Myriad is neither an extracted liver nor an uprooted plant, but instead a highly useful, purified and chemically modified compound that never existed in nature until Myriad created it. If someone ever tries to patent an extracted liver, the Court can address any problems then. It would be tragic, however, to let the "tail" of that remote future possibility wag the "dog" of patent-eligibility for biotech inventions today.

5. Innovation. Some Justices appeared anxious incentivizing innovation without inhibiting it, with Justice Breyer noting "uncomfortable compromises" in patent law. The Myriad patents specifically and gene patents generally require no such discomfort. First, ACLU's argument that the claims preclude any study of the BRCA genes is simply wrong. Untargeted sequencing and analysis of the genes would not infringe claims to isolated BRCA DNA because it does not involve purification (thus no "isolation") of the BRCA genes out of the genomic milieu. Second, putting ACLU's anecdotes aside, all available systematic evidence shows that gene patents do not inhibit but instead spur innovation. ACLU's imaginative assertions about what the claimed molecules can be used for are a red herring; the Petitioners in Myriad clearly stated in their declarations that they want to use the claimed molecules not for DNA-based computers or developing new drugs, but instead to replicate Myriad's test.

6. Every Chemical Invention Is Possible in Nature. Justice Alito made an insightful comment about a branch washing up on shore looking like a baseball bat. This shows the legal irrelevance of the Lander amicus brief, which figured somewhat prominently in the oral argument. That randomly fragmented DNA floating around in someone's blood might at some point comprise the BRCA1 gene is irrelevant to the question whether what Myriad claimed was produced by human ingenuity rather than by nature. The relevant question is whether the inventor merely found something unmodified in nature and staked claim to it, or instead created something by her own ingenuity. To ask whether a claimed chemical composition could conceivably ever exist in nature is an unhelpful question of probability because, given enough time, any arrangement of atoms is inevitable. See, Dan L. Burk, Anticipating Patentable Subject Matter, 65 STAN. L. REV. ONLINE 109, 114 (2013). For example, it was irrelevant to the decision in Chakrabarty that Dr. Chakrabarty assisted the natural process bacterial "breeding" that, given enough time, could certainly have yielded the claimed bacterium naturally.

7. Subtraction v. Addition. Many easily accept that combining two chemical entities creates a man-made, patentable invention, but become instantly skeptical if a single molecule is separated into two parts that do not exist in nature. This surfaced in the Myriad argument as well, but from a chemical, biological, genetic, and even legal perspective there is no defensible distinction between addition and subtraction. A molecule created by removing parts that interfered with its new utility is just as much a product of human ingenuity, and can have just as important a new utility, as a molecule created by addition.

8. Short DNA Molecules. Justice Sotomayor asked about claims directed to short DNA molecules of 15 or more nucleotides. She appeared to rely on ACLU's arguments, based on an article published after Myriad filed its merits brief, about these claims covering the entire genome. Certainly as to Claim 6 of the '282 patent, this is clearly wrong. Claim 2 is directed to a molecule with the cDNA sequence of SEQ ID NO:1 (whose patent-eligibility the Court seemed pretty comfortable with) and Claim 6 is merely directed to fragments of that molecule. If the larger molecule is a product of human ingenuity, then human-made fragments of it must also be. Regardless, ACLU's unproven allegations on this point are irrelevant from a practical perspective. Anything as small as 15 nucleotides would only be used as part of a primer pair and, when used this way, the molecules would be 100% specific for BRCA1.

9. Myriad: A Unique Chance to Return Clarity and Fairness to Patent-Eligibility by Returning to the Statute and Chakrabarty. There is currently great confusion amongst courts, the patent office, patentees and the public about patent-eligibility under section 101 of the Patent Act. While the spirit behind the judicial exclusions for patentability is correct, decisions applying them can often be, in the words of Justice Frankfurter, "infected with too much ambiguity and equivocation" due to "vague and malleable terms" such as "the work of nature" and the "laws of nature." But the language of section 101 itself and the Court's seminal decision in Diamond v. Chakrabarty provide the Court with a framework for a long overdue recalibration and clarification of patent-eligibility in the Myriad case.

Section 101 requires that a claimed composition of matter be both new and useful, thus encompassing the judicial exclusions and giving courts the tools to resolve difficult questions of patent-eligibility. The claimed chemical composition must have some structural, physical or chemical change from the natural starting materials used by the inventor in order to be new under section 101. Limiting patent-eligibility to structurally, physically, or chemically "new" things addresses the judicial concern over patentees removing from the public domain that which exists in nature because there must be a modification of the natural thing. It further addresses the Mayo Court's concern over section 101 becoming a dead letter. Section 101 fills the gap in sections 102 and 103 by excluding anything the inventor found in nature but that was not previously known to others (which could not be anticipated or obvious under section 102 or 103, but which we don't want to award a patent for).

Merely being new is not enough under section 101; the claimed invention must also be useful. This is where the statute really does its work and gives courts an objective yet flexible framework for giving proper force to the legislature's intent. Not just any utility will do. The claimed composition must have one or more significant new utilities and these new utilities must directly result from the structural, physical or chemical changes made by the inventor. Courts can exert substantial discretion in determining whether the new utilities are "significant" under section 101. Courts can weigh the structural changes (how new the composition is) with the new utilities (how significant they are) to decide whether the invention is patent-eligible. If the utility is relatively minor, more of a structural change may be required. If the utility is groundbreaking, very minor structural changes may be sufficient. For example, purification of a molecule from its natural surroundings, without any change in the chemical structure, is a relatively minor structural/physical change from the natural state of things. Nevertheless, this may be patentable if the highly purified composition has significant new (e.g., therapeutic, diagnostic) uses. Importantly, these uses must be assessed from the perspective of human endeavors. The purified molecule always has some or all of the same chemical properties (e.g., polarity, electronegativity, etc.) as it did in nature, but its purification has opened up a world of human uses that take advantage of those properties.

The Court's decision in Chakrabarty, the definitive statement of patentable subject matter for compositions of matter, epitomizes the judicial exclusions and the statute working at their harmonious best. Chakrabarty cited to many of the early cases that established the judicial exclusions from patent-eligibility, then clarified that the dispositive question for patent-eligibility is whether what is claimed is a product of nature or a product of human ingenuity. The Court's analysis paralleled section 101's text, emphasizing that the claimed bacterium was different from what existed in nature (i.e., it was new) and had "significant utility" (i.e., it was useful).

In a great insight into what it means for something to be "new" under section 101, the Court made clear that it is the differences between what is claimed and what exists in nature, not the similarities, that make all the difference in patent-eligibility. Dr. Chakrabarty manipulated bacterial breeding to give one bacterium the natural ability of other bacteria to eat oil. As Dr. Chakrabarty himself noted in his amicus brief in support of Myriad, "the genetically-engineered bacterium that I created and sought to patent in Chakrabarty had a quite similar structure to what existed in nature. It shared the same genome and internal structure as naturally occurring Pseudomonas bacteria and differed only by a few pieces of DNA."

But these elegant changes resulted in "significant utility" such that the Court declared that these modest modifications yielded a product that was "markedly different." The vast similarities were irrelevant; they did not negate the fact Dr. Chakrabarty's human ingenuity brought about something that never existed before with "a distinctive name, character and use." As the Chakrabarty Court noted, legislative history makes clear that what is not eligible for patenting is that which is "created wholly by nature unassisted by man" while anything that "is unique, isolated, and is not repeated by nature, nor can it be reproduced by nature unaided by man" is eligible. The modified bacterium gained significant utility from the donor bacteria and could now be put to many important new uses (e.g., cleaning up oil spills). Again, a relatively minor structural change can be enough if the gained utility is significant.

In Myriad, the Court can readily apply this framework to find that the claimed compositions are new and useful and thus patent-eligible. The isolated DNA molecules are new because they are not found in nature by definition. As shown in point # 1 above, "isolation" under the patents requires a brand new chemical composition with significant structural changes that has been purified and concentrated out of the milieu that previously prevented its new uses. Chromosomal DNA in its natural environment, whether whole in the cell or fragmented in the blood, is neither new nor patent-eligible, while the molecule chemically modified and purified by man is both.

The new molecules have gained significant new utilities. They can be used as laboratory tools for targeted sequencing of the BRCA genes of patients, which is not just transfer of an existing utility to a new product as in Chakrabarty, but an entirely new utility never possible before. ACLU makes much of the fact that these utilities largely depend on properties shared with the natural DNA. This is true but irrelevant. The new molecules share some useful properties with the natural source material (why else would we have sought them out?), but the breakthrough new utilities were impossible before the inventors' modifications. This is precisely what the patent system was designed to incentivize.

Upholding the Myriad patents does a lot more than affirm patent protection of a deserving invention of human-made molecules with significant societal value. In Myriad the Court can honor the language and intent of the statute passed by Congress and bring the objectivity, clarity and predictability that patentees and alleged infringers alike yearn for, all while advancing the policy goals of the judicially-created patent-eligibility exclusions.

Reverse Payments at the Supreme Court

Patent, ,

FTC v. Actavis (Supreme Court 2013) /media/docs/2013/03/12-416.pdf

The Supreme Court today heard oral arguments in the reverse-payment pharmaceutical case of FTC v. Actavis. The FTC is asking the court to rule that it is impermissible for a pharmaceutical company to pay a potential competitor to stay out of the market – even when shrouded as a patent litigation settlement. This case stems from the Hatch-Waxman Act that encourages a generic manufacturer to step forward and challenge a patentee’s patent rights. In a number of cases, branded manufacturers have offered various incentives to the first-filing generic to end its challenge. These are termed “reverse payments” because the patentee is offering the incentive (money) rather than the usual patent infringement case where the patentee is expecting to be paid.

The FTC challenged a settlement between Solvay and Actavis where Solvay paid around $30 million per year to generic companies to keep generic versions of Androgel off the market.

The question asked by the cert petitions:

Whether reverse-payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

The following are a few notes from oral arguments. USDOJ Deputy Solicitor Malcolm Stewart began with the government’s basic premise:

MR STEWART: As a general matter, a payment from one business to another in exchange for the recipient’s agreement not to compete is an paradigmatic antitrust trust violation. . . . Reverse payments to settle Hatch-Waxman suits are objectionable for the same reasons that payments not to compete are generally objectionable. They subvert the competitive process by giving generic manufacturers an incentive to accept a share of their rival’s monopoly profits as a substitute for actual competition. . . . [T]he point here is that the money is being given as a substitute for earning profits in a competitive marketplace.

Some think of patent law as an exception to antitrust law and a number of courts have basically exempted would be collusive or anticompetitive conduct because the activity was conducted under the a patent shield. Justice Scalia focused on this point:

JUSTICE SCALIA: Mr. Stewart, do you have a case in which the patentee acting within the scope of the patent has nonetheless been held liable under the antitrust laws for something that it’s done acting within the scope of the patent?

MR. STEWART: Yes, if you adopt Respondent’s conception of what it means to act within the scope of the patent. And let me explain. When the Respondents say that the restrictions at issue here are within the scope of the patent, what they mean is that the goods that are being restricted are arguably encompassed by the patent and the restriction doesn’t extend past the date when the patent expires.

That’s all they mean. And if that were the exclusive test, the defendants in Masonite, in New Wrinkle, in Line Material, they would all have been off the hook, because all of those cases involved restrictions on trade in patented goods during the period that the patent was in effect, and yet, the Court found antitrust liability in each of these.

Answering that same question in his presentation, Jeff Weinberger disagreed:

MR. WEINBERGER: The answer to that question is no. All of the cases that have found violations of the antitrust laws based on a patent-based restraint do so because the object of the agreement, the restraint that’s being achieved in the agreement, is beyond the scope that could be legitimately achieved with a patent.

The incentive for a patentee to pay a generic challenger to keep off the market is at least partially governed by the chance that the patentee would lose the infringement litigation.  At its core, this case should really about whether antitrust officials should take-into account the fact that a patent is likely-invalid or not-infringed when judging anticompetitive behavior.  However, neither party supports that approach:

MR. WEINBERGER: The patent g[ives] the patent holder the legal right to exclude. So unless there’s a reason, there’s some reason to believe that it couldn’t reasonably assert that patent, it’s entitled to monopoly profits for the whole duration of the patent.

…

[Earlier] JUSTICE KENNEDY: And one way [to judge anticompetitive behavior] is to assess the validity or the strength of the infringement case?

MR. STEWART: We would say that that’s not a way

JUSTICE KENNEDY: That’s my concern, is your test is the same for a very weak patent as a very strong patent. That doesn’t make a lot of sense.

MR. STEWART: Well, [our proposed] test is whether there has been a payment that would tend to skew the parties’ choice of an entry date, that would tend to provide an incentive … for the generic to agree to an entry date later than the one that it would otherwise insist on. Now, it probably is the case that our test would have greater practical import in cases where the parties perceive the patent to be [invalid].

JUSTICE KENNEDY: Why wouldn’t that determination itself reflect the strength or weakness of the patent so that the market forces take that into account?

MR. STEWART: [unable to give a direct answer]

…

MR. WEINBERGER: I think our patent system depends upon the notion that you don’t evaluate from the perspective of the antitrust laws a patent restraint based upon whether you could have proved in a litigation that that patent was infringed.

. . .

JUSTICE SCALIA: You can’t possibly figure it out, can you, without assessing the strength of the patent? … And to say you can consider every other factor other than the strength of the patent is to leave out the the elephant in the room.

MR. WEINBERGER: I agree with that, Justice Scalia. I don’t think that an alternative test — the only alternative test that could be fashioned that would — that would make sense is one based on strength of the patent. But there are so many reasons that that is an undesirable result that I — I don’t think it’s the way this Court should go.

Justice Breyer was also clearly frustrated with the FTC’s proposed “overcomplicated” test as well as with the patentee’s insistence that reasonable invalidity and non-infringement arguments be ignored in the antitrust analysis.

MR. WEINBERGER: I’ve obviously given a lot of thought to whether there is any kind of an intermediary test that works, and I don’t believe there is.

As per his usual Justice Scalia found some amount of fault with Congress as well:

JUSTICE SCALIA: I have the feeling that what happened is that Hatch-Waxman made a mistake. It did not foresee that it would produce this kind of payment. And in order to rectify the mistake the FTC comes in and brings in a new interpretation of antitrust law that did not exist before, just to make up for the mistake that Hatch-Waxman made, even though Congress has tried to cover its tracks in later amendments, right, which -which deter these, these — these payments? . . . So, why should we overturn understood antitrust laws just to — just to patch up a mistake that Hatch-Waxman made?

In the end, the basic question for decision seems to be whether or not to presume that a reverse payment is anticompetitive. With Justice Alito’s recusal, I’m looking for a 4-4 tie that would simply reinforce the current circuit split.

More from Lyle Denniston and Lisa Larrimore Ouellette.

Revisiting Inequitable Conduct at the Supreme Court

Patent, ,

By Dennis Crouch

The US Supreme Court has decided a number of patent cases that raise questions of unenforceability. Perhaps most notable among these are:

  • Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240 (1933);
  • Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944); and
  • Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945).

This trio of cases explains that inequitable conduct fits within the scope of the traditional equitable doctrine of unclean hands.

Keystone involved a patentee paying another party to lie about its prior use of a patented invention where that use might have been a prior public use. Similarly, in Hazel-Atlas, the patentee wrote an article and had it published under the name of a well-known expert (with the expert's consent). After seeing how the article lauded the invention (and without knowing the connection), the PTO was willing to issue the patent. Precision involved perjury in the course of an interference proceeding. In each of these cases, the Supreme Court held that that the unclean hands doctrine could be used to render the patent unenforceable.

For many years, the doctrine of unclean hands (and, as we call it now inequitable conduct) was a powerful in-court tool for accused infringers to challenge patent enforcement. Almost since the Federal Circuit beginning, Federal Circuit judges have been on a crusade to limit the doctrine. The court's most recent pronouncement found in Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276 (Fed. Cir. 2011) (en banc) continues this trajectory and strongly limits the scope of inequitable conduct allegations.

In Therasense, the Federal Circuit offers two pathways for proving inequitable conduct in the patent prosecution process. The first and primary pathway clear and convincing proof of (1) intentional misconduct and (2) that the misconduct is a but-for cause of the patent issuing. As shorthand, we speak of (1) intentionality and (2) materiality. The Therasense majority, also offered a second pathway for proving inequitable conduct based upon "egregious affirmative acts of misconduct." According to the court, the mere non-disclosure or omission of required information will always fit within the primary pathway while intentional affirmative misstatements that go beyond attorney argument could fit within the second pathway if sufficiently egregious. In reading the trio of Supreme Court cases, the Federal Circuit found that Keyston, Hazel-Atlas, and Precision all fit the definition of egregious misconduct.

Writing in dissent Judge O'Malley criticized the majority opinion as unduly rigid in its formulation of the unclean hands doctrine.

[B]oth the majority and [other] dissenting opinions eschew flexibility in favor of rigidity. Both opinions suggest tests for materiality to apply in all cases. Their respective materiality inquiries are black or white, while equity requires judicial consideration of shades of gray.

The majority defines materiality under a but-for test, with an exception for intentionally false affidavits filed with the PTO. The dissent, on the other hand, defines materiality according to Rule [37 C.F.R. 1.56]. Both tests fail to provide district courts with flexibility to find inequitable conduct in an extraordinary case where the conduct in question would not be defined as such under either test. This result is contrary to the very nature of equity and centuries of Supreme Court precedent. I cannot, accordingly, lend support to either of the immutable tests proposed by my colleagues.

= = = = =

Sony Computer v. 1st Media LLC (on petition for writ of certiorari 2013)

In a recently filed petition for writ of certiorari, Sony and Viacom have asked the Supreme Court return the law to the flexible tests of its old precedent. Raising the following question:

Did the Court of Appeals for the Federal Circuit err in restricting district courts' equitable discretion in evaluating patent unenforceability, contrary to this Court's precedent in Keystone Driller, Hazel-Atlas, and Precision Instrument, by applying a rigid test that (a) forecloses district courts from considering the entire circumstantial record; and (b) precludes district courts from granting equitable remedies where a patent applicant has violated the PTO's duty of candor.

The Federal Circuit intended that the second pathway for egregious misconduct add sufficient flexibility to fit within the Supreme Court's doctrine. Sony responds that the limited carve-out "is flawed because it creates a rigid threshold [of an egregious affirmative act of misconduct] as a prerequisite to the equitable discretion called for by this Court's precedent. The flexibility embodied in this Court's precedent should apply in all cases, not just those involving affirmative egregious misconduct."

Read Sony's Petition:  Download 1st Media Certiorari Petition

Related articles
Unenforceability
Despite Therasense: Federal Circuit Finds Aventis Patent Unenforceable
Unenforceable Patents
Therasense v. BD: En Banc Federal Circuit Raises Bar for Proving Inequitable Conduct and Unenforceability
Therasense: Encouraging Intentional Deception?
Predicting En Banc Issues

Gunn v. Minton: Supreme Court Narrows Arising Under Jurisdiction for Patent Cases

Patent, ,

By Dennis Crouch

Gunn v. Minton, 568 U. S. ____ (Supreme Court 2013)

In a 9-0 decision, the Supreme Court has limited the scope of "arising under" jurisdiction for patent cases and held that the Minton's patent litigation malpractice case does not arise under the patent laws and therefore is not amenable to exclusive federal jurisdiction. This decision collaterally overrules the Federal Circuit's prior case law in Air Measurement Technologies, Inc. v. Akin Gump Strauss Hauer & Feld, L. L. P., 504 F. 3d 1262 (2007) and Immunocept, LLC v. Fulbright & Jaworski, LLP, 504 F. 3d 1281 (2007)). As I discuss at the end of this essay, the America Invents Act of 2011 expanded the scope of federal court jurisdiction and thus counteracts some of the impact of this decision.

28 U. S. C. §1338(a) indicates that federal "district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents" and that the jurisdiction "shall be exclusive of the courts of the states." (Note, this language has now been somewhat amended by the AIA).

Gunn used to be Minton's attorney and represented Minton in prior patent infringement litigation. However, in that prior litigation, the district court declared Minton's patent invalid because he had placed it "on sale" more than one year prior to filing his application. Minton later found that he may have won under the "experimental use" exception to the on-sale bar, but Gunn had allegedly failed to advise him on that front. Minton then sued Gunn for attorney malpractice in Texas state court. However, after losing in State court, Minton changed heart and asked that the case be sent to Federal Court based upon Section 1338(a)'s provision for exclusive federal jurisdiction over any case "arising under any Act of Congress relating to patents." The Texas Supreme Court agreed with Minton and found that the exclusivity prong of the federal law denied jurisdiction to the state. Gunn then petitioned the Supreme Court to decide the scope of federal arising under jurisdiction in this case.

The "arising under" language used in Section 1338(a) has its foundation in the U.S. Constitution. Article III states that "[t]he judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution." §1338(a) language is also parallel to §1331's general principle of federal court jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." §1338(a) is particularly limited to "any civil action arising under any Act of Congress relating to patents." However, the statute is also particularly strong because, unlike most causes of action, the statute provides for exclusive federal jurisdiction if the arising under condition is met. §1338(a).

In most patent cases the arising under analysis is simple because the complaint asserts a cause of action that is based on federal patent law, such as patent infringement or declaratory judgment of invalidity. Supreme Court has additionally held that arising under jurisdiction may exist in cases where the cause of action is not based upon federal law, but where there is an underlying federal issue arising from the well pled complaint. Most importantly, see Grable & Sons Metal Products, Inc. v. Darue Engineering & Mfg., 545 U. S. 308 (2005). In Grable, the Supreme Court indicated that this secondary form of arising under jurisdiction only exists when the claim made in the complaint "[1] necessarily raise[s] a stated federal 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." Grable was an interpretation of §1331 arising under jurisdiction, but the court previously held in Christianson v. Colt Indus. that §1331 arising under analysis applies to §1338(a) analysis as well. Christianson v. Colt Industries Operating Corp., 486 U. S. 800, 808–809 (1988).

Regarding the present case, we know that malpractice is ordinarily a state law claim and thus we need to consider whether the case qualifies under Grable. On that point, the Supreme Court agreed that [1] Minton's "experimental use" theory was a federal patent question necessary for his case and that [2] the issue was actually disputed. However, the Court found Minton's case failed [3] to raise a "substantial" federal issue with [4] the appropriate balance of state and federal interests.

Here, the substantiality requirement is focused on the impact that the case may have on the federal system as a whole. The court writes:

[T]he federal issue in this case is not substantial in the relevant sense…. I]t is not enough that the federal issue be significant to the particular parties in the immediate suit; that will always be true when the state claim "necessarily raise[s]" a disputed federal issue, as Grable separately requires. The substantiality inquiry under Grable looks instead to the importance of the issue to the federal system as a whole.

This case, the court found carries no significance with regard to the federal system:

Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton's lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical "case within a case," it will not change the real-world result of the prior federal patent litigation. Minton's patent will remain invalid.

At the creation of the Federal Circuit, patent law was given a somewhat special status based upon the congressional sense for national uniformity of the patent law. The Supreme Court confirmed that notion in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141 (1989). Here, the Supreme Court found that the sense of national uniformity is not disturbed by state law decisions since (1) the federal courts are of course not bound by state court decisions; and these particular malpractice proceedings only ask hypothetical patent questions of "what would have happened."

One point that Minton raised in the case is that the Texas state court applied patent law doctrine in a way that varies from Federal Circuit precedent. On that point, the Supreme Court merely stated that "state courts can be expected to hew closely to the pertinent federal precedents" and that issues not already covered by federal precedent will eventually be "decided by a federal court in the context of an actual patent case, with review in the Federal Circuit. If the question arises frequently, it will soon be resolved within the federal system, laying to rest any contrary state court precedent." This is the one point where the Supreme Court decision is somewhat disingenuous since state courts are not obligated to follow precedent set by either district courts or the Federal Circuit. Thus, the reality is that it is well within a state court's power to unsettle issues seemingly well-settled by Federal Circuit precedent.

Although not so holding, the Supreme Court also suggested that state court decisions on patent issues should not have preclusive effect on other courts. Thus, a state court decision involving a licensing dispute that results in invalidation of a patent would have no preclusive effect on either the USPTO or other Federal Courts. Rather, "the result would be limited to the parties and patents that had been before the state court."

Since Minton failed to prove a substantial Federal interest in deciding the state cause of action., it also follows that Minton fails the fourth prong of Grable that involves the balancing of State and Federal interests.

In its conclusion, the Court makes a clear statement of its decision:

As we recognized a century ago, "[t]he Federal courts have exclusive jurisdiction of all cases arising under the patent laws, but not of all questions in which a patent may be the subject-matter of the controversy." New Marshall Engine Co. v. Marshall Engine Co., 223 U. S. 473 (1912). In this case, although the state courts must answer a question of patent law to resolve Minton's legal malpractice claim, their answer will have no broader effects. It will not stand as binding precedent for any future patent claim; it will not even affect the validity of Minton's patent. Accordingly, there is no "serious federal interest in claiming the advantages thought to be inherent in a federal forum," Grable. Section 1338(a) does not deprive the state courts of subject matter jurisdiction.

The judgment of the Supreme Court of Texas is reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

 On remand, the Texas Supreme Court will now be asked to decide the merits of Minton's appeal rather than merely the jurisdictional question.

= = = = =

In many ways, this decision is the echo of EBay and MedImmne where the court basically said: patent litigation is not special, it is just litigation. Patent cases are not untouchable by state courts and Congressional statements regarding the uniformity principle are not statements also declaring that patent law is especially unique.

= = = = =

Impact: This case will have some immediate impact in that patent law malpractice suits currently being litigated in federal court, absent special circumstances or diversity, should be dismissed for lack of subject matter jurisdiction. And, malpractice cases will likely be almost uniformly heard in state court going forward.

Role of the AIA: For licensing dispute, the decision here means that few breach-of-contract allegations will be seen as arising under the patent law. However, the impact of this case on licensing disputes is likely wholly overwhelmed by the changes to §1338(a) and the new removal statue 28 U.S.C. §1454. The new law does not apply to the Gunn case because the complaint was filed before the law was enacted. However, under the new law, the question is not whether the "civil action" arises under the patent laws, but instead whether the lawsuit involves "any claim for relief arising under any Act of Congress relating to patents." Section 1454 makes clear that the federal court will have jurisdiction whenever "any party" asserts a claim arising under the patent laws. Thus, in a breach-of-patent-license dispute it is almost always the case that the accused breaching party can assert a counterclaim of patent invalidity. When that occurs, the new law expressly eliminates state court jurisdiction and offers an option for removal to Federal Court rather than straight dismissal. This change in the law essentially overrules the Supreme Court's decision in Holmes Group, Inc. v. Vornado Aircirculation Systems, Inc., 535 U.S. 826 (2002). In Holmes Group, the Supreme Court held that patent claims that arise only in a counterclaim did not trigger Federal jurisdiction under §1338(a).

Gunn v. Minton: issue of patent law does not deprive state court of jurisdiction over malpractice claim

Patent

By Jason Rantanen

Read the opinion here: Gunn v. Minton

This morning the Supreme Court released its opinion in Gunn v. Minton The Court held that the presence of a substantive issue of patent law did not deprive the state court of jurisdiction over the malpractice claim. Notably, the Court did not feel that allowing these claims to proceed in state court would substantially affect federal patent law.

From the syllabus:

(3) Minton’s argument founders, however, on Grable’s substantiality requirement. The substantiality inquiry looks to the importance of the issue to the federal system as a whole. Here, the federal issue does not carry the necessary significance. No matter how the state courts resolve the hypothetical “case within a case,” the real-world result of the prior federal patent litigation will not change. Nor will allowing state courts to resolve these cases undermine “the develop- ment of a uniform body of [patent] law.” Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U. S. 141, 162. The federal courts have exclusive jurisdiction over actual patent cases, and in resolving the nonhypothetical patent questions those cases present they are of course not bound by state precedents. Minton suggests that state courts’ answers to hypothetical patent questions can sometimes have real-world effect on other patents through issue preclusion, but even assuming that is true, such “fact-bound and situation-specific” effects are not sufficient to establish arising under jurisdiction, Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U. S. 677, 701. Finally, the federal courts’ greater familiarity with patent law is not enough, by itself, to trigger the federal courts’ exclusive patent jurisdiction.

Patent Term Calculations: District Courts Split on PTA Calculations; Revive Focus on Deference to PTO Determinations

Patent

By Dennis Crouch

Exelixis v. Kappos (Exelixis II) (E.D. Va. 2013)

We now have a district court split on post-RCE patent term adjustment. This decision – siding with the PTO – arises from a second Exelixis case and will be called Exelixis II (Brinkema, J.) In Exelixis I, Judge T.S. Ellis sided with the patentee in finding that the PTO was improperly under-calculating the patent term owed to patentees who had filed a request-for-continued examination during the course of prosecution. Exelixis v. Kappos, — F. Supp. 2d —, 2012 WL 5398876 (E.D. Va. Nov. 1, 2012), as amended Nov. 6, 2012. In the parallel caes of Novartis AG v. Kappos, — F. Supp. 2d –, 2012 WL 5564736 (D.D.C. Nov. 15, 2012), Judge Huvelle adopted the reasoning of Judge Ellis in siding with the patentee. Those decisions basically held that "once the three year clock has run, PTA is to be awarded on a day for day basis regardless of subsequent events." The PTO has argued that an RCE stops the running of the PTA clock.

In her newly released opinion, Judge Brinkema has sided with the PTO in holding that "'any time consumed by continued examination of the application requested by the applicant under section 132(b)' (via the filing of an RCE) does not count toward that three-year period." Quoting 35 U.S.C. §154(b)(1)(B). Exelixis I is already on appeal to the Federal Circuit and part II may be there soon as well.

The PTA statute is poorly written and thus both sides offer reasonable interpretations. In that type of scenario the most important factor is often whether deference is given to the agency's statutory interpretation. Here, Judge Brinkema determined that the PTO's interpretation of its statute should be accorded Skidmore deference because the PTO's interpretation is a "reasonable conclusion as to the proper construction of the statute." Quoting Cathedral Candle Co. v. U.S. Int'l Trade Comm'n, 400 F.3d 1352 (Fed. Cir. 2005). In that case, Judge Bryson wrote "we believe the Supreme Court intends for us to defer to an agency interpretation of the statute that it administers if the agency has conducted a careful analysis of the statutory issue, if the agency's position has been consistent and reflects agency-wide policy, and if the agency's position constitutes a reasonable conclusion as to the proper construction of the statute, even if we might not have adopted that construction without the benefit of the agency's analysis." Of course, that case was not a patent case. And the Federal Circuit has appeared much less willing to offer deference to USPTO decisions.

Read the new opinion here: /media/docs/2013/01/gov.uscourts.vaed.280154.31.0.pdf.

Does License of Future Inventions Invoke Patent Law Based Court Jurisdiction?

Patent, ,

By Dennis Crouch

National Pasteurized Eggs v. Davidson (Fed. Cir. 2012)

010713_1547_DoesLicense1In yet another patent contract dispute, the Federal Circuit has transferred appellate jurisdiction back to the regional circuit. Here, it appears that the mistake was due to an error by the district court clerk who thought of the case as a patent case.

= = = =

National Pasteurized Eggs (NPE) filed the case in 2007 asking the New Hampshire district court to quiet title in several US and foreign patents. From the complaint:

By this action, NPE seeks a declaratory judgment of rightful ownership of three United States patents and two international patent applications and resulting foreign patents, as specified below.

Download Davidsoncomplaint.

The patents at issue all list Mr. Leon J. Davidson (LJD) as the inventor and involve methods of pasteurizing in-shell chicken eggs and treating eggs with anti-bacterial agents. See U.S. Patent No. 6,322,833.

Davidson founded the Pasteurized Egg Corporation (PEC). When he left the company in 2000, he signed an assignment and further cooperation agreement.  [Appendix to Complaint] PEC went bankrupt in 2003 and its intellectual property assets were purchased by National Pasteurized Eggs (NPE) who is looking to ensure all of the Davidson patents are assigned to the company. (Note – the Davidson's brand shown to the right is also owned by PEC).

In considering what rights Mr. Davidson retains, the agreement uses the term "inventiveness." The agreement states:

New processes or intellectual property ("inventiveness") developed prior to January 1, 2001 ("Old Inventiveness"), including a method for extending the shelf life of pasteurized eggs by treatment with antibacterial agents, shall be the property of PEC and LJD shall take such actions as may be reasonably required by PEC to assist PEC to complete the development, improvement, documentation, protection and patenting of such Old Inventiveness.

Inventiveness developed by LJD, whether in combination with "Old Inventiveness" or prior inventiveness, which results in protection from new patents or patent applications providing broader or improved protection, on or subsequent to January 1, 2001 ("New Inventiveness") shall be considered the property of LJD.

It is this poorly written agreement that has led to the legal conflict.

Davidson filed a number of patent applications following the 2001 agreement and argued that those applications involved new inventiveness. In its ruling, the district court sided with NPE – holding that the inventiveness associated with the primary disputed patent occurred prior to the 2001 date since testing had already begun on the new process.   Download Davidsonfinaljudgment.  It is this decision being appealed.

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After losing at the district court, Davidson filed a Notice of Appeal to the First Circuit. However, the district court clerk sent the docket and certificate to the Federal Circuit. On unopposed motion, the Federal Circuit has now transferred the case to the First Circuit.

In its order, the Federal Circuit suggested, but did not decide, that the First Circuit is the proper site of appellate jurisdiction. In this case, however, the transfer was required because the Fed. R. App. P. 3(d)(1) does not allow a district court clerk to unilaterally change the appellate court.

Fed. R. App. P. 3(d)(1) states that the clerk of the district court "must promptly send a copy of the notice of appeal and of the docket entries .,. to the clerk of the court of appeals named in the notice."

Because of the mandatory language of Rule 3(d)(1), we believe we must transfer this appeal to the First Circuit, i.e., the clerk of the district court was required to send the notice of appeal to that court. Although we do not address jurisdiction, the case appears to involve ownership of patents rights and contract interpretation. See Luckett v. Delpark, Inc., 270 U.S. 496 (1926).

The appeal will now be heard by the Court of Appeals for the First Circuit.

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There is some chance that the Federal Circuit will see the case again – depending upon whether the First Circuit sees a substantial question of patent law buried in whether Davidson's new patents include some "inventiveness developed by LJD . . . subsequent to January 1, 2001."

Related articles
Federal Circuit Refuses to Hear Contract Dispute over Patent Assignment and Royalty Contract
Federal Jurisdiction over Patent Malpractice Cases – Supreme Court Shows Interest in Gunn v. Minton
Patent Malpractice Jurisdiction

Guest Post:Claim Construction Catch-22: Why the Supreme Court Should Grant Certiorari in Retractable Technologies

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Guest Post by Peter S. Menell (UC Berkeley School of Law) and Jonas Anderson (American University Washington College of Law).

After nearly two decades of lower court confusion, there was a glimmer of hope that the Supreme Court might intervene to clarify the standard of appellate review of claim constructions determinations.   Following strongly worded dissents from denial of rehearing en banc, the Supreme Court invited the Solicitor General’s views on the certiorari petition in Retractable Technologies, Inc. v. Becton, Dickinson and Co., 653 F.3d 1296 (Fed. Cir. 2011), denial of rehearing en banc, 659 F.3d 1369 (2012).

In its filing last week, the Solicitor General has unfortunately recommended against Supreme Court review principally on the ground that Retractable Technologies is not an “appropriate vehicle” because the district court did not specifically rely upon factual findings.  Therein lies the Catch-22.  No district court since at least the Federal Circuit’s 1998 en banc Cybor ruling has been willing to make factual findings in construing patent claims for the pragmatic, logical, and legal reason that to do so would contradict Federal Circuit law that claim construction is a pure question of law.

As we have chronicled at length elsewhere, see Anderson & Menell, From De Novo Review to Informal Deference: An Historical, Empirical, and Normative Analysis of the Standard of Appellate Review for Patent Claim Construction (2012) available at <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2150360>,  Anderson & Menell, Appellate Review of Patent Claim Construction: The Reality and Wisdom of a “Mongrel” Standard the Federal Circuit, the Federal Circuit has struggled mightily over the standard of appellate review since the Markman case.  A slim majority adheres to de novo review notwithstanding the Supreme Court’s recognition of the “mongrel” character of claim construction.  The confusion has contributed to a high, variable, panel-dependent reversal rate of claim construction determinations.  Fearing reversal for relying upon expert testimony, district judges avoid and/or mask use of experts in determining how skilled artisans interpret patent claims.  Numerous studies indicate — and district court and several Federal Circuit jurists believe — that the de novo standard has significantly increased the uncertainty and costs of patent litigation, reduced settlement rates, and misapplied the Supreme Court’s Markman ruling.

The SG’s rationale overlooks a critical and unique structural feature of the federal patent system: the Federal Circuit’s exclusive jurisdiction over patent appeals.  Circuit splits are not possible on patent issues and district courts throughout the land are bound by the Federal Circuit’s interpretation of patent law.  Under the SG’s logic, therefore, the standard of appellate review will not be ripe for Supreme Court review unless a district court defies the Federal Circuit.  Such logic nearly guarantees that there will never be an “appropriate vehicle” for considering this issue, notwithstanding the vehement cries for help from Chief Judge Rader, Judge Moore, and Judge O’Malley.

It is possible that the Federal Circuit will eventually revisit this standard on its own, although the historical record does not inspire confidence.  As we chronicle in our article, members of the Federal Circuit have repeatedly sought to revisit the de novo standard since the Markman decision to no avail.  Meanwhile, district courts and the patent system have endured a doubtful application of the Supreme Court’s Markman ruling, causing substantial disruption and wasted resources.

To avoid the Catch-22, the Supreme Court should view dissents from rehearing en banc in the Federal Circuit as a proxy for a circuit split.  Furthermore, the fact that a “split” has festered since the time of Markman strongly indicates that the standard of appellate review is ripe for Supreme Court consideration.  The SG has missed these critical points in its assessment of the Retractable Technologies certiorari petition.

Solicitor General to the Supreme Court: Deny Cert. in Retractable Technologies

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Guest Post by Andrew Dhuey

The U.S. Solicitor General has recommended that the Supreme Court deny certiorari in Retractable Technologies, Inc. v. Becton, Dickinson and Co. The key issues in Retractable concern i) the role of the specification in interpreting patent claim language and ii) the level of deference, if any, the Federal Circuit should give to trial court claim constructions. The SG's recommendation is a setback for those who hope the Court will address these two fundamental questions of patent law and procedure. In recent years, the Court has followed about 80% of the SG's recommendations that certiorari be denied. See, e.g., p. 276 of this 2009 George Mason Law Review article.

A Supreme Court decision in Retractable could fundamentally alter the way trial courts construe patent claims and how the Federal Circuit reviews claim constructions. If the Court decides to review the case, it might limit or overrule the Federal Circuit's en banc decisions in both Phillips v. AWH Corp. and Cybor Corp. v. FAS Techs., Inc. Or the Court might deny review and leave the status quo intact.

Pertinent Facts and Procedural History

Retractable Technologies, Inc. ("RTI") and Becton, Dickinson ("BD") manufacture retractable medical syringes that are designed to reduce the risk of needlestick injuries and infections to health care workers. RTI accuses BD of infringing U.S. Patents 5,632,733 and 7,351,224. The disputed issue of greatest precedential importance concerns the meaning of the claim term "body" as it is used in both patents to describe the structure of RTI's claimed retractable syringe. BD's accused syringe has a two-piece body, so the question of literal infringement hinges largely on whether "body" is limited to a one-piece structure.

Judge David Folsom (E.D. Tex.) sided with RTI on the construction of "body" as not being limited to a single-piece structure. Judge Folsom gave the construction short treatment in his claim construction order, adopting the reasoning and conclusion of his fellow Eastern District of Texas jurist, Leonard Davis, who construed the same term in related patents in earlier litigation RTI brought against New Medical Technologies.

In the earlier case, Judge Davis observed that the specifications of the patents-in-suit did suggest a one-piece structure limitation. Still, he opined, the claims themselves pointed in the opposite direction:

In sum, the Court finds that "body" . . . simply means "hollow outer structure that houses the syringe's components." . . . The only construction of "body" that is consistent with the . . . claim language is a structure that may be one or more pieces. This reading is consistent with the specification, despite some indications to the contrary.

A divided Federal Circuit panel reversed based on the district court's claim construction of "body". Circuit Judge Alan Lourie wrote the Court's opinion, joined by Senior Circuit Judge S. Jay Plager. The majority "agree[d] with BD that the claimed 'body' is limited to a one-piece structure in light of the specifications." Chief Judge Randall Rader dissented: "Because the language of the claims make clear that 'body' does not contain [a one-piece structural] limitation, and it is improper to import limitations from the specification into the claims, I respectfully dissent."

Judge Plager wrote a short concurrence to underscore the majority's position that claims must not be interpreted in ways that go beyond what the inventor disclosed:

However much desired by the claim drafters, who want claims that serve as business weapons and litigation threats … the claims cannot go beyond the actual invention that entitles the inventor to a patent. For that we look to the written description.

RTI petitioned for rehearing en banc, which the Court denied. Circuit Judge Kimberly Moore, joined by Chief Judge Rader, dissented from the denial of the petition. Judge Moore opined that the panel majority "attempt[ed] to rewrite the claims to better conform to what it discerns is the 'invention' of the patent instead of construing the language of the claim." This ran afoul of proper claim construction under Phillips, she contended, and it has happened with such frequency to warrant en banc review.

Judge Moore also suggested that the Court should reconsider Cybor en banc.

We have waited five years (since Amgen Inc. v. Hoechst Marion Roussel, Inc., 469 F.3d 1039 (Fed. Cir. 2006), where six judges claimed a willingness to review Cybor) for that ever-elusive perfect vehicle to review the issue of deference to the district court's claim construction. The Supreme Court held that claim construction was a "mongrel practice." Markman v. Westview Instruments, Inc., 517 U.S. 370, 378 (1996). As such it is clearly a mixed question of law and fact and deference should be given to the factual parts.

Circuit Judge Kathleen O'Malley also dissented from the denial of RTI's petition, but her concern was limited to the de novo standard of review mandated by Cybor.

The SG's Denial Recommendation

In response to RTI's petition for a writ of certiorari, the Supreme Court solicited the SG's views on whether to review the case. The SG recommended a denial of the petition, opining that "[n]either of the questions set forth in the petition for a writ of certiorari warrants review in this case."

On the first question concerning the role of the specification in interpreting patent claim language, the SG contends that there is general doctrinal agreement among Federal Circuit judges:

There is broad agreement among the judges on the Federal Circuit about the principles of law that govern that inquiry, and the Federal Circuit's claim-construction jurisprudence is fully consistent with this Court's precedents. Although different judges sometimes disagree about the proper interpretation of particular claim terms, that is simply the inevitable result of case-by-case adjudication, not a reason for this Court's intervention.

Regarding the second question about the standard of appellate review for claim constructions, the SG agreed that the issue might warrant review in a future case, but not this one:

In an appropriate case, this Court's intervention might be warranted to determine the appropriate standard of review when a district court makes subsidiary factual findings in the course of construing a disputed patent claim. The district court in this case, however, did not make any factual findings about the meaning of the term "body," the state of the relevant art, or any other matter…. Nor did the court consider any expert testimony, make any credibility determinations, or receive any documentary evidence. Rather, the district court's hearing consisted entirely of the oral argument of counsel regarding the claim language, the specification, and pertinent legal authorities…. Because the district court's claim-construction ruling did not depend on the resolution of any questions of fact, this case does not present the question whether a claim-construction ruling that is predicated on factual determinations should nevertheless be subject entirely to de novo appellate review.

RTI may now file a brief responding to the SG's recommendation. The Court will likely decide whether to grant or deny RTI's petition in one of its January conferences.

Andrew Dhuey is an appellate lawyer in Berkeley, California.

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

Patent

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

Patent

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.

Related articles
Federalism and Patent Law: Courts Split on Scope of Federal Circuit Arising Under Jurisdiction
Dissenting Opinions at the Federal Circuit

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

Patent

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

Patent,

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

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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).

Patent, , , ,

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

Patent

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

Patent

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.)