Posts in US Supreme Court

Tuesday, in Kirtsaeng v. John W. Wiley and Sons, Inc., the Supreme Court held 6-3 that the first sale doctrine of Section 109(a) of the Copyright Act trumps a copyright owner’s right under Section 602(a)(1) to bar importation of copies when they were made and sold outside the United States. The Court appropriately rejected a cramped geographic reading of “lawfully made under this title,” but largely gutted the right of copyright owners under Section 602(a)(1) to bar importation of copies. Along the way, the Court unequivocally adopted international copyright exhaustion without a lick of statutory support or evidence of Congressional intent. Given the Court’s willingness to find international exhaustion even in the face of statutory language limiting parallel imports under the Copyright Act, it wouldn’t be surprising to see the Court fully embrace international patent exhaustion in the future, since there’s even less statutory basis to bar its adoption.

The Supreme Court tried to simplify the issue by concentrating on whether the state-law claim raised a substantial and disputed federal issue, which a federal forum would be able to entertain without disturbing the approved balance between federal and state jurisdictional responsibilities. The Supreme Court went on to note that “federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress. Where all four of these requirement are met, we held, jurisdiction is proper because there is a ‘serious federal interest in claiming the advantages thought to be inherent in a federal forum.”

The Honorable Alex Kozinski immediately posed the question—by way of an analogy to scientists who stare at the stars—of why should someone be able to get a gene patent just because there was a significant amount of effort put in to discover that gene. Throughout the event, Judge Kozinski took on the role of the generalist judge, who would need to be convinced that the invention in the lab is anything other than a product of nature. Professor David Winickoff of UC Berkeley followed that question up by discussing James Watson’s amicus brief and the idea that genes are both symbolic in our culture and shared by all humans, thus making them a unique item in our world.

While one can never know for certain how the Supreme Court will rule, even a casual observer has to conclude that the Supreme Court seems poised rule in favor of Monsanto. Seconds after Bowman’s attorney started Chief Justice Roberts interrupted asking why anyone would ever patent anything if Bowman were to prevail. Shortly thereafter Justice Breyer openly concluded that Bowman infringed in a matter of fact way. It later may have seemed Breyer was probing for a response he didn’t get more so than announcing his view of the case. Nevertheless, if Bowman loses Breyer he has no chance.

In its amicus brief, CLI responds by arguing that the term “makes,” as used in Section 271(a), has its plain and ordinary meaning, which embraces the concepts of “bringing about” or “causing.” CLI contends that Bowman, through his acts of planting and cultivating, brought about and caused the formation of a next-generation of herbicide-resistant soybeans. Alternatively, CLI argues that, even if the concept of a “making” only literally reaches the acts of the herbicide-resistant soybean plants Bowman cultivated, Bowman would still be liable for those acts under principles of agency-instrumentality law. Based on his acts of planting and cultivating, CLI asserts that Bowman exercised sufficient control over the herbicide-resistant soybean plants he raised that they should be treated as mere instrumentalities of his, the conduct of which can and should be attributed to him.

The parties and amici have filed over 25 briefs in this case, almost none of which address or even consider whether the actual right granted under Section 109(a)—to “sell or otherwise dispose of” copies—applies outside the United States; instead, they have focused almost exclusively on Section 109(a)’s “lawfully made under this title” preamble, resulting in unsatisfactory readings of the Copyright Act as a whole. As the American Intellectual Property Law Association has urged the Supreme Court in its amicus filing, applying long-standing extra-territoriality principles to the actual right created by Section 109(a) handily harmonizes both Sections 109(a) and 602(a)(1). It also avoids damage to the rest of the Act caused by undue emphasis on the prefatory “lawfully made under this title” language.

Bowman v Monsanto involves a farmer who figured out how to get Monsanto’s patented seeds cheaper from a grain elevator than from the company. I won’t attempt to delve into the intricacies of the litigation or the doctrine of patent exhaustion, but do want to consider a larger point. What happens if our innovators lose confidence in the patent system? Some apparently believe this is a desirable outcome

The Court went to the actual terms of the Covenant to determine if Nike had met this very tough burden burden. In this case, though, Nike did. The terms of the Covenant were unconditional and irrevocable. They prohibited Nike from making any claim or demand, and even went so far as to shield YUMS’ distributors and customers. This coupled with the fact that YUMS did not provide a shred of evidence that it had plans to market a shoe that the Covenant wouldn’t cover was enough to convince the Court that the possibility of future harm was just too remote here.

The concurring opinion of Justice Kennedy is even more unfortunate. Like Chief Justice Roberts, while agreeing with Justice Thomas’ holding that the traditional “four-factor” test applied to the grant of injunctive relief in patent cases, Justice Kennedy’s concurring opinion went even further to suggest that “trial courts should bear in mind that in many instances the nature of the patent being enforced and the economic function of the patent holder present considerations quite unlike earlier patent cases.” As Justice Kennedy saw it, “an injunction, and the potentially serious sanctions arising from its violation, can be employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.” What is particularly distressing about Justice Kennedy’s concurring opinion is the further comments he makes about injunctive relief in the context of patents on “business methods.”

Patent exhaustion is one of the most fundamental restrictions on patent rights. Under this doctrine, an authorized sale of a patented article moves it outside the scope of the U.S. patent monopoly. With respect to the vended article, the patent right is extinguished and the patentee can no longer sue for infringement. One question that remains unsettled, however, is the role of territoriality. That is, where must the authorized sale take place? For well over a century courts have struggled to answer whether extraterritorial sales qualify for purposes of patent exhaustion.

One side in the “gene patent war” has nevertheless convinced the Supreme Court to weigh in on the issue of whether DNA sequences derived from the human genome are patentable, in Association for Molecular Pathology (AMP) v. Myriad Genetics, while disingenuously labeling the patents at issue as “human gene patents.” Let’s set the record straight.

In the past several years, the Second, Eleventh, and Federal Circuits have upheld these settlements (known as “reverse payment” agreements since the money flows from the patentee to the alleged infringer rather than the other way around). These courts have focused on the benefits of settling cases and the presumption of patent validity, and they have explained that payments fall within the “scope of the patent.” In contrast, the Third Circuit recently applied more aggressive scrutiny, rejecting the scope test and finding that payments for delay were “prima facie evidence of an unreasonable restraint of trade.”

As Myriad has correctly pointed out in its brief in opposition to the grant of certiorari, the question posed by the ACLU/PubPat (“Are Human Genes Patentable”) is absolutely the wrong one to answer: “The first question presented [by the ACLU/PubPat] bears no relation to the uncontroverted facts of this case.” (Myriad’s brief in opposition has also pointed out at least 4 other significant factual and legal “misstatements” made in the petition for certiorari by ACLU/PubPat.) As much as the ACLU/PubPat (and others) want to make the Myriad case into about “Who Owns You,” what Myriad has claimed does nothing of the sort. In fact, a “yes” answer to the question posed by the ACLU/PubPat does not automatically lead to Myriad’s claimed “isolated” DNA sequences being patent-ineligible. Those claimed “isolated” DNA sequences are not “genes” by any standard molecular biology definition of what that term actually means. Instead, and as accurately characterized by Judge Lourie, these claimed “isolated” DNA sequences are “novel biological molecules.”

There are two stages of litigation in the Supreme Court.  There’s what’s called the petition stage and the merit stage.  This is a phenomenon that doesn’t exist in the Federal Courts of Appeals, which are courts of mandatory jurisdiction.  There’s no doubt that if you lose a patent trial you have a right to appeal to the Federal Circuit.  You don’t have to come hat in hand begging the Federal Circuit to take your case or making it appear so sexy that they’re smitten and they take it.  But the Supreme Court of the United States has very, very little mandatory jurisdiction.  It’s almost all discretionary jurisdiction.  It gets 10,000 petitions a year and it currently grants review in about 75 cases a year.  And so there is a whole level of advocacy that begins with the filing of a petition for a writ of certiorari and then it’s followed by a brief in opposition by the winning party below and then a reply brief.  And whatever amicus briefs are filed by friends of the petitioner or the respondent in 10,000 cases in which the court is picking a few for plenary review.

The other thing I think that’s at play here, and maybe it’s the principal reason is a point that I made earlier which is our economy depends utterly on intellectual property. That is in fostering innovation and inventiveness in the manner in which the framers of the Constitution understood needed to be fostered. That is within appropriately countered system of protections for discoveries and inventions and novel expression. But that doesn’t smother innovation by competitors and by others. And because our economy is so utterly tied to intellectual property the Supreme Court correctly understands that this is a substantive area in which it is very, very important for the correct balance to be struck.