Recent Developments in United States Patent Law

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Recent Developments in United States Patent Law

• Katherine J. Strandburg
• DePaul University College of Law

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OUTLINE

• SUPREME COURT CASES (PAST TERM)
• SUPREME COURT CASES (NEXT TERM)
• III. ISSUES POTENTIALLY BEFORE THE COURT IN THE
  FUTURE
• IV. LEGISLATION (FUTURE)
• V. CONCLUSION

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SUPREME COURT CASES (PAST TERM)

• Supreme Court has been unusually active in patent
  law recently (most active since early 80s)
• RECENT CASES
• MERCK V. INTEGRA
• - statutory research exemption
• ILLINOIS TOOL WORKS
• - antitrust, patents and market power
• EBAY v. MERCEXCHANGE
• - standard for injunctive relief
• LABCORP V. METABOLITE
• - Patentable subject matter

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I.A. MERCK V. INTEGRA

• ISSUE Extent of the exemption from infringement
  for research use of a patented invention under 35
  U.S.C. 271(e), exempting
• uses reasonably related to the development and
  submission of information under a Federal law
  which regulates the manufacture, use or sale of
  drugs . . .

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I.A. MERCK V. INTEGRA

• FACTS
• - RGD peptides were potential drug candidates b/c
  of possible role in inhibiting angiogenesis
• - Research at issue involved animal tests to
  evaluate suitability of specific compounds for
  drug use

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I.A. MERCK V. INTEGRA

• FEDERAL CIRCUIT DISPOSITION
• MAJORITY Research at issue was not clinical
  testing to supply info to the FDA but general
  biomedical research to identify new
  pharmaceutical candidates
• NOT EXEMPTED
• DISSENT (Newman) Focused on common law research
  exemption argued experimentation aimed at
  characterizing patented substance is exempted
  either by statute of by common law exemption

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I.A. MERCK V. INTEGRA

• SUPREME COURT OPINION
• OUTCOME Vacated and remanded
• Exemption covers any info reasonably related
  (including preclinical studies)
• Exemption covers efficacy and safety info
• Exemption can cover research for which no IND is
  eventually filed
• Use is reasonably related where a drug maker
  has a reasonable basis for believing that a
  patented compound may work, through particular
  biological process, to produce a particular
  physiological effects, and uses the compound in
  research that, if successful, would be
  appropriate to include in a submission to the FDA

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I.A. MERCK V. INTEGRA

• LOOSE ENDS/WHATS NEXT?
• REMAND Argument heard on remand, but no
  opinion as of 8/21/06
• COMMON LAW EXEMPTION Supreme Court has yet to
  weigh in, extremely narrow exemption is
  controversial esp. wrt experimenting on
• RESEARCH TOOLS
• parties and Court agree not at issue here
• Subject of amicus briefing at SCt
• Rader pushed argument on this point at remand
  hearing
• Issue remains hot

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I.B. ILLINOIS TOOL WORKS v. INDEPENDENT INK

• ISSUE Presumption that patent confers market
  power per se in antitrust context
• Questioned Supreme Court precedent in Intl Salt
  Co. v. US which established this presumption in
  antitrust law

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I.B. ILLINOIS TOOL WORKS v. INDEPENDENT INK

• FACTS
• Involved patented print cartridges and unpatented
  ink
• Agreement to purchase ink for patented
  cartridges only from ITW and not to refill
  cartridges challenged as illegal tying
  arrangement

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I.B. ILLINOIS TOOL WORKS v. INDEPENDENT INK

• SUPREME COURT OPINION
• OUTCOME Vacated and remanded
• - over the years this Courts strong disapproval
  of tying arrangements has substantially
  diminished and no longer presume that tying
  arrangements serve hardly any purpose beyond the
  suppression of competition

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I.B. ILLINOIS TOOL WORKS v. INDEPENDENT INK

• MARKET POWER AND PATENT MISUSE
• ? presumption of market power arose in patent
  misuse cases
• Congress rejected the presumption in patent
  misuse (35 USC 271(d))
• - No misuse b/c of tying unless the patent owner
  has market power in the relevant market for the
  patent or patented product on which the license
  or sale is conditioned
• ? Begs questions why antitrust should have a
  different rule

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I.B. ILLINOIS TOOL WORKS v. INDEPENDENT INK

• REBUTTABLE PRESUMPTION?
• Independent Ink arguments
• 1. rebuttable presumption of market power when
  purchase of patented product conditioned on
  exclusive agreement wrt unpatented product
• 2. (fallback)
• distinction btw simultaneous purchase of tied
  products (no presumption) and requirements tie
  (presumption)
• ARGUMENTS REJECTED NO PRESUMPTION, MARKET POWER
  MUST BE PROVED CASE BY CASE

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I.C. EBAY v. MERCHEXCHANGE

• ISSUE Proper test for injunctive relief in
  patent cases
• FEDERAL CIRCUIT general rule that courts will
  issue permanent injunctions against patent
  infringement absent exceptional circumstances
• PETITIONER Traditional equitable test should be
  applied

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I.C. EBAY v. MERCHEXCHANGE

• FACTS
• eBay runs internet auction
• MercExchange has business method patent for
  electronic market designed to facilitate the
  sale of goods between private individuals by
  establishing a central authority to promote trust
  among participants

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I.C. EBAY v. MERCHEXCHANGE

• SUPREME COURT OPINION
• OUTCOME Vacated and remanded
• MAJORITY OPINION
• Four-factor test applies
• Irreparable injury
• Remedies at law inadequate
• Balance of hardships
• Public interest

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I.C. EBAY v. MERCHEXCHANGE

• MAJORITY OPINION
• Neither court below applied the test properly
• Fed Cir. did not apply test
• Dist. Ct. Concluded broadly that willingness
  to license lack of commercial activity no
  irreparable harm
• No categorical rule, principles of equity apply

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I.C. EBAY v. MERCHEXCHANGE

• OPINION FOR COURT
• Neither court below applied the test properly
• Fed Cir. did not apply test
• Dist. Ct. Concluded broadly that willingness
  to license lack of commercial activity no
  irreparable harm
• No categorical rule, principles of equity apply

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I.C. EBAY v. MERCHEXCHANGE

• ROBERTS CONCURRENCE (SCALIA, GINSBURG)
• Historical practice granted injunctions in vast
  majority of patent cases
• No general rule favoring injunctions
• BUT when it comes to discretion pursuant to
  four-factor test a page of history is worth a
  volume of logic

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I.C. EBAY v. MERCHEXCHANGE

• KENNEDY CONCURRENCE (STEVENS, BREYERE, SOUTER)
• Earlier pattern of injunctions in patent cases
  simply illustrates the results of the four-factor
  tests in historical contexts
• In many cases current patents present different
  considerations, e.g. firms primarily licensing
  patents patented invention small component of
  enjoined product some potentially vague and
  suspect business method patents
• Equitable discretion suited to allow district
  courts to adapt to rapid technological and legal
  developments

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I.C. EBAY v. MERCHEXCHANGE

• LOOSE ENDS/WHATS NEXT?
• REMAND No opinion as of 8/21
• Cases following the Supreme Ct opinion
• z4 Technologies v. Microsoft (E.D. Tex.) denying
  permanent injunction
• - no presumption of irreparable harm
• - no product, no irreparable
• - money damages sufficient
• - balance of hardships favors Msoft
• - potential negative effects of depriving
  public of Office weigh slightly in favor of MSoft

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I.C. EBAY v. MERCHEXCHANGE

• Abbott Labs v. Andrx Pharms. (Fed. Cir.)
  reversing grant of preliminary injunction
• - No likelihood of success when there is
  invalidity defense that patentee cannot prove
  lacks substantial merit
• - No longer presumption of irreparable harm
  w/o likelihood of success
• - absent any other relevant concerns the
  public interest is best served by enforcing
  patents that are likely valid and infringed
• - (Aside) relation of undue experimentation to
  obviousness?
• Newman Dissent
• Majority failed to defer to District Court

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I.C. EBAY v. MERCHEXCHANGE

• Christiana Inds. v. Empire Electronics (E.D.
  Mich.)
• - Denying motion to reconsider preliminary
  injunction
• - EBay did not invalidate a presumption
  (rebuttable) of irreparable harm from patent
  infringement

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I.D. LABCORP v. METABOLITE

• ISSUE Patentable Subject Matter
• Patentability of a process using prior art
  medical diagnostic tests plus a step of
  correlating the results with a particular
  condition

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I.D. LABCORP v. METABOLITE

• FACTS
• - Patent claims process for diagnosing B vitamin
  deficiencies
• Researchers found correlation between blood
  levels of homocysteine and vitamin deficiency
• Developed and patented new tests for
  homocysteine
• Also claimed A method for detecting a vitamin
  deficiency . . . Comprising . . . Assaying . .
  . For a elevated level of total homocysteine and
  correlating an elevated level . . . With a
  vitamin deficiency . . .

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I.D. LABCORP v. METABOLITE

• PROCEDURAL BACKGROUND
• Patentable subject matter issue under 101 not
  considered by the Federal Circuit
• Cert granted to consider
• Whether a method patent . . . directing a party
  simply to correlate test results can validly
  claim a monopoly over a basic scientific
  relationship . . . such that any doctor
  necessarily infringes the patent merely by
  thinking about the relationship after looking at
  a test result

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I.D. LABCORP v. METABOLITE

• SUPREME COURT OPINION
• OUTCOME Writ DIG after extensive briefing and
  argument
• BREYER DISSENT (STEVENS AND SOUTER)
• Reads like a draft majority opinion
• Reason for excluding laws of nature is that too
  much patent protection can impede progress, rule
  reflects basic judgment that protection in such
  cases, despite its potentially positive incentive
  effects, would too often severely interfere with,
  or discourage development and the further spread
  of useful knowledge itself.

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I.D. LABCORP v. METABOLITE

• BREYER DISSENT (STEVENS AND SOUTER)
• Difficult to define unpatentable subject matter
  but this case not at the boundary
• Physical transformation during the test does not
  matter because the claim does not require that
  the test involve a physical transformation
• State Street Bank test useful, concrete, and
  tangible result has never been adopted by S Ct
  and if taken literally the statement would cover
  instances where this Court has held the contrary
• The process is no more than an instruction to
  read some numbers in light of medical knowledge
  - natural phenomenon

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I.D. LABCORP v. METABOLITE

• BREYER DISSENT (STEVENS AND SOUTER)
• Case should be decided at this point
• - LabCorp argued the essence of its claim
  below (despite not referring to 101)
• - Though no Federal Circuit opinion, numerous
  briefs, Govt brief, oral argument provide
  comprehensive record
• - Public interest would be served by answering
  this question

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I.D. LABCORP v. METABOLITE

• LOOSE ENDS/WHATS NEXT?
• Patentable Subject Matter Likely To Resurface
  Soon, S Ct Obviously Interested!!
• QUESTIONS ABOUT STATE STREET BANK (Cf. EBay
  Concurrence)
• Questions About Mental Steps And Natural
  Phenomena
• Query relationship between this issue and KSR v.
  Teleflex nonobviousness case

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SUPREME COURT CASES (NEXT TERM)

• UP NEXT TERM
• MEDIMMUNE v. GENENTECH (to be argued October 4,
  2006)
• KSR v. TELEFLEX (no argument date as of 8/21/06)
  (Full disclosure I filed Law Professor Amicus
  briefs in support of KSR at petition and merits
  stages)

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II. A. MEDIMMUNE v. GENENTECH

• ISSUE Ability of a licensee in good standing to
  sue for a declaration of patent invalidity
• BACKGROUND
• Lear v. Adkins licensee is not estopped from
  challenging validity when sued (but did not deal
  with licensee paying royalties)
• Declaratory Judgment requires case or
  controversy exercise of discretion
• QUESTION PRESENTED
• ? Does actual controversy requirement . . .
  require a patent licensee to refuse to pay
  royalties and commit material breach of the
  license agreement before suing to declare the
  patent invalid, unenforceable or not infringed?

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II. A. MEDIMMUNE v. GENENTECH

• FEDERAL CIRCUIT DECLARATORY JUDGMENT RULE
• For declaratory judgment jurisdiction must have
• Reasonable apprehension of suit
• Present activity constituting infringement

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II. A. MEDIMMUNE v. GENENTECH

• PETITIONERS ARGUMENTS
• Actual controversy does not require apprehension
  of suit
• Purpose of Declaratory Judgment Act was to allow
  contracting parties to resolve their disputes in
  court without breach and without risking economic
  destruction and multiplying damages, breach not
  required in other contexts
• Challenges to patent validity are favored by
  public policy

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II. A. MEDIMMUNE v. GENENTECH

• RESPONDENTS ARGUMENTS
• A patent license is a compromise of legal rights
  by which the licensee voluntarily opted out of
  the statutory patent system
• This is not a dispute about the terms of a
  contract
• Patent policy is served by legal rules permitting
  predictable transfer of technology
• If plaintiff can prevent an injury from occurring
  it is ordinarily not imminent

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II. B. KSR v. TELEFLEX

• ISSUE Proper standard of obviousness Is the
  Federal Circuits requirement of a teaching,
  suggestion, or motivation to combine prior art
  references appropriate?
• BACKGROUND
• Graham v. John Deere
• Obviousness is a question of law with three
  underlying questions of fact 1) the scope and
  content of the prior art 2) differences between
  the prior art and the claims at issue 3) the
  level of ordinary skill in the pertinent art
• Secondary indicia of obviousness or
  nonobviousness may be provided by the
  circumstances surrounding the invention

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II. B. KSR v. TELEFLEX

• FEDERAL CIRCUIT SUGGESTION TEST
• Combination of prior art references is obvious
  ONLY IF there is a teaching, suggestion, or
  motivation to combine the references in the
  prior art
• Suggestion can come either
• Explicitly from the references
• Implicitly from the general knowledge of the
  skilled in the art
• Implicitly from the nature of the problem to be
  solved
• Patent Examiner must present evidence in the
  record of reliance on general knowledge or nature
  of problem to be solved

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II. B. KSR v. TELEFLEX

• PETITIONERS ARGUMENTS (merits briefs to be filed
  8/22/06)
• Suggestion test is inconsistent with Supreme
  Court precedent
• Suggestion test takes insufficient account of the
  ordinary problem-solving of the PHOSITA
• Suggestion test undermines PTO expertise
• Suggestion test results in issuance of patents on
  obvious advances

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II. B. KSR v. TELEFLEX

• RESPONDENTS ARGUMENTS (merits briefs to be filed
  in October)
• Suggestion test is necessary to avoid hindsight
  bias
• Possibility of implicit suggestions is sufficient
  to permit application of examiner expertise and
  skill of the PHOSITA

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III. ISSUES POTENTIALLY BEFORE THE COURT IN THE
FUTURE

• Research exemption research tools, common
  law exemption
• Patentable subject matter especially business
  method patents, State Street Bank test
• Other issues of justiciability (depending on
  outcome of Medimmune)
• Divided/Extra-territorial infringement
  Blackberry case, Microsoft v. ATT (awaiting
  CVSG)
• Various issues about Fed Cir deference to
  district court (e.g. claim construction), to PTO
  (depending on KSR outcome)

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III. LEGISLATION

• Lots of proposals last year
• Two proposals live as of 8/21/06
• Proposal for voluntary opt in for district
  court judges to hear patent cases (HR5418)
• Hatch-Leahy Bill
• - first inventor to file (important to pay
  attention to exactly what happens to 102)
• - no interferences, but derivation proceedings
• - reasonably royalty to account for economic
  contribution of invention
• - grounds for willfulness restricted
• - limitations on pleading inequitable conduct
• - prior user defense expanded
• - repeals 271(f)
• - institutes post-grant opposition
• - rulemaking authority (substantive?)