Monday, May 9, 2011

Patent Law, State Law, and Abraxis v. Navinta

I am studying for my federal jurisdiction exam, so I have been thinking about how patent law fits into the themes of this course. We used the classic casebook, Hart and Wechsler's The Federal Courts and the Federal System, and one of the themes emphasized by the book is the interstitial nature of federal law. From p. 459:
Federal law is generally interstitial in its nature. It rarely occupies a legal field completely, totally excluding all participation by the legal systems of the states. . . . It builds upon legal relationships established by the states, altering or supplanting them only so far as necessary . . . . Congress acts, in short, against the background of the total corpus juris of the states in much the way that a state legislature acts against the background of the common law, assumed to govern unless changed by legislation.
One might think that patent law is entirely federal, but Professor Amar (who has also reviewed an earlier edition of the casebook) liked to remind us that federal law is never in a vacuum.

Amar often cited a 1957 article by the late Paul Mishkin, The Variousness of "Federal Law": Competence and Discretion in the Choice of National and State Rules for Decision, in which Mishkin discusses the 1956 Supreme Court copyright case De Sylva v. Ballentine. The issue was whether a deceased author's illegitimate son was within the undefined statutory term "children" in the Copyright Act (for receiving the right of renewal). The Court said this should be determined by state law, but Justice Douglas thought they should promote "uniformity" by establishing a federal common law rule. Mishkin notes that this uniformity in what "children" means under the Copyright Act would result in a competing disuniformity for individual citizens who must look to state law to determine their "children" in most contexts besides copyrights. Mishkin argued that "[t]he balance here . . . seems to fall in favor of absorbing local law." One might disagree about which disuniformity is worse, but this is what the argument should be about.

A similar issue came up in the patent law context this spring in Abraxis BioScience v. Navinta. A panel decision of the Federal Circuit held, as part of a decision finding lack of standing, the the transfer of patent ownership is a matter of federal law (as developed by Federal Circuit precedent), not New York Law (which the parties to the transfer had agreed should cover the transaction). Dissenting from the denial of rehearing en banc, Judge O'Malley argued that this decision "conflicts not only with our precedent, but with longstanding Supreme Court precedent restricting judicial preemption of state law." It is probably easier for the Federal Circuit to just set its own patent transfer rules rather than dealing with the nuances of the laws from different states, but it likely isn't more efficient for the parties, as PatentlyO pointed out: "Now, any major or complex asset purchase or corporate reorganization must be reviewed by someone familiar with Federal Circuit Patent Transfer Law in order to ensure that the patent portion of the transfer is done in accordance with federal law." This raises the same competing uniformities and disuniformities as Mishkin highlighted 50 years ago. Which rule does the balance favor in this context?

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