Tim Holbrook on Induced Patent Infringement at the Supreme Court

Tim Holbrook (Emory Law) has a new article, The Supreme Court's Quiet Revolution in Induced Patent Infringement (forthcoming in the Notre Dame Law Review), arguing that with all the hand-wringing over Supreme Court patentable subject matter cases, scholars have missed the substantial changes the Court has wrought in induced patent infringement. Here is the abstract:

The Supreme Court over the last decade or so has reengaged with patent law. While much attention has been paid to the Court’s reworking of what constitutes patent eligible subject matter and enhancing tools to combat “patent trolls,” what many have missed is the Court’s reworking of the contours of active inducement of patent infringement under 35 U.S.C. § 271(b). The Court has taken the same number of § 271(b) cases as subject matter eligibility cases – four. Yet this reworking has not garnered much attention in the literature. This article offers the first comprehensive assessment of the Court’s efforts to define active inducement. In so doing, it identifies the surprising significance of the Court’s most recent case, Commil USA, LLC v. Cisco Systems, Inc., where the Court held that a good faith belief on the part of the accused inducer cannot negate the mental state required for inducement – the intent to induce acts of infringement. In so doing, the Court moved away from its policy of encouraging challenges to patent validity as articulated in Lear, Inc. v. Adkins and its progeny. This step away from Lear is significant and surprising, particularly where critiques of the patent system suggest there are too many invalid patents creating issues for competition. This article critiques these aspects of Commil and then addresses lingering, unanswered questions. In particular, this article suggests that a good faith belief that the induced acts are not infringing, which remains as a defense, should only act as a shield against past damages and not against prospective relief such as injunctions or ongoing royalties. The courts so far have failed to appreciate this important temporal dynamic.

The four cases he's talking about are Grokster, Global-Tech, Limelight, and Commil. (You might say, "Wait, Grokster is a copyright case!" But Holbrook explains the substantial impact it had on patent law.) I think the article is worth a read, and that the concluding point on damages is quite interesting.

Decoding the Patent Venue Statute

Last Friday, Colleen Chien and I published an op-ed in the Washington Post arguing that the courts and/or Congress should take a hard look at venue provisions. It was a fun and challenging project, because we worked hard to delineate where we agreed and where we disagreed. One area where we weren't sure if we disagreed or not was whether the 2011 amendment to the general venue provisions should affect patent venue.

This is a thorny statutory interpretation issue, and because we didn't have space to discuss it in the op-ed (nor did we agree on all the details), I thought I would lay out my view of the issues here. My views don't speak for Colleen. Further, while my views fall on one side, they do so based solely on statutory interpretation. I don't have a horse in the policy race other than to say that it's important, it's complicated, and it should be considered.

Here is my tracing of the history:

Defending a Federal Trade Secrets Law

This last week, 42 professors sent a letter to Congress opposing the Defend Trade Secrets Act. This same week, James Pooley, a well-known attorney and former Deputy Director General of WIPO, released a draft of The Myth of the Trade Secret Troll: Why We Need a Federal Civil Claim for Trade Secret Misappropriation, forthcoming in the George Mason Law Review.

Jim Pooley is the author of a treatise on trade secrets, and I respect him greatly. He has forgotten more about trade secrets than most people will ever know, and it should be no surprise that this support of the DTSA is the most well-reasoned that I've seen. He considers each of the studies one by one and and addresses their concerns: that the UTSA is not that uniform, that the seizure provision is narrow, that global trade secret risks require federal jurisdiction, and that state trade secret laws will not be preempted.

The paper is worth a read. It is likely to be persuasive to those who are on board. It might sway those that are undecided.

I'm right in the middle on this one. I signed on the professor's letter, but barely. I think the latest version of the proposed law is much improved from before, but I have concerns about inevitable disclosure and the seizure rules.

Here is my take on four of the primary defenses of/needs for the new act:

It's a cyber world that needs federal procedures: A big part of the push for a federal law is that it opens up federal courts to trade secret cases and thus better procedures. While I understand this, I wonder whether the argument proves too much. If the concern is about foreign actors acting over the network, then federal courts will have diversity jurisdiction, and all the procedural hurdles melt away. Further, if it's about procedure, then a simple solution would be to allow filing of trade secret actions in federal court. Furthermore, the procedural advantages are not a panacea; sometimes state court judges are more accessible and move faster than federal judges. Pooley argues the opposite, but my own, admittedly more limited, experience is that it depends on the judge, not the forum. Furthermore, the procedures are improved in a federal system, but it was only in 2014 that out of district subpoenas could issue in the local district court, and one must still file motions in the remote district to enforce them.

The UTSA is not really that uniform: This is true. Indeed, I wrote an empirical essay and book chapter showing that courts routinely fail to cite other state court Uniform Trade Secrets Act decisions. But it is not clear that the non-uniformities, either in statute or in practice, are of the type that will affect important outcomes when there is a real trade secret misappropriation. I've yet to hear of a case where the venue's peculiar trade secret laws made a difference to the types of "global cyber-espionage" type misappropriation that Pooley is concerned with.

Seizures rules are narrow, and they are narrower than they were in prior drafts: In my studies, injunctions were the types of decisions least likely to result in citation to UTSA cases, as opposed to "general" injunction law. This seems to favor the need for a specialized procedure. That said, I've yet to hear a convincing reason why TRO practice is insufficient or why they must be in federal court. I've represented clients on both sides of seizures, and I've seen how court papers can be manipulated to get desired results. This is not to say that we shouldn't have ex parte seizures; just that the case for a specialized procedure is not clear. I've yet to hear of a case with a real misappropriation of the "global cyber-espionage" type where a TRO was refused and the bad guys got away. I also think that the seizure laws are not quite as narrow as they could be - there is still plenty of room for abuse. [UPDATE: Eric Goldman provides good analysis--and critique--of the seizure provisions.]

The proposed act is neutral on inevitable disclosure: The paper makes a good point: inevitable disclosure is not substantive trade secret law, but instead how courts apply "threatened" misappropriation injunctions. This is true, but it doesn't answer the concern. Some states have a stronger policy of employee mobility than others, and thus require more evidence of a threat. The concern with a federal law is that precedent in one circuit (or district court) will be applied in other district courts. That state trade secret law is not preempted is no answer, because the supremacy clause will dictate how federal law applies. State trademark laws aren't preempted either, and we don't see those applied very often-and never to allow more use by the defendant, only less. Thus, the standard for what constitutes a "threat" could be weakened, and that concerns those who view employee mobility important for competition policy. While I agree with Pooley on the doctrine, I don't think the doctrinal view is enough to persuade that this is not a concern.

So, where does that leave us? Quite frankly, I don't know. I think that the case for a federal trade secret law is not that strong. There are benefits to such a law, but I'm not convinced they are so great that we should supplant 150 years of state regulation of trade secrets. On the other hand, I don't think the case for keeping state trade secret laws is that great either. I like the federalist experiment argument, but there are a whole lot of states that have rules that I don't like (such as the inevitable disclosure doctrine). In my view, no one has made the case that one system is better than the other.

What I do think would be helpful - to me, at least - would be to hear the horror stories of trade secret misappropriation where current law and procedure failed, and the misappropriator got away because we did not have this law. I bet there are some such stories, but I haven't heard one yet.

McCarthy & Roumiantseva on Federal Circuit Exclusive Trademark Jurisdiction: "We Think Not"

Even though the Federal Circuit is often called "the patent court," it hears appeals in a wide variety of areas. Statistics on caseload by origin are available here; note that patent appeals have ballooned to 62% of the docket in FY2015 from 29% in FY2006.

A number of commentators have proposed "fixing" the Federal Circuit by adjusting its jurisdiction; for example, Paul Gugliuzza's creative suggestion has been discussed on this blog. One proposal has been to give the court exclusive jurisdiction over trademark cases. Tom McCarthy and Dina Roumiantseva think it is time to squelch any enthusiasm for this idea:

With some regularity over the years, a proposal is made to change the Lanham Act so that appeals in all Lanham Act trademark and false advertising cases from district courts across the United States will be diverted from the regional circuit courts of appeal to the Court of Appeals for the Federal Circuit. We think it is time to discuss this proposal head on and hopefully to convince the reader that this diversion is not a good idea and should never be implemented. Advocates of this proposal claim that trademark law would benefit from the consistency that a single appeals court could provide and that the Federal Circuit has exceptional expertise in trademark law. We believe, however, that trademark law does not suffer from the kind of circuit conflict that led to the channeling of all patent appeals to the Federal Circuit in 1982. Moreover, our review of case law suggests that some regional circuits have a comparable or greater experience with trademark law. We argue that no change in the present system of trademark appeals is needed.

Given the benefits of policy diversity and the lack of a compelling argument for centralizing trademark appeals, I tend to agree. Their full essay, Divert All Trademark Appeals to the Federal Circuit? We Think Not, is on SSRN.

Will there ever be changes to the Federal Circuit's jurisdiction? Given the lack of consensus on whether the current jurisdiction creates problems and if so, how best to fix it in a way that is both sound and politically palatable, I don't foresee any imminent changes.

Erika Lietzan on the Myths of Data Exclusivity

Erika Lietzan joined the Missouri Law faculty last fall after a distinguished career practicing FDA law, which included making partner at Covington & Burling and serving as Assistant General Counsel for PhRMA (the pharmaceutical lobbying organization). She thus has a wealth of knowledge about the intricacies of pharmaceutical patents and FDA approval, and scholars and reporters interested in the details of pharma news (like the Daraprim controversy) could learn a lot by contacting her.

Lietzan recently posted The Myths of Data Exclusivity. The data exclusivity period for a drug is the period during which the FDA won't allow a generic to rely on the drug's clinical trial data for approval—typically 5 years for new non-biological drugs and 12 years for biological drugs. Data exclusivity was most recently in the news as the "final sticking point" in the TPP negotiations.

Data exclusivity is typically viewed as a patent-like benefit for innovative firms that provides a market-based reward by allowing firms to charge supracompetitive prices. But Lietzan attempts to reframe data exclusivity as not a benefit for pioneer pharmaceutical firms, but rather "a period of time during which all firms are subject to the same rules governing market entry." She explains:

In 1984 [with the Hatch-Waxman Act], pioneers with non-biological drugs approved after 1962 lost something; their right to perpetual exclusive use of their research became a right to only five years of exclusive use. And in 2010 [with the Biosimilars Act], pioneers with licensed biological drugs lost something; their perpetual exclusive right was shortened to twelve years. This reframing identifies the primary beneficiary of the choice made by policymakers as follow-on applicants rather than pioneers.