Sunday, October 8, 2017

Tejas Narechania: Is The Supreme Court Against "Patent Exceptionalism" Or In Favor of "Universality"?

Tejas Narechania's new paper, Certiorari, Universality, and a Patent Puzzle, forthcoming in Michigan Law Review argues that a major identifying factor for the Supreme Court's interest in patent cases is a field split: an area where a particular patent law doctrine plays out differently in patent law than in other fields of law where it is used. Narechania argues that the Court's apparent need to resolve, or at least address, these differences by taking review, has to do with the Court's overarching interest in preserving "universality." "[T]he Court," he writes, "is not interested in merely eliminating exceptionalism altogether. Rather, it appears concerned for calibrating a degree of consistency across doctrinal areas in light of its underlying interests in judicial efficiency, neutrality, and legitimacy." (47).

Narechania's article, especially when read alongside recent work by Peter Lee, teaches that there are two ways to explain the Supreme Court's increased interest in patent law. One is that the Court is against what is often called "patent exceptionalism" - i.e., against the Federal Circuit's use of patent-specific rules that differ from similar doctrines used other fields.  The other, which may or may not be the same thing, is that the Court is intent on preserving universal rules across all areas of law. Narechania has insightfully reoriented the "patent exceptionalism" discussion towards the latter.

Read more at the jump.

Before delving into the details of Narechania's article, a bit of background on the scholarship in this area is necessary.

Tim Holbrook - The Supreme Court's Interest in Patent Law, Generally

Like others, when it came time to discuss the topic of the Supreme Court's interest in patent law, I was happy to discover Tim Holbrook's short essay, Explaining the Supreme Court's Interest In Patent Law, in a 2013 issue of IP Theory. The essay recounts, one after the other, several theories for why the Supreme Court may decide to take certiorari in a patent case, and to explain why the Court has been taking so many cases of late. Explanations range from rejecting the Federal Circuit's rigid reliance on "bright line" rules; to resolving "intracircuit" splits among the Federal Circuit judges; to responding to the growing importance of patents in the modern economy. Holbrook's short essay is part of a long line of scholarship addressing the question of Supreme Court review in patent law, including papers by, to name just a few,  John Duffy, Robin Feldman, and Peter Lee.

One of the reigning theories that Holbrook and others note for the Court's scrutiny of the Federal Circuit is the Court's concern for so-called "patent exceptionalism."  As in cases like eBay (where the Court held that, as in other areas of law, patent injunctions can't be granted as a matter of course, and that the general four-part test applies in patent cases too), the Court may be trying to "bring patent law back into the mainstream". Here is Holbrook's short description of the issue:
With the creation of the Federal Circuit, patent law became somewhat siloed from other areas of the law. Although the Federal Circuit was created with broader jurisdiction to avoid potential jurisprudential isolation—a noted concern with specialized courts—patent law has nevertheless developed somewhat in isolation from other areas of the law. Rarely do, or at least did, the Federal Circuit’s patent decisions draw on other areas of the court’s jurisprudence, or even other areas of the law. The concern with such isolation is that biases could develop. 
The Supreme Court appears to be aware of this risk and is acting to bring patent law back into the legal tapestry, rejecting any form of patent exceptionalism. 
Peter Lee - A Project of Eliminating Patent Exceptionalism

Lee explores this commonly made argument in depth in his recent article, The Supreme Assimilation of Patent Law, in Michigan Law Review, postulating that Supreme Court patent doctrine has the "project of eliminating 'patent exceptionalism' and assimilating patent doctrine to general legal principles." Lee highlights specific areas where the Court has reviewed the Federal Circuit's unique use of standard doctrine, such as remedies and the award of attorney’s fees. "In these and other areas," Lee writes, "the Supreme Court has consistently sought to eliminate patent exceptionalism, bringing patent law in conformity with what it characterizes as general legal standards."  (1416).

Lee argues that the Court's review of patent cases reflects a tension between the need for "legal universality", on the one hand, and the need for "exceptionalism", on the other. Although Lee contends that the tension between universality and exceptionalism applies "throughout law," he finds the tension is "particularly relevant to patent law, which deals with highly technical subject matter."  (1415-1416).  At a descriptive level, Lee explains the tension between legal universality and exceptionalism in patent law as stemming primarily from the unique nature of patents, which cover highly technical subject matter.  On the one hand, the Federal Circuit's "patent exceptional" rules are a response to the unique nature of patent law and the "unique role and expertise of the Federal Circuit", which "justifies a certain degree of exception- alism from general doctrine." (1418) But on the other hand, "invoking broad legal principles" can also help generalist judges, such as the justices on the Supreme Court, alleviate the "cognitive burdens" of a jurisprudence that requires understanding complex technologies as well as complex and arcane legal doctrine.  (1459).  (This point follows up on Lee's prior article, Patent Law and the Two Cultures, published in the Yale Law Journal in 2010.  There Lee explored another common explanation for Supreme Court review of the Federal Circuit: the Court's skepticism of the Federal Circuit's use of overly formalistic rules.  Lee argued these formalistic rules can help courts, especially generalist judges, navigate scientific complexity in patent cases by "truncat[ing] difficult technical inquiries, thus helping to mediate the intersection of law and science.")

At a normative level, Lee advises courts to seek a "balance" between "a general preference for consistency" and the unique needs of specialized patent institutions and particular patent statutes and doctrines.  (1468) One example he gives of successfully achieving balance is the Supreme Court's holding in Markman v.Westview that the usual preference for juries does not apply in full force when it comes to patent claim construction. "The Court," Lee observes, "acknowledged that claim construction rests on factual inquiries[,]" which ordinarily would "counsel toward assigning this task to juries based on the general rule that juries are entrusted with evaluating the demeanor of witnesses," but the Court found "these considerations are less relevant to patent litigation" where scientific expertise is preferred to jury commonsense. (1468-1469). In sum, weeding out exceptionalism altogether is not a desirable outcome; "the special nature of patent law—particularly the unique role and expertise of the Federal Circuit—justifies a certain degree of exceptionalism from general doctrine." (1418).

Tejas Narechania - Reframing The Issue  

Now to Narechania's new paper. Narechania tackles precisely the same issue - the Supreme Court's scrutiny of "exceptional" patent rules - but he does so using a new methodology, and a new framing for what the Court is up to.

1. Methodology

First, to the methodology.  Rather than looking at decided cases from the Federal Circuit and the Supreme Court, Narechania looks at the Court's petitions for certiorari in order to determine empirically why the Court decides to take cert in one kind of patent case versus another. According to Nacherenia, a major "cue" for predicting the Court's decision to take certiorari in a given patent case is a "field split".  A field split, in Narechania's definition, is an area where some patent law doctrine - be it laches, willfulness, or availability of damages - differs from how the doctrine plays out in other fields of law.  Narechania identifies three types of field splits:  splits across related fields, such as a difference between patent and copyright's treatment of an issue like laches; splits across random fields, such as patent law's differing treatment of "willfulness" from Fair Credit Reporting Act (FCRA) cases; and lastly "outliers", where a patent specific rule exists that does not comport with general law." (23-30).

Narechania finds that a significant number of cert petitions that are accepted by the Court address some form of field split. Specifically, he finds 18 of the 53 cert petitions accepted since the Federal Circuit's formation involve field splits. (33-35).  Importantly, the petitions don't always succeed.  But, at least at the cert stage, addressing a field split significantly increases a petition's chances of succeeding in getting the Court's attention.

2. An Interest In Preserving "Universality"

Second, Narechania argues that the Court's decision to take cert in these types of cases is less about weeding out patent exceptionalism than it is about the Court's interest in preserving "universality." By "universality," Narechania means retaining "a degree of consistency across doctrinal areas in light of its underlying interests in judicial efficiency, neutrality, and legitimacy." (47)  Universality is distinct from uniformity. When the Court takes cert in others fields of law, it often does so to resolve circuit splits among the regional courts of appeal in order to preserve uniform (federal) law across the country.  "[T]he Court’s attention to circuit splits," he writes,
is usually justified by its preference for geographic uniformity in federal law. But none of the usual uniformity-related rationales for reviewing circuit splits apply to field splits. The legitimacy of the federal law may be at stake when the meaning of statutes varies state-by-state, but there are no such stakes when willfulness means something different in patent law than it does under the Fair Credit Reporting Act. Field splits likewise do not give rise to forum shopping concerns nor do they impose any special burden on multistate actors.
Why, then, does the Court bother to take these cases—especially when space on the docket is at premium? The answer must lie outside the usual explanations for the Court’s certiorari decisions: Neither a general regard for uniformity nor these cases’ substantive importance to core patent doctrine explains the Court’s interest. ...
The better hypothesis is that the Supreme Court values legal universality—general consistency across substantive fields of law—in addition to geographic uniformity. 

3. How Does This Fit Into the "Patent Exceptionalism" Discussion?

One might wonder how differs from the discussion surrounding patent exceptionalism: the idea that patent law tends to use different rules from other areas of law.  Holbrook's paper, Lee's, and many others addressing this issue, identify the Court's resistance to patent exceptionalism as one factor in leading it to take more cases. This discussion is sometimes tinged with resistance to exceptionalism.  Robin Feldman, for instance, has argued that exceptionalism can do harm. "The patent system is not a deity to which we must respectfully defer," she writes. "It is a living, breathing part of the organism that is our legal system. If we continue to treat patents with exceptionalism, we have only ourselves to blame as we walk willingly into the volcano."

The discussion surrounding exceptionalism seems inherently, if not always explicitly, to recognize the Supreme Court's (and the legal system as a whole's) interest in preserving "universality" across fields. Lee, for instance, identifies the universality interest explicitly, as noted above.

However, Narechania's paper adds several dimensions to this discussion. First, he adds the methodology.  Reviewing cert petitions is a creative and effective way to judge what the Court is really doing. It convincingly shows that striving to resolve a field split is empirically at least one cert stage criteria. This reveals just how important this particular interest is to the Supreme Court. (After all, Narechania pointed out to me, the Court grants cert in less than 100 cases out of 10,000 petitions annually.)

Second, he adds nuance. "Anti-exceptionalism" literature tends to paint the Court as on a mission to weed out all patent-specific doctrine (as in Lee's article), or to see exceptionalism as an evil to be weeded out (as in Feldman's).  The choice between exceptionalism and universality is black and white. Narechania's view is that, at a descriptive level, the Court appears to be seeking balance. One key piece of evidence for this is that in several cases he identifies, the Court grants cert on a field split but then leaves the split intact.  As noted below, this at one level casts doubt on the strength of Narechania's field split hypothesis versus other factors. But it also could mean the Court is actually getting it right.  As noted above, Lee suggests that the Court, at a descriptive level, is on a single-minded mission to "consistently assimilate patent law to ... broader legal doctrines[]" (Lee at 1450). Lee suggests, at the normative level, that the Court is misguided to always do so. (1459).  Narechania, in contrast, sees the Court's project as itself about delivering the balance Lee prescribes. In Narechania's words,

the Court’s motives range beyond a bare desire to discipline a Court of Appeals, or even an interest in eliminating exceptionalism altogether. Rather, the Supreme Court seems genuinely interested in the question of how much patent exceptionalism to accept: It seeks some balance between context-sensitive adjudication and the efficiency, neutrality, and legitimacy benefits conferred by universality.

In other words, Narechania has some kind words for the Supreme Court in patent law, for a change.

Lastly, Narechania's paper seeks to do some very important early work in bridging the gap between the exceptionalism  literature in patent law with exceptionalism literature elsewhere in the academy. "To the extent the Court also pays attention to exceptional rules in immigration, in tax, in procedure, and elsewhere," he writes to me (in an email), this may "suggest that the Court's interest in these cases is more deeply rooted in some institutional value, rather than, say, a suspicion of the Federal Circuit. Though, of course, both might be motivations, especially when you're trying to ascribe motives to nine individual members."

4. A Need for Caution

A final caveat is in order.  Narechania is careful not to overstate how significant a factor field splits are as compared to other factors. A field split, he writes, "is no guarantee of certiorari.  Indeed, it is not the Court’s exclusive signal for certworthiness in patent cases. As in the rest of its discretionary docket,"
the Court considers a variety of factors—a dissent at the Court of Appeals, a hearing en banc, amicus support for the petitions, among others—when deciding whether to grant a petition for a writ of certiorari. My claim is that the presence of a field split seems to be, like a positive amicus recommendation from the Solicitor General, one significant additional factor that tends to favor certiorari. Either may cue a case’s potential for review.

I would second this caution. Take Halo (and its sister case Stryker). The Court took cert to address when enhanced damages can be awarded for prevailing patentees under 35 U.S.C. § 284 of the Patent Act. § 284 simply says "the court may increase the damages up to three times the amount found or assessed." Prior to Halo and Stryker, the Federal Circuit had required infringement be "willful" for purposes of awarding enhanced damages under § 284, and used a two-part test to establish willfulness.  A patentee had to show, first, that the infringer acted "despite an objectively high likelihood" that its actions constitute infringement, and, second, that the risk of infringement was subjectively "either known or so obvious that it should have been known to the accused infringer."

Narechania argues the Court took cert, in part, because the cert petition observed that the Federal Circuit's definition of "willfulness" for purposes of awarding enhanced patent damages differed from the definition of "willfulness" used in Fair Credit Reporting Act (FCRA) cases. (28).  In Halo, the Court critiqued the Federal Circuit's rule for awarding willful damages, in relevant part, as follows.
The principal problem with [the Federal Circuit's] two-part test is that it requires a finding of objective recklessness in every case before district courts may award enhanced damages. Such a threshold requirement excludes from discretionary punishment many of the most culpable offenders, such as the "wanton and malicious pirate" who intentionally infringes another's patent — with no doubts about its validity or any notion of a defense — for no purpose other than to steal the patentee's business.
In Safeco Ins. Co. of America v. Burr, [an FCRA case] we stated that a person is reckless if he acts "knowing or having reason to know of facts which would lead a reasonable man to realize" his actions are unreasonably risky. ...Nothing in Safeco suggests that we should look to facts that the defendant neither knew nor had reason to know at the time he acted. [Likewise, here,] Section 284 allows district courts to punish the full range of culpable behavior. Yet none of this is to say that enhanced damages must follow a finding of egregious misconduct.   
There are many, many potential explanations for this holding, and for the Court's decision to take cert in this case.  On the one hand, as Narechania suggests, the Court could be resolving a "field split" between how willfulness is defined in patent law versus in FCRA case law. This hypothesis, while not impossible, becomes complicated when we learn the Court, as Narechania notes, actually did not rely on the FCRA standard in the end, holding instead that conduct can satisfy § 284's standard for enhanced damages, even if it would not meet the willfulness standard required under the FCRA. (28) ("...the Court appears to have granted the petition, at least in part, in light of an apparent rift between a consumer credit statute and the patent laws with respect to the meaning of willful conduct. But the Court’s ultimate decision leaves the split intact."). But in theory, Narechania could be right that the Court took cert for this reason,and in the end decided to exercise its "balance" function and keep the field split intact.


On the other hand, there are many other explanations for the Court's actions, some of which are consistent with Narechania's cert petition empirics. Maybe the Court is not interested in "universality" when it takes cert in these cases, but is just angry that the Federal Circuit is ignoring the Supreme Court's own case law in other fields of law. Maybe the Court is objecting to the Federal Circuit's use of overly rigid, formalistic rules versus a holistic standard (certainly plausible in Halo). Or maybe the Court is streamlining its own decisions respecting interpretation of the Patent Act itself. The Court decided Halo on the heals of Octane Fitness, where the Court had corrected the Federal Circuit's similar use of the same two-part test in deciding whether to grant attorneys' fees to prevailing parties, including prevailing defendants, under 35 U.S.C. § 285 ("The court in exceptional cases may award reasonable attorney fees to the prevailing party").  The Court in Halo expressly stated this justification for its holding in Halo, writing that "[o]ur recent decision in Octane Fitness arose in a different context but points in the same direction."

Yet another, closely related explanation (my favorite) is that the Court took cert in Octane, and also subsequently in Halo/Stryker, because, for decades now, the Federal Circuit has been misapplying and overusing the Noerr-Pennington doctrine in the patent context, employing the First Amendment to shield patentees from any kind of liability for bringing lawsuits. I like to think that in Octane the Court overruled the Federal Circuit's standard for awarding fees against losing patentees because the standard wrongly assumed the Petition Clause/Noerr-Pennington immunizes patentees unless the defendant can show the case was, from the outset, both objectively and subjectively unreasonable. Again, the Court explicitly said this is what it was doing in that particular case:
We crafted the Noerr-Pennington doctrine—and carved out only a narrow exception for “sham” litigation—to avoid chilling the exercise of the First Amendment right to petition the government for the redress of grievances.  But to the extent that patent suits are similarly protected as acts of petitioning, it is not clear why the shifting of fees in an “exceptional” case would diminish that right. The threat of antitrust liability (and the attendant treble damages, 15 U. S. C. §15) far more significantly chills the exercise of the right to petition than does the mere shifting of attorney’s fees. In the Noerr-Pennington context, defendants seek immunity from a judicial declaration that their filing of a lawsuit was actually unlawful; here, they seek immunity from a far less onerous declaration that they should bear the costs of that lawsuit in exceptional cases.
So basically, my story is that the Court corrected the First Amendment abuse in Octane, and then corrected it again in Halo/Stryker, where using the Petition Clause/Noerr-Pennington standard makes even less sense. (The Petition Clause, after all, doesn't protect losing defendants in a patent infringement case so far as I know, unless they are engaged in "petitioning" when they infringe).

I brought this possibility up to Narechania, whose response is worth nothing: maybe Octane itself was addressing a field split between patent and other areas of law. And, indeed, a closer read shows that, along with correcting the Federal Circuit's overuse of the First Amendment, the Octane Court was also explicitly coordinating attorneys fees awards in patent with attorneys fees awards in copyright. "As in the comparable context of the Copyright Act," the Octane Court wrote,`"[t]here is no precise rule or formula for making these determinations,' but instead equitable discretion should be exercised `in light of the considerations we have identified.'"

The point is, as Narechania himself carefully concedes, one cannot rate the "field split" factor too highly within the entire mix noted by Holbrook, Lee, and others.  There are many factors, and all may be doing some work, together or alone.  Personally, I prefer the old-fashioned approach to figuring out what the Court is doing: just read the case after the fact and decide. But academics and Supreme Court litigators alike are surely going to be very interested in Narechania's findings.

In sum: this is an absolutely fascinating, extremely well-done paper. I highly recommend it.

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