Hikma v. Amarin Argument Preview

Guest post by Kaidi (KD) Zhang, Stanford Law School J.D. expected 2027; UC Berkeley Ph.D. in Chemistry 2024

The Supreme Court will hear arguments in Hikma v. Amarin on April 29. The core question before the Court is seemingly straightforward but carries massive industry implications: Should a patent infringement claim based on inducement survive a 12(b)(6) motion to dismiss if the alleged infringer uses a statutorily permitted “skinny label,” but markets its generic drug as the “therapeutically equivalent” of the patented drug? 

In the decision below, the Federal Circuit held that pleading “the totality of the allegations of inducement” as “a whole” was sufficient for an induced infringement case to proceed. This ruling continued to narrow the viability of skinny labels, following the court’s earlier decision in GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc. (GSK), where it upheld a jury verdict of induced infringement based on a skinny label. 

In a recent Stanford Law Review article, Professors Jacob Sherkow and Paul Gugliuzza criticized the GSK decision for “turn[ing] two decades of Federal Circuit jurisprudence on drug labels and inducement on its head.” The Supreme Court declined to intervene then, but has granted certiorari in this case, which may have profound implications for the pharmaceutical industry. A brand-name drug is often approved to treat multiple different conditions (known as “indications”). Over time, the patent for the original drug compound may expire, but the brand-name company might still hold active “method-of-use” patents for specific indications. In many cases, companies pursue these additional indications after the drug is already on the market, which can extend their exclusivity.

Section viii (21 U.S.C. § 355(j)(2)(A)(viii)) of the Hatch-Waxman Act provides a statutory pathway for generic companies to enter the market before all method-of-use patents have expired. It allows a generic manufacturer to submit a statement to the FDA essentially saying: “We only want approval to sell this drug for older, unpatented uses; we are not seeking approval for the use that is still under patent.” To legally utilize the Section viii pathway, the generic manufacturer must remove—or “carve out”—all instructions, marketing, and references related to the patented use from their product’s packaging and informational inserts.

This specific dispute centers on Vascepa, a brand-name drug developed by the respondent, Amarin. Vascepa was initially approved in 2012 for a small group of patients suffering from severe hypertriglyceridemia (SH). In 2019, following a five-year study involving 8,000 patients, the drug received approval for a second indication for reducing the risks of cardiovascular events (CV). The petitioner, Hikma, subsequently developed a generic version of Vascepa (icosapent ethyl) and obtained FDA approval to sell the drug exclusively for the SH indication using the Section viii pathway. 

Notably, there are 11 companies with generic versions of icosapent ethyl approved for SH, and many of these generics (seven at the time the respondent’s brief was filed) are already on the market. Even though all generic pharmaceuticals are legally required to have the same labels carving out the CV indication, Amarin only sued Hikma because, according to Amarin, “[Hikma] alone chose to publish statements that healthcare providers would interpret as encouraging prescriptions that infringe respondents’ patents.”

Under 35 U.S.C. § 271(b), inducement liability requires that a party “actively induce[d]” a direct infringer to take specific action that suffices for “infringement of a patent.” Hikma contends it can be liable only if it actively encourages medical professionals to prescribe its generic icosapent ethyl specifically for the CV indication, and that none of its actions rise to this level. It argues that its skinny label encourages only non-infringing use, and that its external statements do not actively induce specific conduct. Hikma emphasizes that the only time the patented CV indication was mentioned on the label was to warn of the drug’s potential side effects “in people who have heart (cardiovascular) disease.” This warning, Hikma argues, cannot plausibly establish active inducement of the CV treatment method. Therefore, the case should be dismissed for failure to state a claim under the rigorous Iqbal-Twombly pleading standard.

Rob Merges Guest Post: Who Gives a Hoot About Minerva? The Patent Act and the Common Law of Patents

Guest Post by Rob Merges, UC Berkeley

In the immediate, practical sense, the Minerva opinion registers like the mildest tremor on the landscape of patent law. With a few tweaks of the standard patent assignment agreement, and putting aside the potential that the Federal Circuit will bollix up the follow-through, the opinion changed very little.

But, sometimes, a ripple on the surface denotes more dramatic movement in the deep crust. So it may be with this prosaic little case of assignor estoppel. Justice Barrett’s dissent signals a potentially radical reappraisal of the many common law rules that supplement, permeate and modify the body of operational U.S. patent law. If the signals are portents, then many settled doctrines of patent law – and other fields of IP law as well – have been quietly but surely put into play.

Google v. Oracle - The Final Shoe Drops

The Supreme Court ruled yesterday in Google v. Oracle that Google did not infringe Oracle's copyright in its APIs by virtue of fair use. The vote was 6-2, with Justice Breyer writing for the Court, and Justices Thomas and Alito dissenting. 

The opinion was straightforward and went to great lengths to attempt to explain the technology at issue. I thought it did a decent job of it (definitely more Godot than Guffman), even as the opinion continued to struggle for a good analogy. The Court adopted the file cabinet/drawer/folder analogy presented in Google's brief, which I thought was a terrible analogy...so I guess there's no accounting for taste (or winning advocacy). The court's fair use analysis was influenced by Judge Boudin's concurrence in Lotus v. Borland, though that concurrence didn't actually call it fair use, but instead "privileged use."

Others have and will surely write about the fair use aspects and what this means for software APIs. Contrary to Oracle's ridiculous and vitriolic press statement yesterday, this case will likely not change the way anyone in the industry behaves in the least. APIs have been used and reused for decades, and will continue to be. And contrary to being a barrier to entry, reuse of APIs allows for competitive inroads and entry, including by Oracle, in its mimicry of Amazon's AWS API. (Indeed, the hubris of Oracle's statement in light of its implementation of another company's API is stunning, assuming it was unlicensed-I've been unable to verify one way or the other.)  

The opinion also has some nuggets for other fair use - discussion of transformation and art, definition of markets for determining harm, another reaffirmation of Campbell v. Acuff-Rose Music, fair use as a mixed question of law and fact (something I discussed in a prior blog post), and so forth.

Instead, I will focus on my hobby horse-whether the APIs are copyrighted, and if so how we get to non-infringement. The Supreme Court explicitly decided that the copyrightability of APIs is a third-rail and did not attempt to touch the issue. There are two ways to read the tea leaves. First, perhaps a majority of the court thought they were uncopyrightable, but feared the effects of saying so. Second (and my guess), perhaps a majority of the court (or a 4-4 split) thought that they were copyrightable, but fair use was an acceptable compromise. The second possibility is why I wrote and submitted my amicus brief, which was intended to give a path to non-infringement even if the APIs were copyrightable.

Alas, the court did not buy into the abstraction/filtration argument I made, which I believe was doctrinally appropriate, nor did the brief get a cite, as many that discussed the importance of APIs did. However, in a sense, the court adopted the methodology I suggested. From my brief:

But the copyrightability of an entire work does not answer the question of whether any particular portion of it, if used by another, is infringing. That analysis requires determining whether the defendant has taken too much expression and not ideas, systems, methods of operation, or the like. And such a determination cannot be made outside of the infringement analysis. Any functionally required aspects—including any expression necessary to practice the idea—should be removed from the comparison. 

What remains should then be compared. The advantage of this approach is that it recognizes that while entire software programs may be copyrightable in some contexts, their pieces might not be infringed in others. There need be no zero-sum game, but only a recognition that the scope of copyright depends, as it always has, on the accused’s use of the copyrighted work. 

...

[T]he Court need not decide whether any part of Oracle’s code is copyrightable standing alone. It should only determine that the scope of its copyright in the Java source code cannot extend to infringement through the reuse of declaring functions necessary to create a compiler or interpreter that accepts the same commands and parameter names to allow programmers to use the Java programming language.

The primary pushback on this argument that I received from smart colleagues asked this question: why should context matter in the infringement analysis? Justice Thomas's dissent is replete with this same concern. My answer was always the same - because use in a functional context may be a use of the idea/method, whereas use in a different context might not be.

But Justice Breyer has sidestepped this question to essentially reach the same result using fair use. The one place where we can be sure that context matters is fair use. The nature and character of the use is one of the factors, after all. The Court's analysis tracks many of the same issues in my brief - the functionality of the APIs, their use as a de facto standard, switching costs, etc.

And so the Court's final resolution is not that far off from what I had asked. Rather than excluding the APIs from infringement by filtering them out, the Court would instead exclude them from infringement under a fair use analysis that considers many of the same factors. I can live with this solution--way back in 1999, I published a paper that argued that "courts have been able to determine efficient economic outcomes based on the cases before them, but they have been unable to settle on a rule that definitely determines how much reuse to allow in each case." The article lays out a variety of economic factors that predict how cases come out, and you'll be shocked to find out that they favor Google in this case (e.g. switching costs, de facto standards, lack of slavish copying of the implementation, no breach of an underlying economic duty, public benefits of compatibility). Perhaps that's a reason this case has stuck in my craw for so long: it's about the only one that didn't fit with my 20+ year old model.

Despite my doctrinal sanguinity, the downside of the court's approach is that it might still lead to framing issues in the future. Litigants might still be subjected to juries asked to simply decide whether the APIs were used (for infringement) and then hope to rely on fair use as a defense. Then again, a judicial fair use inquiry might keep the question from ever getting to a jury, which is basically the same result I've advocated. But this case went to a jury, by appellate order, and it's unclear that it should have. It was certainly costly. However, the strong language of this opinion may apply the next time, as in the case I recently blogged about with control codes.

The end is near for my Oracle and Google blogging, a 9 year expedition. But I do have one more in me, a more technical post in a week or so about the so-called 170 lines of code that supposedly all that are necessary to implement Java.

Google v. Oracle: Amicus Briefing

Hello again, it's been a while. My administrative duties have sadly kept me busy, limiting my blogging since the summer. But since I've blogged consistently about Google v. Oracle (fka Oracle v. Google) about every two years, the time has come to blog again.

I won't recap the case here -my former post(s) do so nicely. I'm just reporting that 20+ amicus briefs were filed in the last week, which SCOTUSblog has nicely curated from the electronic filing system.

There are many industry briefs. They all say much the same thing - an Oracle win would be bad for industry, and also inconsistent with the law (The R Street brief -and prior op ed-describes how Oracle has copied Amazon's cloud based API declarations). But since I'm an academic, I'll focus on those briefs:

1. Brief of IP Scholars (Samuelson & Crump): Merger means that the API declarations cannot be protected
2. Brief of IP Scholars (Tushnet): Fair Use is warranted
3. Brief of Menell, Nimmer, Balganesh: Channeling dictates that API declarations are not protected
4. Brief of Lunney: Infringement only occurs if whole work is copied; protection does not promote the progress
5. Brief of Snow, Eichhorn, Sheppard: Fair Use jury verdict should not be overturned
6. Brief of Risch: Protection should be viewed through the lens of abstraction, filtration, and comparison

My brief is listed last, but it's certainly not least. Indeed, I think it's a really good brief. But of course I would say that. If you've read my prior blog posts on this (including the one linked above), you'll note that my brief puts into legal terms what I've been complaining about for eight or so years: by framing this case as a pure copyrightability question, the courts have lost sight of the context in which we consider the protection of the API declarations. There might be a world where the declarations, if published as part of a novel and reprinted in a pamphlet made by Google, are eligible for copyright registration. But in the context of filtration, which neither the district court nor the Federal Circuit performed, the declarations are not the type of expression that can be infringed by a competing compiler. Give it a read. It's better than Cats (and not just the new movie), you'll read it again and again.

An even better summary of all the briefs is here.

I conclude with a paragraph from the brief, which I think sums things up:

This case boils down to [the] question: can a company own a programming language through copyright? Oracle would say yes, but the entire history of compatible language compilers, compatible APIs, compatible video games and game systems, and other compatible software says no. Michael Risch, How Can Whelan v. Jaslow and Lotus v. Borland Both Be Right? Reexamining the Economics of Computer Software Reuse, 17 The J. Marshall J. Info. Tech. & Priv. L. 511, 539–44 (1999) (analyzing economics of switching costs, lock-in, de facto standards, and competitive need for compatibility).

Trademarking the Seven Dirty Words

With the Supreme Court agreeing to hear the Brunetti case on the registration of scandalous trademarks, one might wonder whether allowing such scandalous marks will open the floodgates of registrations. My former colleague Vicenç Feliú (Nova Southeastern) wondered as well. So he looked at the trademark database to find out. One nice thing about trademarks is that all applications show up, whether granted or not, abandoned or not. He's posted a draft of his findings, called FUCT® – An Early Empirical Study of Trademark Registration of Scandalous and Immoral Marks Aftermath of the In re Brunetti Decision, on SSRN:

This article seeks to create an early empirical benchmark on registrations of marks that would have failed registration as “scandalous” or “immoral” under Lanham Act Section 2(a) before the Court of Appeals for the Federal Circuit’s In re Brunetti decision of December, 2017. The Brunetti decision followed closely behind the Supreme Court’s Matal v. Tam and put an end to examiners denying registration on the basis of Section 2(a). In Tam, the Supreme Court reasoned that Section 2(a) embodied restrictions on free speech, in the case of “disparaging” marks, which were clearly unconstitutional. The Federal circuit followed that same logic and labeled those same Section 2(a) restrictions as unconstitutional in the case of “scandalous” and “immoral” marks. Before the ink was dry in Brunetti, commentators wondered how lifting the Section 2(a) restrictions would affect the volume of registrations of marks previously made unregistrable by that same section. Predictions ran the gamut from “business as usual” to scenarios where those marks would proliferate to astronomical levels. Eleven months out from Brunetti, it is hard to say with certainty what could happen, but this study has gathered the number of registrations as of October 2018 and the early signs seem to indicate a future not much altered, despite early concerns to the contrary.

The study focuses not on the Supreme Court, but on the Federal Circuit, which already allowed Brunetti to register FUCT. Did this lead to a stampede of scandalous marks? It's hard to define such marks, so he started with a close proxy: George Carlin's Seven Dirty Words. This classic comedy bit (really, truly classic) nailed the dirty words so well that a radio station that played the bit was fined and the case wound up in the Supreme Court, which ruled that the FCC could, in fact, ban these seven words as indecent. So, this study's assumption is that the filings of these words as trademarks are the tip of the spear. That said, his findings about prior registrations of such words (with claimed dual meaning) are interesting, and show some of the problems that the court was trying to avoid in Matal v. Tam.

It turns out, not so much. No huge jump in filings or registrations after Brunetti. More interesting, I thought, was the choice of words. Turns out (thankfully, I think) that some dirty words are way more acceptable than others in terms of popularity in trademark filings. You'll have to read the paper to find out which.

Helsinn Argument Recap: Did the AIA Change the Meaning of Patent Law's "On Sale" Bar?

As Michael previewed this morning, the Supreme Court heard argument today in Helsinn v. Teva, which is focused on the post-America Invents Act § 102(a)(1) bar on patents if "the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public" before the relevant critical date. The Federal Circuit held that Helsinn's patents were invalid because Helsinn had sold the claimed invention to a distributor more than one year before filing for a patent, but Helsinn (supported by the United States as amicus) argues that the "on sale" bar is triggered only by sales that make the invention "available to the public" under a broad reading of "public."

During argument, none of the Justices seemed inclined to favor Helsinn's attempt to argue that "on sale" clearly means on sale to everybody—Justice Kavanaugh said "it's pretty hard to say something that has been sold was not on sale," and Chief Justice Robert's noted that Helsinn's interpretation "might not be consistent with the actual meaning of the world 'sale'" because "if something's on sale, it doesn't have to be on sale to everybody." Nor did they jump at the government's argument that "on sale" means a product can be purchased by its ultimate consumers—Justice Sotomayor said: "This definition of 'on sale,' to be frank with you, I've looked at the history cited in the briefs, I looked at the cases, I don't find it anywhere."

Helsinn's better statutory argument is that the meaning of "on sale" is modified by "or otherwise available to the public" to require that the sale be publicly available. Indeed, for a reader with no background in patent law, this might seem like the most natural reading of the statute. Justice Alito said that "the most serious argument" against the Federal Circuit's position is "the fairly plain meaning of the new statutory language," and that he "find[s] it very difficult to get over the idea that this means that all of the things that went before are public." And Justice Gorsuch suggested, at least for hypothetical purposes, that "the introduction of the 'otherwise' clause introduced some ambiguity about what 'on sale' means now." But if there was more support to reverse the Federal Circuit, it was not apparent from the argument.

Much of the statutory language used in the Patent Act—including "on sale"—has developed a technical legal meaning over time, generally due to courts' attention to the law's utilitarian focus. For example, patentable subject matter caselaw is "implicit" in § 101, courts have put a highly specialized gloss on the word "obvious" in § 103, and—relevant here—the § 102 categories of prior art have long been interpreted to include relatively obscure and private uses. Although this expansive definition of prior art might seem unfair to patentees, there are also strong policy arguments in its favor, including (1) encouraging patentees to get to the patent office early (leading to earlier disclosure and patent expiration) and (2) avoiding patents when their costs (including higher prices for consumers and subsequent innovators) aren't likely to be outweighed by their innovation-incentivizing benefits, such as when there is independent invention—even when evidence of that invention is relatively obscure.

As Justice Kavanaugh noted at argument today, Mark Lemley's amicus brief on behalf of forty-five IP professors describes the long history of treating relatively non-public disclosures as prior art, including (1) "noninforming public use" cases, (2) "output of a patented machine or process" cases, and (3) cases involving secret, confidential, and nonpublic sales transactions. Justice Breyer also mentioned the Lemley brief, and he said it "seems right" to have the on-sale bar include private sales "to prevent people from benefitting from their invention prior to and beyond the 20 years that they're allowed." The legislative history of the AIA does not suggest that Congress intended to do sweep away all of these cases—Justice Kavanaugh said that he thinks "the legislative history, read as a whole, goes exactly contrary" to Helsinn's contention because "there were a lot of efforts … to actually change the 'on sale' language, and those all failed," leaving the losers "trying to snatch victory from defeat" with "a couple statements said on the floor."

It is perhaps because of this history that Helsinn and the government seemed more focused on the argument that "on sale" has always excluded nonpublic sales than on the argument that the AIA changed the law. Justice Ginsburg's only comment during argument was to ask Helsinn to clarify this: "I thought that one argument was that the AIA changed the way it was. But … you seem to say there was no change; 'on sale' never included the secret sale." Arguing for the government, Malcolm Stewart even conceded—in response to questioning from Justice Kagan—that if the law was settled pre-AIA such that "on sale" included nonpublic sales, then the new AIA language ("or otherwise available to the public") "would be a fairly oblique way of attempting to overturn" the law. But based on my reading of the transcript, it doesn't seem likely that the argument that "on sale" has always meant "on sale publicly" will get five votes.

I waited until after writing the above to get Ronald Mann's take at SCOTUSblog, but I think I very much agree on his bottom line conclusion: while this isn't "a case in which the argument clearly presages the result," the overall transcript "suggests that the most likely outcome will be an affirmance."

How Important is Helsinn?

In honor of the oral argument in Helsinn today, I thought I would blog about a study that questions its importance. For those unaware, the question the Supreme Court is considering is whether the AIA's new listing of prior art in 35 U.S.C. §102(a)(1): "the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public..." changed the law.

Since forever, on sale meant any offer or actual sale, regardless of who knew about it. Some have argued that the addition of "or otherwise available to the public" means that only offers that are publicly accessible count as prior art. I think this is wrong, and signed on to an amicus brief saying so. We'll see what the Court says. Note that non-public does not mean "secret." True secret activity is often considered non-prior art, but the courts have defined "public" to mean "not-secret." The question is whether that should change to be "publicly accessible."

But how big a deal is this case? How many offers for sale would be affected? Steve Yelderman (Notre Dame, and soon to be Gorsuch clerk) wanted to know as well, so he did the hard work of finding out. In a draft paper on SSRN that he blogged about at Patently-O, he looked at all invalidity decisions to see exactly where the prior art was coming from. Here is the abstract for Prior Art in the District Court:

This article is an empirical study of the evidence district courts rely upon when invalidating patents. To construct our dataset, we collected every district court ruling, verdict form, and opinion (whether reported or unreported) invalidating a patent claim over a six-and-a-half-year period. We then coded individual invalidation events based on the prior art supporting the court’s analysis. In the end, we observed 3,320 invalidation events based on 817 distinct prior art references.

The nature of the prior art relied upon to invalidate patents informs the value of district court litigation as an error correction tool. The public interest in revoking erroneous patent grants depends significantly on the reason those grants were undeserved. Distinguishing between revocations that incentivize future inventors and those that do not requires understanding the reason individual patents are invalidated. While prior studies have explored patent invalidity in general, no study has reported data at the level of detail necessary to address these questions.

The conclusions here are mixed. On one hand, invalidations for lack of novelty bear many indicia of publicly beneficial error correction. Anticipation based on obscure prior art appears to be quite rare. When it comes to obviousness, however, a significant number of invalidations rely on prior art that would have been difficult or impossible to find at the time of invention. This complicates — though does not necessarily refute — the traditional view that obviousness challenges ought to be proactively encouraged.

So, let's get right to the point. The data seem to show that "activity" type prior art (that is sale or use) is much more prevalent in anticipation than in obviousness. This is not surprising, given that this category is often the patentee's own activities.

With respect to non-public sales, they estimate that a maximum of 14% of anticipation and 2% of obviousness invalidations based on activity were based on plausibly non-public sales. This translates to about 8% of all anticipation invalidations and 1% of all obviousness invalidations. Because there are about as many obviousness cases as anticipation cases, this averages to 4.25% of all invalidations. They note that with a different rule, some of these might have been converted to "public" sales upon more attention paid to providing such evidence.

A related question is whether the inventor's actions can invalidate, or whether the AIA overruled Metallizing Engineering, which held that an inventor's secret use can invalidate, even if a third-party's secret use does not. The study found that the plaintiff's actions were relevant in 27% of anticipation invalidations and 13% of obviousness invalidations.  Furthermore, they found that most of the secret activity was associated with either the plaintiff or defendant--this makes sense, as they have access to such secret information.

So, what's the takeaway from this? I suppose where you stand depends on where you sit. I think that wiping out 4% of the invalidations, especially when they are based on the actions of one of the two parties, is not a good thing. It's bad to allow the patentee to non-publicly sell and have the patent, and it's bad to hold the defendant liable even if it has been selling the patent in a non-public (though non-secret) way. We're talking about 20 claims per year that go the other way - too high for my taste, especially when it means we have to start defining new ways to determine whether something is truly public.

Furthermore, the stakes of reversing Metallizing are much higher. I freely admit that the "plaintiff's secret actions only" rule has a tenuous basis in the text of the statute, but it has been the law for a long time without being expressly overruled by two subsequent revisions. Given that more than 25% of the invalidations were based on the plaintiffs actions, I think it would be difficult to reverse course.

The Uneasy Case for Ariosa Diagnostics v. Illumina

The Supreme Court's request for views from the Solicitor General in Ariosa Diagnostics v. Illumina has renewed interest in this nerdy issue of patent prior art. I appear to be in a very small minority that believes that Federal Circuit's rule on this may be right (or at least is not obviously wrong), so I thought I would discuss the issue.

Let's start with the (pre-AIA) statute. 35 U.S.C. 102(e) says that one type of prior art may be where:

the invention was described in ... a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent...

This is a pretty old rule, dating back to the Alexander Milburn case. The gist of the rule is that delays in the patent office should not deprive references of being prior art. Thus, even though the patent application is "secret" until published, we backdate the reference to the date of filing once the patent is granted (or the application published, which is covered in a subsection I do not reproduce above).

The issue in Ariosa v. Illumina is what to do with provisional patent applications. For the reference at issue, the prior art patent first relied on a provisional patent application, which is never published but becomes publicly available if a patent that relies on it is granted. Later, a regular patent application was filed and eventually issued. There is a dispute about whether the invention was even described in the provisional, but we'll assume that it was. However, the PTAB ruled (and the Fed. Cir. affirmed) that because the issued patent claims were not supported by the provisional patent disclosure, then the reference could not be backdated to the filing of the provisional patent, even if the invention was described in the final patent.

This is where the objections come in. If the patent relies on the filing date of the provisional patent (and incorporates it by reference), then surely it is described as of the provisional patent date and should be prior art. We are, after all, living in a first to invent world and it is unfair that the first inventor (in the provisional patent) should not count as prior art.

Let's start with Alexander Milburn. I love that case. I have assigned it to my students. I think it explains this statute well. But it is not controlling. It was an interpretation of the statute at that time. We have a later adopted statute that defines what is and is not prior art, and Alexander Milburn does not speak to the facts of the Ariosa dispute because there were no provisional patents at that time. This is not like, say, on sale (Section 102(b)) in Helsinn in which that statute remained unchanged and the meaning of the words remained unchanged. There were no provisional patents when Alexander Milburn was granted, and thus it has little to say; the statute was intended to deal with that (and even that has a difficult time).

As a corollary to this analysis, I want to put the rest that there is a problem with the Federal Circuit's rule because it rewards the second inventor. I would bet dollars to donuts that many people arguing this scoffed at complaints that the AIA's first to file rule was unconstitutional because it rewarded second inventors. Both arguments fail for the same reason - the patent system has a long history of allowing the second invention to issue as a patent under certain circumstances. Indeed, even the current version of 102(e) disallows many early foreign patent filings, even though such filings are clearly the first invention. Once again, we have to look at the statute.

So, let's look at the statute: "The invention is described in" - critics focus on this, saying it makes no sense to look at a patent's claims. We only care about whether the invention was described. Fair enough - I agree.

But what about the next part: "a patent granted on an application for patent by another filed in the United States before the invention." Looking at this in pieces, we see a few requirements. First, the description must be in the patent, not the provisional application. Thus, looking at what the provisional patent says should be irrelevant...for this piece.

Second, that description must be in a patent "granted on an application for patent...filed...before." This is where the action is. What does it mean for a patent to be granted on an application for patent filed? For a provisional application, means that the patent must satisfy Section 119(e). It must be filed within one year, and the final patent claim must be supported by the written description of the provisional patent. It is as simple as that - the plain words of the statute dictate the Federal Circuit's rule.

There is a policy benefit to this reading. I think that patentee's can take advantage of the jump from provisional to final patent disclosures, adding new matter while always claiming priority back to the provisional. The provisional patent is not easily obtained, and it takes work to parse out which claims are actually entitled to the earlier filing date. Enforcing the rules on prior art better incentivizes complete provisional patent disclosures.

Then why do I say this is an uneasy case? Well, did I mention that I like Alexander Milburn? The policy it states, that delay in the patent office shouldn't affect prior art can easily be applied here. So long as the description is in the provisional patent, and so long as that provisional patent is eventually publicly accessible, then the goal, even if not the strict language, of the statute is met.

Also, my reading leads to a potentially unhappy result. A party could file a provisional that supports invention A, and then a year later file a patent that claims invention A but describes invention B. The patent could then be asserted against B while relying on the earlier filing date of A, even though B was never described in the provisional as of the earlier date. Similarly, a provisional patent could describe B, and B could then be removed from the final patent application, and the patent would not be prior art because B was not described in the patent, even though B had been described in the earlier, now publicly accessible provisional application.

I don't know where I land on this - as readers of this blog know, I tend to be a textualist. Sometimes the Court has agreed with that, but sometimes (see patentable subject matter and patent venue) it does not.

Patents and the Administrative State

When Justice Gorsuch was confirmed to the Supreme Court, many commentators, well, commented that he was wary of administrative overreach. But it turns out he was really active in patent cases, writing opinions in all the patent cases he saw last term. Who knew he was so interested in patents? He does have some IP chops; his opinion in Meshworks remains one of my favorite copyright cases, not the least of which because it validates a legal argument I made about virtual reality copyright some 25 years ago. I was able to cite that case in a recent book chapter on the same subject.

But it turns out that his interest in patents may be one and the same as his concern about the administrative state. We suspected as much with Oil States, but what about the others? To answer this, Daniel Kim and Jonathan Stroud (both of Unified Patents) have an article forthcoming in the Chicago-Kent Journal of Intellectual Property called Administrative Oversight: Justice Gorsuch’s Patent Opinions, the PTAB, and Antagonism Toward the Administrative State. A draft is posted on SSRN, and the abstract is here:

In his first term, Justice Neil Gorsuch has made a surprisingly forceful impact on, of all things, patent law—and even more unlikely, the United States Patent and Trademark Office’s adjudicatory arm, the Patent Trial and Appeal Board. Was there any way to predict, from his 10th Circuit opinions below, that he would author opinions in all three patent cases in his first term? Was this attention the result of deeply submerged but long-felt opinions on patent law, or rather a result of his sharp distrust of administrative overreach? We analyze 10th Circuit and Supreme Court opinions authored by Justice Gorsuch, and conclude his unforeseen interest springs from his desire to limit agency power rather than from any particular concern with patents. Still, his opinions—intentionally or by happenstance—will reverberate through our patent law for years.

This article is straightforward and illuminating. It begins with the justice's background and some comments on his writing style. It then examines his Tenth Circuit opinions in IP and tribal immunity (there are really not that many, which the authors attribute to the backwater location of the 10th Circuit devoid of any innovation, which I'm sure the folks in Denver will be happy to hear).

What's interesting about the article is that its analysis of the cases is not about IP outcomes, but about methods and the administrative state. Returning to Meshwerks, for example, the authors focus primarily on how it traces the history and purpose of IP rather than the important holding that realistic renditions of physical objects lack creativity.

This analysis bears fruit, though, because they show how these same methods and concerns about the administrative state drive Gorsuch's patent opinions, including those where he is dissenting or breaking from other conservative justices.

I found this article an interesting and insightful read, and I thought it was especially well done given the authors' own admission that they do not agree with Justice Gorsuch's judicial perspective. In other words, this wasn't a fan piece, but instead really useful commentary about how judicial philosophy and concerns about the administrative state may be brought to bear on the IP system in unexpected ways.

The Real World Impact of the Copyright Registration Prerequisite

Just before the summer recess, the Supreme Court snuck in a certiorari grant that I don't think has received much attention in proportion to its importance--Fourth Estate Public Benefit Corp. v. Wall-Street.com LLC. The issue is seemingly simple: before filing a lawsuit, a copyright owner must register the copyright. But what does it mean to register the copyright? Simply file the application, or actually receive the registration certificate.

I'd say this question is one of the most practically important IP questions the Court has faced in the last decade. When I was in active practice, I would estimate that a quarter to a third of our clients did not have a registration at the time they wanted to sue, and we relied on the Ninth Circuit's permissive "application is enough" rule to get a case filed (and sometimes seek injunctive relief). The alternative was to file and wait, sometimes months or even more than a year, to get a registration. (I've read that pendency is now about six to eight months). Alternatively, one can pay $800 for an expedited registration within 10 days.

Why might someone not file a registration well in advance of suing? First, because they don't have to. The post-Berne Convention adoption amendments from 1989 allow copyright to vest from the time of fixation. Indeed, in order to maintain compliance with Berne, the pre-filing registration requirement only applies to U.S. Works. Foreign works may sue at will--more on this later.

More practically, there are plenty of reasons why one might not file. In an era of mass digital photography, it would be ridiculously expensive to register every work in case one was infringed; it is far more efficient to see if anyone infringes, and then register that work. In software, new versions are created all the time--almost literally so in software as a service platforms. It would be impossible to file a new derivative work registration for every single released version, especially for open source (though I bet Microsoft does it).

As a result, the registration requirement would become a hammer that would keep rightful owners from bringing suit. The Supreme Court even recognized this several years ago in Reed Elsevier, Inc. v. Muchnick. In that case, a class of journalists filed suit for transfer of their print works into electronic databases. Some putative class members objected to a settlement, but they had not registered. The Court ruled that registration was not jurisdictional. Does this mean that one can apply and sue, so long as registration occurs before any final determination?

I won't run through the pro and con arguments in detail, as arguments can be made on each side from different interpretive points of view. The statute clearly states that registration is required. But another section states that registration is effective from the date of application. But another part states that one may sue if the registration has been denied, which implies that registration is not complete until accepted. But then one wonders how long an applicant must wait until there is an assumption that the work has been "pocket denied," especially when registration is a ministerial act. But then the copyright office might argue that registration is not a ministerial act. And so forth. But the outcome of the arguments will have a real effect on real people and businesses.

I'd like to end with the challenge not made in the case: equal protection. While a couple commentators here and there have mentioned this problem with the dual registration rules, I can find no case with "411(a) & 'equal protection'" as search terms. Requiring a separate hurdle for some works and not others is about as unequal as I can think of. It is unclear why SAP can file suit immediately, but Oracle may not. I don't know if the Supreme Court can reach this issue as part of its interpretive determination (it's not an issue and it wasn't briefed), but I hope it does.

The False Hope of WesternGeco

The Supreme Court issued its opinion in WesternGeco last week. The holding (7-2) was relatively straightforward: if an infringer exports a component in violation of 35 USC 271(f)(2) (that is, the component has no substantial noninfringing use), then the presumption of extraterritoriality will not bar damages that occur overseas. And that's about all it ruled. It left harder questions, like proximate cause, for another day.

I spent the end of the week and weekend reading commentary on the case (and tussling a bit on Facebook and Twitter). A couple blog posts worth checking out are Tim Holbrook's and Tom Cotter's. I had just a few thoughts to add.

A Couple Thoughts on Apple v. Samsung (part ?100?)

I've done a few interviews about the latest Apple v. Samsung design patent jury verdict, but journalistic space means I only get a couple sentences in. So, I thought I would lay out a couple points I see as important. We'll see if they hold up as predictions.

There's been a lot written about the case, so I won't rehash the epic story. Here's the short version. The design patent law affords the winning plaintiff all of the profits on the infringing article of manufacture. The Supreme Court ruled (reversing about 100 years of opposite practice) that the article of manufacture could be less than the entire accused device for sale. Because the original jury instructions did not consider this, the Court remanded for a determination of what the infringing article of manufacture was in this case (the design patents covered the shape of the phone and the default screen). The Federal Circuit remanded, and the District Court decided that, yes, in fact, the original jury instructions were defective and ordered a retrial of damages.

The District Court adopted the Solicitor General's suggested test to determine what the article of manufacture was, determined that under that test it was a disputed fact question, and sent it to the jury. Apple asked for $1 billion. Samsung asked for $28 million. The jury awarded $533 million, which is more than $100 million more than the damages were before the Supreme Court ruled.

After the trial, one or more jurors stated that the entire phone was the article of manufacture because you can't get the screen without the rest of the phone. I suppose that the half a billion is deducting expenses that Apple didn't want to deduct.

So, here are my points:

Statute v. Constitution as IP Limiting Doctrine

In his forthcoming article, "Paths or Fences: Patents, Copyrights, and the Constitution," Derek Bambauer (Arizona), notices (and provides some data to support) a discrepancy in how boundary and limiting issues are handled in patent and copyright. He notes that, for reasons he theorizes, big copyright issues are often "fenced in" by the Constitution - that is the constitution limits what can be protected. But patent issues are often resolved by statute, because the Constitution creates a "path" which Congress may follow. Thus, he notes, we have two types of IP emanating from the same source, but treated differently for unjustifiable reasons.

The article is forthcoming in Iowa Law Review, and is posted on SSRN. The abstract is here:

Congressional power over patents and copyrights flows from the same constitutional source, and the doctrines have similar missions. Yet the Supreme Court has approached these areas from distinctly different angles. With copyright, the Court readily employs constitutional analysis, building fences to constrain Congress. With patent, it emphasizes statutory interpretation, demarcating paths the legislature can follow, or deviate from (potentially at its constitutional peril). This Article uses empirical and quantitative analysis to show this divergence. It offers two potential explanations, one based on entitlement strength, the other grounded in public choice concerns. Next, the Article explores border cases where the Court could have used either fences or paths, demonstrating the effects of this pattern. It sets out criteria that the Court should employ in choosing between these approaches: countermajoritarian concerns, institutional competence, pragmatism, and avoidance theory. The Article argues that the key normative principle is that the Court should erect fences when cases impinge on intellectual property’s core constitutional concerns – information disclosure for patent and information generation for copyright. It concludes with two examples where the Court should alter its approach based on this principle.

The article is an interesting theory piece that has some practical payoff.

What happened in patent law in the past year?

Last Thursday I gave a 25-min recap patent law update to judges and practitioners at the Northern District Practice Program Patent Law Symposium, and I thought blog readers might be interested in my recap of highlights from the past year:

Patent Case Filings and Procedure: Venue, PTAB, and Stays

Lex Machina reports that there were 4057 cases filed in 2017, down 10% from the 4529 in 2016. The biggest procedural change was to venue. As I have explained, in its May 2017 decision in TC Heartland, the Supreme Court held that for purposes of the patent venue statute, a corporation only "resides" in its state of incorporation. The Federal Circuit has since held that this was a change in law, so the venue defense was not "available" under FRCP 12(g)(2), allowing district courts in pending cases to consider venue arguments that were not previously raised by defendants. And the Federal Circuit has offered guidance on the other possibility for proper venue—"where the defendant has committed acts of infringement and has a regular and established place of business"—saying that this requires (1) a fixed, physical presence that (2) is regular and established (not transient) and that (3) is a place of the defendant (not merely of an employee).

TC Heartland is likely responsible for the decline in cases filed in E.D. Tex. and the uptick in districts like D. Del. and N.D. Cal., though in neither of the latter have filings reached pre-2015 levels:

Judge Dyk on the Supreme Court and Patent Law, with Responses

Judge Timothy Dyk of the Federal Circuit has long welcomed the Supreme Court's involvement in patent law—see, e.g., essays in 2008 and 2014. In a new Chicago-Kent symposium essay, he states that he "continue[s] to believe that Supreme Court review of our patent cases has been critical to the development of patent law and likewise beneficial to our court," such as by "reconciling [Federal Circuit] jurisprudence with jurisprudence in other areas."

Four pieces were published in response to Judge Dyk, and while Michael previously noted Greg Reilly's argument that the Supreme Court does understand patent law, the others are also worth a quick read. Tim Holbrook (Emory) argues that some of the Court's interest reflects "suspicion about the Federal Circuit as an institution" but that the result is "a mixed bags" (with some interventions having "gone off the rails"). Don Dunner (Finnegan) is even more critical of the Supreme Court's involvement, arguing that "it has created uncertainty and a lack of predictability in corporate boardrooms, the very conditions that led to the Federal Circuit's creation." And Paul Gugliuzza (BU) argues that "the Supreme Court's effect on patent law has actually been more limited" because its decisions "have rarely involved the fundamental legal doctrines that directly ensure the inventiveness of patents and regulate their scope" and because its "minimalist approach to opinion writing in patent cases frequently enables the Federal Circuit to ignore the Court's changes to governing doctrine."

More Impressions About Patent Exhaustion

Daniel Hemel and Lisa Larrimore Ouellette
Cross-posted at Whatever Source Derived

As we explained last week, the full impact of the Supreme Court’s decision in Impression Products v. Lexmark will depend on whether courts are willing to view creative patent transactions as licenses (which do not exhaust the patentee’s rights) rather than sales (which, after Impression, now do). While it is too early to answer that question, we can already anticipate answers to two related questions regarding Impression’s impact: (1) What does the decision mean for pharmaceutical prices in the United States and abroad?; and (2) How will Impression affect information costs in markets for patented products? With respect to the first question, we expect that Impression will put upward pressure on pharmaceutical prices in developing countries—and downward pressure on prices in the United States—notwithstanding the fact that the importation of drugs from abroad will remain illegal under most circumstances. As for the second question, we are skeptical that Impression will have a substantial effect on information costs in markets for patented products, notwithstanding some of the enthusiastic commentary in the technology press immediately after the decision.

Below, we explain both of these conclusions in more detail.

Licensing in the Shadow of Impression Products

Daniel Hemel and Lisa Larrimore Ouellette
Cross-posted at Whatever Source Derived

Judging by the media coverage, the Supreme Court’s decision today in Impression Products, Inc. v. Lexmark Inc. will have dramatic implications for producers and consumers of patented products around the world. The decision places “sharp limits on how much control patent holders have over how their products are used after they are sold,” says the New York Times’s Adam Liptak. The ruling is a “sure-to-be-landmark decision,” reports Ronald Mann at SCOTUSblog. It “takes away an important tool used by companies to control the marketplace,” according to Bloomberg.

Well, maybe. But the Court’s opinion, authored by Chief Justice Roberts, also opens the door for creative contract lawyers to draft licensing agreements that severely restrict resale of patented products. The full impact of the Supreme Court’s decision won’t be known for years, but much will depend on how courts view the newfangled licensing agreements that are almost certain to follow in the wake of Impression Products.

To see why, let’s start with a hypothetical: Suppose your firm, Company A, holds a U.S. patent covering a certain widget. You manufacture one such widget and sell it to B on the condition that B not resell the widget to anyone else. In violation of that condition, B resells the widget to C, who then uses the widget. Can you sue B and/or C for patent infringement?

Prior to today, the answer under Federal Circuit precedent was yes: A could sue both B and C. Today’s decision changes that. The Court holds that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose.” This is true even if A’s sale to B occurs outside the United States. Thus, Company A now cannot sue B or C for patent infringement, though it still might be able to sue B for breach of contract.

But now reconsider the above scenario with the following modification: Company A—instead of selling the widget to B—licenses the widget to B with the proviso that B can do whatever she wants with the widget except resell it. If B violates the terms of the license and resells the widget to C, who then uses it, can Company A sue B and/or C for patent infringement?

Patent Exhaustion Policy Tradeoffs in the Impression v. Lexmark Oral Argument

Rather than grappling with the hard economic policy issues that patent exhaustion presents, the Justices were surprisingly quiet during Tuesday's oral argument in Impression v. Lexmark. I've previously discussed the Federal Circuit decision in this case, and Ronald Mann has a preview and recap of the argument, so I'll just add a couple of additional thoughts on the policy tradeoffs:

Daniel Hemel and I have explained how a ruling for Impression would likely hurt consumers in poor countries in a Columbia Law Review Sidebar piece last year and in a Wall Street Journal op-ed on Monday, and our longer Minnesota Law Review article explains why a U.S. rule of international patent exhaustion would undermine the ability of other countries to experiment with alternatives to the patent system for allocating access to knowledge goods. The only acknowledgement of this concern during argument seemed to be when the advocate for Impression, Andrew Pincus, implied that pharmaceutical parallel imports would not be a problem because "the FDA has full authority to prevent imports under 21 U.S.C. 381." But as Daniel and I note in our Columbia piece, this statute is far from a substitute for U.S. patent rights—it depends on discretionary government enforcement (which might not be particularly vigorous when U.S. policymakers are concerned about health care costs), it is subject to a personal use exemption, it only prohibits re-importation (not importation of drugs manufactured abroad), and it only affects prescription drugs (not trade in other patented products including medical devices or low-cost laptops).

So what were the Justices concerned about? The only policy consequence they asked about was the argument of pro-exhaustion parties that the current system generates needless complexity. Chief Justice Roberts asked about the "products with literally thousands of different patents" such that "it just gets too complicated," Justice Sotomayor questioned whether "having different rules with respect to copyright and patents … will complicate the checking," and Justice Breyer was concerned about needing "a sticker on every toy" to explain the relevant patent rights. But as Daniel and I have explained, "the cost of determining whether the patentee has reserved its U.S. patent rights does not seem particularly onerous in comparison with all the other information costs involved in verifying that a product is noninfringing." And none of the amici have been able to quantify—or even point to good examples of—severe information-cost externalities related to the current patent exhaustion laws. Justice Alito asked counsel for Impression whether the current rule has "caused a lot of problems," and he didn't get any concrete examples.

Given the relatively cold bench, it is difficult to predict where the Court will end up. Justice Breyer, Justice Sotomayor, and Chief Justice Roberts asked questions favoring Impression, but Justice Alito seemed to lean toward the status quo, and Justice Kennedy asked if the Court should be "cautious in extending" patent exhaustion because it is not codified. Justices Kagan and Thomas were silent. Ronald Mann thinks the Justices "are well aware of the major implications here and don’t see any obvious way to avoid doing something that will have real economic consequences"; I hope he's right that they have really had a chance to consider the inevitable tradeoffs at stake.

Does the Supreme Court Understand Patent Law?

It's been a busy semester, but I thought I would note briefly a provocative essay that just came across my feed by Greg Reilly (Chicago Kent): How Can the Supreme Court Not "Understand" Patent Law? The abstract is here:

The Supreme Court does understand patent law. This invited Essay responds to Federal Circuit Judge Dyk’s remarks at the Chicago-Kent Supreme Court IP Review, in particular, his observation that the patent “bar and the academy have expressed skepticism that the Supreme Court understands patent law well enough to make the governing rules” (a view Judge Dyk did not endorse). The idea that the Supreme Court does not understand the law of patents is implausible. Even more generous interpretations of this criticism – that the Supreme Court insufficiently understands innovation policy, insufficiently understands the patent system that Congress desired in creating the Federal Circuit, or insufficiently understands the technical facts to resolve patent issues – do not hold up under closer scrutiny. Rather, those leveling this charge against the Supreme Court are mistaking policy disagreement for a lack of understanding. This mistake, even if one primarily of rhetoric, has potentially negative consequences for understanding the role of patent law, promoting productive debates about patent law and policy, and preserving the Supreme Court’s legitimacy in patent law and patent law’s (perhaps limited) contribution to the constraints imposed by legal authority in our society.

Despite its relatively short length, there's much to parse here: the Supreme Court's jurisprudence from the lens of law, innovation policy, and technical understanding. While I disagree with some of the points, on the whole this essay resonates with me. There's no doubt that the Court's favoring of standards over rules is something that rubs folks the wrong way, but is consistent with the history of Supreme Court patent jurisprudence dating to the early 1800s. Further, even in those areas where I vehemently disagree with the Court's rulings (e.g. patentable subject matter), I think that disagreement is not because the Court fails to understand the issues. Instead, the Court has made policy choices that I disfavor.

In any event, this essay is worth a read regardless of your view of Court jurisprudence.

Blockbuster IP Term for 8-Member SCOTUS

After the Senate's failure to move forward with Judge Garland's nomination to the Supreme Court, the conventional wisdom was that the Justices would shy away from politically sensitive cases that could lead to 4-4 splits, focusing instead on areas such as intellectual property in which cases tend to be unanimous. So far, that's spot on. The Court added a hot patent venue case to its docket this week, its seventh IP case for the Term so far. For those who have lost count, here's a quick round-up. You can also see my list of all Supreme Court patent cases back to 1952 here.

TC Heartland v. Kraft Food (cert granted Dec. 14): Does a change to the general federal venue statute affect the venue rule in patent cases? Most observers think this is the end of E.D. Tex.'s patent dominance—and perhaps the end of the incongruous Samsung ice-skating rink outside the Marshall, TX courthouse.