IP Law - Analysis


Supreme Court Rules That A Patentee Bears Burden Of Proving Infringement, Even If It’s A Defendant.

Subject: Court Decision - Medtronic, Inc. v. Mirowski Family Ventures, LLC

Posted January 29, 2014 By David C. Berry

The U.S. Supreme Court kicked off its patent-related work for the September 2013 term on Tuesday with a unanimous decision in Medtronic, Inc. v. Mirowski Family Ventures, LLC, No. 12-1128 (Jan. 22, 2014). In a 9-0 decision, the Court reversed the U.S. Court of Appeals for the Federal Circuit and held that in a declaratory judgment action, the patentee always bears the burden of proof on the issue of patent infringement.

Patent infringement litigation in federal district court can commence with one of two forms of action. In the more common direct action, the patent owner files a “coercive” claim for infringement against an accused infringer. The infringer usually responds by filing a counterclaim seeking a declaration that the asserted patents are not infringed and invalid. In these coercive actions, the patentee always bears the burden of proof on infringement.
In the second type of action, a non-patentee who is concerned that it might be infringing a patent attempts to draw first blood by filing a declaratory judgment (“DJ”) action under the Declaratory Judgment Act, 28 U.S.C. § 2201. The potential infringer is nominally the plaintiff in such an action. The defendant-patentee typically responds with a counterclaim alleging infringement. In DJ actions involving coercive counterclaims, the patentee always bears the burden of proof on infringement. In addition, because the patentee is the “natural plaintiff,” in most DJ actions of this type the court essentially proceeds as if the patentee was the plaintiff.

Medtronic involved a somewhat unusual situation in which a concerned non-patentee filed a DJ action, but the defendant-patentee was precluded from filing a coercive counterclaim. The case involved a license agreement covering patents for implantable cardiac pacemakers owned by Mirowski Family Ventures (“MFV”). The license provided that if Medtronic introduced a new product, and the parties disputed whether the product embodied subject matter claimed in the licensed patents, then Medtronic could commence a DJ action to litigate the issue of liability and pay the disputed royalties into an escrow account pending the outcome of the action.

When just such a dispute arose, Medtronic filed a DJ action in the U.S. District Court for the District of Delaware. The district court ruled that MFV – as patentee – had the burden of proving that the new Medtronic product infringed the licensed patent claims, and that MFV failed to meet that burden. On appeal, the Federal Circuit reversed. It held that although patentee-defendants in DJ actions usually bear the burden of proof on infringement, an exception exists where the DJ plaintiff is the only party seeking relief in the action. Since MFV had no grounds to file a counterclaim alleging infringement due to the fact that the license to Medtronic was still in force, the appeals court ruled that the exception applied and Medtronic should bear the burden of proof.

On appeal, a unanimous Supreme Court ruled that the district court was correct, and MFV must shoulder the burden. Associate Justice Stephen Breyer wrote for the Court and stated that this result was supported by “simple legal logic.” First he noted that the Declaratory Judgment Act was intended to be a purely procedural device to permit parties subject to a cloud of potential liability to file suit and clear the air. The burden of proof, by contrast, is a substantive element of a patent infringement claims. Thus, the use of the DJ procedure should not affect the normal evidentiary burden.

Second, Justice Breyer noted that practical problems would result if the burden was shifted to the non-patentee. First, in presenting its proofs, a non-patentee would have to anticipate the patentee’s infringement theories, leading to a potentially confusing and inefficient trial. In addition, the shifted burden could create confusion about the effective scope of a patent. Breyer envisioned a situation in which both the non-patentee and the  patentee filed actions relating to the same accused product, but both failed to meet their burden of proof on infringement. As a result, the different burdens might leave “infringement question undecided, creating uncertainty among the parties and others who seek to know just what products and processes they are free to use.” Slip op. at 7.

Perhaps most compelling was the Court’s policy rationale for not shifting the burden of proof to the DJ plaintiff. The court invoked its prior decisions in Lear, Inc. v. Adkins, 395 U. S. 653 (1969) and, more recently, MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118 (2007). In Lear, the Court ruled that the strong public interest in sweeping away defective patents justified abrogating the doctrine of licensee estoppel, which had prevented patent licensees – usually the only parties with the motivation and knowledge necessary to challenge a patent – from filing claims seeking to invalidate issued patents. In MedImmune, the Court made it easier for a party concerned about potential infringement liability to maintain a DJ action challenging the patent by allowing a licensee to file a DJ action even though the license remained in place. Taken together, those two cases demonstrate that licensee challenges to patents are an important counterweight in the patent system machinery. If the Court shifted the burden of proof, however, then a licensee or other non-patentee who took on the task of litigating a patent would be put at a disadvantage compared to others who simply waited to be sued in coercive actions. The Court noted that, “[t]he general public interest considerations are, at most, in balance. They do not favor a change in the ordinary rule imposing the burden of proving infringement upon the patentee.” Slip op. at 11.

The entire opinion is available HERE.

 

Supreme Court Upholds First Sale Doctrine in Imported Textbook Case

Subject: Court decision - Kirtsaeng v. John Wiley & Sons, Inc.

Posted March 26, 2013 By Gerald T. Tschura

In a much anticipated decision, the Supreme Court ruled (6-3) that the first sale doctrine which permits the owner of a lawful copy of a copyrighted work to resell such copies without the permission of the copyright holder, applies equally to owners who have acquired or imported legitimate copies manufactured and sold abroad. As a result of what many are calling a landmark ruling, publishers of copyright protected works such as books or music, cannot use copyright law to enforce price discrimination by prohibiting importation and resale of their lower priced foreign made works often priced on a country by country basis. This decision comes in the case of Kirtsaeng v. John Wiley & Sons, Inc. reversing an August, 2011 ruling in the Second Circuit in favor of the publisher, Wiley, prohibiting Kirtsaeng from importing and reselling in the United States, foreign editions of Wiley textbooks printed for exclusive distribution and sale abroad.

Supap Kirtsaeng, a Thai native studying at Cornell, had his friends and family in Thailand buy foreign editions of Wiley's textbook in Thailand, which sold for much lower prices than the editions in the U.S., and ship them to him where he sold them through online auctions such as eBay for profit. Wiley sued Kirtsaeng for the unauthorized importation and sale of the books. Both the District Court and the Court of Appeals held the first sale doctrine did not apply to works that are manufactured abroad even though the works were legitimately manufactured abroad. 

Justice Breyer, writing for the majority, focused on the language of the statutory implementation of the first sale doctrine, Section 109(a) of the Copyright Act, which applies to any work "lawfully made under this title." In the opinion, the Court held that the phrase "lawfully made under this title" is not meant to impose a "geographical limitation" on the doctrine. In Breyer's view, such a geographical limitation would fail to further the basic constitutional copyright objective, namely, "promot[ing] the Progress of Science and useful Arts."

The law, as it applied in this situation, has remained unsettled for fifteen years leaving, to many minds, a legal ambiguity in the drafting of 109(a) supporting two different but perhaps equally plausible interpretations. One, of course, favoring the publisher/copyright holder and the other the consumer. In the end, Justice Breyer came down on the side of consumer rights:

Putting section numbers to the side, we ask whether the ‘first sale’ doctrine applies to protect a buyer or other lawful owner of a copy (of a copyrighted work) lawfully manufactured abroad. Can that buyer bring that copy into the United States (and sell it or give it away) without obtaining permission to do so from the copyright owner? Can, for example, someone who purchases, say at a bookstore, a book printed abroad subsequently resell it without the copyright owner’s permission?

In our view, the answers to those questions are, yes.



Supreme Court Limits Federal Court Role in Patent-Related Disputes

Subject: Court decision - Gunn v. Minton

Posted March 13, 2013 By David C. Berry

In February's 9-0 decision in Gunn v. Minton, the U.S. Supreme Court ruled that a state law action that includes a substantive issue of federal patent law must be heard in state court, not federal court. The decision may allow state courts to determine patent issues which in the past were the exclusive province of the federal courts.

Gunn involved a state-court action for legal malpractice relating to a failed patent infringement litigation. The patentee, Minton, lost the infringement case when the trial court ruled that his patent was invalid for violating the "on-sale" bar. Gunn, Minton's attorney in the infringement action, argue that the on-sale bar did not apply under the experimental use exception. Minton subsequently sued Gunn for malpractice under Texas state law. The Texas Supreme Court ruled that because the malpractice claim turned on whether the experimental use exception would have saved the patent, Minton's malpractice claim "arose under" the federal Patent Act, and thus was subject to exclusive federal jurisdiction under 28 U.S.C. § 1338(a).

The Supreme Court reversed. The Court held that the patent issue was not "significant," because the outcome of the issue would not affect the "federal system as a whole." Essentially, the Court reasoned that Minton's patent was invalid, and the state court's determination of the experimental use issue could not change that result. Second, the Court ruled that allowing a federal court to hear the malpractice claim would disrupt the balance between federal and state courts established by Congress. Specifically, the Court noted that state courts have a special interest in deciding cases relating to the conduct of attorneys licensed in the state. Thus, the federal court lacked jurisdiction, and Minton's claim must be decided in the Texas state courts.

Under Gunn, other cases involving patent issues which are currently heard in federal courts may be sent to state courts. These include breach of contract actions relating to patent licenses and commercial disparagement cases based on allegations of infringement. For a fuller discussion of the Gunn v. Minton case, and whether the Court's decision addresses the practical and policy concerns resulting from state court jurisdiction over patent law issues, read Prof. Berry's paper, "Gunn v. Minton: The Supreme Court Pokes Another Hole In Exclusive Federal Jurisdiction Over Patent Rights," available on SSRN ID 2232879.


 

Cooley Patent Law Courses Focus On Changes Resulting From AIA

Subject: Leahy-Smith America Invents Act ("AIA")

Posted July 18, 2012 By David C. Berry

On September 16, 2011, President Barrack Obama signed into law the Leahy-Smith America Invents Act ("AIA"). The AIA was the culmination of efforts over many years to pass legislation to reform the U.S. patent system. The Act implements several important changes to the Patent Act, 35 U.S.C. § 1, et seq. Notable changes include converting the U.S. from a "first-to-invent" priority system to a "first-to-file-or-disclose" system, reforming the standards for prior art, and implementing post-grant administrative challenges to issued patents. Take together, the AIA represents to most extensive reform of U.S. patent law since the current Patent Act was enacted in 1952.

The AIA and its impact on the U.S. patent system is a prominent topic in patent law courses offered in Cooley's Graduate Program in Intellectual Property Law. During this summer term, the Advanced Patent Law Seminar focuses on recent patent law reforms, including the AIA and recent important decisions from the U.S. Supreme Court and U.S. Court of Appeals for the Federal Circuit. Students in the course are researching the developments and will present their research results during seminar sessions. In addition, the required LL.M. – level Patent Law course in Michaelmas 2012 has been revised extensively to address the AIA. Professor David C. Berry, who teaches patent law in Cooley's graduate IP program, notes that, "The changes resulting from the AIA have forced a wholesale revision of the structure of our Patent Law course. Surprisingly, the changes have made me reevaluate my approach to teaching patent law to our IP students. The result is a more interactive and effective patent law course."

The fall term Patent Law course will be offered in Auburn Hills, with live videoconference links to Cooley's campuses in Lansing, Grand Rapids, and Ann Arbor, and also in a synchronous on-line format.


 

Supreme Court Decides Bilski v. Kappos; Fate Of Business Method Patents Left In Doubt

Subject: Court decision - Bilski v. Kappos

Posted June 30, 2010 By David C. Berry

Since the Bilski v. Kappos case was argued in November 2009, patent attorneys and information technology companies have waited for the U.S. Supreme Court to rule on whether or not so-called "business method" inventions, including computer-implemented processes, are eligible for patenting under the Patent Act. 35 U.S.C. § 1, et seq. Although the Court ruled unanimously on June 28, 2010 that the specific method at issue in Bilski was not eligible for patent protection, the Court opted for a narrowly reasoned decision. As a result, the ruling provides little guidance for the U.S. Patent and Trademark Office ("USPTO") and the courts to apply in determining patent eligibility in future cases.

Bilski involved a patent application for a method of hedging against the risk of commodity market price fluctuations, such as in the energy market. The USPTO rejected the claims as ineligible for patenting under 35 U.S.C. § 101, on the grounds that the application did not result in a "useful, concrete, and tangible result," the standard for patentability established in the Federal Circuit's 1998 decision in State Street Bank & Trust Co v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (Fed. Cir. 1998). In a subsequent en banc decision, the Federal Circuit ruled that the "Machine-or-Transformation Test" was the exclusive standard for determining patent eligibility under § 101. In re Bilski, 545 F.3d 943, 959–960 (Fed. Cir. 2008)(en banc). Under the machine-or-transformation test, a process or method claim is patent-eligible only if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

In its recent holding, the Supreme Court affirmed the Federal Circuit's ruling that Bilski's commodity hedging invention was ineligible for patenting, but rejected the machine-or-transformation test as the exclusive test for eligibility of process inventions under § 101. Writing for a plurality of five justices, Associate Justice Anthony M. Kennedy stated that at least some business method patents are eligible for protection under the Patent Act. Although the machine-or-transformation test is an important "clue" in determining eligibility, it is not the sole standard to be applied. The Court criticized the "useful, concrete, and tangible result" test established in State Street, but it left the door open for the Federal Circuit to apply other tests for patent eligibility, consistent with the language of § 101 and prior Supreme Court case law.

Deciding the issue before the Court narrowly, Justice Kennedy ruled that the Bilski commodity scheme was merely an abstract idea, and therefore not protectable under the "guideposts" of prior Supreme Court cases involving computer-related inventions since 1972. The court declined to "define further what constitutes a patentable 'process,' beyond pointing to the definition of that term provided in [the Patent Act] and looking to the guideposts[.]"

In a lengthy opinion (his last in a nearly 35-year career on the Supreme Court), Associate Justice John Paul Stevens wrote for four justices in concurring in the result, but strongly disagreeing with the plurality's approach. Stevens wrote that the plurality decision will create "mischief," and preferred instead a blanket rule that business methods are categorically excluded from patent eligibility.

Although the Bilski opinions make it clear that process inventions amounting to mere abstract ideas are not patentable, the opinions taken together may not establish a reliable framework for analyzing patent eligibility in future cases. Other than the State Street test, which was criticized by all nine justices, the Court seems content to allow the lower courts to apply pre-State Street tests, or to experiment with new tests. As a result, the Bilski decision reaffirms that at least some business methods are patentable – but leaves open the question of how to determine which ones.


 

District Court Strikes Down Gene Patents

Subject: Court decision - Ass'n for Molecular Pathology v. USPTO

Posted April 13, 2010 By David C. Berry

In a decision restricting patents claiming human genetic discoveries, a result that may have far-reaching effects the biotechnology industry, the U.S. District Court for the Southern District of New York recently ruled that patents owned by Myriad Genetics claiming the BRCA1 and BRCA2 genes, which are associated with an elevated incidence of breast and ovarian cancers, are invalid because they fail to claim eligible subject matter under 35 U.S.C. § 101.

The plaintiffs, represented by the American Civil Liberties Union Legal Foundation, challenged the U.S. Patent and Trademark Office's policy of granting patents on isolated or purified genes.

The district court ruled that isolated genes do not have "markedly different characteristics" from naturally occurring (and thus unpatentable) genes, because the human genetic information encoded in the isolated genes remains identical to the information in nonisolated genes. The decision is Ass'n for Molecular Pathology v. USPTO, No. 09 Civ 4515 (S.D.N.Y. Mar. 29, 2010).


 

Senate To Consider Compromise Patent Reform Act

Subject: Analysis of Proposal Patent Reform Act of 2010, S. 515

Posted March 13, 2010 By David C. Berry

Efforts in Congress to pass comprehensive patent reform took a major step forward on March 4, 2010, when a bipartisan group of senators introduced a substitute proposal, known as the Patent Reform Act of 2010, S. 515.

The substitute act is the culmination of negotiations to resolve an impasse between industry groups with markedly different reform objectives, most notably the computer and electronics industry, which favored provisions weakening patent rights, and the pharmaceutical industry, which favored retaining strong patent rights.

The bipartisan agreement introduced in the Senate features the following major provisions:


 

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