Tug-of-war over interpretations of patent law continues between Federal Circuit and SCOTUS
The U.S. Supreme Court has tried for 10 years to rein in the U.S. Court of Appeals for the Federal Circuit and its strongly pro-patent interpretations of the law, yet the tug-of-war does not appear to be letting up.
Two recent decisions suggest the lower court is adamantly sticking to its position no matter what the Supreme Court says. The Federal Circuit issued one decision that refuses to apply Supreme Court precedent and a second controversial decision that undermines a seminal high court ruling.
These rulings are likely to boost confusion in patent law, increase patent litigation and heighten tensions between two of the highest courts in the nation.
Historically, the Supreme Court paid little attention to patent law. That changed in 2005, when it began reviewing an unprecedented number of the Federal Circuit’s patent law decisions. The court heard 27 patent cases over the next 10 years, and in 22 of them the justices overturned the Federal Circuit’s interpretation of the law.
“The Federal Circuit has not done well. It has replaced the 9th Circuit as the most reversed court,” says Mark A. Lemley, a professor at Stanford Law School.
The Supreme Court’s last decade of patent rulings displayed three trends. First, the high court repeatedly cut back on patent protections that had been upheld by the Federal Circuit. Second, the court repeatedly rejected the Federal Circuit’s use of bright-line rules for patent law and insisted on a flexible, case-by-case analysis. Third, the court repeatedly rejected special rules for patent litigation that had been created by the Federal Circuit.
“There is a history of the Supreme Court trying to harmonize patent law with the rest of the law and getting rid of patent-specific rules. That is one of the things driving the Supreme Court to take patent cases,” says Matthew K. Blackburn, a partner in the San Francisco office of Locke Lord and chair of the Patent Litigation Committee of the ABA’s Section of Intellectual Property Law.
THE FEDERAL CIRCUIT STRIKES BACK
The Federal Circuit did not respond well to the Supreme Court, often applying the high court’s rulings narrowly and, apparently, rather reluctantly. This dynamic was evident after the Supreme Court vacated a Federal Circuit ruling that upheld the patentability of isolated human genes. The high court instructed the lower court to reconsider the ruling in light of a Supreme Court decision that reduced the scope of patent-eligible subject matter, but the Federal Circuit did little reconsidering. The circuit applied the same reasoning and came to the same conclusion as before, upholding patents on isolated human genes in 2012’s Association for Molecular Pathology v. U.S. Patent and Trademark Office. “The Federal Circuit wrote the same decision twice,” says Arti Rai, a professor at Duke University School of Law.
The Supreme Court reversed. The justices held unanimously in Association for Molecular Pathology v. Myriad Genetics that naturally occurring gene sequences, even when isolated from other parts of DNA, were natural phenomena and thus unpatentable.
This was not an isolated instance of Federal Circuit obstinacy, and the Supreme Court was well aware of the lower court’s behavior, as indicated by Chief Justice John G. Roberts’ remarks during the June 2009 oral argument in Carlsbad Technology Inc. v. HIF Bio Inc. Noting that circuit courts uniformly applied a certain standard, Roberts said: “Well, they don’t have a choice, right? They can’t say, ‘I don’t like the Supreme Court rule, so I’m not going to apply it—other than the Federal Circuit.’ “
A NEW HOPE
Some experts expect the Federal Circuit to end its feud with the Supreme Court, now that a majority of that circuit’s judges have retired and been replaced by President Barack Obama’s appointees. “There were judges who used to try to write around Supreme Court rulings, but no one left on the bench has revealed such inclinations,” says Meredith Martin Addy, a partner in the Chicago office of Katten Muchin Rosenman.
That view, however, is hard to reconcile with the Federal Circuit’s Sept. 17 decision in Apple v. Samsung, which tries to write around the Supreme Court’s 2006 decision in eBay v. MercExchange. That seminal high court ruling threw out the circuit’s unique, bright-line standard that practically guaranteed injunctions against patent infringers. The Supreme Court unanimously held that, like other civil litigants, a patent litigant seeking an injunction must satisfy the traditional four-factor test:
• That it has suffered an irreparable injury.
• That remedies available at law, such as monetary damages, are inadequate to compensate for that injury.
• That, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted.
• That the public interest would not be disserved by a permanent injunction.
After eBay, patentees obtained far fewer injunctions. They also found it nearly impossible to obtain an injunction when an infringed patent was just a tiny part of a large, complex product or service, because the courts (including the Federal Circuit) repeatedly held that irreparable harm exists only when an infringing feature “drives consumer demand” for the infringing good or service.
The Federal Circuit reversed this stance in Apple, adopting a new, pro-patentee interpretation of “irreparable harm.” By a 2-1 vote, the panel held that such harm exists when a patented feature “impacts customers’ purchasing decisions” or is “important to customers.”
This redefinition of irreparable harm favors patentees seeking injunctions, but it can be reconciled with eBay. That Supreme Court decision “left open how the four-factor test should be interpreted. This Federal Circuit decision is filling in some of that gray area, rather than announcing a new legal standard,” says J. Karl Gross, a member of Leydig, Voit & Mayer in the firm’s Chicago office.
However, the Federal Circuit’s interpretation of the fourth factor—public interest—more clearly challenged eBay. “The public interest nearly always weighs in favor of protecting property rights” of patentees, the court stated. And when a patentee practices its inventions, “the public interest strongly favors an injunction.”
This doesn’t square well with eBay. “The Federal Circuit is putting its thumb on the scales in favor of injunctions, rather than applying a true neutral analysis of this [public interest] factor,” Gross says. “That will be seen as counter to eBay, which tried to adopt a neutral approach on whether to grant injunctions.”
Judge Jimmie V. Reyna’s concurrence goes even further in attacking eBay, asserting that merely violating a patentee’s right to exclude is sufficient to constitute irreparable harm. “That takes on the whole notion of eBay,” says Lemley. “Judge Reyna wants to reject eBay and presumptively grant injunctions in every case of patent infringement.”
THE PETRELLA MENACE
In SCA Hygiene Products v. First Quality Baby Products, the question before the Federal Circuit last year was whether to follow the Supreme Court’s rule on laches, which can bar a plaintiff from recovery if there’s an undue delay in seeking relief. The lower court decided to follow the high court only partially.
The en banc Federal Circuit unanimously struck down its old bright-line rule that laches did not bar any prospective relief, declaring it incompatible with Supreme Court precedents. According to the Federal Circuit, the four-factor test of eBay requires that when a court is considering an injunction against patent infringement, it must take into account a patentee’s laches. Two other high court cases—Petrella v. Metro-Goldwyn-Mayer, 2014, and Menendez v. Holt, 1888—mandate that laches may bar ongoing royalty payments, but only in extraordinary circumstances.
The main question before the Federal Circuit, however, was whether laches could prevent a patentee from recovering monetary damages for past infringements. The court decided 6-5 not to follow Supreme Court precedent in Petrella.
Petrella held that laches did not bar money damages for past copyright infringements. The Federal Circuit limited this ruling to copyright law, declaring that the patent statute required a different interpretation. Laches can bar damages for past patent infringements, the court said.
Five judges joined in a strong dissent, highlighting the “Supreme Court’s clear, consistent and longstanding position on the unavailability of laches to bar damages claims filed within a statutory limitations period.” Moreover, the dissent noted, “the Supreme Court has repeatedly cautioned this court not to create special rules for patent cases.”
If Petrella is any indication, the Supreme Court and the Federal Circuit may not be ending their disputes anytime soon.
This article originally appeared in the January 2016 issue of the ABA Journal with this headline: “Patent Tension: The Federal Circuit and the Supreme Court continue their tug-of-war over interpretations of patent law.”
