Cruel of Law

An important feature of the rule of law is the economic support imparted by its predictability, a growth-supporting quality enabling the economically necessary use of contracts, deeds, debt, trusts, currency and licensing. Without it, long range planning and investment are impossible, variously timed delivery differences would cancel trades, and mutually beneficial transactions would necessarily be crammed into the immediate present. The absence of a predictable rule of law thus severely hamstrings economic progress. Patent law depends heavily on its special rule of law. It is expressly created in our Constitution to authorize Congress to provide future investment reliability for a “limited times.” What does limited mean? It doesn’t say how much time but it certainly means some. But if AIA’s IPR can nullify a patent throughout its term all the way to expiry, metaphysically there is no “limited” time. If laws and court decisions continue to nullify effective patents retroactively, the express constitutional provision for prospectively “limited times” is distorted. If patent rights are property rights instead of public privileges, Article I agency-appointed PTAB tribunals cannot be constitutionally enabled to cancel them without reference to the protections in Article III and the Bill of Rights.

A wise man once warned me that standing by themselves, arrogance or ignorance was to be pitied, not condemned but combined in positions of power, they are extremely dangerous. So it is with patents. Our nation’s patent system finds itself caught between apathetic ignorance and under-informed assertiveness. On the one hand, there is the proud apathy of congressional ignorance that resulted in AIA’s PTAB. On the other, there is the under-informed assertiveness of SCOTUS that still uses the term “patent monopoly” in Impression Products v. Lexmark while erasing decades of established patent law by retroactively altering the impact of conditional sales that conformed to existing law when made. Such retroactive conduct scorns patents’ special “limited time” rule of law, by enacting retroactive nullifications unforeseeable during past compliance by legal practitioners as well as practitioners of grant patents. Retroactive patent nullification decisions have become commonplace in the courts and Congress. From AIA’s IPR to Lexmark’s recent nullifications of then complying conditional sales, such conduct not only cancels past established economic process, but it also deters future investment of innovative time and developmental financial support in our nation’s innovation ecosystem. It harms our economic future. The on-going self-inflicted collapse of the patents’ rule of law has become a counter-productive “cruel of law.” Worse, stopping this relentless DC march to economic madness may itself be madness. Can we halt them? Continue reading Cruel of Law

AAMC Acts Collectively to Rescue NIH’s Commercialization Mission

On the day the president’s budget was released this week 300+ medically engaged entities and associations nationwide, the backbone of our nation’s biomedical research ecosystem including many universities, disease advocacy groups, and medical centers, signed a full-page ad in the WSJ and POLITICO. Sponsored by “The Ad Hoc Group For Medical Research” and paid for by the Assoc. of American Medical Collages, its purpose was to thank Congress for its recent increased support for basic medical research. Ascribing US medical and economic strength to congressional bipartisan medical research, its content was straightforward and simple.

“When it comes to the Nation’s health
There’s One thing we can all agree on
Medical research Makes America Healthier and Stronger. ”
“LET’S KEEP THE PROGRESS GOING. INCREASE FUNDING FOR NIH BY 2 BILLION IN 2018.”

IP Strategic gratefully salutes this concerted effort to come to the rescue of NIH’s critical role in our life science innovation ecosystem.

Within our national health care ecosystem, NIH is the bridge between congressional R&D public investment in otherwise uninvestable life science and private sector development of its commercially promising results through Bayh-Dole directed commercialization. The ad’s focus is the NIH’s bridge’s on-ramp of congressional R&D funding. For the ecosystem to work the commercialization bridge’s off-ramp of private sector investment and development also must provide public benefit with its therapies, jobs and economic development. Off-ramp commercialization requires private sector investment which in turn requires reliable patent protection. Support and direction of commercialization bridge traffic flow is NIH’s mission. That bridging mission is undercut at its entry point by the Trump budget and effectively undermined at its exit point by patent uncertainties created by Congress, SCOTUS, and the USPTO. Here are just a few: Continue reading AAMC Acts Collectively to Rescue NIH’s Commercialization Mission

Efficient Infringement Works

Patent reform veterans agree that its proponents’ penetration of DC policy maker “top of mind” with its misleading patent troll narrative is what led SCOTUS and Congress down the primrose path to the twin disasters of eBay and AIA and everything that has followed both. Inundated with Amicus brief and anti-patent administration input, the Courts accepted Justice Kennedy’s uninformed musings in his concurrent opinion where legislating from the bench he effectively erased patents’ presumption of validity while for certain patent holders he replaced patent exclusivity with compulsory licensing. The term’s congressional use, (which the FTC described later as “unhelpful”) enabled busy salons to say “no” to a conjured bogeyman by saying “yes” to comprehensive patent litigation reform too few had understood. The tactic switched the “burden of persuasion” from patent reform’s proponents (where passing any bill belongs) to the bills’ opponents. And when it comes to arcane patent litigation that is a massive burden. C’mon man! There is no “elevator pitch” to explain why anyone running for the next election should not say “yes “to cash-laden Silicon Valley mega techs on a complicated bill the public doesn’t care about. Better to say “no” to predatory trolls. Pro-patent advocates were back-footed long before they climbed Capitol Hill.

“Efficient infringement” is economically explained in a short essay by economist Adam Mossoff. Below are its closing paragraphs. Efficient infringement may never be as effective as the patent troll meme, but it is short, it efficiently describes an economic practice that is far more prevalent than the occasional abuses of the few patent trolls that remain, and it is readily described even on the shortened elevator rides available on the Hill. Most important it is real and succinctly explains why big tech wants patent litigation revision that adversely affects ALL patent holders and not just abusers.  Efficient infringement is economically sound even though it is unlawful and morally reprehensible. Its use is an insurance policy against lesser-resourced patent holder assertion. It is time Congress and the courts said “no” to efficient infringement!

Continue reading Efficient Infringement Works

Our Patent System Needs More Than An IPR Fix

Under Secretary of Commerce, Michelle Lee has begun an initiative to further shape and improve PTAB  Her Senior Advisor at the PTO will be “coordinating this effort.  Because her tenure is ending soon her post grant “effort’s” timing has caused some to wonder whether she plans to fix AIA’s second windows or to preserve them. Whatever her unspoken motives, if any, an official in-depth review of PTAB’s past performance is warranted. But is the PTO looking in the right places?

Continue reading Our Patent System Needs More Than An IPR Fix

The Chicken or the Egg

The old question which came first, (one of life’s most perplexing riddles) is often asked about “efficient infringement” (E I) and “patent trolls ” the conjoined twins invented by ICT bigs to degrade our patent system. Inspired by Samuel Butler’s famous species preservation observation that, ” Hens are the egg’s way of making another egg”, we think it important to explain that chronologically EI was first in line. Thematically originating with the mythic tale of “Billy Goat Gruff”, the term “patent troll” was invented at Intel by Peter Detkin (who ironically now helps Nathan Myhrvold run Intellectual Ventures.) “Patent Trolls” have long and ably served; as a device to distract the IP community from EI, as a symbolic cookie easily snarfed by academic street walkers and a lazy press, as a goad for SCOTUS patent property dilution and as “shiny object” by which to engineer enactment “bait-and-switch” AIA in an apathetic Congress. Even though EI literally created them, Patent Trolls have consistently preceded E I in whatever passes for” top of mind” awareness on Capitol Hill. Having recently been labeled “unhelpful” by the FTC, the term reappeared in a recent anti-patent op-ed in “The Hill”. So, although the troll meme has grown tired, it still is being kept alive. Its more obscure E I twin lives-on as well. Indeed, E I is now more prevalent as ICT biggies get bigger, patents become less reliable and costlier, and early stage innovation retreats to secondary market’s cheaper “bird-in-the-hand” monetization. Until courts see it for what it is, EI will continue creating market demand for assertion specialists among up-stream patent holders. Demand legislation could finish off obvious abuse by bad actors. The more pressing issue is how can EI be stopped? Continue reading The Chicken or the Egg

Canada’s “Promise Doctrine” to Continue Weakening Patent Reliability

Canada’s pernicious ” Promise Doctrine” has been upheld by a NAFTA tribunal in which Eli Lilly claimed that Canada’s unique judicially-created “promise doctrine” by which patented subject matter is strictly held to the application predicted specifics of its patent application claim even though new uses have emerged since its development and use. In contrast to SCOTUS “over-broad” concerns underlying continuing US patent eligibility, Canada’s unique requirement that the “promise” (i.e. its described future post development use) creates and absolute limitation on its enforceability for any other use. So, if a patent claim describes a process to prevent apples from quickly turning brown when cut can be similarly used for pears, its patent protection applies only to apples.

Driven by Canadian generic drug makers seeking to narrow patent protection, the doctrine is inconsistent with AIA mandated First to File patent prosecution requirements which compel early applications to assure patent protection for early stage innovation. But often during its development and use the method to accomplish A. is later found to accomplish B as well. In virtually all other patent venues the A. Patent would provide exclusivity protection to its applicability to B. Continue reading Canada’s “Promise Doctrine” to Continue Weakening Patent Reliability

More on Judge Gorsuch

The Judge Gorsuch concurrent Gutierrez opinion calls for fresh analysis of the venerable Chevron Doctrine, according to which agency interpretations of ambiguous statutory language are routinely deferred to by the courts. According to Judge Gorsuch, this gives the Executive branch what amounts to unconstitutional Article I law-making authority clearly conferred on Congress by Article II. Continue reading More on Judge Gorsuch

Trump Moves Towards Life Science Support

The pre-election clamor about prescription drug pricing took an interesting turn last week following President Trump’s meeting with prescription drug-makers at the White House. Earlier this year pricing abuse by rogue firms whose lack of competition in certain markets enabled upward price ratcheting attracted glaring press outrage leading to presidential campaign promises to curb prescription drug pricing if elected. Unfortunately, top down price controls cannot cure this market malady. Indeed, by choking-off investment in basic life science research to develop cures advancing competition they will only worsen it. Post-AIA uncertainty plaguing commercialization is shrinking independent private investment in the long and costly development of high-risk life science products, shielding sole suppliers to certain patient markets from competition. Continue reading Trump Moves Towards Life Science Support

State Research University Immunity from PTAB Review

In a recent post, patent law guru Dennis Crouch discussed PTAB’s 11th Amendment Sovereign Immunity decision exempting state research universities and their affiliates from IPR review.

For those of us inclined to suspect PTAB’s justifiable fears of constitutional elimination (which also could nullify AIA itself which has no savings clause) one reader’s anonymous comment was intriguing …

“Believe me, PTAB considered all angles before this decision. My informed speculation would be this decision is from the solicitors office and the political branch and was given to the panel. It’s pure self preservation. To ignore the 11th as this juncture, would create a SCOTUS scenario, in which the entire framework of the IPR construct would need to be squared against a separation of powers and federalism framework implicated by the purpose behind the 11th amendment. Screwing the requestor and dismissing under the 11th, allows the IPR construct to survive another day. And the longer PTO can keep the IPR construct in place, the better chance it has to survive.”

Sovereign Immunity Excuses University of Florida from IPR Challenge by Dennis Crouch

As public universities continue to obtain more patents, issues of sovereign immunity continue to arise. In a recent decision, the Patent Trial and Appeal Board (PTAB) dismissed a trio of inter partes review proceedings against the University of Florida based upon its claim of sovereign immunity.[1]

The 11th Amendment to the US Constitution limited the “Judicial power of the United States” so that it does not “extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.”[2] Although the text of the amendment appear to include several important limitations that might exclude an administrative action (“judicial power; “suit in law or equity”), the Supreme Court has broadly interpreted the statute precluding many adjudicative administrative proceedings.  For anyone who is not an American lawyer, you may need to pause here to recognize that each of the 50 American states are treated as sovereign governments and, although the Federal Government sets the “supreme law of the land,” its powers are limited by the U.S. constitution and federalist structure.

The Supreme Court has interpreted this amendment to encompass a broad principle of sovereign immunity, whereby the Eleventh Amendment limits not only the judicial authority of the federal courts to subject a state to an unconsented suit, but also precludes certain adjudicative administrative proceedings, depending on the nature of those proceedings, from adjudicating complaints filed by a private party.  Following Supreme Court precedent from other areas of law, the Federal Circuit held in Vas-Cath[3] that Missouri’s sovereign immunity allowed it to avoid an interference proceeding.

The petitioner Covidien argued that the PTAB should think of the IPR as an in rem action directed at the patent rather than at the patent owner.  However, the PTAB rejected that argument – finding that the procedural elements of inter partes reviews and estoppel provisions make it look much like contested litigation – the very thing protected by the 11thAmendment.

The Panel:

On the whole, considering the nature of inter partes review and civil litigation, we conclude that the considerable resemblance between the two is sufficient to implicate the immunity afforded to the States by the Eleventh Amendment. Although there are distinctions, such as in the scope of discovery, we observe that there is no requirement that the two types of proceedings be identical for sovereign immunity to apply to an administrative proceeding. Further, we note that there are several similarities between civil litigation and inter partes review that are not unlike those compared in Vas-Cath for interferences.

Outcome here – Dismissed before Institution based on Sovereign Immunity of the patentee.  Moving forward it will be interesting to see whether the Federal Circuit is willing to hear an appeal or instead apply the standard law that institution decisions are not subject to appeal.

The dispute between the parties extends back to a license agreement between UFL and Medtronic/Covidien of the patent at issue. UFL exerted its right to audit the books, but was refused by Medtronic.  UFL then sued in state court on the contract.  Medtronic counterclaimed for DJ of invalidity/noninfringement and removed the case to federal court on the patent claims and on diversity grounds.  The district court however remanded back to state court on sovereign immunity grounds.  That remand is now on appeal at the Federal Circuit, although the court has just issued a show-cause – asking whether the case should be transferred to the 11th Circuit.  Under the AIA-revised statute, cases go to the Federal Circuit if either the civil action “arises under” US patent law or a “compulsory counterclaim” arises under patent law.  Here, it is clear that the counterclaim is a patent claim, but the big question is whether it is “compulsory” – normally defined as one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.”[4]

Of interest though, in the order to show cause, the court suggests that it might keep the case in the “interest of justice” rather than transfer it. [5][federalcircuitjurisdictionorder]

= = = =

[1] See Covidien LP v. University of Florida Research Foundation Inc., Case Nos. IPR 2016-01274; -01275, and -01276 (PTAB January 25, 2017).

[2] U.S. CONST. amend. XI.

[3] Vas-Cath, Inc. v. Curators of Univ. of Missouri, 473 F.3d 1376 (Fed. Cir. 2007).

[4] Fed. R. Civ. P. 13(a)(1)(A).

[5] 28 U.S

 

Justice Gorsuch?

We believe it will be messy but Judge Gorsuch will be confirmed as Justice Gorsuch. Significantly his textual originalism tilts his constitutional analysis towards limiting the kind of federal agency overreach we have come to expect from USPTO’s IPR. We suspect he similarly will be suspicious of AIA’s legislative history shenanigans, some of which occurred after its passage. He thus is unlikely to support efforts by any USPTO Director to administratively bend AIA’s ambiguities in ICT tech’s direction. Continue reading Justice Gorsuch?