21 March 2017

SCOTUS On Patent Law

SCOTUS to Federal Circuit: We Meant What We Told You The First Time

Today, the U.S. Supreme Court overruled the Federal Circuit again and held that the equitable doctrine of laches cannot be used to bar the recovery of patent infringement damages incurred within the six year statute of limitations. This follows another recent ruling that laches does not bar the recovery of damages for patent infringement incurred within the three year statute of limitations. The decision in SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC was 7-1.

More analysis is available at SCOTUS blog.

This is a rare ruling that is pro-patent holder, even though it reverses the Federal Circuit. Patent holders are now about 4 pro to 17 against to 4 neutral in U.S. Supreme Court litigation implicating patent law since 2005, a period which also included the America Invents Act in 2011 which was a major reform of U.S. patent law.

A Long Awaited Patent Venue Case

On Monday, the U.S. Supreme Court will hear oral arguments on a bigger patent law case where it granted certiorari. In the case of TC Heartland v. Kraft, the petitioner asks the U.S. Supreme Court to reaffirm its 1957 decision in Fourco Glass Co. v. Transmirra Products Corp., 353 U.S. 222 (1957), which held that venue was proper in patent infringement suits only in state where the defendant is located pursuant to 28 U.S.C. § 1400(b) (which has not been subsequently amended), and not also under the general venue statute for civil cases, 28 U.S.C. § 1391(c) (which has been amended since 1957), that would permit patent infringement suits to be brought anywhere that the defendant regularly conducts business.

This holding has led to widespread forum shopping in patent infringement cases (especially to the Eastern District of Texas which is known for its pro-plaintiff judges and juries in patent infringement lawsuits). 

A proposed bill in Congress to reverse this holding with bipartisan support that has been put on hold while it awaits a ruling from the U.S. Supreme Court. A decision for the petitioner in this case would be a major blow to patent holders because it would force them to seek much less favorable forums in which to bring suit, and yet another rebuke to the Federal Circuit for botching a seemingly straight forward case of statutory and case precedent analysis.

The Federal Circuit determined that the amendment of 28 U.S.C. § 1391(c) authorized it to revisit the U.S. Supreme Court's Fourco decision. In all likelihood, Monday's oral argument will reveal that the eight sitting Justices of the U.S. Supreme Court will almost unanimously disagree with the propriety of this decision and will signal a reversal of the often reversed Federal Circuit on this issue as well.

The outcome is telegraphed in part by the clarity of the issue, and in part because the Federal Circuit has exclusive jurisdiction over federal patent cases, so these cases are never taken up by the U.S. Supreme Court to resolve a circuit split where it may easily take either side of the split or some other approach entirely. Usually, Federal Circuit appeals of patent cases signal a likely reversal.

These two cases follow a long string of reversals of the Federal Circuit on patent law issues by the U.S. Supreme Court in recent years.

Exhaustion (update added March 22, 2017):

Another big case, Impression Products, Inc. v Lexmark Int’l, Inc.on the patent law doctrine of exhaustion (which is similar to the "first sale" doctrine in copyright law) was also argued on the day of the most recent patent law decision. The Justices are considering a case to limit that doctrine and thereby expand the rights of patent holders (e.g. to protect makers of proprietary ink cartridges for prints and proprietary coffee pods for coffee makers from products that refill them that are not made under license). Unlike copyright law in which the "first sale" doctrine is codified, the exhaustion doctrine was devised by Federal Circuit judges 25 years ago.
The case involves the doctrine of “exhaustion,” under which a patentholder’s rights to enforce its patent ordinarily are “exhausted” with regard to any particular object at the moment the patentholder sells the object. As applied to this case, for example, Lexmark’s rights to control the use of its patented refillable print cartridges would be “exhausted” when it sells those cartridges to retail buyers, even if Lexmark conditions the sale on the promise that the buyer will not refill the cartridge. That, at any rate, is the argument of Impression Products, which makes a business out of refilling Lexmark cartridges in violation of those agreements. Lexmark’s argument, by contrast, is that modern commerce requires that innovators have the flexibility to devise contracting structures that segment the market into separate sectors, each of which gets a different price commensurate with the uses to which products will be put in that sector.
The argument was to a "cold bench" leaving few hints regarding how the case will be resolved.

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