Commentary: Tide turns for Federal Circuit in patent cases.

By Ronald Mann
on Jul 6, 2011 at 8:34 am

One of the most interesting features of the just-ended Term’s decisions is the surprising resurgence of the Federal Circuit.  For almost a decade, the Court has been on an apparent campaign to rein in “patent exceptionalism” at the Federal Circuit.  Thus, in a series of cases starting with eBay v. MercExchange, the Court has reversed pro-patent decisions of the Federal Circuit that rely on doctrinal peculiarities developed at the Federal Circuit level.  eBay itself rejected a presumption in favor of injunctive relief.  KSR v. Teleflex forced up the threshold for establishing that a patent describes an invention that is not “obvious” in light of prior art.  And although it affirmed the judgment of the Federal Circuit in Bilski v. Kappos, the Court implemented a major retrenchment in the Federal Circuit’s decade-long experiment in permitting relatively unbounded patenting of business methods.

But in the space of ten days during the last month of this Term, the Court handed the Federal Circuit affirmances in all of the Term’s three patent cases.  First, in Global Tech Appliances, Inc. v. SEB S.A., the Court affirmed the Federal Circuit’s holding that a Hong-Kong-based company which reverse-engineered a deep fryer could be held liable for “actively inducing” infringement even though it acted on the basis of a legal opinion that its product did not infringe.  Then in Board of Trustees of Stanford University v. Roche Molecular Systems, the Court rebuffed a challenge to the Federal Circuit’s conclusion that the Bayh-Dole Act vests title to federally funded inventions in the inventor rather than the government contractor.  Finally, in the most important of the cases, Microsoft Corp. v. i4i Limited Partnership, the Court acquiesced in the Federal Circuit’s longstanding conclusion that patent challengers must establish invalidity by “clear and convincing evidence” even when they present prior art that the Patent Office never saw.  [Disclosure:  Goldstein, Howe, & Russell, the sponsor of this blog, filed an amicus brief in support of respondent i4i in that case.]

Gone is the grand style of cases like eBay, KSR, and Bilski, when the Court’s opinions (resonating with Jaffe and Lerner’s 2004 monograph on Innovation and Its Discontents) started from the premise that the central problem in modern patent law is the adverse effects on innovation of aggressive enforcement of weak patents rubber-stamped by a quiescent Federal Circuit.  In the New Age of patent law, the Court shrugged aside such concerns in Microsoft, largely because even a “squint” could not discern that they influenced Justice Cardozo when he considered a similar issue.  This to affirm a nine-figure verdict and an injunction against marketing of Microsoft Word based on an obscure functionality that no ordinary user of the product could comprehend, much less deploy.  Similarly, the Court in Global Tech was so set on the unconscionability of a manufacturer’s decision to rely on a clean patent search that it created a new doctrinal category of knowledge sought by none of the parties (“willful blindness”) and used it to affirm a judgment resting on a jury verdict permitting a much lower standard of proof – precisely the slackness an earlier Court would never have tolerated from the Federal Circuit.

Gone are the days when “special rules for patents” were a bull’s-eye marking Federal Circuit decisions fated for reversal.  If counsel for Microsoft established anything in their briefing, it is that the “clear and convincing” standard for establishing patent invalidity is out of step with the Court’s general jurisprudence on burdens of proof.

Most interestingly, gone are the days when the critical views of prestigious scholarly amici line up in support of the Court.  Where scholarly amicus submissions played key roles in cases like eBay and KSR, the scholarly submissions were largely ineffective this Term.  A strong submission in Global Tech emphasizing the risks of making it too easy to pursue “inducing” liability against parties that do not themselves infringe turned out to be largely irrelevant when the Court turned the case into a dispute about a conspicuously bad actor.  And the high-profile support for turning back the “clear and convincing” standard was swept to the side in an opinion that started and (pretty much) ended with the notion that what was good enough for Justice Cardozo should be good enough for the twenty-first-century patent system.

Interestingly, although the run of wins for the Federal Circuit should quell any efforts to pair it with the Ninth Circuit as a major target of the Court’s discontent, the Court in the last week of the Term showed a willingness to continue its sustained attention to major patent issues, as it granted two more major patent cases for October Term 2011.  The first of these, Mayo Collaborative Services v. Prometheus, will follow Bilski’s examination of the Federal Circuit’s doctrine on patentability.  Here, the Federal Circuit has repeatedly approved a patent on a medical test that approaches the boundaries of rules that forbid patents on natural phenomena.  The second, Kappos v. Hyatt, will follow i4i’s examination of the deference due Patent Office decisions on patentability.  The issue here is the standards for introducing and assessing evidence in district court proceedings challenging a patent denial.  Because the district court’s authority rests on a distinct provision of the Patent Act from the provision at issue in i4i (used by holders of issued patents use to enforce their patents against alleged infringers), the decision in i4i sheds so little light on the correct answer that the Court apparently thought plenary review necessary.