Lawyers, Judges at ‘Bench & Bar’ Conference Explore Mutual Role in Spurring Innovation(2)

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KEY BISCAYNE, FLA.—Jurists and practitioners at the Federal Circuit Bar Association's June 23-25 “Bench and Bar Conference” suggested a host of ways that the courts, government, companies, and attorneys can increase innovation.

Though there was inevitable commentary, both positive and negative, on the patent reform bill being debated on the floor of the U.S. House of Representatives during the conference proceedings, the meeting participants sought other ways to meet goals of promptness and predictability at both the Patent and Trademark Office and in the courts.

In fact, the audience arguably responded most favorably to a “corporate perspectives” panel that focused on streamlining agency and court processes well beyond the contours of patent reform.

Chief Judge Randall R. Rader of the U.S. Court of Appeals for the Federal Circuit, in a “state of the court” address, committed the court to take important cases en banc to provide more consistent decisions “beyond the next panel,” as well as to implement electronic filing within a year or so.

However, conference panelists were also concerned with ways to speed up lower court litigation and to get output from the PTO that more clearly establishes the metes and bounds of issued patents.

Review of 2011 Supreme Court Decisions

The conference began with a discussion of what many in the audience considered the most surprising occurrence of 2011, the U.S. Supreme Court's affirmance of all three patent cases it took up challenging the Federal Circuit's jurisprudence.

While the conventional wisdom has been that the high court takes Federal Circuit cases to reverse, Gregory G. Garre of Latham & Watkins, Washington, D.C., suggested that the court, after handling so many patent cases recently, “may now have a deeper understanding of the statutory history” of the Patent Act, leading it to be more likely to agree with the appeals court's views.

Thomas C. Goldstein of Goldstein, Howe & Russell, Bethesda, Md., in describing the result in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems Inc., No. 09-1159, 98 USPQ2d 1761 (U.S. 2011) (109 PTD, 6/7/11), said, “The Federal Circuit was affirmed, the U.S.'s position lost, and the patent owner won—contrary to the three general rules recently for how the court has handled patent cases.”

Garre discussed the result in Microsoft Corp. v. i4i L.P., No. 10-290, 98 USPQ2d 1857 (U.S. 2011) (112 PTD, 6/10/11), in which the court refused to upset, he said, the Federal Circuit's 30-year-old invalidity standard in favor of putting more emphasis on simply providing more flexibility in jury instructions.

Carter Phillips of Sidley Austin, Washington, D.C., said that perhaps the most significant result from the high court was its decision in Global-Tech Appliances Inc. v. SEB S.A., No. 10-6, 98 USPQ2d 1665 (U.S. 2011) (105 PTD, 6/1/11).

The court rejected an inducement standard proposed by the Federal Circuit but affirmed the appeals court by agreeing that the defendant was liable under a willful blindness standard. That will create “fairly substantial and difficult issues” for companies to determine “what you have to disclose to counsel” in getting patent clearance and freedom to operate opinions, Phillips said.

High Court's Patent Docket Next Term

Looking ahead, Phillips noted that the court granted cert in Mayo Collaborative Services v. Prometheus Laboratories Inc., No. 10-1150 (U.S., review granted June 20, 2011) (119 PTD, 6/21/11). He said that the issue presented—subject matter patentability for medical diagnostics and treatments—is “about as complicated and difficult conceptually to wrap your mind around,” and he could not make a prediction of the result.

Though the conference took place before the court granted certiorari in two more cases, the participants anticipated that the court would take those cases. Caraco Pharmaceutical Laboratories Ltd. v. Novo Nordisk A/S, No. 10-844 (U.S., review granted June 26, 2011); Kappos v. Hyatt, No. 10-1219 (U.S., review granted June 26, 2011). “The more [the justices] get to know an area, the more likely they are to want to hear more cases,” Phillips said.

A “town hall” meeting involving audience participation was focused on Mayo. Mark Jackson, senior patent counsel at Genetech Inc., and Erik Puknys of Finnegan, Henderson, Farabow, Garrett & Dunner, Palo Alto, Calif., led a query into why the court took the case in the first place. Specifically, it was noted that the Mayo case covers similar ground as another case that was dismissed by the high court with a three-judge dissent—Laboratory Corporation of America Holdings d/b/a/ LabCorp. v. Metabolite Laboratories Inc., 548 U.S. 124, 79 USPQ2d 1065 (2006) (121 PTD, 06/23/06). Since two of the three dissenting judges in the LabCorp. case are no longer on the court, the discussion facilitators questioned how the court managed to get enough votes to grant certiorari.

The biggest concern expressed by the town hall participants, nevertheless, was that the Supreme Court in Mayo could continue to confuse Section 101 statutory subject matter and Section 103 obviousness questions. One audience member said that such a concern was justified simply by looking at the question presented in that case: “Whether 35 U.S.C. §101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve ‘transformations' of body chemistry.” How well-known the methods are should not be part of a statutory subject matter query, he said.

However, Dennis Crouch, a law professor at the University of Missouri and operator of the Patently-O blog, suggested that the Supreme Court's interest in the Mayo case reflects its public policy approach to patent law. In contrast, he said, the patent community tends to compartmentalize the law into Section 101 and Section 103 details.

Whether patent stakeholders like it or not, Crouch said, “Mayo and Myriad are the public face of patent law,” the second reference being to the Federal Circuit's review of DNA patenting in Association for Molecular Pathology v. U.S. Patent and Trademark Office, No. 2010-1406, (Fed. Cir., oral arguments April 4, 2011) (65 PTD, 4/5/11). The two cases “get a lot of people up in arms,” he said.

Therasense Discussed

While the Supreme Court cases dominated discussions about patent rulings at the conference, one Federal Circuit decision in the last year received significant attention, Therasense Inc. v. Becton Dickinson & Co., No. 08-1151 (Fed. Cir. May 25, 2011) (en banc) (102 PTD, 5/26/11).

Crouch provided statistics on the history of inequitable conduct charges, generally to provide a base for assessing whether its use will drop in light of the May 25 en banc decision in Thereasense. However, an earlier case on pleading inequitable conduct already has and will likely continue to have more impact, Crouch said, pointing to Exergen Corp. v. Wal-Mart Stores Inc., 575 F.3d 1312, 91 USPQ2d 1656 (Fed. Cir. 2009) (151 PTD, 8/10/09).

The Federal Circuit in Exergen Corp. ruled that accusations of inequitable conduct require pleading with particularity under Fed. R. Civ. P. 9(b). Crouch reported three trends since that 2009 decision based on preliminary data: (a) parties are somewhat less likely to plead the defense; (b) when they do plead inequitable conduct, it is more likely now to arise in an amended pleading filed later in litigation; and (c) those pleadings often provide more detailed factual allegations, including the names of the patent attorneys accused of inequitable conduct.

Another town hall meeting addressed Therasense as well. Attendees told BNA that a significant part of the discussion—moderated by Judge Susan Braden of the U.S. Court of Federal Claims and Associate Dean for Intellectual Property Law Studies John Whealan of the George Washington University Law School—centered on whether the Federal Circuit's tightened standards for proving inequitable conduct will reduce the perception that patent applicants must provide a raft of prior art references to the PTO or risk inequitable conduct charges.

However, some in the audience reportedly argued that, instead, Microsoft v. i4i is likely increase the applicant's burden of producing prior art. That is, the high court in i4i signalled that lower courts should have considerable latitude in instructing juries to give more weight to references that were not disclosed to the PTO. Therefore, some argued, practitioners are likely to continue piling references on the PTO simply to avoid that jury instruction if litigation later ensues.

Innovation and Government

The analysis of court decisions provided only brief respites from the central theme of the conference, though, which was to cover the various ways in which patent system stakeholders affect innovation. The first panel on the topic, moderated by Senior Judge S. Jay Plager of the Federal Circuit, attacked the question from the government's perspective.

The PTO's solicitor, Raymond T. Chen, took multiple opportunities to argue in favor of the two patent reform provisions of greatest concern to the agency—granting the PTO fee-setting authority and allowing it to have access to all the fees it collects. A timely and high-quality examination system depends on predictable funding, he said.

Chen also commented on the Supreme Court's generalist view of patent law and its impact on the agency. The high court has repeatedly rejected the Federal Circuit's attempts to establish bright line rules in litigating, but Chen said that it is absolutely critical for patent examiners to have rules and to apply them. “We need clear rules from the courts to examine applications efficiently and also ensure we are issuing valid patents,” he said.

Plager commended the agency for recent guidelines to examiners that require that a patent application include clarifying language and that the application provides adequate definitions. The theme of clarifying the metes and bounds of issued patents would be repeated throughout the conference.

Stephen McGrath, senior attorney for patent litigation at Microsoft Corp., was more focused on what government can do in the area of enforcement. Shashank Upadhye, vice president of intellectual property at Apotex Inc., identified two areas for increased government involvement—expanded funding of basic research and major changes to the country's immigration policies, changing from a “company-centered” to an “individual-centered” visa policy that would encourage innovators to remain in the United States after they leave the companies that sponsored their visas.

Heinz Goddar, honorary professor at the University of Bremen, Germany, assessed the government impact on innovation in Europe. Though he cited pro-innovation policies in Germany in particular—for example, guaranteeing patent rights to the individual inventor that must be compensated by an employer—Goddar said that legislative patent reform aimed at enhancing innovation is no further along overseas than it is in the United States, pointing to the long-term failure to agree to a European Patent Court as an example.

E-Discovery Problems Must Be Addressed

Additional conference panels addressed the impact of court processes on innovation, as well as the dual goal of providing the same quality of justice with more efficiency and economy for all parties involved.

E-discovery was identified as a primary culprit for litigation delays, but some delays were attributed to brinkmanship between counsel and the “scorched earth” attitudes of antagonistic parties. Generally, though, Judge Faith Hochberg of the U.S. District Court for the District of New Jersey said, such uncooperative attitudes arise when one party is technologically savvy as to e-discovery techniques and the other party is not.

Magistrate Judge John Facciola of the U.S. District Court for the District of Columbia expressed the need to find ways to train the technologically illiterate, but was concerned that the bar will only get farther behind with the rapid changes in technology.

As Courtney Barton, senior e-discovery counsel for AOL, phrased it, “Technology is moving a million miles an hour while e-discovery is chugging along.” She added that the problem was compounded with having to monitor data not only on AOL's internal computing systems, but also stored on the internet.

“Technology is flying ahead and nobody is worrying what we're going to do with all this [data being collected],” Facciola said. “Plus, there are fundamental issues about privacy to be considered.”

Ultimately, the panel concluded that the best potential for a resolution to discovery problems is cooperation between counsel. Facciola said he appoints a special master for purposes of mediating e-discovery disputes as a form of “early intervention” to prevent problems. “We try to forge a cooperative atmosphere from the minute we get the case,” he said.

Speaking in the corporate stakeholder panel, Mark Sullivan, general counsel at Bose Corp., noted the increased speed of resolving cases in jurisdictions—most notably in Europe—that have minimal discovery.

T. Jason White, general counsel at Toshiba America Business Solutions Inc., agreed that less discovery would be a positive development, but contended that the indefiniteness as to the metes and bounds of patent applications is a predicate problem.

The only non-attorney to speak in any of these panels, Joseph Kiani, chairman and CEO of Masimo Corp., was happy for the role that discovery played in his litigation experience, even though it took almost seven years for his startup firm to win an infringement case. “Discovery is necessary,” he said. “The documents tell the true story.”

District Court Patent Judges' Ideas

The corporate panel expressed no clear preference for generalist judges or those with significant specialization in patent cases. However, according to Bart Newland, chief intellectual property counsel at Biogen Idec, “Scientific concepts are difficult for a jury to understand, and it requires a bifurcation between the way we present the case and the record we need on appeal.” He said, “We have to be careful not to glaze the jury's eyes over, but we need to get it into the record.”

Several district court judges comprised the panel that followed. Three will be involved in the recently announced 10-year pilot program to encourage enhancement of expertise in patent cases among district court judges : Chief Judge James F. Holderman of the U.S. District Court for the Northern District of Illinois, Judge Andrew Guilford of the U.S. District Court for the Central District of California, and Magistrate Judge Chad Everingham of the U.S. District Court for the Eastern District of Texas.

Judge Leonard Stark of the U.S. District Court for the District of Delaware, also sat on the panel. He said that his court was not included in the program because “We're the control group,” referring to the hundreds of cases already on each Delaware judge's docket.

Several additional efficiency ideas arose in their panel.

• Stays for reexamination. Holderman recalled discussions at a joint meeting in June in Berkeley, Calif., between PTO Director David J. Kappos and several district court judges. Going forward, Kappos apparently promised to provide, upon request from a federal judge, a reasonable prediction of when a particular patent reexamination proceeding by the PTO will be complete. He also said he would try to give priority to reexamining those patents involved in a litigation stay.

Guilford—particularly after hearing the comments in the corporate panel—said that he is developing the theme that “one-size-does-not-fit-all” when it comes to handling patent cases. For example, in determining whether or not to grant a stay, he said, the competitive marketplace at issue might suggest that one defendant, such as one contesting a high technology patent with a limited life cycle, might be seeking to delay litigation, while another defendant, such as pharmaceutical industry challenger, might not need such a quick result.

• Markman efficiencies. While there was no consensus on whether to hold a Markman hearing early in the case, Stark said he tries to get the parties at least to identify the key disputes jointly, to brief them in the same order, and then to come to an agreement on the order in which they will be argued.

Everingham argued for tighter briefing. “If there are only 2-3 [key disputes], then only write about 2-3,” he said.

• More attention to waiver. Holderman was particularly troubled by those who do not “put all your cards on the table” in his court, leaving arguments to raise for the first time on appeal. He asked the appeals court to “take a sterner look” at those arguments and rule in most cases that the arguments have been waived. When participants know they have to bring all issues up in my court, Holderman said, it will speed up the litigation and provide the predictability the conference attendees are seeking.

• Hard dates for trial. Holderman also said that he sets a trial date at the initial status conference and that he rarely grants requests for continuances.

The Federal Circuit Perspective

Of course, the Federal Circuit was the focal point of the conference, with multiple panels and presentations—in addition to Rader's state of the court address—describing events at the court in the last year.

The court's newest members, Judges Kathleen O'Malley and Jimmie Reyna, were joined by Judge Sharon Prost in a mostly lighthearted review of the collegiality of the court.

Reyna was elevated to the court March 10 after a career mostly in private practice. He laughed as he described his difficulty making the break from bench to bar. “I'm the only one still checking my e-mail in case there's a [client] fire I have to put out,” he said.

O'Malley, who joined the court Dec. 27, is the only member of the court rising from the district court ranks. The biggest difference she noticed when joining the court was that, “now you have to get someone else to agree with you.” Even her husband, a patent attorney, has lately been saying “You need another vote” on decisions around the house, O'Malley said.

One additional efficiency issue arose in the judges' panel, related to briefing. Prost decried the overuse “of things mysteriously marked confidential. It's a nuisance that needlessly takes up our time.”

The appeals court was the focus of two other sessions at the conference.

In the first session, James Amend, the Federal Circuit's chief circuit mediator gave an update on the mediation program's success. The court can require mediation of patent and other litigants upon request, though he told BNA that only about one-third of the patent cases now go through that path. In the last quarter, 55 percent of the patent cases his group handled settled.

Co-chairmen of the FCBA's amicus process, Mark Walters of Frommer, Lawrence & Haug, Seatttle, and Joseph Reisman of Knobbe, Martens, Olson & Bear, San Diego, followed Amend. Reisman moderated a session on best amicus brief practices that included Rader, Thomas G. Hungar of Gibson Dunn & Crutcher, Washington, D.C.; Tina Chappell, senior litigation counsel for Intel Corp.; Robert Armitage, senior vice president and general counsel at Eli Lilly and Co.; and Kevin Kramer, associate general counsel for intellectual property litigation at Yahoo Inc.

Most notable at that session were comments from Rader on what types of briefs are most valuable to the court. Noting that, the parties' briefing usually “has hit the legal issues quite well,” Rader said, “The real value is often to enlighten us about the consequences in a particular industry of our rulings. The outcome could be massive unpredictability, investment could shift, etc.”

The court does not get enough of that type of input, Rader said, discounting the value of the more typical briefs that “repeat legal argument in slightly different terms.”

“The real power is in telling us how it hits the pharma industry,” he said, “maybe even how that is different from how it hits the IT industry.”

By Tony Dutra