Tag Archives: Supreme Court Patent Decisions

U.S. Supreme Court Rejects Farmer’s Patent Exhaustion Defense in Monsanto Patent Infringement Suit

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

SupremeCourtImage_1In Bowman v. Monsanto Co., the U.S. Supreme Court held that the patent exhaustion doctrine did not permit a farmer to reproduce patented seeds them through planting and harvesting.

Monsanto invented and patented a genetic modification that enables soybean plants to survive the application of many herbicides, including Monsanto’s Roundup.  Thus, farmers using these seeds can use certain herbicides to kill weeds without damaging their crops.  The seeds are known as “Roundup Ready” seed.

Monsanto requires growers who purchase the seed to sign a special licensing agreement that permits the grower to plant the purchased seeds in one, and only one, season.  The growers are prohibited from saving any of the harvested soybeans for replanting or giving them to anyone else for that purpose.   Consequently, a grower must buy seeds from Monsanto each season.

Bowman, an Indiana farmer, purchased the patented seeds each year for his first crop of the season, and in accordance with the license agreement, he used all of that seed for planting.  He then sold his entire crop to a grain elevator.  However, Bowman also planted a second crop of each season.  Because he believed late-season planting was risky, he did not want to pay the premium price for the Roundup Ready seeds.  He therefore went to a grain elevator, and purchased “commodity soybeans” intended for human or animal consumption and planted them.  Most of these commodity soybeans were grown from the Roundup Ready seeds.  When Bowman applied a herbicide, most of the new plants survived the treatment and produced a new crop of soybeans with the Roundup Ready trait.   Bowman saved the seed from that crop to plant his second crop the following year.  Bowman did this for eight growing seasons.  Monsanto found out and sued Bowman for patent infringement.

Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale from the grain elevator.  The Supreme Court rejected Bowman’s argument.  The court reasoned that the patent exhaustion doctrine, which provides that the initial authorized sale of a patented item terminates all patent rights in them, does not permit a buyer to make new copies of the patented item.  A second creation of the patented item calls the patent “monopoly” in play for a second time.  Here, Bowman was reproducing Monsanto’s patented invention, and the court held that the exhaustion doctrine did not protect him.  To hold otherwise, the Supreme Court explained, would result in Monsanto having a patent with little benefit because farmers could buy the seed only once and reproduce it.

Bowman tried to argue that seeds were special in that they were naturally self-replicating and that it was the soybean, not Bowman himself, that made the replicas of Roundup Ready seeds.  The court was not convinced by this “blame-the-bean” defense because Bowman was not a passive observer of his soybeans’ multiplication, having devised a novel way to replicate seeds from the soybeans.

The Supreme Court stressed that its holding was limited to addressing the specific situation before it, rather than other self-replicating products in the market.  The court recognized “that such inventions are becoming ever more prevalent, complex, and diverse.  In another case, the article’s self-replication might occur outside the purchaser’s control.  Or it might be a necessary but incidental step in using the item for another purpose . . . .  We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances.”

Thus, the Supreme Court did not use the Monsanto case as an opportunity to give any kind of broad guidance on the patent exhaustion defense as it applies to self-replicating products.  This guidance will have to await another day.

Are Human Genes Patentable?–Association for Molecular Pathology v. Myriad Genetics

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

Supreme CourtYesterday, the United States Supreme Court heard oral argument on a key patent issue—are human genes patentable subject matter? In the Association for Molecular Pathology v. Myriad Genetics, Inc., (No. 12-398), the Supreme Court granted certiorari to decide this issue, which will have a profound impact on the medical research and pharmaceutical industries. (For a complete list of the issues presented, see here). This post follows up on our earlier post discussing the Court’s decision to grant cert.

In this case, Myriad Genetics identified and isolated a human gene that could be used to help predict a patient’s genetic predisposition to breast and ovarian cancers. Myriad then obtained a patent on, among other things, cDNA molecules associated with the relevant genes, as well as the use of the molecule to  probe a patient’s DNA and to prime the production of the patient’s DNA in the laboratory. (The parties’ briefs explaining the details of the patented claims can be found here). Myriad then created a test that could be used on patients to help assess whether they were more likely to be predisposed to certain kinds of breast and ovarian cancers.

After creating the tests and obtaining the patent, Myriad sent letters to various researchers, informing them of the patent rights and requesting that they refrain from infringing. As a result, numerous researchers ceased working in this area. A number of researchers and institutions filed a declaratory judgment action, seeking a determination, among other things, that the patents were invalid.

The Federal Circuit, in a split decision with each Judge writing separately, held that human genes are patentable subject matter. The Association filed a writ of certiorari challenging this decision, which the Supreme Court granted. Oral arguments were held on April 15, 2013, and a transcript can be found here.

While it is always difficult to predict how the Supreme Court will rule, there are some aspects that appeared to concern the Court more than others.  First, the Justices probed the parties for where and how lines should be drawn about what is a product of nature that should not be patented and what is the result of human intervention. This is the heart of the question presented and what they were struggling to define. Ultimately, the Court seemed more inclined to uphold the patent claims associated with the cDNA, as they involved more human intervention, but we will have to wait to see what they actually do.

Second, the Court  questioned whether striking these kinds of patents  would eliminate the incentives for inventors to invest the time and money in developing these kinds of tests and treatments. There was some concern that eliminating these kinds of patents could hinder innovation. On the other hand, counsel for the Association argued that allowing these kinds of patents actually creates a disincentive, as many researchers and companies will not invest any time and money for fear of being sued (which is what happened here).

The transcript of the oral argument makes for a fascinating read. What will be more interesting is reading the ruling. We expect a decision sometime later this summer.

For more analysis on the oral arguments, see here.


Supreme Court Decides Gunn v. Minton Patent Legal Malpractice Case – State Court It Is

Authored by Henry M. Sneath, Esq.  – Chair of the Intellectual Property Practice Group at Picadio Sneath Miller & Norton, P.C. , Pittsburgh, Pa.

Sneath, Henry 2012 headshotToday – The US Supreme Court in Gunn v. Minton decided that a patent legal malpractice case is properly brought in state court. The court held that even though the “case within a case” standard would require interpretation of a patent and other typically Federal Issues, that “case within a case” is a hypothetical case, that does not need to be in Federal Court.  Further the court wrote:

“Because of the backward-looking nature of a legal malpractice claim, the question is posed in a merely hypothetical sense: If Minton’s lawyers had raised a timely experimental-use argument, would the result in the patent infringement proceeding have been different? No matter how the state courts resolve that hypothetical “case with a case,” it will not change the real-world result of the prior federal patent litigation. Minton’s patent will remain invalid.

Nor will allowing state courts to resolve these cases undermine “the development of a uniform body of [patent] law. … Congress ensured such uniformity by vesting exclusive jurisdiction over actual patent cases in the federal district courts and exclusive appellate jurisdiction in the Federal Circuit. … In resolving the non-hypothetical patent questions those cases present, the federal courts are of course not bound by state court case-within-a-case patent rulings. … In any event, the state court case-within-a-case inquiry asks what would have happened in the prior federal proceeding if a particular argument had been made. In answering that question, state courts can be expected to hew closely to the pertinent federal precedents. It is those precedents, after all, that would have applied had the argument been made.”

We previously reported on this case and will follow for any interesting cases which actually try one of these malpractice cases in state court. Here is the opinion delivered by Chief Justice Roberts: http://tinyurl.com/a474okm

Supreme Court Hears Argument on Patent Legal Malpractice Case

Supreme CourtYesterday the US Supreme Court heard oral argument  in Gunn v. Minton (No. 11-1118, U.S. Sup) where the issue is the long debated question of proper jurisdiction for patent law legal malpractice cases. For more background, please see a December 3, 2012 post by my colleague Kelly Williams in this blog and to read the Amicus brief filed by the AIPLA.  Read the transcript of yesterday’s Supreme Court oral argument here: http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-1118.pdf    The central question is whether legal malpractice claims against attorneys representing the inventors, for failing to raise an “experimental use” defense to the “on-sale bar” doctrine, constituted a question of exclusive state law, or one of exclusive federal jurisdiction and law – like traditionally all Patent Law issues.  The issue turns on whether such a state court claim can create or affect Federal patent rights. Our friends at Lexis-Nexis have summarized the oral argument and issues at this link: http://t.co/GaRLnbwN

We will follow this case closely: For more information, please contact Henry M. Sneath, Esq. chair of the Intellectual Property Group at Picadio Sneath Miller & Norton, P.C. in Pittsburgh, Pa. 412-288-4013 or hsneath@psmn.com  Firm Website: www.psmn.com  Blog at: www.pitiptechblog.com or follow him on Twitter @picadiosneath

Are Human Genes Patentable?–Supreme Court to Decide in Association for Molecular Pathology v. Myriad Genetics

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. ()

On November 30, 2012, the United States Supreme Court granted certiorari in Association for Molecular Pathology v. Myriad Genetics (No. 12-398) to decide whether human genes are patentable. The case arises out of a declaratory judgment action brought by various researchers and institutions that certain claims in patents held by Myriad Genetics relating to isolated genes associated with a predisposition to breast and ovarian cancer are invalid because the subject matter of the patents is not eligible to be patented under 35 U.S.C. § 101.

SupremeCourtImage_1What Subject Matter Can Be Patented?

The Patent Act provides that “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor . . . .” 35 U.S.C. § 101.

While this statement and scope is broad, it is not unlimited. The Supreme Court has held, most recently in Mayo Collaborative Services v. Prometheus, Inc., 132 S. Ct. 1289 (2012), that laws of nature, natural phenomena, and abstract ideas are not eligible to be patented, as are mental processes and products of nature.

The question in this case is whether human genes fall within the scope of Section 101, or whether they are natural phenomena that are ineligible to be patented.

Split Decision at the Federal Circuit

In deciding this issue, the Federal Circuit panel (comprised of Circuit Judges Lourie, Moore, and Bryson) each wrote separate opinions endorsing different rules to decide this issue. Judge Lourie (writing for the majority) found that human genes are patentable, reasoning that the isolated DNA molecules at issue in the claims of the patents are not found in that form in nature. Because they are different from natural materials and isolated through the product of human ingenuity, they are eligible to be patented.

Judge Moore agreed that the claims are patent eligible, but for a different reason. She noted that human genes have been patented for years and are specifically allowed by the US Patent Office. She also noted that if she was writing on a blank slate, she might reach a different conclusion.

Finally, Judge Bryson dissented, finding the claims were not patent eligible. He found that the isolated genes performed the same function as they do inside the full DNA sequence. Thus, there was no transformation, and the genes are nothing more than an extraction of a naturally-occurring phenomena.

The researchers and institutions petitioned the Supreme Court for a writ of certorari, which the Supreme Court granted on the limited question of “Are human genes patentable?”

Numerous Amici Have Weighed in

Given the importance of this issue, both to researchers and pharmaceutical companies, a number of parties have weighed in with the Supreme Court, urging that the standard for patent eligibility for human genes be clarified. Their briefs can be read here.

It will be interesting to follow this case and its briefing in the coming months to see how the Supreme Court decides this issue or whether it leaves it to Congress to decide.

U.S. Supreme Court Argument — Should Federal Courts Exercise Jurisdiction Over Patent Legal Malpractice Claims?

by: Kelly A. Williams, a shareholder at Picadio Sneath Miller & Norton, P.C.

LasSupreme Courtt week, an intellectual property law group, the American Intellectual Property Law Association (“AIPLA”), argued before the U.S. Supreme Court that state court, rather than federal court, is the appropriate venue to hear legal malpractice claims involving patents.  AIPLA was arguing in support of an amicus brief, or “friend of the court” brief that it filed in an effort to further aid and educate the Court in the matter of Gunn v. Minton.  AIPLA did not represent or have any connections to the parties in the case.

By way of background, AIPLA is a national bar association of approximately 14,000 members engaged in private and corporate practice, in government service, and in the academic community.  AIPLA represents individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright and unfair competition laws, as well as other fields of law affecting intellectual property.

AIPLA took the position that the Federal Circuit, which has jurisdiction over patent cases, has taken an overly broad approach to subject matter jurisdiction.  AIPLA states that the Federal Circuit has been routinely finding federal jurisdiction over state law claims that raise patent law issues based upon Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988).  The Federal Circuit, according to AIPLA, has interpreted Christianson, as supporting the existence of jurisdiction any time a state law claim makes it necessary to resolve a federal patent issue.

AIPLA argued that this interpretation is wrong because Christianson did nothing to alter prior U.S. Supreme Court precedent that provided that a federal court may exercise jurisdiction over a state law claim raising a federal issue only when it is necessary, disputed and substantial.  This only occurs, according to AIPLA, when a claim creates a controversy as to significant patent law issues, such as a controversy regarding the validity of a patent, the construction or effect of a patent statute or a principle of patent law.  The Federal Circuit has combined these separate considerations, “necessary, disputed and substantial,” into a single question of whether any patent issue is “necessary” to the state law claim.

AIPLA also argued that by asserting subject matter jurisdiction over malpractice claims involving patents, the Federal Circuit is disturbing the Congressionally approved balance of federal and state judicial responsibilities.  Further, allowing federal courts to exercise jurisdiction over various state law claims merely because those claims raise a patent law issue diminishes the right of litigants to select a forum based on the traditional well-pleaded complaint rule.  This rule states that the plaintiff is “the master of its complaint” and may have its cause heard in state court by avoiding claims based on federal law.  However, the Federal Circuit’s exercise of jurisdiction over such claims forces litigants to litigate in federal court, even if the case involves local disputes involving local interests, simply because the dispute raises an issue relating to patent law.

For more information, the entire amicus brief of the AIPLA can be found here and a Law360 article can be found here (subscription required).

U.S. Supreme Court Decides Kappos v. Hyatt

By: Joseph R. Carnicella, intellectual property and commercial litigation attorney at Picadio Sneath Miller & Norton, P.C.

In Kappos v. Hyatt, 566 U.S. ___ (2012), decided on April 18, 2012, a unanimous Supreme Court affirmed a Federal Circuit decision that (a) a patent applicant faces no limitations on their ability to introduce new evidence in a Section 145 (35 U.S.C. § 145) proceeding beyond those already in place in the Federal Rules of Evidence and the Federal Rules of Civil Procedure, (b) the district court must take de novo factual findings of both new evidence presented on a disputed question of fact and the administrative record before the PTO, and (c) the district court may consider what weight to afford any new evidence taking into account whether the applicant had an opportunity to present the new evidence before the PTO.

In this case, Gilbert Hyatt (Respondent) filed a patent application that included 117 claims.  The PTO’s patent examiner denied each of the claims for lack of an adequate written description pursuant to 35 U.S.C. § 112.  Hyatt appealed the decision to the Board of Patent Appeals and Inferences (Board), and after receiving approval of 38 claims, Hyatt filed a Section 145 action in federal district court against the Director of the PTO (Petitioner).  In support of his position that the patent application included an adequate written description, Hyatt included a written declaration with his submission to the district court setting forth the portions of the patent specification that, in his opinion, supported the claims that were deemed unpatentable by the Board.  The district court refused to consider the declaration on the grounds that applicants are precluded from presenting new issues, at least in the absence of some reason of justice put forward for failure to present the issue to the PTO.  The district court then applied a deferential substantial evidence standard under the Administrative Procedure Act (APA) in reviewing only the PTO’s administrative record and subsequently granted summary judgment to the Director.

Hyatt appealed to the Federal Circuit, and a divided panel affirmed the district court’s decision that the APA imposed restrictions on the admission of new evidence in a Section 145 proceeding and that the district court’s review is not wholly de novo.  The Federal Circuit granted rehearing en banc and vacated the grant of summary judgment.  The Supreme Court granted certiorari following the ruling from the en banc court.  The Director argued before the Supreme Court that a district court should admit new evidence in a Section 145 action only if the proponent of the evidence had no reasonable opportunity to present the evidence to the PTO in the first instance.  Also, the Director argued that, when new evidence is introduced, the district court should overturn the PTO’s factual findings only if the new evidence clearly establishes that the agency committed error in its findings.

The Supreme Court began its analysis of the Director’s arguments by first reviewing the text of Section 145: “An applicant dissatisfied with the decision of the Board of Patent Appeals and Interferences in an appeal under section 134(a) may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director . . . . The court may adjudge that such applicant is entitled to receive a patent for his invention, as specified in any of his claims involved in the decision of the Board, as the facts in the case may appear, and such adjudication shall authorize the Director to issue such patent on compliance with the requirements of law.”  The Supreme Court concluded that the plain text neither imposes unique evidentiary limits in district court proceedings nor establishes a heightened standard of review for factual findings by the PTO.

The Supreme Court next considered the Director’s argument that the statute should be read in light of traditional principles of administrative law under the APA.  The Director argued that (a) the district court should defer to the PTO’s factual findings and (b) in line with the traditional rule that a party first must exhaust administrative remedies, the district court should consider new evidence only if the party did not have an opportunity to present the evidence to the PTO.  The Supreme Court disagreed with the Director’s positions.  First, the Director conceded that Section 145 proceedings are not limited in the same manner as judicial review of an agency decision under the APA, which is typically limited to the administrative record.  The Supreme Court noted that the PTO cannot account for evidence that was not presented, and as a result, the district court must make its own findings de novo.  Also, the Supreme Court determined that administrative exhaustion does not apply to Section 145 because, while administrative exhaustion avoids premature interruption of the administrative process, the PTO’s process is complete by the time a Section 145 proceeding occurs.

The Supreme Court then analyzed the evidentiary and procedural rules in effect at the time when Congress enacted Section 145 in 1952.  The Supreme Court traced the history of Section 145 back to the 1836 Act, which established the Patent Office, and noted that the specific language in Section 145 originated in the 1870 Act.  According to the Supreme Court, in 1878, the relevant provision of the 1870 Act was codified by Congress as Revised Statute § 4915 (R.S. 4915), which served as the immediate predecessor to Section 145.  The parties agreed that R.S. 4915 and judicial interpretations of that statute provided the foundation for the understanding of Section 145.  The Supreme Court analyzed the two primary cases describing the nature of R.S. 4915, and concluded that Congress intended that applicants would be free to introduce new evidence in Section 145 proceedings subject to the rules applicable to all civil actions and that, where new evidence is presented to the district court, a de novo finding would be necessary.

Finally, in agreeing with the Federal Circuit that the district court may decide what weight to afford an applicant’s newly admitted evidence, the Supreme Court noted that the proper means for the district court to accord respect to decisions of the PTO would be through the court’s broad discretion over the weight to be given to such new evidence in Section 145 proceedings.

Supreme Court to Consider Patentability of Natural Phenomena—Grants Cert in Mayo Collaborative Services v. Prometheus Laboratories

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Yesterday, the Supreme Court granted cert in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (No. 10-1150) to address whether a patentee can monopolize basic, natural biological relationships. This case could have far-reaching effects for those patenting medical procedures and biological processes. In particular, the Court appears to be confronting the issue of what are the bounds of patentable subject matter with natural phenomena and processes. The specific question presented is:

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.

The Court previously began to consider this issue in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124 (2006), but dismissed the case for technical reasons. Three dissenting Justices (Breyer, Stevens, and Souter) and would have decided the case and held that such claims are not patentable subject matter because they cover a law of nature and a basic scientific relationship. The full Court will now consider this issue.

The Patent at Issue

At issue in Mayo Collaborative is Prometheus’s patent claim involving the treatment of autoimmune disorders by administering a drug and determining whether the dosage was appropriate based on an observed metabolite level in the patient. Once administered, the body automatically converts the drug into a metabolite, the amount of which determines whether the dosage was appropriate. Specifically, the claim reads:

1. A method of optimizing therapeutic efficacy for treatment of an immune-mediated gastrointestinal disorder, comprising:

(a) administering a drug providing 6-thioguanine to a subject having said immune-mediated gastrointestinal disorder; and

(b) determining the level of 6-thioguanine in said subject having said immune-mediated gastrointestinal disorder,

wherein the level of 6-thioguanine less than about 230 pmol per 8×108 red blood cells indicates a need to increase the amount of said drug subsequently administered to said subject and

wherein the level of 6-thioguanine greater than about 400 pmol per 8×108 red blood cells indicates a need to decrease the amount of said drug subsequently administered to said subject.

The Case Below

Defendant (Mayo) argued that this claim was invalid because it was not patentable subject matter–all it amounts to is administering a drug and observing a reaction. Prometheus did not try to patent the reaction, which is a naturally-occurring one. Mayo also argued that the claim was unpatentable as a matter of public policy because of its broad scope and the effect it would have on public health and research. In particular, Mayo argued that any doctor that administered a drug and saw the results may infringe the patent, even if the doctor never took any action based on the results.

The patent was held invalid in the District Court, but the Federal Circuit reversed, finding that the claims satisfied the “machine-or-transformation” test under 35 U.S.C. § 101. On its first appeal, the Supreme Court remanded so that the Federal Circuit could consider the then-recent decision in Bilski v. Kappos, 130 S. Ct. 343 (2010). On remand, the Federal Circuit again reversed the District Court, finding that the patent claims were not invalid. Mayo again petitioned the Supreme Court for cert, which was granted yesterday.

What This Case Means

This case should clarify the scope of patents, especially as they relate to biological and natural processes. In Bilski, the Court rejected the Federal Circuit’s prior “machine-or-transformation” test as being too rigid. It will be interesting to see if and how they revise or clarify that standard. In addition, the Court will likely have to address whether an idea that is not abstract can nonetheless be so broad as to be unpatentable on that basis (as opposed to being anticipated or obvious).

If the LabCorp decision is any guide, the Court (or at least Justice Breyer) will be particularly hostile to claims that appear to cover laws of nature, natural phenomena, and abstract ideas. In that case, which also involved a patent claim for correlating test results with a physical condition, Justice Breyer found the claim invalid because it simply patented a natural phenomenon, albeit in the cloak of the abstract patent language of a process. In addition, Justice Breyer was concerned about the chilling effect of patents like these on doctors and their patients.

Regardless of what the Court determines, this case should be particularly important for those in the biological and pharmaceutical markets and could have a large impact on what kinds of inventions and processes can be patented.

Supreme Court Affirms Clear and Convincing Standard for Proving Invalidity in Microsoft v. i4i Decision

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Today, the Supreme Court confirmed that parties challenging the validity of a patent have the burden to prove invalidity by clear and convincing evidence. Justice Sotomayor delivered the unanimous opinion for the Court in its decision in Microsoft Corp. v. i4i Limited Partnership (No. 10-290), which affirmed the Federal Circuit. Justice Breyer filed a concurring opinion, and Justice Thomas filed an opinion concurring in judgment. Chief Justice Roberts took no part in the decision.

Circumstances Below

By statute (35 U.S.C. § 282), patents are presumed valid, based, in part, on the deference shown to the Patent Office in examining patents. In the underlying case, Microsoft challenged the validity of the patent using a reference never considered by the Patent Office when examining the patent. Microsoft argued that the presumption of validity did not mean that it needed to prove invalidity by clear and convincing evidence, especially in these circumstances. Both the district court and the Federal Circuit disagreed, finding under long-established precedent that those challenging the validity of a patent must prove invalidity by clear and convincing evidence in all circumstances.

Microsoft’s Arguments For a Preponderance of the Evidence standard

At the Supreme Court, Microsoft argued that the Court should adopt one of two standards, either (1) accused infringers need only prove invalidity by a preponderance of evidence or (2) a hybrid approach where accused infringers need to prove invalidity by clear and convincing evidence for those references considered by the Patent Office but only by a preponderance of the evidence for anything else. The Supreme Court strongly rejected both approaches and affirmed the clear and convincing standard in all circumstances.

The Supreme Court’s Analysis

Tracing the history of patent law in the United States, the Court noted that it had previously considered the standard of proof in its decision in Radio Corp. of America v. Radio Engineering Laboratories, Inc., 293 U.S. 1 (1934). In that decision, Justice Cardozo stated that “there is a presumption of validity, a presumption not to be overthrown except by clear and cogent evidence.” This common-law understanding was well-rooted by the time that Congress enacted § 282, which declared that patents are presumed valid.

The Court also found persuasive how Congress reacted to the courts on this point. In 1984, the Federal Circuit recognized the clear and convincing standard of proof in its decision in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350 (Fed. Cir. 1984), and, in the nearly thirty years since that decision, consistently reaffirmed this standard of proof. Despite amending the patent act numerous times since the American Hoist decision, Congress never expressed disapproval with the Federal Circuit’s decisions, which indicated to the Court that Congress agreed with this standard.

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Supreme Court Clarifies Rights Under Bayh-Dole Act in Stanford v. Roche Decision

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C.

Today, the Supreme Court announced its decision in Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, Inc. (No. 09-1159) involving the rights of parties to inventions under the Bayh-Dole Act (also known as the University and Small Business Patent Procedures Act of 1980, 35 U.S.C. § 200 et seq.). Chief Justice Roberts wrote the decision for a 7-2 court, in which the Court confirmed that invention rights are held by individuals and held that the Bayh-Dole Act does not by itself automatically void ab initio an inventor’s rights in government-funded inventions. Justice Sotomayor concurred and Justices Breyer and Ginsburg dissented.

The Court first traced the history of the Bayh-Dole Act. “The Bayh-Dole Act applies to subject inventions ‘conceived or first actually reduced to practice in the performance of work’ ‘funded in whole or in part by the Federal Government.’”  The Court stated that “The Bayh-Dole Act does not confer title to federally funded inventions on contractors or authorize contractors to unilaterally take title to those inventions; it simply assures contractors that they may keep title to whatever it is they already have.” Contractors in this context means the university or agency receiving federal funding, not the employees of such entities. “Only when an invention belongs to the contractor does the Bayh-Dole Act come into play. The Act’s disposition of rights—like much of the rest of the Bayh-Dole Act—serves to clarify the order of priority of rights between the Federal Government and a federal contractor in a federally funded invention that already belongs to the contractor. Nothing more.” The Court clarified that a university would not obtain title to an employee’s invention simply because some amount of federal funding was used during conception or reduction to practice. Rather, the contractor must first obtain the rights to the invention from its employee, which should be standard practice.

The Court affirmed the Federal Circuits decision finding that Stanford University lacked standing to sue Roche for patent infringement because the researcher in question (Dr. Mark Holodniy) had assigned his rights to Cetus, which Roche later acquired, and the Bayh-Dole Act did not give Stanford University the right to trump that assignment. By only obtaining an agreement from Dr. Holodniy to assign his rights, rather than an actual assignment, Stanford could not use the Bayh-Dole Act to trump that assignment.

One of the key insights to glean from this decision may involve an issue that the Court expressly declined to consider. As stated above, when Dr. Holodniy began working with Stanford University, he agreed to assign his rights in any inventions made using Stanford’s funding to the University. He did not actually assign the rights to the University, however. Instead, he assigned them later to Cetus. The Federal Circuit, based on its precedent in FilmTec Corp. v. Allied-Signal, Inc., 939 F.2d 1568 (Fed. Cir. 1991), determined that the language in his agreement with Stanford (“agree to assign,” rather than “do hereby assign”) was only a promise to assign rights in the future and did not act as an actual assignment of these rights. This particular issue was not appealed by Stanford, so it was not addressed in the briefs or explicitly considered by the Court. In his dissent, however, Justice Breyer strongly indicated that this rule is questionable, at best, and suggested that the Court remand for the Federal Circuit to consider this rule more carefully. Justice Breyer’s dissent suggests that the Court will be taking this question up in the future. For now, though, practitioners should carefully consider employee or contractor assignment provisions to make sure that they are drafted so as to assign the rights immediately, and not act simply as a promise to assign them later.