Mark Lemley Part 2: In re Cipro, Patent Misuse, Fun Stuff

Professor Mark Lemley, Stanford Law School

In part 1 of my interview with Mark Lemley, the William H. Neukom Professor at Stanford Law School and a partner in the San Francisco law firm Durie Tangri LLP, we discussed the brief he filed with the United States Supreme Court urging them to accept the i4i v. Microsoft case for the purpose of addressing the presumption of validity enjoyed by a patent. Lemley and the 35 other professors who signed the brief are urging the Supreme Court to take the case and to tie the presumption enjoyed to the references cited in the case or perhaps those reviewed by the patent examiner during prosecution. We discussed whether the Supreme Court is competent to address such an issue, and what implications such a ruling would have on the value of previously acquired property rights.

In part 2 of the interview, which appears below, we move past the presumption of validity to several other patent matters, including reverse pharma payments and In re Ciproflaxacin (see News & Notes, note 4), the Stanford Patent Prize, patent misuse, patent trolls and the usual fun questions with a heavy emphasis on science fiction.

QUINN: I know you probably don’t have all day to chat with me, although I’m really enjoying our conversation as always. I know you filed a brief in the In re Ciproflaxacin litigation. And just over the last couple weeks the entire Second Circuit decided not to take that case despite the panel inviting the entire Second Circuit to take the case.

LEMLEY: Right.

QUINN: Can you tell us in a nutshell a little bit about what that case is about, and do you plan on trying to file something with the Supreme Court, or do you suspect that the Supreme Court would take a case like this?

LEMLEY: The issue is one of reverse payments in the pharmaceutical industry. It’s become increasingly common in the pharmaceutical industry for patent owners and generics to settle litigation by having the patent owner pay the generic challenger to stay off the market, either entirely until the patent expires, or for some period of time. This was an antitrust challenge to one of those pay-for-delay settlements. And in particular what’s notable about this one was that the amount of money the generic got paid not to enter the market was larger than the projections of the amount the generic would have made if it had won the lawsuit and entered the market. So the generic had no incentive to stay in and litigate the validity of the patent. And the payment was sufficient large that it makes one sort of wonder how vulnerable that patent was to attack. The patentee was obviously willing to plunk down a substantial amount of money, $398 million, to avoid having the court answer the question of whether the patent was valid. So what we argued in the cipro case, this was an amicus brief on behalf of I think 86 law and economics professors, was that the Second Circuit’s rule which said on a motion to dismiss (the old Second Circuit rule in the tamoxifen case was on a motion to dismiss) you could throw out the antitrust claim because settlement of patent disputes is a good thing and this was legal, per se. And I think there is disagreement as to what the right antitrust standard ought to be. There are some people who say you should just never allow these settlements. There are some people who say, well, it depends on how much the settlement is. Or it depends on who would have won the underlying lawsuit. But it’s pretty radical to say this could never be an antitrust problem. Because in any other context outside settlement of patent lawsuits, if you called your competitor and said, hey, I want to pay you to stay out of the market, we’d just say that was illegal and we wouldn’t let you do it at all.

So I had hopes that the Second Circuit would take the case. We filed a professors’ brief, but the Federal Trade Commission, the Department of Justice, I think 39 attorneys general all filed a brief encouraging the court to take the case. The three panel judges on the Second Circuit urged the court to take the case and reconsider. I think the Second Circuit just as a practice is very reluctant to grant en banc. So I think it will go to the Supreme Court. And I expect that I will try to organize a similar brief urging the Supreme Court to take the case.

QUINN: This seems to me to be another one of those cases that has got Supreme Court interest written all over it. It’s a patent case, at least on the periphery, and an antitrust case. And the combination of the two would seem to me to be attractive to the Supreme Court.

LEMLEY: Yeah. I agree with that. Although I will say they’ve turned down this issue before in the face of fairly strong petitions. Although this one, in part because it’s now the Obama Administration rather than the Bush Administration, probably is going to have the solicitor general’s support. And maybe that will make a difference.

QUINN: Okay. Now I’d like to transition into some fun, fun questions if I can.

LEMLEY: Sure. And let me throw one other sort of piece of information out which is a different, it’s not on the policy issue. We just announced a patent prize for papers on patent remedies.

QUINN: I saw that. I meant to ask you about that. It’s about patent remedies, right? Can you explain what do you mean by remedies? I had some people ask me about that, and I think I understand it. You’re talking sort of like a law school remedies class, right?

LEMLEY: Yes, yes, right. Not fixing the patent system. This is about what happens when you win your lawsuit. We’re going to do a conference in February so that people can present the papers and we’ll discuss them. And I think a lot of the focus is going to be on patent damages. But our intent is to include things like injunctive relief rules or willfulness. I mean, anything in the area of what the patentee gets when they win category.

QUINN: Okay. Well, then what I was thinking of probably doesn’t apply. I was thinking that patent misuse ought not to be just an affirmative defense. That potentially it should be more than that. And potentially even a cause of action. And allow some of these people that are being held up by these bad patents to take the fight to those people rather than have to constantly just sit back and be a target.

LEMLEY: Right. I think that’s a reasonable concern. Although the worry is that one of the things we’ve seen with antitrust counterclaims in patent cases is, it’s kind of like inequitable conduct. You see these people filing them all the time saying, oh, well, this was sham litigation that you filed against me. And in part for that reason we’ve made the standard pretty hard. Because we don’t want to over-discourage people from filing a lawsuit because they’re afraid that they’ll get hit with a motion or a counterclaim of this sort. So there’s definitely a balance to walk there.

One of the things I’ve been playing with, and I actually have a client who’s briefing this issue in the Federal Circuit, is the question of when we ought to allow fee shifting. Because I think one of the things we could do try to distinguish the frivolous lawsuits from the legitimate ones is to say, well, if you ended up filing a particularly weak case the defendant ought to get their attorneys fees. As a practical matter today we do that only where the defendant can show there was inequitable conduct. But these kinds of weak holdup suits might well–many of them might well go away if the lawyers or the clients who are filing them thought they had something to lose at the end of the day if somebody actually was willing to take it to court and win.

QUINN: Yes, see, that’s the exact thing. Because I think what a lot of these patent trolls–and not all of them, some of the patent trolls are getting good patents that they win on.

LEMLEY: Oh, absolutely.

QUINN: But there’s a handful of these bad actor types I think out there that are causing problems. And from an objective standpoint, I don’t understand why everybody’s not a patent troll any more. Because from an investment standpoint you put a certain amount of money upfront, you get a handful of other fairly rich folks fund something, buy some patents, and then get a litigator whether on a contingency basis or you’re paying them out-of-pot. There’s no downside to you.

LEMLEY: Right.

QUINN: And there’s tremendous, tremendous upside. So I’ve thought for a long time there must be a way to change that calculus, for the bad actors. You can no longer just be a target, you’ve got to figure out ways, and maybe they’ve got to be creative ways, to take the flight to these folks and change the calculus.

LEMLEY: Right. Absolutely. Nobody knows exactly what the definition of a “patent troll” is, which is part of the problem, right?

QUINN: Right, exactly.

LEMLEY: The problem is people who are filing suits on weak patents, or patents that they’re just broadly over-claiming whether they people are manufacturing entities or nonmanufacturing entities. And sure there are patent trolls who file bad patents. But there are also non-practicing entities with perfectly strong patents, and they deserve to get paid.

QUINN: I agree, I totally agree. And the whole “who is a patent troll”, from a definitional standpoint is immensely problematic.

LEMLEY: Yeah. Nathan Myhrvold and I actually have a long-standing project that we hope eventually to complete. It collects all of the patent plaintiffs in the last several years and tries to categorize them. And rather than say, here is the definition of a troll, you’re on one side or the other, what we’ve got is a pretty complex ecology of kind of 12 different types of patent plaintiffs. Some of whom are standard product producing companies. Some of whom are in probably what most people would think of the troll context: they’re in the business of buying up patents in order to assert them. But then in between you’ve got universities, you’ve got consortia, you’ve got individuals, you’ve got companies that actually did invent the thing, they didn’t sell the patent to anyone, but they didn’t succeed in making it into the marketplace. You’ve got companies who once made a product but don’t any more. Or companies who are startups who hope to make a product. There’s a really wide array of different companies here.

QUINN: Even those companies that all they do is R & D; that’s what they do.

LEMLEY: Right. But they develop it in-house, right, as opposed to just buying up patents, exactly.

QUINN: Right.

LEMLEY: And to me, rather than try to ask the question, which ones of these are patent trolls, those are bad people, if we can get the system to work so that we discourage the filing of weak lawsuits and we discourage kind of the sort of reaching for the giant award that’s kind of too large in proportion to what the defendant does, but nonetheless find a way for those people who’ve got legitimate patents to get paid something that approaches the value of what they’ve contributed, then I think we’d be a lot better off. And we’d also make it much more likely to get a rational patent market. Part of the problem now is because it’s so attractive a business model to just gather up some patents however weak and file the suits, tech companies in particular tend to put their head in the sand. They don’t want to actually shell out money for even legitimate patents because they are just inundated with requests from the non-legitimate ones. And so the only way to get paid, even if you’ve got a strong patent, is basically to file a lawsuit. And that can’t be the right system.

QUINN: No, I would agree with that. Okay, now.

LEMLEY: All right, the fun questions.

QUINN: Well, before I get into the really fun stuff, or the interesting stuff that will give us a picture of you, Mark Lemley, behind the scenes. I interviewed Todd Dickson recently. And I started taking to asking the people that I interview to come up with a fun/random question that I can use for the next person that I’m interviewing. You’re the next person. And I’m going to ask you to think of a question for whoever’s next as well. Now I don’t tell anybody who’s next.

LEMLEY: I was just going to say, do I get to know who’s next?

QUINN: No, no, no, no. And sometimes I don’t even know because I have interviews scheduled and then they get pushed back or whatever. But the question he came up with I thought was great, and I think I’m going to ask this of everybody. It’s about mentorship. What do you think the role of mentorship is? And can you identify someone who is a particular mentor of yours and what that meant for you and the development of your career?

LEMLEY: Yeah, absolutely. As an academic in the IP world, this is something that I think is actually really important. When I first started teaching in 1994, I was teaching at the University of Texas. I had a colleague who did copyright work, but most of the people in the building aren’t doing things that are in your field. And so I aggressively went out and circulated paper drafts to some people who were well-known in the field who had no reason to know who I was. And I was actually really gratified at the sort of helpfulness and people’s willingness to take time to read papers, to kind of talk through things and whatnot. One person in particular I guess I would identify is Pam Samuelson at Berkeley. And she has been extraordinarily helpful from the very early days. She was extremely well-known in the fields I was working in when I was a junior scholar but always took the time to help and to talk to me. And so one of the things I’ve tried to do in return is the same thing. I end up commenting on a lot of papers for a lot of people and try to participate in things like junior faculty forums to encourage people to work up their scholarship and give comments on it and that sort of thing.

QUINN: Now, let me follow up with that. How did you get into doing all these amici briefs, and was there somebody who came to you and said, you know, Mark, you ought to be doing this? Because it strikes me that you’re very good at this and you know exactly how to frame these in a way to maximize the likely acceptance of the cases.

LEMLEY: Not really. When I started doing IP litigation–. I graduated law school in 1991 and I practiced in Silicon Valley. And I started doing IP litigation at a firm called Brown and Bain, which no longer exists, but was really a leader in software copyright litigation. They did a number of–. The represented Apple in the Apple Microsoft case, for example. Did a number of the cases for Intel in the early days around microcode. And at about that time we started to see the sort of first professor amicus briefs really in software copyright cases. And they played a significant role. Both Pam Samuelsson and Peter Menell at Berkeley ended up authoring briefs in major cases that really did move the law of software copyright in a dramatically different direction. And so I guess watching that gave me some indication of the value and power of a sort of well-written position that’s actually directed to the particular case before the court, as opposed to just a law review article that might or might not present the very issue. And I’ve stayed in practice as I’ve been teaching every since. I’ve been of counsel to one firm or another. And I think you probably know 18 months ago a group of us left Keker and Van Nest and founded a firm called Durie Tangri that does IP litigation, and I’m a partner there.

There are not that many law professors who are also active practitioners. And the combination of the two really does suit amicus work, right, because I both am thinking about the issues from policy perspectives in the articles I write, but also have some sort of sense of how to write a hopefully persuasive brief.

QUINN: Right. (laughing) I think you do, which is why I’m a little worried that the Supreme Court will take up the case and address the presumption of validity.

LEMLEY: Right.

QUINN: All right. Now the fun stuff to let us get a look at inside Mark Lemley. Your favorite pastime or hobby?

LEMLEY: Favorite pastime or hobby. Boy, it probably depends on what you call a pastime. I do a lot of yoga. I got into it about six years ago and really enjoy it. I don’t know whether that’s an exercise or a pastime or what. We travel quite a bit. We’re going to Egypt and Jordan in March, which should be a lot of fun. And I actually am sort of popular culture junkie a little bit. I watch a fair bit of television, I read fantasy and science fiction novels. I play video games, so I’m–

QUINN: Okay, well, that’s a good segue into the next few questions then. Who is your favorite author?

LEMLEY: Boy, um–

QUINN: You can come up with more than one if you like.

LEMLEY: Yeah. The author I am currently reading the most of right now is a guy named Brandon Sanderson who writes fantasy and that’s who I’ve recently discovered and really have been enjoying his work. I fully and freely confess that my reading tastes tend to be low-brow. Definitely fiction and fantasy and science fiction. I quite like William Gibson and Bruce Sterling in the science fiction genre.

QUINN: How about your favorite movie?

LEMLEY: Favorite movie. Again, I’ve got a couple, you know, I sort of go in different directions. Up on the top list I guess I’d have to put Casablanca.

QUINN: Oh, my goodness, you’re killing me. You know, that was Judge Rader’s answer, and it was also Dave Kappos’ answer

LEMLEY: Interesting. Well, yeah, there’s obviously a patent cabal, we should get together a movie night. The other one I put on the list which is very different is The Princess Bride.

QUINN: Yes, that would be very different. (Laughter) How about Star Trek versus Star Wars?

LEMLEY: Star Wars, the original ones, and Star Trek the later ones.

QUINN: Kirk versus Picard?

LEMLEY: Picard.

QUINN: Okay. And does that go along with your liking the Star Trek the later ones?

LEMLEY: Yes, exactly.

QUINN: All right. How about, and the theme here is famous U.S. inventors that you would like to meet. And I’m going to throw a couple out, you can go off the board if you like, but Thomas Edison, the Wright Brothers, Benjamin Franklin, or somebody else?

LEMLEY: Thomas Edison.

QUINN: Why?

LEMLEY: Because he was placed in this sort of remarkable time in history where invention was starting to become commercialized. And I think he was actually at the forefront of doing that. And Benjamin Franklin would be fascinating, I have no doubt. But he’s fascinating in part because he was sort of a man out of time. Whereas Edison I think really did shape the time he was in.

Interesting story about the Wright Brothers. I did a conference at Dayton for the 100th anniversary of the invention of flight several years ago, and so I did a little bit of historical research. The Wright Brothers were, if we had invented the term “patent trolls” most of the people in the aviation industry would have called the Wright Brothers “patent trolls.” They asserted their patents very broadly. Glen Curtis, who was the defendant in one of the lawsuits that went on for many years is reputed to have said, “The Wright Brothers think their patent is so broad that if I jump up and down and flap my arms I’ve infringed.” (Laughter) One of the things I’m actually interested in pursuing right now as an academic matter is the back stories behind a lot of the iconic invention myths that we learn in the elementary school. Because they almost all seem to have a really more complex story. Alexander Graham Bell ends up in patent litigation that goes to the Supreme Court over the scope of his patent. There were fights over whether Morse really invented the telegraph. Edison didn’t invent the light bulb, what he really did was improve the filament in the light bulb. The list goes on and on. And I think that actually tells us something about the innovation process and the patent process. Innovation really does seem to be something that’s happening simultaneously more often than not. And we need to kind of think about what implications that has for the patent system.

QUINN: Yeah.

LEMLEY: Sorry, I went from fun back to serious.

QUINN: No, no, you know what, that’s one of the reasons I ask these questions is you’d be amazed at the interesting conversations you get into sparked off by a fun and random question.

LEMLEY: Right.

QUINN: Here is another good one for you as a movie/sci -fi buff. Best fictional inventor, Q from James Bond, Tony Stark from Ironman, Emmet Brown from Back to the Future, MacGyver or the Professor from Gilligan’s Island?

LEMLEY: (Laughter) Oh, boy. I’m going to go with MacGyver. I’m tempted to Tony Stark because I like the inventions, but there’s something attractive about making do with what you’ve got, rather than unlimited resources to try to build cool stuff.

QUINN: Okay, good. Now, the best of–how do I want to say–yeah, let’s just say the best science fiction visionary? And I’m going to throw a couple names out and you can go off the board again.

LEMLEY: Okay.

QUINN: Jules Verne, H. G. Welles, George Lucas, Gene Roddenberry?

LEMLEY: Hum. So actually probably go off the board a little bit and say Isaac Asimov.

QUINN: Good one. You know, great, I’m going to have to add him to the list because so far, I was almost starting to think I couldn’t ask this question anymore because everybody was saying Jules Verne.

LEMLEY: (Laughter) Right, right.

QUINN: Tell me a little bit why about Asimov? Have you done a lot of reading of his?

LEMLEY: I have done a lot of Asimov reading. I will tell a story which actually points in the opposite direction in a minute, but I think he’s–you know, all science fiction writers are products of their time. If you read science fiction that isn’t written within the last two years, you almost invariably learn more about the time in which they wrote than the projected time of what they thought would be the future. But I think he did a really good job in a number of different contexts of trying to envision what a world would look like with a different set of technologies. What would a world look like with personal nuclear power? What would a world look like with ubiquitous robots, and that sort of thing.

QUINN: I’m a big fan of the Foundation series.

LEMLEY: I love the Foundation series. I read it as a kid and it really sort of got me into science fiction. But I will tell the following story about the Foundation series. It’s written in the kind of early 1940s, and you know the series, right, a galactic empire 12,000 years in the future, with space ships flying around and these little personal force fields that are little walnut-size nuclear power inventions. But if you go back and read it you will note that when they’re flying their space ships, the use pencil and paper to calculate their jumps. Because Isaac Asimov, who I think is the greatest science fiction visionary, in the early 1940s couldn’t see 12,000 years into the future and envision the computer.

QUINN: Right. That is interesting.

LEMLEY: And the cool thing I think about that — that doesn’t to me mean it’s a failing of Isaac Asimov. The cool thing about it I think is we are all terrible at predicting the areas and the directions in which technology will go. Because it’s subject to both the individual creativity of people and the whims of the market and the whims of kind of other developments in seemingly unrelated fields.

QUINN: Yes. I know, and I really also liked the later Foundation series when he went back and rather writing them in short story form he wrote them in novel form.

LEMLEY: Right.

QUINN: I think that’s a good one to add, and I’m embarrassed having read all the Foundation series, not to have him on the list. Okay. Well, that wraps this up except for the question that you would like to pass on to whoever’s next.

LEMLEY: Well, so since we’ve got a science fiction theme here, let me add to it. What invention from a science fiction book or show would you most like to have in the real world?

QUINN: Oh, that will be a very interesting question. All right, Mark, well, I really appreciate you taking the time.

LEMLEY: Oh, no problem. Thanks for doing it.

QUINN: No problem. Thank you.