The Roberts Supreme Court: Pro-Business and Anti-Patent?

John Roberts, Chief Justice of the United States Supreme Court

The latest edition of Fortune magazine has John Roberts, Chief Justice of the United States Supreme Court, on the cover. The Fortune cover proclaims that it will be taking “an unflinching look at the man who is presiding over the most pro-business court we have ever seen.” As I read that I couldn’t help but chuckle. Really!?!? The Roberts Court is the most pro-business court we have ever seen? I knew right away that this article couldn’t be about patents, or even mention patents, and I wondered how the article would treat the failure to get involved in the Chrysler bankruptcy, which fundamentally altered investors expectations in public companies beholden to unions. So how can it be that the Roberts Court, which has shown hostility toward innovators and contempt for patents that is unusual, is considered pro-business? On top of that, the Roberts Court seems poised to strike at the very heart of the patent right granted by the United States federal government; namely the presumption of validity. That sure doesn’t sound very pro-business to me.

Truthfully, the Fortune cover over-hypes the article. Yes, the article does opine that the Roberts Court is perhaps the most pro-business court ever, but the analysis on that front is weak at best. The article overwhelmingly focuses on John Roberts the man, and is really a good read, but the evidence that the Roberts Court is extremely pro-business is scant, at least if you ask me. The article says:

The Roberts Court is also widely seen as pro-business —“Supreme Court Inc.,” the New York Times Magazine called it in 2008. Since 2006, according to the liberal Constitutional Accountability Center, the Roberts Court has ruled for business interests in 68% of the cases in which the U.S. Chamber of Commerce submitted friend-of-the-court briefs. During a comparable span (1981-1986) drawn from the Berger Court years, the Chamber’s win ratio was just 43%. Close to 80% of the Chamber’s wins before the Roberts Court have been by votes of 7-2 or better.

The rest of the defense of the thesis that the Roberts Court is pro-business centers almost exclusively around the Supreme Court’s First Amendment ruling in Citizens United v. Federal Elections Commission. Despite what President Obama may think about the ruling, the Citizens United ruling is not as far reaching as most on the left would have you believe. The ruling basically says that corporations have First Amendment rights and limits on their spending to air their messages during campaigns is an unconstitutional Act of Congress. Say what you will, but this ruling is hardly revolutionary. It has been a view of conservatives for a long time, and any fair reading of the text of the First Amendment does not exempt out corporations. The First Amendment doesn’t say that Congress shall not abridge the right to freedom of expression unless you are a corporation.  Rather, the First Amendment is written as an absolute prohibition. Do you really believe that business owning Framers of the Constitution would have said that Congress could tell corporations what to say and disseminate? Of course not, and there is no good justification for limiting corporate freedom to speak to those that are “press.” This is particularly true given the rise of the Internet.

So the Roberts Court sides with the Chamber of Commerce frequently, and they say corporations have First Amendment rights. I don’t see that being exceptionally pro-business. Excuse me for noticing that it is quite a weak argument to say the Roberts Court is pro-business because corporations now have the same First Amendment as unions.  Corporations are treated under the laws of the United States and the various States as “persons,” and it seems hardly pro-business to say they enjoy First Amendment rights that cannot be abridged by Congress.

Let’s assume, however, that the Roberts Court is pro-business, which I suspect is an appropriate characterization of the Court at least to some extent on certain issues, although I have a lot of difficulty characterizing the Court’s refusal to apply well established bankruptcy laws to prohibit the haircut of creditors in the Chrysler bankruptcy matter as being pro-business.  As you will see I also have difficulty understanding how infusing uncertainty into the law is pro-business.  But for now allow me to simply ask — how is it that a pro-business Court can be hostile to patents? That is the $64,000 question no doubt.  Before answering that question it is worth taking a look at the Supreme Court patent cases heard by the Roberts Court so we can appreciate the depth of the Court’s lack of understanding of patents and patent law.

In March of 2006, the United States Supreme Court issued a decision in eBay Inc. v. MercExchange, LLC, a decision relating to the issuance of injunctions to victorious patent owners upon successful completion of patent litigation. Being as diplomatic as possible, this Supreme Court decision has left the entire patent world scratching its head and wondering how the Court could have, with such a short decision, infused such uncertainty into an otherwise completely certain area of law, while at the same time terribly compromising the value of an issued and litigated patent.

In order to understand the Supreme Court’s decision in eBay v. MercExchange we will need to take several steps backward and set the table so to speak. As we rewind the clock in pursuit of greater understanding, let’s begin with the well established law that was in place up until the early morning hours of May 15, 2006, the day the Supreme Court issued the decision in question.

Pursuant to 35 U.S.C.  283, courts may grant an injunction in a patent case “to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.” Prior to May 15, 2006, when a patent owner prevailed on the merits in a patent infringement lawsuit, this statute had been interpreted as setting forth a general rule that an injunction should issue when infringement has been found, absent the presence of a sound reason for denying it. Furthermore, it was universally accepted that irreparable harm should be presumed once invalidity arguments failed and infringement of the patent was established. Notwithstanding, district courts still retained broad discretionary powers under the patent statute to determine whether the facts of any particular case warrant the entry of an injunction, although injunctions were, in fact, routinely granted as a matter of right. The discretion of the district courts with respect to the issuance of injunctions once validity and infringement were determined in favor of the patent owner related mostly to the proper scope of such an injunction.

While some circles criticized this approach to injunctions, it did have the benefit of being a bright-line rule, providing certainty and predictability, which is of the utmost importance for businesses and investors. As is ever more clear with each new case, the Roberts Court abhors bright line rules and favors more flexible approaches that are less predictable and far more difficult to arrive at. That in and of itself leads to greater, and unnecessary, uncertainty and hardly establishes a business friendly environment.

While the issuance of a permanent injunction to the victorious patent owner may seem eminently reasonable, particularly given the fact that the patent grant itself provides the patent owner the right to exclude others from making, using, selling and importing goods that infringe, such a bright-line rule was believed by some to be inconsistent with well established equitable principles that apply to all areas of law. Specifically, minus the aforementioned patent specific rules, a plaintiff seeking a permanent injunction, regardless of the area of law, must satisfy a four-factor test before a court may grant such relief. In order to receive a permanent injunction a victorious plaintiff is required to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. Furthermore, the decision to grant or deny permanent injunctive relief is an act of equitable discretion by the district court, reviewable on appeal only for abuse of discretion, which as any lawyer will tell you means that it is quite difficult to prevail on appeal if you are suggesting the district court was wrong.

To the lay observer the choice between these two competing approaches to permanent injunctions may seem insignificant, as if the patent world is making a mountain out of a mole hill. After all, why aren’t the rules that apply for all other cases appropriate for patent cases?  The simple truth is that the patent itself provides the right to exclude, so an injunction should absolutely be granted as a matter of right to a victorious patent owner in a patent litigation.  Without a permanent injunction it is as if the victorious patent owner has lost a part of what the law promises; namely the exclusivity promised by the right granted.

The truth is that the United States Supreme Court has drove a dagger through the well established patent specific approach in favor of the amorphous approach used in all other areas of law. To make matters worse, the Supreme Court did not elaborate upon the meaning of the test as it applies to the patent context, nor did the Supreme Court offer any opinion or insight with respect to whether the district court should have entered a permanent injunction against the infringer, eBay. In typical Supreme Court fashion they answered less than half the question and threw the issue back to the lower courts without any guidance. Someone is going to need to explain to me how the intentional infusion of uncertainty is indicative of a pro-business approach to resolving a matter.

While law school professors, judges and scholars will explain that it is the role of the Supreme Court to exercise restraint and make rulings no broader than necessary, the truth is that the Supreme Court has dodged critical issues time and time again. eBay v. MercExchange is but one example, KSR v. Teleflex, which will be discussed later on in this series, is another. Dodging critical issues in eBay and in other patent cases only brings tremendous and needless uncertainty to patent enforcement, and must force innovators to question the eroding value of a patent.

Patents still offer a competitive advantage, but it would be naïve not to recognize that the Roberts Court has made all issued patents less valuable. It is hardly pro-business to change well established laws that govern property rights; laws that were in place and well understood by innovators and corporations when they made financial decisions to pursue the protection of assets. We would never be so cavalier about changes to real property law, unless of course it pertained to eminent domain, which is another story for another day.

Part 2 of this series will look at KSR v. Teleflex.  Part 3 will look at Microsoft v. i4i.