Vernon Bowman is a 75-year-old, recently bankrupt small farmer in Indiana. Monsanto is a multinational corporation that is revered in the industry for its innovations in the field of genetically modified seed technologies, but equally reviled in the American heartland for its staunch protection and ruthless enforcement of its patent rights against small farmers. In a unanimous decision, the Supreme Court sided with Monsanto in finding that Bowman had infringed Monsanto’s patents on genetically altered soybean seeds. This would translate into tens of thousands of dollars in liability for the small farmer. Those reacting purely emotionally to the story will be inclined to sympathize with the small farmer. And recalling Steinbeck’s Grapes of Wrath, they would lament, “The small farmer was weary and frightened because he had gone against a system he did not understand and it had beaten him.” However, the Court’s decision is merely a classical application of basic patent principles.

For years, Vernon Bowman purchased Roundup Ready® soybean seeds from a Monsanto affiliate each year for his main crop of the season. The purchase required Bowman’s assent to a licensing agreement, which prohibited Bowman from saving any of the seeds for replanting. For his late-season second crop, however, Bowman would attempt to skirt Monsanto’s licensing agreement and instead purchase commodity soybean seeds from a grain elevator. The commodity soybean seeds are normally tagged for human or animal consumption only. Anticipating that a batch of commodity soybean seeds would surely contain some Roundup Ready® seeds, Bowman planted the seeds, applied Roundup herbicide to his fields, selectively recovered soybeans exhibiting the Roundup Ready® trait, and saved those seeds for further plantings. Bowman harvested eight late-season crops in this way.

While the Supreme Court has done away with the “useful, concrete and tangible result” test from State Street Bank v. Signature Financial, in Bilski v. Kappos, 8 out of 9 Justices (i.e., everyone except Justice Scalia) signed onto an opinion that recognized that the patent claims in State Street displayed patent eligible subject matter. Indeed, the dissenters in Bilski specifically acknowledged that the claims at issue in State Street did not deal with processes, but dealt with machines. See Footnote 40 of the Steven’s dissent.

The import of this is that machines are specifically patent eligible subject matter, so if the claims of State Street are to machines then claims that are similarly configured would also be directed to machines and therefore patent eligible. So if the systems claims at issue in CLS Bank v. Alice Corp. are configured similarly to those that now stand invalid that would mean that Judges Lourie, Dyk, Prost, Reyna and Wallach have ignored the Supreme Court. Any fair comparison of the claims, as shown below, demonstrates this rather conclusively.

Similarly, the United States Supreme Court famously ruled in Diamond v. Diehr, that the United States Patent and Trademark Office inappropriately rejected claims to a computerized process for molding raw, uncured synthetic rubber into cured precision products. Ultimately, thanks to the decision of the Supreme Court the inventors, Diehr and Lutton, received U.S. Patent No. 4,344,142. If the claims in Diamond v. Diehr are similar to those that now stand invalid that would be further proof the Federal Circuit as a whole has ignored the Supreme Court.

Since my last article here on IPWatchdog.com, the pharmaceutical industry has been simply overflowing with interesting developments, including the US Supreme Court hearing arguments concerning three significant cases.

The first case argued at the Supreme Court will determine whether generic drugmakers can be sued for alleged flaws in the design of their medications. At issue is whether federal law preempts such claims from proceeding in state court and if drugmakers can be held liable if they decline to withdraw their medicines from the marketplace.

Of course, the same concept could be applied to brand-name drugmakers, which is why the entire pharmaceutical industry is on edge. In fact, the Obama administration filed a brief in support of drugmakers over concerns the FDA regulatory review process could be undermine if medicines deemd safe and effective could later by considered ‘unreasonably dangerous.’

The court reviewed an appeal by Mutual Pharmaceutical to overturn a $21 million jury award to a New Hampshire woman who in 2004 had taken a generic painkiller called sulindac, but developed Stevens-Johnson Syndrome and toxic epidermal necrolysis. She’s nearly permnanetly blind and suffered burn-like lesions over most of her body, underwent numerous surgeries, and is now unable to read, drive or work, and must use a feeding tube, her lawsuit says.

Yesterday the United States Supreme Court heard oral arguments in Association for Molecular Pathology v. Myriad Genetics, Inc. While the Association for Molecular Pathology (AMP) is the named party in the case, it is really a case brought and forwarded by the American Civil Liberties Union (ACLU).

Myriad Genetics is the patent holder on various innovations relating to isolated DNA comprising an altered BRCA1 DNA and various methods of screening for cancer built upon various observations of the altered BRCA1 DNA. Essentially, AMP and the ACLU, along with researchers, competitors of Myriad Genetics and consumers filed a lawsuit challenging the constitutionality of a number of gene patents owned by Myriad and argued that gene patents should not be granted because patenting a gene is the same as patenting something that exists in nature.

This argument succeeded at the district court, but has twice failed at the Federal Circuit. The Federal Circuit initially reversed the district court, but appeal was made to the Supreme Court by AMP/ACLU. See As Predicted, Federal Circuit Rules Isolated DNA Patentable. In the meantime the Supreme Court issued a decision in Mayo v. Prometheus and remanded this case to the Federal Circuit for further consideration in light of the Court’s decision in Mayo v. Prometheus. The Federal Circuit again sided with Myriad Genetics. See AMP v. USPTO Remand Déjà Vu. Appeal was taken to the Supreme Court, which accepted certiorari. See Supreme Court Grants Cert in Amp v. Myriad. The only issue accepted by the Supreme Court was the broadest issue: are human genes patent eligible?

Today the Supreme Court will hear oral arguments in Association for Molecular Pathology v. Myriad Genetics, Inc. Myriad Genetics was founded in 1991, and licensed, exclusively in the field of diagnostics, and also invented a group of patents associated with the five to ten percent of breast cancers known to have a strong hereditary component. The biomarkers disclosed, discussed, and claimed in these patents are also associated with an increased lifetime risk of ovarian and other cancers. See this U.S. Government website Genetics of Breast and Ovarian Cancer, updated 3/04/2013, and accessed April 14, 2013, for timely information on the significance of these biomarkers.

Social policy concerns have influenced the AMP v Myriad debate.  This article is intended to address certain misstatements of fact and draw attention to other facts not generally considered.

Atmosphere.

Petitioners have cast the case as “patients versus patents”. Petitioners comprise primarily molecular pathologists and women who assert they had to provide, and receive, respectively, inferior medical care because of Respondent’s patents. In part, because the SACGHS found that so called “genetic” diagnostic tests which were covered by patents cost no more than such tests which were not covered by patents, alleged negative impacts on future medical research have been more forcefully added into the mix of policy concerns creating a biased context for the debate.

Several weeks ago I attended the annual meeting of the Association of University Technology Managers (AUTM). I spoke at the event on the Bayh-Dole panel, explaining how Universities and the start-ups that they form can better get their positive innovation stories to the media. See Getting Your Invention Story to Journalists Who Care and Time to Take a Stand. I also attended the fireside chat between Chief Judge Rader and AUTM President Sean Flanigan. See Chief Judge Rader Speaks Out About Patent Litigation Abuse.

The fireside chat between Rader and Flanigan lasted nearly 60 minutes, and the Chief took questions from the audience. I found this entire presentation terribly interesting, but there were several things in particular that I have wanted to get to publishing, which did not neatly fit into the first article about patent litigation abuse. Namely, the Chief discussed the Supreme Court’s aversion to bright line rules and why they are really quite important in the commercial law context. He also discussed what the Federal Circuit has done to bring more certainty to damages, and he provided a razor sharp criticism of Judge Posner of the United States Court of Appeals for the Seventh Circuit.

On February 20, 2013, the Supreme Court of the United States ruled on the question of whether a state law claim alleging legal malpractice in the handling of a patent case must be brought in federal court, ultimately determining that patent legal malpractice claims do not arise under federal law and can be handled in State Courts. See Gunn et al v. Minton.

The respondent Vernon Minton (“Minton”) developed a computer program and subsequent telecommunications network aimed towards facilitating securities trading. A few years later in 1995, Minton leased the very same technology to R. M. Stark & Co. (“Stark”). In January of 2000, the U.S. Patent and Trademark Office granted Minton a patent on his securities trading technology.

Mr. Minton proceeded to file a lawsuit against the National Association of Securities Dealers, Inc. (NASD) and the NASDAQ Stock Market alleging patent infringement. Mr. Minton was represented by Jerry Gunn (“Gunn”). Almost immediately after the lawsuit was filed, NASD and NASDAQ filed a motion for summary judgment on the basis that the Minton patent was invalid pursuant to the “on sale” bar -35 U.S.C. §102(b).  NASD and NASDAQ alleged that since Minton leased the product to Stark at least a year prior to the patent being issued, that Minton therefore should be barred from being issued a patent, as a matter of law. The District Court did not find Minton’s argument persuasive and granted the motion for summary judgment in favor of NASD and NASDAQ.

On February 20, the UC Hastings Constitutional Law Quarterly held a symposium titled, Patent Pending: Corporations, the Constitution, and the Human Gene. See Event Program. The 3-hour event featured Alex Kozinski, Chief Judge of the US Court of Appeals for the Ninth Circuit, as well as Professor David Winickoff of UC Berkeley, Dr. Megan Allyse of Stanford University, Vern Norviel of Wilson Sonsini Goodrich & Rosati, and James Mullen and Wes Overson of Morrison & Foerster. I was the moderator for the symposium, and what follows is a summary of the discussion.

I began by describing the facts of the Myriad case, which is currently before the Supreme Court, and the science behind the issues, as well as introducing the panelists. I then began the discussion by asking the panelists if genetic sequence and cDNA patents interfere with scientific research and with those who provide health care.  Vern Norviel of Wilson Sonsini argued that it does not matter either way with regards to patents and new biotech product innovations.  Mr. Norviel pointed out that the entire human genome was already mapped and the company who mapped it was not sued.  More importantly, he argued, is that human genes are limited and it would be a very small bit of information that could be determined to not be patentable.  He did, however, caution that the Court should try and restrain itself and not go too far such that it destroys what is currently a massive and successful life sciences industry.  The bottom line is that regardless of whether a patent exists, professors and researchers will continue to do the research.  Dr. James Mullen of Morrison & Foerster further argued that patents encourage research and innovation as venture capitalists want to know if (1) the research does what it is claimed to do and (2) if the party owns that research.

The Honorable Alex Kozinski immediately posed the question—by way of an analogy to scientists who stare at the stars—of why should someone be able to get a gene patent just because there was a significant amount of effort put in to discover that gene.  Throughout the event, Judge Kozinski took on the role of the generalist judge, who would need to be convinced that the invention in the lab is anything other than a product of nature. Professor David Winickoff of UC Berkeley followed that question up by discussing James Watson’s amicus brief and the idea that genes are both symbolic in our culture and shared by all humans, thus making them a unique item in our world.

Yesterday, the United States Supreme Court heard oral arguments in the matter of Bowman v. Monsanto. See Transcript. The case presents the Court a question of patent infringement by farmers planting the progeny of genetically altered seeds covered by U.S. patents.

Monsanto Company and Monsanto Technology LLC (collectively “Monsanto”), sued Vernon Hugh Bowman (“Bowman”), in the United States District Court for the Southern District of Indiana alleging infringement of U.S. Patent Nos. 5,352,605 (“’605 Patent”) and RE39,247E (“’247E Patent”). The district court granted summary judgment of infringement in favor of Monsanto. Bowman appealed to the United States Court of Appeals for the Federal Circuit, which affirmed the district court judgment in favor of Monsanto. See Monsanto v. Bowman (CAFC, Sept. 21, 2011).

Bowman then appealed to the United States Supreme Court, with oral argument in the matter being held on February 19, 2013. While one can never know for certain how the Supreme Court will rule, even a casual observer has to conclude that the Supreme Court seems poised rule in favor of Monsanto. Seconds after Bowman’s attorney started Chief Justice Roberts interrupted asking why anyone would ever patent anything if Bowman were to prevail. Shortly thereafter Justice Breyer openly concluded that Bowman infringed in a matter of fact way. It later may have seemed Breyer was probing for a response he didn’t get more so than announcing his view of the case. Nevertheless, if Bowman loses Breyer he has no chance.

On January 23, 2013, CropLife International (CLI) filed an amicus brief in the U.S. Supreme Court in Bowman v. Monsanto (no. 11-796), supporting the view that the authorized sale of a patented seed does not extinguish the patentee’s right with regard to the use of next generation of seeds for planting.  Therefore persons who plant progeny seeds, without the consent of the patentee, and, in turn, produce a next-generation of seeds are liable for engaging in an unauthorized making under 35 U.S.C. §271(a).

Background

Monsanto has developed and patented a genetically-modified soybean that bears the trait of resistance to the herbicidal compound glyphosate.  Seeds bearing such herbicide resistance are sold by Monsanto and its licensees under the trade name Roundup Ready®.  By virtue of that trait, a farmer can plant the patented soybean, and treat a resulting crop with a glyphosate-based herbicide, such as Roundup®, so as to selectively kill off any undesired weeds that have infested the crop, without damaging the crop itself.

In Kirtsaeng v. John W. Wiley and Sons, Inc., the Supreme Court is set to decide whether the right of an owner of lawfully-made copies under Section 109(a) of the Copyright Act to “sell or otherwise dispose of”  those copies  trumps a copyright owner’s right under Section 602(a)(1) to bar importation of those copies when they were made and sold outside the United States.

The parties and amici have filed over 25 briefs in this case, almost none of which address or even consider whether the actual right granted under Section 109(a)—to “sell or otherwise dispose of” copies—applies outside the United States; instead, they have focused almost exclusively on Section 109(a)’s “lawfully made under this title” preamble, resulting in unsatisfactory readings of the Copyright Act as a whole.  As the American Intellectual Property Law Association has urged the Supreme Court in its amicus filing, applying long-standing extra-territoriality principles to the actual right created by Section 109(a) handily harmonizes both Sections 109(a) and 602(a)(1).  It also avoids damage to the rest of the Act caused by undue emphasis on the prefatory “lawfully made under this title” language.

Two cases before the U.S. Supreme Court, Bowman v. Monsanto and Association of Molecular Pathology v. Myriad Genetics have much in common.  Both involve companies that played by the rules using the patent system to develop products providing great social benefits.  Both innovators find themselves in high stakes law suits with plaintiffs credited with representing the broad public interest whose bottom line is gaining cheaper access to important discoveries without being hampered by patents.

And both cases have ramifications for our nation beyond the interests of the targeted companies.

Bowman v. Monsanto involves a farmer who figured out how to get Monsanto’s patented seeds cheaper from a grain elevator than from the company.  I won’t attempt to delve into the intricacies of the litigation or the doctrine of patent exhaustion, but do want to consider a larger point. What happens if our innovators lose confidence in the patent system? Some apparently believe this is a desirable outcome.

Last week, theåç Supreme Court handed down its ruling in Nike v. Already, dba YUMS, 568 U.S. — (2013).  While this case is set against the backdrop of trademark infringement, the big issue here is tied up in the way the Constitution grants federal courts the power to hear cases.  For those who haven’t survived a Constitutional Law class, this can be a bit confusing.  The Nike case was “mooted out”, which is a phrase lawyers like to throw around when we want to sound like we know something.  Mootness is part of the larger doctrine of justiciability and requires a bit of an explanation before we can discuss what was really going on in Nike.  Bear with me-things are going to get a bit technical.

Article III of the United States Constitution establishes the judicial branch of our government and creates the Supreme Court (lower federal courts are created by Congress).   Section 2, Clause 1 has what’s known as the “Case or Controversy Clause”, which the Supreme Court has interpreted to tell us what limitations must be put on judicial review, e.g., what cases courts can or cannot decide.  There are several different limitations on a court’s power to hear a case, but for our purposes in discussing Nike, the justiciability concepts of standing and mootness are what we need to focus on.

EDITORIAL NOTE: The decision denying Apple’s permanent injunction was recently followed by the CAFC decision in Presidio that tilts the pendulum back toward the awarding of permanent injunctions when competitors are involved. Eric Guttag and I have communicated via e-mail about permanent injunctions. Guttag wrote the following article in 2006. I asked if I could republish it here and he agreed. Here is Guttag’s take on eBay v. MerchExchange.

Once upon a time, the view was that “methods of doing business” could not be patented.  That view changed forever with the 1998 case of State Street Bank & Trust Company v. Signature Financial Group Inc. [i]  In State Street, the Court of Appeals for the Federal Circuit (Federal Circuit) held there was no “business method” exception to patentability:  “Whether the [patent] claims are directed to subject matter within § 101 [ii] should not turn on whether the claimed subject matter does “business” instead of something else. [iii]

In certain quarters, the grant of patents on “business methods” has been increasingly viewed with alarm and concern.  One concern is that the holder of such patents could permanently enjoin such infringement, thus potentially increasing the bargaining position of the “business method” patent holder.  That concern is very real.  For example, in the “non-business method” patent context, the Federal Circuit held in the 1989 case of Richardson v. Suzuki Motor Company that, in view of the recognized “right to exclude” under the patent, “the general rule [is] that an injunction will issue when infringement has been adjudged, absent a sound reason for denying it.” [iv]

Patent exhaustion is one of the most fundamental restrictions on patent rights.[i]  Under this doctrine, an authorized sale of a patented article moves it outside the scope of the U.S. patent monopoly.[ii]  With respect to the vended article, the patent right is extinguished and the patentee can no longer sue for infringement.

One question that remains unsettled, however, is the role of territoriality.  That is, where must the authorized sale take place?  For well over a century courts have struggled to answer whether extraterritorial sales qualify for purposes of patent exhaustion.[iii]

While the question was briefly settled in 2001 when the Federal Circuit adopted a national exhaustion standard—requiring that the authorized sale occur in the United States—little support exists for this territoriality requirement.[iv]  The lack of Supreme Court precedent has bred uncertainty and challenges.[v]