Chief Judge Rader on the Supreme Court and Judge Posner

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.

First, when discussing the Supreme Court’s aversion to bright line rules and the need to be able to provide certain advice in a commercial law context Chief Judge Rader explained:

Let me talk about kind of a underlining clash of cultures, which is disrupting the patent field. The Supreme Court comes from a different culture than my legal culture. They handle these majestic cases involving individual vs. collectives rights, liberty vs. order, public vs. private, and they balances these grand principles wonderfully. They are creditably talented and bright people who have a real grasp of that vast responsibility given to them by our Constitution. But that’s not my legal culture.

I come from the commercial law area where to tell the CEO that “well I’m going to have to balance several factors and ask three courts over a period three years whether or not you can have this product enter the market” is simply an inadequate response. In the commercial area we have to have a predictable, yes or I will use the B word — a Bright line rule. Now, that’s lead to kind of this culture clash where the Supreme Court says there needs to be more balancing and flexibility. The formalism of the Federal Circuit is uncomfortable to [the Supreme Court]. But that’s a function of our legal culture. I think perhaps the answer is the Federal Circuit needs to gain a little bit more flexibility from its experience with the Supreme Court, but I hope the Supreme Court also recognizes that the Federal Circuit is reaching its decisions for well considered reasons.

Several minutes later a question was asked about damages and Judge Posner specifically by Ashley Stevens, a past AUTM President. In his rambling decision in Apple v. Motorola, Posner suggested that there were situations where patent owners would not be allowed to seek damages in federal courts. For example, if the damage doesn’t pass a certain threshold Posner believes there is no subject matter jurisdiction for federal courts. How someone could hold a position of authority in the judiciary and also hold that clearly erroneous view is curious. More curious to me is that he actually wrote it down for all to see. Patents are in the Constitution and federal courts clearly have subject matter jurisdiction over such litigation. But what would Chief Judge Rader say? He did not disappoint.

Rader stated:

When [Judge Posner] says he his not sure if Patent Cases should be in the federal courts, frankly the patent cases are the one thing that is guaranteed by the Constitution to be in the federal court. It’s the rest of it that he has to justify.

Rader would then move on to take on the issue of damages, explaining what the Federal Circuit has done recently on the issue:

But damages is what you’re really putting your finger on and the Federal Circuit is has made a real effort to bring more discipline the evaluation process let me give myself a little test here to see if I can state in three sentences what we have done. Sentence number one would be — we require particularized economic evidence including downward sloping demand curves. Second that economic evidence should be limited to the scope of the claimed invention, which really means the scope of the contribution of the invention to the field of art. Third no rules of thumb. Those are probably the three biggest thing we said on damages.

Toward the end of the presentation Chief Judge Rader discussed the categories of invention that are statutorily defined as patent eligible subject matter by 35 U.S.C. 101. He explained:

The Statute is interesting. The United States Patent Statute says whoever invented a machine, process, composition of matter or an article of manufacture or improvement thereof is entitled to a patent. No Exclusions, no exceptions… I always ask my students is there anybody who can think of anything that doesn’t fit within those four statutory categories. I always get one kid in the back and he’ll hold his hand up and give me some answer and my response is always very clear. I say: “Congratulations you’re the only person in this room smart enough to be on the Supreme Court.”

As you can imagine this elicited great laughter in the audience. While those within the industry who have spent a great deal of time considering patent eligibility are hard pressed to come up with any invention that doesn’t fit within the statutory definition of eligible categories, the Supreme Court always seems to find that whatever invention they are looking at doesn’t seem to fit.

And with this article I will conclude my coverage of the AUTM 2013 annual meeting. Until next year… see you in San Francisco.