United States: The Power Play Between Congress And The Courts Over Patents

The interplay between the legislative and judicial branches in the area of patent law has become a tectonic collision.  Congress appears to be ever more active in telling courts how to handle patent matters, and the courts are increasingly writing their own exceptions into the statutory language governing patents.

For several years now, Congress has been promising to address patent litigation abuse, but judges have expressed concern that this would be a land grab in Article III territory.  In 2013, Federal Circuit judges publicly warned that Congress was ill-suited to address litigation reform, and that any such attempts might encroach on the constitutionally enshrined power of the judiciary.  One judge chided a senior senator for saying that there were three branches of government: the executive, the House, and the Senate.  The judge devoted an entire keynote address to the topic of "how dismissive the other branches of government have become of the judiciary."  She spoke of "the inherent authority of the courts to manage and control patent litigation" and criticized legislative proposals dictating when sanctions are to be applied and how much discovery should be allowed.  The Judicial Conference of the United States ultimately sent letters to the ranking members of the House Judiciary Committee in late 2013 warning that the proposed Innovation Act introduced by Rep. Goodlatte "runs counter to" the process set forth in the Rules Enabling Act. 

Notwithstanding those concerns, Rep. Goodlatte just reintroduced a number of similar provisions on February 5, 2015 (H.R. 9). In the Senate, the STRONG Patents Act, S. 632, was introduced on March 3 and goes in a different direction, expressly recognizing that the Judicial Conference is in the process of revising the Federal Rules of Civil Procedure and that recent Supreme Court rulings have "significantly reduced the burden on an alleged infringer to recover attorney fees from the patent owner." Nonetheless, the STRONG Patents Act includes a provision requiring the Director of the Administrative Office of the United States Courts to designate half a dozen district courts for an expanded "pilot program" to address "special issues raised in patent infringement suits against individuals or small business concerns."

On the other side of the coin, courts have been overtly making policy through interpretation of the patent statutes.  The most dramatic example of this comes from Alice Corp. v. CLS Bank International, 134 S. Ct. 2347 (2014) and its progeny in determining what types of inventions are eligible for patent protection.  The U.S. Supreme Court took on four cases in as many years related to this subject, all of which centered on a judicially created set of exceptions to the opening section of the patent statute: "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 USC § 101.

Over 150 years ago, the Supreme Court began chipping away at portions of this statutory language.  In Le Roy v. Tatham, 55 U.S. (14 How.) 156 (1852), the Court essentially wrote the word "discovers" out of the statute, stating by the example of sources of power (e.g., steam power), "the invention is not in discovering them, but in applying them to useful objects."  At the time, three justices joined a lengthy dissent explaining that the patentee's discovery of a property of metal that was at issue in the case at bar "led naturally to the apparatus, by which a new and useful result is produced.  The apparatus was but incidental, and subsidiary to the new and leading idea of the invention.  And hence, the patentees set forth, as the leading feature of it, the discovery, that lead, in a solid state, but under heat and extreme pressure in a close vessel, will reunite, after separation of its parts, as completely as though it had never been separated."

In Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127 (1948), the Court held simply that "patents cannot issue for the discovery of the phenomena of nature."  Justice Frankfurter warned, in a concurring opinion , that, "It only confuses the issue, however, to introduce such terms as 'the work of nature' and the 'laws of nature.'"  He observed that "these are vague and malleable terms infected with too much ambiguity and equivocation.  Everything that happens may be deemed 'the work of nature,' and any patentable composite exemplifies in its properties 'the laws of nature.'"  

By the computer age, the Court was not limiting its policy making to just the "discovers" part of the statutory language.  In Diamond v. Chakrabarty, 447 U.S. 303 (1980), the Court stated, "The laws of nature, physical phenomena, and abstract ideas have been held not patentable."  In the four recent Supreme Court cases on this subject, these exceptions have been applied without further discussion of their legitimacy. 

Thus, over the years the statutory language "invents or discovers" seems to have been judicially reduced to "invents" and further limited to those inventions that do not run afoul of the exceptions created for "laws of nature, physical phenomena, and abstract ideas." Alice was just the latest of the cases along these lines, but it appears to have been a tipping point, based on how lower courts, as well as the Patent and Trademark Office (PTO), reacted to Alice.

Specifically, as a result of Alice and related cases, invalidity defenses in infringement litigation have gone from having a success rate below 1/3 to a success rate well above 3/4 for some types of inventions. Given these statistics, it seems appropriate to consider the Court's authority in crafting exceptions to statutory language.  At least one district court judge recently quipped in an opinion that it was the Supreme Court that "invented or discovered" the three exceptions to the broad language of the statute.  Eclipse IP LLC v. McKinley Equip. Corp., No. SACV 14–742, 2014 WL 4407592 (C.D. Cal. Sept. 4, 2014) (Wu, J.).    

In the wake of last summer's Alice decision, courts are routinely invalidating patents not just at trial or at the summary judgment phase, but on Rule 12 motions to dismiss at the outset of the case.  Such decisions often come before the claim construction phase of the case.  There has been scant attention given in these cases to the fact that during prosecution of most of these patents, the patent examiners initially raised such § 101 issues, and through amendment or argument the PTO became satisfied that the application was in fact directed to patent-eligible subject matter. 

Under 35 USC § 282, "A patent shall be presumed valid."  Some jurists now appear to be proposing, in the wake of Alice, that there is an exception to this statutory provision as well.  In Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014), Judge Mayer issued a concurring opinion asserting that no presumption of validity should attach to § 101 analysis. Judge Mayer described the rationale for such a presumption as being that the PTO, "in its expertise, has approved the claim" and said that "because the PTO has for many years applied an insufficiently rigorous subject matter eligibility standard, no presumption of eligibility should attach when assessing whether claims meet the demands of section 101." Judge Mayer stated that "while a presumption of validity attaches in many contexts, no equivalent presumption of eligibility applies in the section 101 calculus" (citation omitted). Judge Mayer's view may represent good policy but does not represent a policy balance that has been struck by Congress.

Furthermore, Judge Mayer stated that in the several recent Supreme Court opinions regarding § 101, there has been no mention whatsoever of any "presumption of eligibility" and accordingly concluded that "while a presumption of validity attaches in many contexts, see Microsoft Corp. v. i4i Ltd. P'ship, __ U.S. __ , 131 S.Ct. 2238, 180 L. Ed. 2d 131 (2011), no equivalent presumption of eligibility applies in the section 101 calculus." However, in the Mayo case in 2012, to cite just one example, the Supreme Court concluded its § 101 analysis by stating simply that "the patent claims at issue here effectively claim the underlying laws of nature themselves. The claims are consequentially invalid." Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289. And even in Microsoft, at a portion of the opinion only one page before the section cited by Judge Mayer, § 101 was discussed along with §§ 102, 103, and 112 in connection with the statutory presumption of validity in 35 USC § 282. Judge Mayer's attempt to say that whether a patent satisfies § 101 is not related to whether a patent is "valid" seems to be supported neither by the statute nor by the recent case law.

In this instance, we see a second attempt to create a judicial exception to statutory language, this time to ease the mechanism for applying a first judicially created exception to statutory language. Judge Mayer's approach has not been universally adopted. See StoneEagle Servs., Inc. v. Pay-Plus Solutions, Inc., 8:13-cv-2240 (M.D. Fla. Feb. 9, 2015) (order citing to Judge Mayer's concurrence in Ultramercial but holding nonetheless that the presumption applies, and denying as premature defendant's motion on the pleadings).

Patent law thus appears to be caught in a battle of Titans. Congress sees the courts as unable to rein in litigation abuses, and so proposes reforms the judiciary finds offensive. The courts see Congress as too reluctant to address the nuanced aspects of patent-eligible subject matter, and so take steps to fill what they see as policy gaps. It seems impossible to predict how it all will play out, but in the meantime we can expect the tectonic activity to keep changing our patent landscape. As always, the lesson is the same: IP law is like a pendulum that just keeps moving back and forth.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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