By Kevin E. Noonan --
The Supreme Court was petitioned today to grant certiorari in two cases important to biotechnology patenting: In re Bilski, involving the standard for determining that method claims are patentable subject matter; and Aventis Pharma S.A. v. Amphastar Pharmaceuticals, regarding the standard for finding inequitable conduct. And in each case, dissents by Judge Rader are an important part of petitioner's arguments.
There were two questions presented by petitioners in the Bilski petition:
Whether the Federal Circuit's "machine-or-transformation" test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect "method[s] of doing or conducting business." 35 U.S.C. § 273.
Bilski argues that the "machine or transformation" test is a misreading of the Court's precedent, which has been expansive in determining the outer boundaries of patentable subject matter (citing the famous "anything under the sun made by man" language from Diamond v. Chakrabarty). Recognizing that the Chakrabarty case concerned "compositions of matter" or "manufacture" claims, the petition also cites Diamond v. Diehr to find the Court's precedent for permissible method or process claims. Here, the Court's reading is decidedly different from the Federal Circuit, where the majority believed its tests, based on the Supreme Court's decision in Gottschalk v. Benson, 409 U.S. 63 (1972), was supported by Diamond v. Diehr. Petitioners stress that while the Court precluded natural phenomena and laws of nature from patentability, the Diehr case held that a process is patentable if, "'taken as a whole', [it] represents 'an application of a law of nature or mathematical formula'." Petitioners suggest that this distinction provides a "bright line" for the Court to draw in deciding what is a patentable method and what is not.
Petitioners also maintain that the Supreme Court itself has deigned not to adopt the Federal Circuit's "machine or transformation" test, ironically in Gottschalk v. Benson, but also in Parker v. Flook. And they are also quick to point out that the Federal Circuit's reliance on the "machine or transformation" test is contrary to the positions the CAFC itself took in State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999).
Petitioners also urge the Court to grant certiorari and reverse the Federal Circuit because the "machine or transformation" test is too restrictive, adopting Judge Rader's position that the test is an outdated relic of the age of mechanical patents in an era where the "bleeding edge" of innovation is "subatomic particles and terabytes." They cite recent examples of the application of the restrictions on process patent claims (arguing that these claims are not "second class" claims under the statute), including In re Comisky and Classen Immunotherapies, Inc. v. Biogen Idec, and also warn that these cases mark a trend. In the Federal Circuit, petitioners cited Comisky and Prometheus Labs., Inc. v. May Collaborative Srvs. as cases where the Federal Circuit had stayed consideration (or reconsideration) in favor of deciding the Bilski case to establish its precedent. The Bilski decision was also affecting how the U.S. Patent and Trademark Office was deciding questions of patent eligibility for process claims, the petitioners argue, citing Ex parte Roberts, 2008 WL 2754746 (B.P.A.I. July 15, 2008), as well as claims to other statutory categories, citing Ex parte Godwin, 2008 WL 4898213 (B.P.A.I. Nov. 13, 2008) (claims directed to a "portal server system" and a "portal server") and Ex parte Noguchi, 2008 WL 4968270 (B.P.A.I. Nov. 20, 2008) (claims directed to a "program for causing a computer connected to an external network to perform the functions of . . ."). These trends rendered certiorari urgent, to avoid continued application of the Federal Circuit's over-limiting test, according to petitioners.
In the Aventis case, this question was presented:
based on the following succinct statement of what is wrong with the Federal Circuit's inequitable conduct jurisprudence:
In framing the factual and legal background of the case, the petition relies heavily on Judge Rader's dissent, regarding "the improper '[m]erging [of] intent and materiality' under the majority's sliding-scale standard, and highlighting several previous cases in which the Federal Circuit had 'emphasized materiality almost to the exclusion of intent'." Perhaps befitting the presence of Supreme Court advocate Theodore Olsen on the brief, petitioner's prayer for relief is based not only on the law of inequitable conduct but also on the application of equitable principles under federal common law. In addition, the petition cites dissension at the appellate level not only among the judges of the Federal Circuit, but in the several regional circuit courts of appeal and the district courts, citing cases that predate the creation of the Federal Circuit but that implicate differences in the circuits relevant to more general questions of equity. In support of these notions, the petition cites Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007); and eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), for the principle that patent law (and the Federal Circuit) are bound by more than just its own specific doctrines (like inequitable conduct) but needs to fit properly within the federal judicial scheme for deciding on the bases for equitable relief. And here, the petitioners argue, the Federal Circuit's "sliding scale" of proof, where the amount of intent required to be shown by a party alleging inequitable conduct varies inversely with the materiality of the reference, is outside the bounds of appropriate federal judicial standards.
In making this argument, petitioners remind the Court that it has held a patent unenforceable in just three cases: Keystone Driller Co. v. General Excavator Co., 290 U.S. 240 (1933); Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238 (1944); and Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co., 324 U.S. 806 (1945). In all those cases, petitioners argue that the Court found overwhelming evidence of affirmative, culpable behavior, involving "'deliberate,' 'corrupt,' 'sordid,' and 'highly reprehensible' fraudulent conduct intentionally committed by the patent holder during prosecution or enforcement of the patent." Such conduct included "false affidavit and false deposition testimony 'to keep secret the details of [a] prior use' which would have been 'sufficient to cast doubt upon the validity of the patent'" (Keystone Driller); "fabrication of an 'ostensibly disinterested' publication describing the claimed invention as a 'remarkable advance in the art,' which was submitted to the PTO and relied on by the patentee in the Court of Appeals" (Hazel-Atlas Glass); and "false testimony by Larson (the patentee) in an interference proceeding, and the discovery of Larson's perjury by Automotive, which used that information to blackmail Larson into assigning his patent rights to Automotive and agreeing never to contest the resulting patent" (Precision Instrument).
Notwithstanding this precedent, the Federal Circuit erred almost from its inception, by adopting a "sliding scale" or "balancing" test in American Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1363 (Fed. Cir. 1984). In that case, petitioners argue:
According to petitioners, this standard is erroneous and inconsistent with Supreme Court precedent, wherein "[t]he non-disclosure of material information is a necessary but not sufficient element of fraud or inequitable conduct. The complainant must also prove that the material information was intentionally withheld" (emphasis in original). The petitioners characterize the Federal Circuit's standard as one of "strict liability" under circumstances where the materiality of the undisclosed information is high. Such a standard is inconsistent with "almost two centuries" of Supreme Court precedent on the requirements of showing fraud, all of which require some element of knowing intention, according to petitioners, citing Lord v. Goddard, 54 U.S. 198, 211 (1851); Wiscart v. Dauchy, 3 U.S. 321, 330 (1796); Moss v. Riddle & Co., 9 U.S. 351, 357 (1809); Magee v. Manhattan Life Ins. Co., 92 U.S. 93, 98-99 (1875); Reilly v. Pinkus, 338 U.S. 269, 275 (1949); and Madigan v. Telemarketing Assocs., 538 U.S. 600, 621 (2003).
Petitioners also assert that the Federal Circuit's "extraordinary" remedy -- unenforceability -- is contrary to equitable principles, since it is a "one-size-fits-all" remedy imposed without regard to whether there are other legal remedies available nor with regard to the effect of the remedy on the public interest. "''The essence of equity jurisdiction has been the power of the Chancellor to do equity and to mould each decree to the necessities of the particular case. Flexibility rather than rigidity has distinguished it,'" citing Hecht Co. v. Bowles, 321 U.S. 321, 329 (1944).
Finally, petitioners argue that the consequences of the chaotic application of inequitable conduct by the Federal Circuit affects innovation by excessive litigation costs, imposing excessive citations of references of dubious relevance to the Patent Office, and creating business uncertainty. This situation is particularly appropriate for Supreme Court review:
The Court can be expected to decide whether to grant these petitions by the end of this term.
• "The Relevance of In re Bilski to the Patentability of the Metabolite Claim," November 17, 2008
• "Aventis Pharma S.A. v. Amphastar Pharmaceuticals (Fed. Cir. 2008)," May 26, 2008