By Kevin E. Noonan --
As patent practitioners learned to their chagrin in the AMP v. Myriad Genetics case, sometimes broader Constitutional issues arise even in patent law. This is also true of matters relating to the Bill of Rights; for example, the last time the Seventh Amendment was considered in the patent context was Markman v. Westview Instruments, Inc., resulting in the Supreme Court affirming the Federal Circuit's understanding that claim construction was not a matter invoking that Amendment's right to a jury to decide construction questions. (Yes, those were more doctrinally peaceful times indeed.) The Seventh Amendment has once more been raised as a patent-related issue in AIA America, Inc. v. Avid Radiopharmaceuticals in a decision by the Federal Circuit last week. Once again the Federal Circuit held that the right to jury trial does not attach, in this case regarding a request for attorney's fees under 35 U.S.C. § 285, keeping in place a fee award to defendant Avid of $3,943,317.70.
The case arose in the context of (Alzheimer's Institute of America) AIA's infringement lawsuit over U.S. Patent Nos. 5,455,169 and 7,538,258; the subject matter of these patents were nucleic acids comprising mutations (known in the art as "the Swedish mutation") associated with Alzheimer's disease onset; claims 1 from each patent are representative:
From the '169 patent:
1. An isolated nucleic acid encoding human amyloid precursor protein 770 (APP No) including the nucleotides encoding codon 670 and 671 of human amyloid precursor protein 770, wherein the nucleic acid encodes asparagine at codon 670 and/or leucine at codon 671 or an isolated fragment of said nucleic acid having at least ten nucleotides and encoding at least positions 4 and 5 of SEQ ID NO:1.
From the '258 patent:
1. A transgenic mouse whose genome comprises a nucleic acid encoding human amyloid precursor protein including the nucleotides encoding codon 670 and 671 of human amyloid precursor protein 770, or encoding the codons corresponding to these in other isoforms of APP, operably linked to a promoter, wherein the nucleic acid encodes an amino acid other than lysine at codon 670 and/or an amino acid other than methionine at codon 671 and, wherein the mouse expresses a human amyloid precursor protein or fragment thereof which has an amino acid other than lysine at codon 670 and/or an amino acid other than methionine at codon 671.
As explained in the Federal Circuit's opinion, the provenance of these patents is muddy at best. The sole named inventor, Dr. Mullan, had worked as a post-doctoral fellow in a London laboratory that had discovered the first genetic mutation associated with Alzheimer's disease (known as the "London mutation"). Due to a dispute between Dr. Hardy, the head of the London research lab, his institution (Imperial College), and its licensee (Athena Pharmaceuticals), Dr. Hardy did not pursue an insight that there was a separate mutation associated with Alzheimer's disease to be found in a Swedish family grouping, but rather sent DNA to Dr. Mullen, who had moved to the University of South Florida. "To hide the involvement of Dr. Hardy and the Imperial [College] researchers," the patents-in-suit were filed solely in Dr. Mullan's name, as the facts were characterized in the Court's opinion. This "scheme" also involved Dr. Hardy sending "false letters" to Imperial denying that Dr. Hardy had any involvement in the Swedish mutation's discovery, while at the same time maintaining to USF that the claimed invention had been made under Imperial's auspices who thus had the patent rights. These prevarications were sufficiently artful that Dr. Mullan and AIA's founder, Ronald Sexton, were successful in having USF waive any rights to the invention. (The opinion also describes Mr. Sexton's role as convincing Dr. Hardy and other Imperial College researchers that Imperial and Athena had "undervalued" their invention of the London mutation.) As a consequence of these maneuverings, AIA was the sole assignee of the '169 and '258 patents.
The District Court held a jury trial on the question of whether USF had knowingly waived its rights to the invention, which the jury found it had not (based at least in part on testimony by Dr. Hardy regarding the "conspiracy" through which he and Dr. Mullan and Mr. Sexton had denied both Imperial College's and USF's rights to the Swedish mutation invention). Accordingly, the Court ruled that AIA lacked standing to sue on the '169 and '258 patents and entered judgment in favor of Avid; the Federal Circuit previously affirmed this decision in Alzheimer's Inst. of Am., Inc. v. Avid Radiopharmaceuticals, 560 F. App'x 996 (Fed. Cir. 2014).
Thereafter the District Court considered Avid's motion for attorney's fees under § 285 and after "extensive briefing, evidence and declarations" and a hearing where "AIA was allowed to present arguments in opposition to the motion," awarded almost $4 million in fees to Avid. AIA appealed, but (perhaps unwisely) not as to the amount awarded.
The Federal Circuit affirmed, in an opinion by Judge Hughes, joined by Judges Newman and Lourie. AIA's first argument was that it had a Seventh Amendment right to have a jury decide the facts from which a court could award attorney's fees. The basis for this argument was that an attorney's fees award "is based in part or in whole on a party's state of mind, intent, or culpability," questions that only a jury should consider if a party does not waive her Seventh Amendment rights (the Court and AIA recognizing that there is no provision for trial by jury in the statute regarding fee awards under § 285). The opinion parses the amendment to require a jury trial only for suits at common law (as opposed to suits in equity, using that archaic dichotomy of remedies and where to find them). In modern practice, the Court recognizes a two-step process for determining whether the jury trial right applies: first, a court must "compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity," citing Tull v. United States, 481 U.S. 412, 417 (1987). Second, the court should "examine the remedy sought and determine whether it is legal or equitable in nature," with this prong of the test being "the more important of the two" pursuant to Supreme Court precedent. Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 565 (1990).
With regard to step one, the panel noted that attorney's fees could be pursued in English courts of both law and equity, but that when considered in the law courts "judges, not juries, determined attorney's fees." This practice suggested to the Court that attorney's fees do not generally implicate legal rights and thus does not support AIA's position. Regarding the second step, the panel differentiated cases where attorney's fees "are themselves part of the merits of an action" (exemplified in the opinion by cases where a lawyer makes a claim against a client for fees or under a contractual indemnification clause) and where the fees are part of a statutory "prevailing party" provision, where fees are considered an equitable remedy as being "collateral to and separate from the decision on the merits," citing Budinich v. Becton Dickinson & Co., 486 U.S. 196, 200 (1988). Thus, the panel's application of the Tull test led to the conclusion that the requested remedy is equitable and thus does not implicate the Seventh Amendment's right to trial by jury.
The opinion goes on to consider AIA's "state of mind" position, the panel stating that, if true then the Seventh Amendment protections could apply. Unfortunately for AIA, the opinion finds AIA presented no authority that "once an issue is deemed equitable, a Seventh Amendment right to a jury trial may still attach to certain underlying determinations." Under 18th Century English law (the Supreme Court's touchstone), a judge deciding a case in equity could refer factual matters to a jury but was not compelled to do so, even when considering the "state of mind" issues raised by AIA in its argument. Finally, the panel found that AIA's position is "at odds with other statutory prevailing party provisions," citing Great Am. Fed. Sav. & Loan Ass'n v. Novotny, 442 U.S. 366, 375 (1979) (involving Title VII).
The opinion then addressed AIA's second argument, that the District Court improperly considered evidence and made factual findings on its state of mind without having a jury make a predicate determination on these issues. But the opinion sets forth the panel's belief that the cited Federal Circuit case law (Door-Master Corp. v. Yorktowne, Inc., 256 F.3d 1308 (Fed. Cir. 2001) and Jurgens v. CBK, Ltd., 80 F.3d 1566 (Fed. Cir. 1996)) only stood for the proposition that a court could not "make findings contrary to or inconsistent with the resolution of any issues necessarily and actually decided by the jury," which was not the case here.
Finally the opinion rejected AIA's contention that it was denied due process, finding that it had ample opportunity to present its case, just not to a jury.
Showing a capacity to learn from hard experience, this panel's opinion appropriately follows the manner with which the Supreme Court has considered similar issues (grounding its understanding of the Amendments and how they should be applied to procedural matter with reference to how related concepts were considered under 18th Century English law). The decision also makes practical sense, insofar as motions for attorney's fees are made after a jury has rendered a verdict, and requiring that jury to make factual determinations on attorney's fees after sitting through a patent infringement trial seems unreasonable. Moreover, insofar as there are situations, as here, where a patentee's behavior could be construed in a harsh and unfavorable light, it may be (paradoxically) more favorable to such a patentee to have a judge rather than a lay jury pass judgment (literally) by making a cash award to a prevailing defendant. This may prove especially true if changing venue rules increase the likelihood that an infringement action will be brought in a defendant's home forum, where it can be expected that a lay jury might be more easily swayed to punish a patentee who can be painted with the brush of unnecessary and perhaps unjustified allegations of infringement against a local defendant and employer.
AIA America, Inc. v. Avid Radiopharmaceuticals (Fed. Cir. 2017)
Panel: Circuit Judges Newman, Lourie, and Hughes
Opinion by Circuit Judge Hughes