Has the Federal Circuit Gotten Gunshy?

    By Kevin E. Noonan --

After several years of having its decisions reversed by the Supreme Court -- including KSR Int'l Co. v. Teleflex Inc., eBay Inc. v. MercExchange, LLC, Quanta Computer, Inc. v. LG Electronics, Inc., Merck KGAA v. Integra Lifesciences I, Ltd., Microsoft Corp. v. AT&T Corp., Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Dickinson v. Zurko, and Medimmune, Inc. v. Genentech, Inc. -- questions have naturally arisen as to the extent of the effects these decisions are having on the Federal Circuit's institutional fortitude in executing its Congressional mandate of harmonizing U.S. patent law.  These questions are raised anew in two decisions handed down today:  Aristocrat Technologies Australia Pty Ltd. v. International Game Technology and Egyptian Goddess, Inc. v. Swisa, Inc.

The Aristrocrat case created something of a stir last year when the District Court for the Northern District of California granted summary judgment of invalidity on the two patents in suit.  (An indication of the extent of the stir is that both the U.S. Patent and Trademark Office and the Nanotechnology Industry Organization submitted amicus briefs in a case involving a "slot machine game and system with improved jackpot feature.")  This decision was based on a determination that the U.S. Patent and Trademark Office had "improperly revived" the U.S.national phase of an International application, where the required filing fee was submitted one day later than the 30-month deadline.  The District Court decided that the Patent Office did not have the statutory authority to revive the application, which ultimately granted as U.S. Patent No. 7,056,215, under the "unintentional abandonment" provisions of 37 C.F.R. § 1.137(b), but rather should have required the applicant to satisfy the more stringent "unavoidable abandonment" provisions of 37 C.F.R. § 1.137(a).  Accordingly, the Court held the '215 patent to be invalid, and the other patent-in-suit, a continuation application that granted as U.S. Patent No. 7,108,603, was also invalid because the published PCT application was prior art under 35 U.S.C. § 102(b) without the benefit of the lapsed priority claim.  As part of its determination, the District Court also decided that IGT's assertion of an "improperly revived" application was an affirmative defense under 35 U.S.C. § 282, or in the alternative, that the Court had jurisdiction to consider the defense under the Administrative Procedures Act (5 U.S.C. § 701 et seq.).

The Federal Circuit reversed, in an opinion written by Judge Linn and joined by Judges Newman and Bryson.  The Court based its decision on statutory construction, specifically whether 35 U.S.C. § 282 was sufficient to include within its auspices IGT's novel "improper revival" defense.  In concluding it did not, the Court construed the provisions of 35 U.S.C. § 282(2) relating to "any ground specified in part II of this title as a condition for patentabity."  The "conditions for patentability," according to the opinion, were those recited in §§ 101, 102, and 103, and they specifically do not include § 133 that contains the six-month deadline for prosecuting an application.  In doing so the court drew a distinction between these "conditions for patentability" and sections such as § 112, which it characterized as "merely requirements for obtaining a valid patent."  The opinion supports its interpretation with reference to § 282(3), which expressly recites failure to comply with §§ 112 or 251; according to the opinion, IGT's interpretation (and the District Court's) would render this portion of the statute redundant, an outcome contrary to the principles of statutory construction.  The CAFC similarly dismissed IGT's contention, and the District Court's reliance thereupon, that the "catch-all" provisions of § 282(4) was a sound basis for its decision.  The Federal Circuit stated that this argument "pretermits the fundamental requirement of the subsection -- namely, that the act or fact is 'made' a defense by the title."  If followed, the District Court's interpretation of § 282(4) would eliminate the need for § 282(1) through (3); if Congress had "intended to permit any provision of title 35 to constitute a defense in an action involving the validity or infringement of a patent, it could have simply said, in one paragraph rather than four, that a defense lies in 'any section of this title.'"

The opinion cited its decision in Magnivision, Inc. v. Bonneau Co. in support of reversal of summary judgment in this case.  The Court in Magnivision stated "[p]rocedural lapses during examination, should they occur, do not provide grounds of invalidity.  Absent proof of inequitable conduct, the examiner's or the applicant's absolute compliance with the internal rules of patent examination becomes irrelevant after the patent has issued" (although the decision in a footnote expressly excludes prosecution laches from these "procedural lapses").

Finally, the Federal Circuit dismissed IGT's arguments relating to support for the District Court's decision under the provisions of the APA in a mere two sentences, stating that they were unpersuasive.

The decision and its basis are unremarkable; the Federal Circuit construed the scope of 35 U.S.C. § 282 and came to a different and more narrow conclusion than the District Court.  What is remarkable is that the CAFC expressly declined to review the underlying basis for the District cCourt's decision:  the extent of Patent Office authority under the statute on the standard for reviving the "abandoned" national phase application.  While first alluding to its decision to eschew the opportunity for review in a footnote, later in the opinion the Court unabashedly states its intentions:  "[e]ven if we assume that the Patent Act permits revival of an application only upon a showing of unavoidable delay, [that is] a question that we expressly decline to reach in this appeal," said the Court.  Thus, rather than addressing head-on the grounds for the District Court decision, the Federal Circuit based its opinion on a narrow construction of § 282 of the Patent Act.  In doing so, the Court left unanswered an important question of Patent Office authority, the standards for correcting mistakes and irregularities during patent prosecution.

The other case decided today, Egyptian Goddess, was an en banc reconsideration of the standard to be applied in deciding whether a design patent was infringed.  (The expected significance of this case is illustrated by the fifteen amicus briefs filed by interested industries, legal and other professional societies, and individual companies that might be affected by the Court's decision.)  Specifically, the Court in an opinion by Judge Bryson addressed the interplay of the "ordinary observer" test for infringement with the "point of novelty" test used in assessing validity, and the interaction between these tests.  The provenance of the "ordinary observer" test is Gorham Co. v. White, a Supreme Court case from 1871, which mandated that:

[I]f, in the eye of an ordinary observer, giving such attention as a purchaser usually gives, two designs are substantially the same, if the resemblance is such as to deceive such an observer, inducing him to purchase one supposing it to be the other, the first one patented is infringed by the other.

81 U.S. at 528.  The "point of novelty" test stems from a Federal Circuit case, Litton Systems, Inc. v. Whirlpool Corp., 728 F.2d 1423 (Fed. Cir. 1984); the Federal Circuit expressly rejected appellants' contention that the Supreme Court had adopted the "point of novelty" test, citing Smith v. Whitman Saddle Co., 148 U.S. 674 (1893).  Rather, the decision stated that the prior art was to be used to help an examiner recognize when a claimed design is unpatentable.  The decision characterizes the prior art as providing a context for assessing patentability of an design patent claim, something that requires the context provided by the prior art.

Again, a not-so-remarkable result.  However, here the Court's decision produces a dichotomy between compliance with perhaps contrary Supreme Court precedent and the Federal Circuit's mandate to bring uniformity to patent law.  Whatever prior art evidence may have been used to interrogate and perhaps satisfy the "point of novelty" requirement under Litton Systems is now limited to providing context for construing design patent claims under Egyptian Goddess.  As the Court recognized, the Litton Systems precedent spawned its own line of cases directed to a patented design's "point(s) of novelty."  That precedent was effectively overthrown by today's decision.  It seems fair to ask whether the Federal Circuit is merely correcting an overdevelopment in the law or clarifying how it apportions the burdens of establishing design patent infringement and validity.  It also seems fair to ask whether the Federal Circuit is making its determinations with an increasing awareness that these decisions will be brought under Supreme Court scrutiny.  And it seems eminently fair to ask what effect this seeming preoccupation with Supreme Court oversight will have on whether the Federal Circuit continues to be as aggressively involved in patent law developments as it was in the 15 years that preceded the Supreme Court's current interest.

Comments

[EG]

Kevin,

Like you, I find Aristocrat "unremarkable". But there's been quite a bit of "huffing and puffing" about this decision on other blogs. I frankly feel the Federal Circuit has interpreted 35 USC 282 correctly here in ruling that an alleged "improvident grant" of unintentional abandonment is not a proper validity defense. At least this panel bothered to read and interprete each part of 35 USC 282 (as it should) to be consistent. In fact, SCOTUS could benefit from looking at how this panel interpreted the statute and stop relying on "SCOTUS patent common law." For example, the reference in KSR International to the improbability of patentability in a combination of old elements is one such awful and nauseating instance of SCOTUS spouting "SCOTUS patent common law" and ignoring the second part of 35 USC 103(a) that says that patentability shall not be negatived by the manner in which the invention was made. Admittedly, the Federal Circuit doesn't always do a good job in interpreting the patent statutes, but SCOTUS is just plain lousy in this regard.

[Kevin E. Noonan]

Dear EG:

I agree that the Supreme Court seems to think it understands patent law the same way it appreciates pornography - "intuitively" and, ultimately, in a policy/goal-oriented way. This puts its philosophy in direct conflict with the Federal Circuit, which has tried to adopt predictable analytical rules to make patent law less arbitrary. Under the Supremes' preferred "totality of the circumstances" jurisprudence patent law has become less rather than more predictable.

It raises the interesting question of whether the Congressional intent of creating the Federal Circuit has any bearing on the scope of Supreme Court review. Certainly the Federal Circuit is an inferior appellate court, but does the CAFC's enabling statute entitle them to any deference within their sphere of expertise? The Supreme Court could undoubtedly be able to cast any opinion in a manner that would avoid Congressional limits on its plenary power over the Federal Circuit, but maybe some enterprising academic could look into it - after all, who knew similar musings could cause an uproar over APJ appointments to the BPAI?

Thanks for the comment

[EG]

"It raises the interesting question of whether the Congressional intent of creating the Federal Circuit has any bearing on the scope of Supreme Court review."

Kevin,

I have had the same thought and have even it expressed it. It was certainly the Congressional intent in creating the Federal Circuit in 1982 that it be the primary court to articulate patent law jurisprudence. In fact, I've argued that the SCOTUS line of thinking in Anderson's Blackrock/Sakraida may have been undermined (and should be undermined given how they don't follow what's written in 35 USC 103) by the creation of the Federal Circuit.

What SCOTUS has done recently not only upsets that Congressional intent, but creates chaos in patent law jurisprudence. Of course, and in response to others who feel I'm saying SCOTUS can't review Federal Circuit cases on patent law, that's not the case. eBay may be a good example of where SCOTUS needed to step in because the issue of permanent injunctions transcends patent law (if only Justice Kennedy hadn't uttered that absolutely noxious concurring opinion that some of the district courts have unfortunately picked up on). But for SCOTUS to opine routinely, as it has recently, on matters (such as in KSR International and in Microsoft) strictly relating to the patent statutes is ill-advised in my opinion. And when SCOTUS does opine, we unfortunately get no clarity on what these patent statutes mean other than SCOTUS "gobbledygook" (sorry, I couldn't resist taking a jab at what Justice Scalia said about TSM).