Bilski and Aventis Petition for Certiorari from the Supreme Court

    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 erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court's precedent declining to limit the broad statutory grant of patent eligibility for "any" new and useful process beyond excluding patents for "laws of nature, physical phenomena, and abstract ideas."

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:

Whether a court may refuse to enforce an otherwise valid patent on the basis of an inequitable conduct determination premised on a sliding scale between intent and materiality, effectively permitting a finding of fraudulent intent to be predicated on gross negligence,

based on the following succinct statement of what is wrong with the Federal Circuit's inequitable conduct jurisprudence:

Under the judge-made doctrine of "inequitable conduct," a federal court may decline to enforce an otherwise valid patent that was procured through fraud or deceit.  Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806 (1945).  As befits the punitive nature of the doctrine, this Court has invoked it only in extreme circumstances involving "deliberate," "corrupt," "sordid" and "highly reprehensible" misconduct.  Some panels of the Federal Circuit have similarly limited the inequitable conduct doctrine to deliberately planned and carefully executed schemes to defraud, but other Federal Circuit panels -- including the majority in this case -- have adopted a "sliding scale" under which "less intent" is required as the materiality of an omission or misrepresentation increases.

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:

A knowing deception is thus presumed from the mere fact that highly material information was omitted, under the justification that "he who failed to supply highly material information should have known about the information's materiality."

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 inequitable conduct doctrine in patent cases is judge-made in every sense, and can (and should) be shaped by the Judiciary to conform to the broader policies of the Progress Clause and the Patent Act, as well as the general run of federal law.  This issue will not benefit from further percolation in the circuits.  The split in the lower courts and within the Federal Circuit itself is deep and mature, and the Federal Circuit has exhibited a steadfast unwillingness to revisit the issue en banc.  Four decades of confusion are enough.  The question presented is ripe -- indeed overdue -- for this Court's review.

The Court can be expected to decide whether to grant these petitions by the end of this term.

For additional information regarding this and other related topics, please see:
• "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

Comments

[EG]

Kevin,

The chances of cert being granted in either of these 2 cases is slim and none. Both killed the application/patent involved. By my count, there have been only 4 instances where SCOTUs granted cert where the patentee/applicant prevailed in the last 50 years. And this SCOTUS is not in the frame of mind to give patentees/applicants any favors. Witness KSR International, MedImmune, eBay, Microsoft and Quanta.

[Fan]

I think Bilski will be granted Cert. especially it has been a while since Diamond v. Chakrabarty. Aventis may be out of luck. Bilksi is huge for biotech patenting especially when the personalized medicine is branching out.

[Kevin E. Noonan]

Dear EG:

Although I can't disagree with your statistics, the bane of social science is determining when such statistical correlations are determinative. Here, there is the equally-important consideration (in my opinion) regarding whether the Supreme Court believes that the Federal Circuit has once again gone off the rails. The Aventis case, if cert were granted, would be one more occasion for the Court to realign the Federal Circuit with its idea of uniform standards in federal law, which was the point in the eBay and Medimmune cases.

As for Bilski, I think they will leave it alone if they think it accurately reflects their views on method claims - since the CAFC expressly made its decision on its appreciation of Supreme Court precedent. If the Court feels the CAFC got it wrong (which seems to be the default position over the past 10 years), then I think there is a chance they will decide to address it.

Finally, there are no true patent cases on their docket so it may be time.

Thanks for the comment.

[Kevin E. Noonan]

Dear Fan:

Particularly in view of the 69-word affirmance in Classen, by a panel that included Judge Newman.

Thanks for the comment.

[EG]

Kevin,

I would agree that there is a need for clarity as what is subject matter under 35 USC 101 may be patentable (Bilski), as well as what is the one (and only) objective standard for inequitable conduct (Aventis). But I frankly have no confidence that SCOTUS will render any order here. Look at the chaos that's been created with KSR International, eBay, and MedImmune. In fact, SCOTUS doesn't even understand how software works (witness the awful "architectual blueprint" analogy in Microsoft v. AT&T). I understand that the "machine or transformation" test of Bilski isn't the only test or necessarily the right test, and that, as even the Federal Circuit acknowledges in Digital, there may be 4 or 5 standards for inequitable conduct. I'm much more hopeful that the Federal Circuit will (eventually) render reasonable order out of the current chaos.

But I've got absolutely no confidence that SCOTUS which arrogantly manifests its ignorance of the technology (and the patent statutes) will do anything but create more collateral damage in our area of the law. Just remember what Scalia called TSM. I can also remember that SCOTUS had some not so polite words for the barn cleaning system in Sakraida. I wish I felt differently about SCOTUS, but I don't, given the current cast of Justices.

[Kevin E. Noonan]

Dear EG:

I cannot disagree, but the Aventis brief does a good job of reminding the Supremes about their own decisions, and might appeal to their tendency to want all the circuits to apply the law consistently. Similarly, Bilski is SO obsequious to what the CAFC majority seems to think is the Supreme Court's instructions on what's patentable, they might be tempted to "set them straight."

Now, how they do that (which is your point) might make strong men a little weak-kneed, but I'm not sure (in words I hope don't come back to bite me) exactly how they could make things worse. The Bilski decision is spreading like a stain to mar not only method claims but manufactures and compositions of matter (as cited in the petition), and the standard that is applied to inequitable conduct is a complete crapshoot. Unlike in KSR, where the Supremes just missed totally undoing 25 years of jurisprudential development by the Federal Circuit, here I don't think there is anything they could do or say that wouldn't make things better.

Thanks for the comment.

[EG]

Kevin,

I hear you. My problem with Bilski in particular is that "bad facts" are making even "worse law." The Bilski test, certainly as applied now by the BPAI, is nonsensical. I'm just very queasy about letting SCOTUS getting their fingers on this patentable subject matter issue, and mucking it up worse than it is (by turning 35 USC 101 into a statute that is relevant only to 19th century technology, not 21st century technology).

Aventis raises a very good point about the inconsistent and multiple standards for determining inequitable conduct. My problem is that the facts in Adventis are messy enough that SCOTUS might come out with a standard for inequitable conduct that none of us want to live with.

Again, I rather see us try a change the course of the Federal Circuit (they've done so in the past) on these issues; trying to change course with SCOTUS is like trying to turn the Titanic (the metaphor to "disaster" is intended).

[EG]

Kevin,

A post script to my prior comment. There are days when I want to go back to 80's when Markey was the Chief Judge of the Federal Circuit, and SCOTUS stayed away from the patent area. At least we had a consistent and rational body of patent law to deal with.

[Evan]

Many of us would like to see the Supreme Court address inequitable conduct after 64-year silence.

Nevertheless, I question whether this is the correct case for two reasons. First, the Court could only review one prong of the test (i.e., the intent prong), as an earlier CAFC decision had already found that Dr. Uzan's misstatements were material to patentability. Second, Aventis did not appear to have questioned the legal standard for inequitable conduct in its appellate briefing, creating doubt as to whether the Court could do anything other than review the district court's fact-finding.

Recently, though, I've become more accepting of the inequitable conduct doctrine. Judge Posner's decision in the Barco case in NDIL convinced me that inequitable conduct is not such a bad thing.