Supreme Court To Decide Patentability of Human Genes

On November 30, 2012, the U.S. Supreme Court granted certiorari in Assn for Molecular Pathology v. Myriad Genetics, Inc., No. 12-398.  In that case, the plaintiffs challenge the eligibility of Myriad’s patents covering isolated human gene sequences corresponding to the BRCA1 and BRCA2 genes, which when mutated are associated with a high risk of developing breast and ovarian cancer, and diagnostic processes using the genes. The U.S. Court of Appeals for the Federal Circuit ruled in August that Myriad’s patent claims covering isolated genes were patent-eligible under Mayo Collaborative Services v. Prometheus, Inc., 566 U.S. ___, 132 S.Ct. 1289 (2012). See Assn. for Molecular Pathology v. U.S. Patent and Trademark Office, 689 F.3d 1303 (Fed. Cir. Aug. 16, 2012).

The Court's grant of certiorari is limited to a single question presented in the plaintiffs’ petition:

“1. Are human genes patentable?” 

Affected Customers Have Standing To Assert Walker Process Antitrust Claims Against Patentee

Under U.S. law, a defendant accused of patent infringement may assert an affirmative counterclaim for antitrust injuries when a plaintiff-patentee asserts a patent knowingly procured by fraudulent conduct in a lawsuit commenced in order to create or preserve a market monopoly. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965). In a recent case, the U.S. Court of Appeals for the Federal Circuit ruled that a customer allegedly injured by increased market prices, but not an accused infringer, also has standing to bring such a Walker Process claim. Ritz Camera & Image, LLC v. SanDisk Corp., Case No. 2012-1183 (Fed. Cir. Nov. 20, 2012). The decision may provide an alternative avenue for those seeking to challenge defective patents.

Ritz Camera is a purchaser of NAND flash memory devices. SanDisk controls approximately three-fourths of NAND market. Ritz filed a putative class action lawsuit on behalf of itself and other NAND users, alleging that SanDisk maintained its market control by procuring two critical patents, U.S. Patent Nos. 5,172,338 and 5,991,517, through fraud before the USPTO and then asserting the patents against competing flash memory manufacturers. As a result, Ritz contends, SanDisk has been able to maintain its prices at inflated levels.

SanDisk moved to dismiss the action on the grounds that Ritz and other NAND consumers lacked standing to bring the Walker Process-style claim, because SanDisk had not threatened to sue them for infringing the ‘338 or ‘517 patents. For example, Ritz likely would lack standing to maintain a declaratory judgment action alleging unenforceability of the SanDisk patents under the Declaratory Judgment Act, 28 U.S.C. § 2201. See Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007).

The Federal Circuit held that the Supreme Court’s Walker Process decision did not restrict antitrust claims under the Sherman Act to accused patent infringers. In addition, the court noted that the jurisdictional limits on patent litigants do not normally apply to actions under the antitrust laws. Ritz Camera’s Walker Process claim was not an “end-run” around the standing requirements for declaratory judgment actions, because plaintiffs in Walker Process claims are seeking redress for antitrust injuries and do not directly seek to invalidate the affected patents. Finally, the CAFC was not persuaded by SanDisk’s argument that Ritz Camera’s claim would open the floodgates for future patent challenges:

[W]alker Process claims “deal only with a special class of patents, i.e., those procured by intentional fraud,” and “cannot well be thought to impinge upon the policy of the patent laws to encourage inventions and their disclosure,” 382 U.S. at 180 (Harlan, J., concurring). Particularly in light of the demanding proof requirements of a Walker Process claim, we are not persuaded by SanDisk’s “flood of litigation” argument.

Ritz Camera, at 10.  The decision is available HERE.

Rights of audience in England and Wales: when will the new rules come into force?

Patent attorney David Harris (Barker Brettell LLP, Birmingham, England) notes that the Legal Standards Board has approved the draft changes made by the Intellectual Property Regulation Board (IPReg) to the rules concerning the rights of audience which patent attorneys and trade mark attorneys have before various courts (see the top entry listed here).  He comments:

"As such, most attorneys on either register will have rights of audience for all IP matters in the Patents County Court, rather than patent attorneys only having rights for patents and designs (but not copyright), and trade mark attorneys not having any rights by default, as at present. We also get a handful of mildly interesting ancillary rights". 

But what we all want to know is whether when these new rules might be brought into force. If any reader of this weblog has a clue, will he or she please post the answer below.

Designation of patent litigation in England and Wales: new practice

From the IP Court Users' Committee (England and Wales) comes the following announcement (it seem a bit alien to readers from outside the jurisdiction, but PatLit is pleased to have the opportunity to promulgate anything the IPCUC asks):

Designation of Claim Forms in the Patents Court from 1 January 2013. 

 With effect from January 2013, all Patents claims will be given a new designation HP.   So instead of e.g. the current HC 12 C01111 for Chancery claims, the claim number will be HP 13 C01111. 

 This will apply to all claims in the Patents Court (and so will include SPCs and sweep in a few registered designs etc). Those who issue proceedings in the Patents Court from 1 January are asked to make it clear to the counter staff on issue that it is a Patents Claim and therefore requires the new HP designation or, if issuing by post, then to emphasise the point in a covering note.  

In general the staff are very good about this and there should not be a problem as, of course, the claim will be headed Patents Court as at present, but it can only help if the point is drawn to the attention of the counter staff at the time of issue. Under s. 96 of the Patents Act 1977, CPR Part 63 and Practice Direction 63 High Court claims relating to patents and certain other Intellectual Property rights are commenced in the Patents Court and the claim form is required to be marked “Chancery Division Patents Court’” If and when the draft agreement on a Unified Patent Court (UPC) becomes effective, it will be necessary to establish how many patent cases are started in the UK in successive years. 

 This change will enable the relevant claims for the purposes of UPC counting to be extracted electronically. This will make the collection of accurate data about the number of “patent cases” significantly easier than at present, although it is expected that it will still be necessary (given that in some European jurisdictions cases may be counted on a different basis) to review the HP cases to establish 

·          how many patents were in issue, 

·          whether there is a revocation counterclaim or anything else that might be characterised as a “patent action” in other parts of Europe, 

·          whether other patents are added into the claim later, and 

·          whether any application for interim relief was made. 

  Philip Westmacott
Secretary IPCUCNovember 2012

Continuing an action after the patent content is resolved

Ningbo Wentai Sports Equipment Co Ltd v Wang [2012] EWPCC 51, decided in the Patents County Court, England and Wales (Judge Birss QC) on 9 November, was a relatively small affair. The court was dealing with an application to revoke a patent for a folding golf cart; the ground of revocation was lack of novelty on account of prior art which, the patentee argued, counterclaiming for damages, was made public virtue of the claimant's contractual and equitable breach of confidence. This was a low-key contest over a low-tech product and the submissions were all made on paper. At an earlier stage the patent was held invalid but the counterclaim for damages for breach of confidence remained to be dealt with.

Could the Patents County Court continue to hear the action now that the patent bit of it had been resolved given that, if the action had consisted of nothing other than the counterclaim in the first place, it would have been an action before the Chancery Division of the High Court?  Yes, said Judge Birss QC: the action had been properly started there and the counterclaim clearly arose from the same subject-matter as the patent revocation action.

"To settle -- or not to settle?" An ethical poser

With apologies to readers of this weblog who also read the IPKat and who therefore already know about this, PatLit would like to draw the attention of readers to this short, sharp poll which Annsley Merelle Ward has posted on that weblog this morning. It asks a very pertinent ethical/practical question which patent litigators and their clients may already have faced.

Please take the time to participate: unless your conscience pulls you simultaneously in opposite directions, it should not take you long to answer.

Enterprising Italians shake up patent litigation

The Italian Supreme Court: we hope that it will
not be troubled by too many patent appeals ...

PatLit learns with interest that the new Italian business enterprise courts will be handling litigation of patent and trade mark matters. Legislative Decree 1/2012 on deregulation now provides for the transformation of the existing 12 courts which specialise in industrial property matters: instead, there will now be no fewer than 21 courts, which will maintain a broader focus on business matters.

Recent experience of specialist IP courts has been positive: improved efficiency has been brought about in the management of IP lawsuits, even though over the years the workload did not spread evenly across those courts: some, like Milan, Rome and Turin, have been processing thousands of lawsuits while others rarely receive any IP cases at all.  Legislative Decree 1/2012 therefore seeks to deliver a more balanced workload.

The new Courts will therefore hear cases on:

* matters pertaining to industrial property;  

* antitrust matters;  

* matters pertaining to contracts of EU relevance; 

* disputes between business corporations, co-operatives, groups.

In order to maintain the specialisation gained over the past years, the Courts of Milan and Rome have already created two subsections, one for IP matters and the other for company matters, which should ensure better quality judgments. This same arrangement may also be adopted by other Italian courts.

Source: Modiano & Partners

Costs awards when both sides claim to be the winner

Vernacare Ltd v Environmental Pulp Products Ltd [2012] EWPCC 49 is an instructive decision of Judge Colin Birss QC, Patents County Court (England and Wales) on the assessment of costs. In this litigation, the court found Vernacare's patent valid and infringed. Environmental Pulp Products Ltd (EPP) agreed that, if the patent was valid, the first version of its product infringed the patent but denied that the second and third versions infringed.  According to the court, the second version infringed but the third did not.

When it came to costs, Vernacare argued that it should have its costs since it had after all won: its patent had been found valid and infringed by two versions of EPP's product. EPP disagreed and said that it was the real-world commercial winner: all that really mattered was that its version three did not infringe, versions one and two being of historic interest only. Moreover, said EPP, Vernacare had even made things worse by failing to engage with offers to settle or to conduct mediation.

The judge opened by asking three questions:

(a) who won?
(b) did the winner lose on an issue which was suitably circumscribed to deprive that party of the costs of that issue?
(c) was the case was a suitably exceptional one to justify making a costs order on that issue against the party which had won overall?. 

Having established this, Judge Birss QC proceeded as follows:

* In determining the successful party, a judge has to look at the facts and decide who, as a matter of substance and reality, had won. True, EPP's freedom to sell its version three was of significant commercial importance to it -- but that did not mean that it could be regarded as the winner for the purposes of assessing the action's costs.  Looking at the dispute from where the judge sat, EPP had firmly pressed its claim that the patent was wholly invalid and that version two did not infringe, even if the patent was valid. So far as validity was concerned, EPP relied on (i) three cited items of prior art, (ii) an attack of obviousness over the common general knowledge and (ii) added matter. However, when it came to the trial, EPP ceased to relyon one of the prior art citations and its other validity challenges failed.  It was indeed Vernacare which emerged as the winner of the legal proceedings, although EPP's victory in relation to version three would be taken into account on an issue-based approach to costs. 

* When deciding what order, if any, to make about costs, the court has to consider all the circumstances -- including the parties' conduct, their success in part if not in whole, and any admissible offers to settle. Here it would be fair to deduct 25% from Vernacare's costs to reflect EPP's success on the version 3 issue. A further 5% would be knocked off in relation to the issue of obviousness over common general knowledge. So far as conduct was concerned, while Vernacare's success on validity meant that it had achieved more than EPP had offered, Vernacare could and should have engaged more constructively with EPP's attempts to negotiate. This being so, a further 5% would be subtracted, leaving Vernacare with 65% of its costs.

* In a summary assessment of costs in the Patents County Court, a judge should start with the actual costs for a given stage, then assess them on the normal Patents County Court basis; the resulting figure was the one to which any issue-based discount should be applied.  Once this discount has been applied, the figure should be compared to the appropriate scale in the Civil Procedure Rules (CPR PD 43-48) and the lower of the two sums will then be taken.

HLP3 and patent infringement litigation funding

My post earlier this afternoon here on the IP Finance weblog touches on a subject that straddles the interests of readers of both that blog and this one: the funding (a classic IP Finance concern) of patent litigation (the sole subject of this weblog).  Given the fact that the overlap between the ascertainable readership of the two blogs is so very low, not least since most IP Finance readers are involved in non-contentious matters while those of PatLit are generally from the opposite extreme, I thought it would be a good idea to reproduce that post here and I apologise to anyone who may be seeing it for the second time.  It reads as follows:

How do you finance both the fixed costs and the contingent expenses incurred in the course of patent litigation?  This has long been recognised as a threshold question which, if not successfully answered at an early stage, will usually result in one of two outcomes: either the claimant will decide not to commence proceedings because the prospect of an unsuccessful outcome is unaffordable, or the defendant will not put in a defence since the cost of defeat (and not infrequently even the cost of victory) is not worth risking.  It is therefore with great interest that this blogger read the press release, reproduced below, relating to what is claimed to be the first "turnkey" funding solution for patent owners, at any rate.  The level of interest rose when he saw that his friend and colleague, Olswang LLP colleague Campbell Forsyth, has been playing an active part in its development.

The press release reads thus:

HLP Integration launches the ‘HLP3’ patent litigation funding solution  

The first integrated solution for monetizing patents offered in Europe 

 Leading US litigation support consulting and services company HLP Integration has come together with commercial litigation funder Caprica; ATE [that's "after the event"] risk assessors Thomas Miller; and Olswang LLP  to create the first ever turnkey solution for IP owners seeking to generate revenues from their patents.  

Suitable patents admitted to HLP3 will undergo a robust and thorough process of analysis, expert review and risk assessment involving exhaustive research carried out by HLP; evaluation by Olswang LLP; and a further risk evaluation by ATE risk assessors. Subscribing patent owners will have the benefit of an option, for qualifying patents, to obtain funding from Caprica to take a patent case to court.  

Funding commercial cases in the UK has grown significantly in recent years. Potential litigants seeking funding are normally required to undertake considerable preparatory work in order for their case to be reviewed by funders. This can be very time consuming and costly.  Patent cases are also technically complex and therefore require access to specialist expertise at every stage leading to evaluation by a funder.  

HLP3 is a process designed to allow a patent owner or licensee access to a detailed due diligence report provided by industry leaders at the least possible outlay and risk.  The fact that the HLP3 process is integrated ensures the time involved from commencement of the patent review to clarity as to whether a patent can be successfully litigated is as short as practicably possible ...” 

As I mentioned on IP Finance, the idea of an integrated multidisciplinary approach is attractive and recognises that far more is needed than pots of money, nerves of steel and a bit of actuarial nous.  The question which most interests this blogger is whether, in reverse mode, the same due diligence-driven approach can be applied to the funding of non-patent-owning litigants too, based on an assessment of the extent to which an allegedly infringing product or process is firmly based upon expired patents, information and technology in the public domain and that vague concept which is so often aired in court, "general knowledge".

A further word comes from Campbell Forsyth:

“The HLP3 solution ... has aligned the interests of all involved enabling those with patent rights access to the courts to release the value from their innovations. HLP3 has been designed to fund not only High Court cases but also smaller Patents County Court claims”.

Reference to the British courts will set readers thinking whether, and to what extent, this solution can be applied mutatis mutandis to litigation elsewhere in Europe, particularly if and when the Unified Patent Court is to be the likely forum.

Anyone wanting further information about HLP3 should email Peter Rouse at peter.rouse@hlpintegration.com or give him a call on +44 7737 128174.