Monday, December 1, 2014
Vintage style poster for the 2014 Patent Law Colloquium

Kathleen Sullivan keynotes 2014 Patent Law Colloquium

By Mark Witten

After a century of neglect, patent cases have catapulted onto centre stage at the Supreme Court of the United States—but this time with a decidedly Canadian twist. In a striking trend since 2005, SCOTUS has adopted a Canadian-style balancing of protection and innovation as a standard feature, and reversed numerous pro-patent holder decisions made by lower appellate courts.

“Proportionality analysis seeks to balance protection of past innovation with healthy future innovation,” said Kathleen Sullivan in her keynote speech at the third annual Patents Colloquium, Nov. 21, hosted by the University of Toronto Faculty of Law’s Centre for Innovation Law and Policy. Sullivan, a leading U.S appellate advocate at Quinn Emanuel Urquhart & Sullivan LLP in New York, argued that the U.S. Supreme Court has strategically intervened in the field of patent law to help restore balance to the patent system so that it encourages rather than stifles innovation.

When patent disputes suck up the lion’s share of future innovation dollars, a common sense, Canadian-style approach says that the costs and benefits of patent protection are seriously out of whack. In 2011, for example, spending by Apple and Google on patent lawsuits and large patent purchases was greater than spending on research and development of new products, according to The New York Times.

“Canada likes the principle of proportionality. In contrast to U.S. constitutional law, Canadian constitutional law uses proportionality analysis that acknowledges there may be competing interests or rights claims, and overtly balances the costs and benefits of protecting one at the expense of another,” said Sullivan, a former dean of Stanford Law School and constitutional law professor, who has represented high-tech clients including Samsung, Google, Oracle and Cisco, in patent cases since joining the firm in 2005 to lead its national appellate practice.

From a historical perspective, she explained that SCOTUS used to hear patent cases and had mandatory jurisdiction over appeals from federal trial courts. In the 19th century, the Court heard Abraham Lincoln argue for the plaintiff against Cyrus McCormick, inventor of the mechanical reaper, and also heard a major appeal in which it upheld Alexander Graham Bell’s telephone patents.

The Court stepped away from patent law after the federal circuit courts (intermediate appellate courts) were created in 1891. It withdrew even further after the U.S. Court of Appeals for the Federal Circuit (CAFC)—a specialized intermediate court for patent cases—was formed in 1982. Proponents favoured a specialized court that could develop technical expertise and believed that it would create a unified and coherent body of patent precedent.

But Sullivan observed that CFAC critics, most notably SCOTUS, have dismissed many of its pro-patentee decisions, often unanimously.

In an age when everyone has a smart phone, SCOTUS under Chief Justice John Roberts has leapt back into the shifting landscape of patent law. Its aim is to strike more of a balance between protecting past innovation and the public interest in competition and future innovation. To illustrate this trend, Sullivan cited 11 examples of cases from 2006 to 2014 in which the Court has overturned FCAC decisions.

In eBay v. MercExchange (2006), the Court determined injunctions shouldn’t automatically be issued in all cases of patent infringement. It overturned the Federal Circuit’s approval of an injunction that prevented e-Bay from continuing to use an online auction technology patented by MercExchange. The ruling restored a traditional four-factor test that makes it harder for plaintiffs to get a permanent injunction to stop the sale of a product or service.

The Court also said that with complex products, like smart phones, a permanent injunction shouldn’t be granted to stop the sale of the whole product because a minor feature was infringed.

While these decisions clearly resemble the Canadian approach favouring balance, Sullivan said that another driving factor is the Roberts Court’s more general efforts to put the brakes on a U.S. system of civil litigation that many perceive to be out of control.

In KSR v. Teleflex, (2007) the Court ruled that Teleflex’s adjustable automobile pedal assembly patent was invalid for being obvious. It simply combined preexisting pedal technology with a preexisting electronic sensor technology. Sullivan said that a more flexible standard of obviousness makes it easier to challenge patents as obvious and narrows patent scope.

She also referred to four recent rulings that limit the scope of patent eligibility, reaffirming that laws of nature or abstract ideas are not patentable. In Mayo Laboratories v. Prometheus (2011), the court found that a method for correlating metabolites measured in blood and responsiveness to drugs couldn’t be patented. In Assn Molecular Pathology v Myriad Genetics (2013), the BRCA1 and BRCA2 gene case, the Court found that merely isolating genes found in nature doesn’t make them patentable.

In 2013, five unanimous reversals of CAFC decisions reduced litigation benefits to patent holders and favoured patent defendants. In Limelight Networks v. Akamai Technologies, the Court ruled that induced infringement cannot be proved unless a single party directly infringed. This decision is especially important for the high-tech sector. With smart phones, for example, many different hardware, software and telecommunications suppliers may provide elements of the device without controlling the whole product. If the Federal Circuit decision had been upheld, any of the multiple participants could then be sued and potentially held liable for indirectly infringing a patent.

In her amicus brief to the U.S. Supreme Court on behalf of Google, Cisco, Oracle and other high-tech giants in support of Limelight Networks, Sullivan had argued that the Federal Circuit’s Akamai ruling encouraged more litigation, fuelling spiraling costs and the potential for abuse in patent litigation. “Every dollar spent defending against patent suits is a dollar that could be used to research new products, improve existing products, or simply bring products and services to customers more efficiently at cheaper prices,” she wrote.

In her keynote speech, Sullivan cited two final examples of Supreme Court decisions that could make patent holders pay a price for questionable or frivolous suits. The rulings in Octane Fitness v. Icon Health and Fitness Center, and Highmark v. Allcare Health Management System, allow District Courts to use their discretion in awarding attorney’s fees to the winning party on a reasonable basis rather than shifting fees only in narrowly defined exceptional circumstances. “Taken together, these two decisions are a powerful deterrent to patent troll suits since attorney fees may often exceed expected recovery,” she said.

While these decisions clearly resemble the Canadian approach favouring balance, Sullivan said that another driving factor is the Roberts Court’s more general efforts to put the brakes on a U.S. system of civil litigation that many perceive to be out of control. “The Court wants to rein in the use of patents as a weapon,” she said.

Sullivan characterized this as the “Prince Charles factor.” She told a story about meeting the Prince of Wales after joining the Harvard Law School faculty by virtue of having been a Marshall Scholar at Oxford a few years earlier. When Sullivan said she was a law professor, he replied: “Don’t you think Americans are terribly litigious?” That classically Anglo-Canadian sentiment could also explain why the U.S. Supreme Court has chosen to intervene and embark on a Canadian-style, peacemaking mission in the patent wars.

  • The annual University of Toronto Patent Colloquium is made possible by a generous gift from Teva Canada.