Supreme Court review of patent cases: what will follow eBay, Medimmune, and KSR?

• Author: Steinberg, Donald

1. Introduction

   Since its inception, the United States Court of Appeals for the Federal Circuit ("Federal Circuit") has had an evolving relationship with the United States Supreme Court. Congress established the Federal Circuit pursuant to the Federal Courts Improvement Act of 1982, in part, to eliminate inconsistent decisions rendered in patent-related cases. (1) In many ways, this was in response to Congress's expressed displeasure with the state of patent law and enforcement in the United States as of 1982. (2) It was under those circumstances that the Federal Circuit came into being, and assumed its role as the overseer of the patent system.

   Of course, the Federal Circuit has not replaced the Supreme Court as ultimate arbiter on issues of patent law. Nevertheless, the Federal Circuit operated with little oversight from the Supreme Court on patent-related matters for the majority of its history. In its first twelve years, the Supreme Court granted certiorari to only six decisions relating to patent cases. (3) Unsurprisingly, the lack of Supreme Court oversight leads commentators to look to the Federal Circuit as the nation's top patent court--implying that it is the only court that matters on issues of patent law. (4)

   The situation, however, may be changing. The Supreme Court has granted certiorari on an increasing number of patent cases. (5) In many of these cases, the Court primarily granted certiorari to deal with perceived splits among different panels, or judges, in the Federal Circuit. (6) In this role, the Court acted to resolve conflicts within Federal Circuit case law.

   Currently pending before the Supreme Court is the question of whether the Federal Circuit's jurisprudence regarding patent exhaustion conflicts with Supreme Court jurisprudence. (7) In Quanta Computer, the petitioners contend that the Federal Circuit undermined the principle that an authorized sale of a patented article or an article embodying essential features of a patented invention exhausts the patentee's patent rights relating to that article. (8)

   While the outcome in Quanta Computer remains to be seen, the Supreme Court recently identified divergences between its jurisprudence and the Federal Circuit's application of its jurisprudence. (9) Most recently, the Supreme Court articulated its concern in a unanimous decision rejecting the Federal Circuit's "rigid a proach" to applying the teaching-suggestion-motivation test in KSR. (10) The Court held the Federal Circuit's application of the test to be "inconsistent with [section] 103 and this Court's precedents." (11) In fording the claimed invention obvious, the Court observed that rigid, preventive rules, such as the Federal Circuit's application of the "teaching-suggestion-motivation test," which prevents the use of common sense, were neither necessary, nor consistent with the Court's case law. (12) Nevertheless, the "teaching-suggestion-motivation test" was not completely rejected in KSR. (13) The Court merely rejected the Federal Circuit's application of the test. (14) It noted that the "teaching-suggestion-motivation test" had diverged from precedent, and applied in a manner inconsistent with the public's desire to prevent the withdrawal of knowledge from the prior art into a patent's monopoly. (15) Lower courts, therefore, could not continue to apply the test as it had been applied in KSR and other cases.

   Before KSR, the Court reversed the Federal Circuit regarding the standing requirement for a patent licensee to bring declaratory judgment proceedings in District Court. (16) The Court found that the reasoning of the Federal Circuit diverged from its precedent and the common interpretation of the Declaratory Judgment Act in other courts. (17) The majority was particularly concerned with the apparent willingness of the Federal Circuit to distinguish its precedent to reach a certain conclusion, particularly noting that, even if its precedent could be distinguished, the Federal Circuit's test still contradicted the Federal Circuit's own precedent. (18)

   In 2006, prior to the decision in Medlmmune, Inc. v. Genetech, Inc. (19), the Court questioned the Federal Circuit's application of equitable principles in evaluating requests for permanent injunctions following a finding of infringement. (20) The majority held that "well-established principles of equity" were to be applied to the granting of permanent injunctions in patent cases. (21) The Court expressed concern with the categorical grant of relief under the Federal Circuit's "general rule." (22) As in Medlmmune, the Court rejected an established Federal Circuit rule under the premise that the Federal Circuit's rule conflicted with precedent.

   If the opinions in KSR, MedImmune, and eBay are any indication, Federal Circuit jurisprudence may face an eventful new period of Supreme Court review. The Court is reviewing Federal Circuit decisions more closely for consistency with earlier Supreme Court decisions and principles.

   The Supreme Court has not ruled on some issues related to patent law in decades (e.g., patent exhaustion, as in Quanta Computer, (23) or assignor estoppel) and has never directly ruled on other issues (e.g., willful infringement). The Federal Circuit, therefore, is not necessarily inconsistent with the Supreme Court in these and other areas. It is, after all, deciding cases in an evolving area of law and in the context of new technologies. Nonetheless, any perceived divergence between Federal Circuit reasoning and Supreme Court precedent will be open to review in this new era of Supreme Court patent law activism. In the following analysis, we identify three areas of potential conflict (other than patent exhaustion) between Federal Circuit case law and Supreme Court precedent: willful infringement, assignor estoppel, and the written description requirement.

2. Willful Infringement

   Patent infringement involves making, using, selling, or offering for sale a patented (claimed) invention without the permission of the patent owner. (24) Patent infringement does not require a showing of intent to infringe, and can occur even when ignorant of the patent. (25) Nonetheless, showing intent can allow a patent owner to obtain increased damages against an alleged infringer pursuant to 35 U.S.C. [section] 284. (26) The Federal Circuit requires a showing of willful infringement for such increased damages because it is a form of punitive damages, awarded to punish the behavior of the infringer. (27)

   The Supreme Court has rarely ruled on the concept of enhanced damages in patent law. It last ruled directly on this matter in Topliff v. Topliff, prior to the turn of the twentieth century. (28) Still, the Supreme Court has ruled extensively on the concept of punitive damages as it relates to tort law. Those decisions elucidate the Court's views on enhancing damages, especially with regard to purely economic harms such as patent infringement. (29) The following review of Supreme Court case law is merely to provide a very brief overview on the Court's reasoning as it applies to willfulness generally. It is not intended to fully analyze Supreme Court case law as it relates to enhanced damages in tort law, as that discussion is beyond the scope of this article.

   The Supreme Court holds that punitive damages (i.e., exemplary damages) may be awarded where wanton, malicious or deliberate actions occur in tort. (30) In the Court's view, these actions are punishable by increased damages. (31) Punitive damages serve the legitimate interests of the government by punishing unlawful, deliberate conduct and deterring repetition. (32) The award of punitive damages is not without its limits. (33) First, the plaintiff must establish that the defendant's behavior was "reprehensible," (34) requiring that the "defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence." (35) Therefore, acts that do not rise to the level of "reprehensible" conduct do not warrant the imposition of punitive damages. (36)

   Additionally, the award must not be excessive. The Supreme Court explained that punitive damages awards cannot be grossly excessive as compared to the harm suffered and the facts and circumstances surrounding the defendant's conduct. (37) Even relatively minor punitive damages awards can be excessive in cases where, as in patent cases, the harm to the plaintiff was merely economic and the plaintiff could be made whole by compensatory damages. (38) In order to determine whether a particular punitive damage award is fair in light of the defendant's actions, three guideposts are considered prior to the imposition of punitive damages, 1) the degree of reprehensibility of the defendant's misconduct; 2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and 3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in other cases. (39) Even if the defendant's conduct is reprehensible, the damages award must satisfy the Due Process clause's guarantees against excessive awards. (40)

   The Supreme Court adopted a restrictive position on punitive damages in patent law as well. (41) In Seymour, the plaintiff brought an infringement suit against defendant's grain reaping device, and alleged that the defendant willfully infringed his patent. (42) The plaintiff had licensed the patent to the defendant, but the defendant refused to complete payments on the license based upon its belief that the plaintiff was not the true inventor. (43) The trial court ruled that the defendant had pirated (i.e., willfully infringed) the patent, and awarded increased damages. (44) In vacating the damages award, the Supreme Court noted that property law generally did not recognize treble damages for taking the property of another. (45) In addition, it was...