bio - toto, i’ve a feeling we’re not in texas anymorego.bio.org/rs/490-ehz-999/images/session 1...

Toto, I’ve a feeling we’re not in Texas anymore . . .

David TelleksonEwa Davison, Ph.D.Michael KrenickyBryan Zielinski

• Personal Jurisdiction:

Acorda Therapeutics v. Mylan Pharmaceuticals Inc.Bristol-Myers Squibb Co. v. Superior Ct. of California

• Venue:

In re TC Heartland LLC

• Patent Exhaustion:

Impression Products, Inc. v. Lexmark Int’l, Inc.

• Overseas Patent Infringement:

Life Technologies Corp. v. Promega Corp.

• Laches:

SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC

Case Law Update

MARCH 2017FENWICK & WEST | BIO IPCC SESSION 1: PATENT LAW UPDATE 1

Personal JurisdictionEwa Davison & David Tellekson

• Product Liability:Bristol-Myers Squibb Co. v. Superior Ct. of California, 377 P.3d 874 (Cal. 2016), cert. granted.

• ANDA Litigation: Acorda Therapeutics v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016), cert. denied.

Personal Jurisdiction


• Due Process Clause of Fourteenth Amendment limits the power of a state court to render judgment against a nonresident defendant.

• Historically, due process limits on personal jurisdiction serve two roles, fairness and federalism.

• “protects the defendant against the burdens of litigating in a distant or inconvenient forum”

• “ensure[s] that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system”

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).



• General (“all-purpose”) jurisdiction allows a court to assert any and all claims against the defendant.

“For an individual, the paradigm forum for the exercise of general jurisdiction is the individual’s domicile; for a corporation, it is an equivalent place, one in which the corporation is fairly regarded as at home.”

• General jurisdiction over a corporation is appropriate in:

• its state of incorporation, or

• the state where its principal place of business is located, or

• any state where its activities are “so continuous and systematic as to render” the corporation “essentially at home.”

Daimler AG v. Bauman, 134 S. Ct. 746 (2014); Goodyear v. Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011).

Personal Jurisdiction – General


• Specific (“case-linked”) jurisdiction is limited to adjudication of a controversy that “is related to or arises out of” a defendant’s contacts with the state.

• Focus is on the relationship between the defendant, the forum, and the litigation.

• Due process satisfied if:

1. the defendant “purposefully directed” its activities at the forum state;

2. the litigation results from alleged injuries that “arise out of or relate to” those activities; and

3. the exercise of jurisdiction is reasonable and does not offend traditional notions of fair play and substantial justice.

Personal Jurisdiction – Specific


• Reasonableness of exercising specific jurisdiction depends on:

• burden on the defendant,

• the interests of the forum state,

• the plaintiff’s interest in obtaining relief,

• the interstate judicial system’s interest in obtaining the most efficient resolution of controversies, and

• the shared interest of the states in furthering fundamental substantive social policies.

Walden v. Fiore, 134 S. Ct. 1115 (2014); Asahi Metal Indus. Co. v. Super. Ct. of Cal., 480 U.S. 102 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).

Personal Jurisdiction – Specific


• Product Liability:Bristol-Myers Squibb Co. v. Superior Ct. of California, 377 P.3d 874 (Cal. 2016), cert. granted.

• ANDA Litigation: Acorda Therapeutics v. Mylan Pharmaceuticals Inc., 817 F.3d 755 (Fed. Cir. 2016), cert. denied.



• Mass tort litigation filed in San Francisco Superior Court by 86 California residents and 592 nonresidents

• Alleged injury by the BMS drug Plavix®

• BMS did not challenge personal jurisdiction wrt claims brought by the California residents

• But does California have personal jurisdiction over BMS for the purpose of adjudicating the nonresident plaintiffs’ claims?

Bristol-Myers Squibb Co. v. Superior Ct. of California377 P.3d 874 (Cal. 2016)


• Primary BMS locations:

• incorporated in Delaware

• headquartered in New York

• substantial R&D operations in New Jersey

• But BMS also has a California presence:

• operates five R&D facilities employing 164 people

• employs 250 sales representatives

• maintains small advocacy office in Sacramento

• Plavix sales in California = 1.1% of BMS nationwide revenue

• registered to do business and maintains agent for service of process



• No general jurisdiction:

• BMS is only “at home” in Delaware and maybe New York or New Jersey.

• “Although the company’s ongoing activities in California are substantial, they fall far short of establishing that it is at home in this state for purposes of general jurisdiction.”



• California Supreme Court finds specific jurisdiction.

• BMS challenged factor two, i.e., whether the litigation results from alleged injuries that “arise out of or relate to” the defendant’s forum activities.

• Must plaintiffs’ claims be caused by the defendant’s forum activities?

“The dissent suggests that we have erred in drawing no distinction between controversies that ‘relate to’ a defendant’s contacts with a forum and those that ‘arise out of’ such contacts. . . . We do not address the validity or consequences of such a distinction because the issue has not been presented in this case.”

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415 n.10 (1984).



• BMS’s California contacts did not cause the nonresident plaintiffs’ injuries:

• nonresidents did not purchase Plavix in California or from a California source

• nonresidents were not prescribed Plavix by a California doctor

• Plavix was not developed in California

• Plavix is not manufactured in California

• regulatory activities not directed from California

• marketing activities not directed from California



• Broad approach to whether claims “arise out of or relate to” the defendant’s forum activities:

• Treats “related to” as separate basis for finding specific jurisdiction.

• Relatedness requires a “substantial connection” between the defendant’s forum activities and the plaintiff’s claim.

• Sliding scale: “The intensity of forum contacts and the connection of the claim to those contacts are inversely related.”



• Relatedness requirement satisfied based on:

• nationwide marketing and distribution campaign

• non-Plavix R&D in California



• Nationwide marketing and distribution campaign:

• California plaintiffs’ claims arise out of BMS’s allegedly misleading marketing and distribution of Plavix in California.

• BMS sold Plavix to both the California and the nonresident plaintiffs as part of a common nationwide course of distribution.

• “BMS’s nationwide marketing, promotion, and distribution of Plavix created a substantial nexus between the nonresident plaintiffs’ claims and the company’s contacts in California concerning Plavix.”



• Non-Plavix R&D in California

• Plavix was not designed or developed in California.

• But “the fact that the company engages in research and product development in [its] California facilities is related to plaintiffs’ claims that BMS engaged in a course of negligent research and design that led to their injuries, even if those claims do not arise out of BMS’s research conduct in this state.”



• California’s approach blurs the line between general and specific jurisdiction.

• No causal nexus between the nonresident plaintiffs’ tort claims and BMS’s California activities.

• Instead, BMS’s wide-ranging contacts with California compensate for the lack of a causal nexus.



• Question Presented:

Whether a plaintiff ’s claims arise out of or relate to a defendant’s forum activities when there is no causal link between the defendant’s forum contacts and the plaintiff ’s claims—that is, where the plaintiff ’s claims would be exactly the same even if the defendant had no forum contacts.

• Oral argument on April 25, 2017



• Acorda / Alkermes and AstraZeneca separately filed ANDA lawsuits against Mylan in Delaware.

• Mylan, a West Virginia company, unsuccessfully sought dismissal for lack of personal jurisdiction.

• Federal Circuit affirmed that Mylan is subject to specific jurisdiction in Delaware.

• If Mylan had already marketed the generic drugs in Delaware, “there is no doubt that it could be sued for infringement in Delaware.”

• ANDA filings reliably confirm Mylan’s intent to market generic drugs in Delaware following FDA approval.

• No “rigid past/future dividing line governs the minimum-contacts standard.”

Acorda Therapeutics v. Mylan Pharm.Inc.,817 F.3d 755 (Fed. Cir. 2016)


• In seeking certiorari, Mylan argued that the Federal Circuit created an “ANDA exception” to “core jurisdictional principles”:

• Specific jurisdiction cannot be based on future conduct.

• Mylan’s only suit-related activity was preparation of the ANDA in West Virginia, and submission of the ANDA to the FDA in Maryland.

• Federal Circuit effected an end-run around Daimler, because personal jurisdiction in ANDA cases was previously asserted under general jurisdiction principles permitting suit wherever a generic manufacturer conducted substantial business.



• Respondents argued that Federal Circuit decision was well-supported by precedent:

• Federal Circuit based specific jurisdiction on Mylan’s past act of ANDA filing, not speculative future sales.

• Supreme Court previously held that the “contemplated future consequences” of a defendant’s past acts “must be evaluated in determining whether the defendant purposefully established minimum contacts within the forum.” Burger King v. Rudzewicz, 471 U.S. 462 (1985).



• Respondents argued that Federal Circuit decision was well-supported by precedent:

• Daimler concerns general, not specific, jurisdiction. And it has long been settled that a patent infringer is subject to specific jurisdiction in every state where infringing sales are made—Federal Circuit simply extended that principle to ANDA context.

• Generic manufacturer free to argue that does not intend to market drug in state where sued.

• Nothing intrinsically wrong with nationwide specific jurisdiction.



• Supreme Court denied Mylan’s petition for certiorari.

• Effectively establishes personal jurisdiction in every state over generic drug manufacturers in ANDA litigation.



VenueEwa Davison & David Tellekson

• Historically, venue protects defendants from inconvenience by limiting where a plaintiff can file suit among those courts having personal jurisdiction.

• For patent infringement actions, 28 U.S.C. § 1400(b) limits venue to those judicial districts:

• where the defendant resides, or

• where the defendant has committed acts of infringement and has a regular and established place of business.

Venue


• Difficulty arises in determining whether 28 U.S.C. § 1391(c) – which Congress has repeatedly amended – defines corporate residence in patent infringement actions.

• Currently, venue in patent infringement cases is co-extensive with personal jurisdiction.

Venue


Venue: Top Districts by Patent Cases Filed in 2016Brian Howard, 2016 Fourth Quarter Litigation Update, LexMachina (Jan. 12, 2017), available at https://lexmachina.com/q4-litigation-update/


District %age No. of Cases

E.D. Tex. 36.4% 1,647

D. Del. 10.1% 455

C.D. Cal. 6.4% 290

N.D. Ill. 5.5% 247

N.D. Cal. 4.2% 188

Other 37.5% 1,693

Venue: Top Districts by ANDA Cases Filed in 2016Statistics from LexMachina


District %age No. of Cases

D. Del 48% 151

D.N.J. 34% 109

E.D. Va. 5% 17

S.D. Ind. 3% 8

E.D. Tex. 2% 7

Other 8% 24

• Will the Supreme Court narrow venue in TC Heartland?

• “This is an extraordinary case because it presents a question of statutory interpretation that this Court specifically answered more than a half century ago.” – Petitioner’s Br.

Venue


28 U.S.C. § 1400(b)

Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.

28 U.S.C. § 1391(c)

A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

Fourco Glass Co. v. Transmirra Products. Corp.353 U.S. 222 (1957)


• “We hold that 28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the provisions of 28 U.S.C. 1391(c).”

• “Specific terms prevail over the general in the same or another statute which otherwise might be controlling.”

• § 1400(b) applies specifically to all defendants in patent infringement actions.

• § 1391(c) is a general corporation venue statute.

• “Where the defendant resides” in § 1400(b) means “the state of incorporation only.”

Fourco Glass Co. v. Transmirra Products. Corp.353 U.S. 222 (1957)


28 U.S.C. § 1400(b) – same


28 U.S.C. § 1391(c) – amended 1988

For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.

VE Holding Corp. v. Johnson Gas Appliance Co.917 F.2d 1574 (Fed. Cir. 1990)


• Sections 1391 and 1400 are both in chapter 87 of title 28 of the U.S. Code.

• “We hold that Congress by its 1988 amendment of 28 U.S.C. § 1391(c) meant what it said; the meaning of the term ‘resides’ in § 1400(b) has changed.”

• General rule that a specific provision is not governed by a general provision does not apply because § 1391(c):

• expressly reads itself into § 1400(b), and

• merely defines a term in § 1400(b).



• “Now, under amended § 1391(c) as we here apply it, venue in a patent infringement case includes any district where there would be personal jurisdiction over the corporate defendant at the time the action is commenced.”



• Kraft sued TC Heartland in Delaware for patent infringement.

• TC Heartland is an Indiana company:

• limited liability company organized and existing under Indiana law

• headquartered in Indiana

• Limited Delaware connections:

• not registered to do business, no local presence, no supply contracts

• but ships orders into Delaware pursuant to two national accounts, for sales totaling 2% of its total annual sales

In re TC Heartland LLC821 F.3d 1338 (Fed. Cir. 2016)


28 U.S.C. § 1400(b) – same


28 U.S.C. § 1391 – amended 2011

(a) APPLICABILITY OF SECTION.—Except as otherwise provided by law—

(1) this section shall govern the venue of all civil actions brought in district courts of the United States

(c) RESIDENCY.—For all venue purposes—

(2) an entity with the capacity to sue and be sued in its common name under applicable law, whether or not incorporated, shall be deemed to reside, if a defendant, in any judicial district in which such defendant is subject to the court’s personal jurisdiction with respect to the civil action in question . . .



• Congress broadened applicability of § 1391 by replacing “For the purpose of venue under this chapter . . . ” with “For all venue purposes . . . ”

• As for “Except as otherwise provided by law”:

• corporate residence is not defined in § 1400(b), and

• to the extent the Supreme Court in Fourco previously defined corporate residence in § 1400(b) as the state of incorporation, that is no longer the law given subsequent amendments to § 1391.



• Whether 28 U.S.C. § 1400(b) is the sole and exclusive provision governing venue in patent infringement actions and is not to be supplemented by 28 U.S.C. § 1391(c).

TC Heartland at the Supreme Court


• Option 1: “judicial district where the defendant resides”

• Under Fourco, residence is state of incorporation.

• Many generic drug manufacturers are incorporated in Delaware or New Jersey, where most ANDA cases are currently filed:

• Delaware : Actavis, Amphastar, Endo, Glenmark, Impax, Par, Takeda, Teva

• New Jersey: Sandoz (Novartis), Dr. Reddy’s

• But some have incorporated in other states:

• Apotex (Florida), Barr (New York), Mylan (West Virginia), Prasco (Ohio LLC), Roxane (Ohio), Sun Pharmaceuticals (Michigan)

Judicial District Where the Defendant Resides


• Option 2: “where the defendant has [1] committed acts of infringement and [2] has a regular and established place of business”

• Both requirements must be satisfied.

Act of Infringement and Place of Business


• Where does infringement occur in ANDA cases?

• 35 U.S.C. § 271(e)(1) provides a safe harbor for “uses reasonably related to the development and submission of information” to the FDA

• ANDA submission is an artificial act of infringement under § 271(e)(2), suggesting at least Maryland (location of FDA) or district where Paragraph IV notice letter is received

• Prospective approach suggests act of infringement in all districts where ANDA filer intends to market the generic drug

Act of Infringement


• Process claims:

• Historically, venue not established by defendant’s sale of product made by patented process in a given district.

• Rather, defendant must practice the patented process in that district.

• See, e.g., Koratron Co. v. Lion Uniform, Inc., 449 F.2d 337 (9th Cir. 1971).

• Multiple steps:

• What if not all steps are performed in one district, particularly in cases of divided infringement?

Act of Infringement


• Requires more than “minimum contacts” or “doing business.” See, e.g., Knapp-Monarch Co. v. Casco Prods. Corp., 342 F.2d 622 (7th Cir. 1965).

• Not satisfied by registration under state law for service of process. See, e.g., Johnston v. IVAC Corp., 681 F. Supp. 959 (D. Mass. 1987).

• Usually, a physical location within the district will suffice, but may not be necessary:

“[T]he appropriate inquiry is whether the corporate defendant does its business in that district through a permanent and continuous presence there and not . . . whether it has a fixed physical presence in the sense of a formal office or store.” In re Cordis Corp., 769 F.2d 733 (Fed. Cir. 1985).

Regular and Established Place of Business


• There is no requirement of a nexus between the act of infringement and the defendant’s place of business in the district. See, e.g., Laitram Corp. v. Rexnord, Inc., 226 USPQ 971 (D. Md. 1985).

• For example, venue can be established based on the location of any corporate division, not merely the division engaged in the infringing activity. See, e.g., Joslyn Mfg. Co. v. Amerace Corp., 729 F. Supp. 1219, 1223, 14 USPQ2d 1223, 1225 (N.D. Ill. 1990).

• But venue cannot be established based on the location of a parent or subsidiary of the defendant, unless not truly separate. See, e.g., L.D. Schreiber Cheese Co. v. Clearfield Co., 495 F. Supp. 313 (W.D. Pa. 1980).

Regular and Established Place of Business


Overseas Patent InfringementMichael Krenicky

This case concerns the intersection of international supply chains and federal patent law.

SCOTUS asked whether a party that supplies a single component of a multicomponent invention for manufacture abroad can be held liable for infringement under 35 U.S.C. § 271(f)(1).

Life Technologies Corp. v. Promega Corp., __ S. Ct. __ (Feb. 22, 2017)

26 March 2017FENWICK & WEST | Toto, I’ve a feeling we’re not in Texas anymore 47

Facts

The Tautz patent, U.S. Reissue Patent No. RE 37,984, claims a toolkit for genetic testing, i.e., STR profiling, where small DNA samples are amplified to generate DNA profiles.

Life Tech's kit includes five components:

(1) a mixture of primers that mark the part of the DNA strand to be copied

(2) nucleotides for forming replicated strands of DNA

(3) Taq polymerase

(4) a buffer solution for the amplification

(5) control DNA

Facts (continued)

Promega sublicensed the Tautz patent to Life Tech for the manufacture and sale of the kits for use in certain licensed law enforcement fields worldwide.

Life Tech manufactured all but one component of the kits in the U.K.

Life Tech manufactured —the Taq polymerase—in the U.S., and shipped only the Taq polymerase to its U.K. facility, where it was combined with the other four components of the kit.

Facts (continued)

Promega sued Life Tech on the grounds that Life Tech infringed the patent by selling the kits outside the licensed fields of use to clinical and research markets.

Promega alleged Life Techs' supply of Taq polymerase from the U.S. to its U.K. manufacturing facilities triggered liability under 35 U.S.C. § 271(f)(1).

35 U.S.C. § 271(f)(1)

Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer.

United States District CourtWestern District of Wisconsin

The jury returned a verdict for Promega, finding that Life Tech had willfully infringed the patent.

Life Tech moved for JMOL, contending that § 271(f)(1) did not apply because the phrase “all or a substantial portion” does not encompass the supply of a single component of a multicomponent invention.

Judge Crabb granted Life Techs' motion agreeing there could be no infringement under § 271(f)(1) because Promega's evidence at trial “showed at most that one component of all of the accused products, [the Taq ] polymerase, was supplied from the United States.”

Judge Crabb ruled that Section 271(f)(1)'s reference to “a substantial portion of the components,” does not embrace the supply of a single component.

CAFC

The CAFC reversed and reinstated the jury's verdict finding Life Tech liable for infringement.

CAFC found “there are circumstances in which a party may be liable under § 271(f)(1) for supplying or causing to be supplied a single component for combination outside the United States.”

The CAFC concluded that the dictionary definition of “substantial” is “important” or “essential,” which it read to suggest that a single important component can be a “ ‘substantial portion of the components' ” of a patented invention.

Relying in part on expert trial testimony that the Taq polymerase is a “ ‘main’ ” and “ ‘major’ ” component of the kits, the court ruled that the single Taq polymerase component was a substantial component as the term is used in § 271(f)(1).

SCOTUS

The question before us is whether the supply of a single component of a multicomponent invention is an infringing act under 35 U.S.C. § 271(f)(1).

The threshold determination to be made is whether § 271(f)(1)'s requirement of “a substantial portion” of the components of a patented invention refers to a quantitative or qualitative measurement.

Life Tech and the United States argue that the text of § 271(f)(1) establishes a quantitative threshold, and that the threshold must be greater than one. Promega defends the Federal Circuit's reading of the statute, arguing that a “substantial portion” of the components includes a single component if that component is sufficiently important to the invention.

SCOTUS Analysis

Under a quantitative approach, a single component cannot constitute a “substantial portion” triggering § 271(f)(1) liability.

This conclusion is reinforced by § 271(f)'s text, context, and structure.

Section 271(f) (1) consistently refers to the plural “components,” indicating that multiple components make up the substantial portion.

Reading § 271(f)(1) to cover any single component would also leave little room for § 271(f)(2), which refers to “any component,” and would undermine § 271(f)(2)'s express reference to a single component “especially made or especially adapted for use in the invention.”

The better reading allows the two provisions to work in tandem and gives each provision its unique application.

SCOTUS Analysis (continued)

The history of § 271(f) further bolsters this conclusion.

Congress enacted § 271(f) in response to Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 92 S.Ct. 1700, 32 L.Ed.2d 273, to fill a gap in the enforceability of patent rights by reaching components that are manufactured in the United States but assembled overseas.

Consistent with Congress's intent, a supplier may be liable under § 271(f)(1) for supplying from the United States all or a substantial portion of the components of the invention or under § 271(f)(2) for supplying a single component if it is especially made or especially adapted for use in the invention and not a staple article or commodity.

But, as here, when a product is made abroad and all components but a single commodity article are supplied from abroad, the activity is outside the statute's scope.

SCOTUS Holding

We hold that the phrase “substantial portion” in 35 U.S.C. § 271(f)(1) has a quantitative, not a qualitative, meaning. We hold further that § 271(f)(1) does not cover the supply of a single component of a multicomponent invention.

The supply of a single component of a multicomponent invention for manufacture abroad does not give rise to liability under Section 271(f)(1) of the Patent Act, which prohibits the supply from the United States of "all or a substantial portion of the components of a patented invention" for combination abroad.

Take Away

A “substantial portion of the components” means “more than one component”.

Pay careful attention to the entire structure of a statute of interest.

The CAFC’s flexible “qualitative” approach to determining whether there is a “substantial portion” of components is replaced by a rigid SCOTUS rule where one component is not enough to have liability under Section 271(f)(1).

What’s missing? How much does one need? 51% OK?

Patent ExhaustionBryan Zielinski

Background:

• Lexmark toner cartridges – “Regular” (no use restriction – full price) versus “Return Program” (single-use, no-resale, return to Lexmark – “Opening this package . . . confirms your acceptance . . .” displayed on packaging - 20% discounted price)

• Single-use restriction enforced with computer chip

• Impression – purchased two categories of recycled Lexmark cartridges for resale in the U.S.

• “Single use” cartridges Lexmark sold in U.S. – spent cartridges, Lexmark chips replaced with hacked chips, refilled with replacement toner

• Lexmark cartridges sold abroad – some with and some without single-use/no-resale restriction

Lexmark Intl., Inc. v. Impression Products, Inc.


Background:

• Legal action – ITC and Dist. Ct. (S.D. Ohio)

• Impression’s defense – Lexmark’s initial sale of cartridges “exhausted” Lexmark’s right to enforce its U.S. patents

“The longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta (2008)

• Dist. Ct. stipulated judgment:

Infringement – Lexmark cartridges first sold outside the U.S.

Non-infringement – Lexmark “single use” cartridges first sold inside the U.S.



Mallinckrodt, Inc. v. Medipart, Inc. (Fed. Cir. 1992):

•Sales to hospitals of Mallinckrodt nebulizer devices that delivered therapeutic or radioactive material. Devices subject to a single-use/no-resale restriction.

•Medipart reconditioned some used devices, resold to hospitals for half price.

•Fed. Cir. held that use restrictions do not exhaust patent rights “unless the condition violates other law or policy” such as illegal price fixing or tying arrangement.

•Lexmark summary of Mallinckrodt:

“Thus, unless a sale restriction is improper under some other body of law, whether within the Patent Act or outside it, a patentee’s own sale of its patented article subject to a clearly communicated restriction does not confer authority to sell or use the article in violation of that restriction, i.e., does not exhaust the patentee’s §271 rights . . .”



Quanta Computer, Inc. v. LG Electronics, Inc. (S. Ct. 2008):

• LG’s patents covered computer chips and aspects of data systems. LG licensed Intel to manufacture and sell the chips.

• Restriction – license included disclaimer that no license was given to Intel’s customers to combine licensed Intel products with non-Intel components in a manner that would fall within LG’s patents. License otherwise allowed Intel to sell without limitation.

• Restriction – separate master agreement required Intel to notify customers of this limitation but sales were not made conditional based on a customer (Quanta) agreement to abide by the limitation.

• Held – unrestricted sale of LG’s patented chips made by a patentee-licensed mf’er (Intel) to a 3rd party (Quanta) was subject to exhaustion.

• Lexmark – the Supreme Ct’s Quanta decision did not overturn Mallinckrodtbecause Quanta did not involve a sale subject to a restriction – rather, it involved a licensee’s sale that “was not subject to any conditions.”



Jazz Photo Corp. v. International Trade Comm’n (Fed. Cir. 2001):

• Addressed ITC’s finding that Jazz Photo’s importation of refurbished disposable cameras infringed Fuji Photo Film’s patents.

• Activities at issue: (a) cameras sold by Fuji in U.S., refurbished abroad, imported back to U.S.; (b) cameras sold abroad, refurbished abroad, imported into U.S.

• Held – (a) authorized first sales in U.S. subject to exhaustion, (b) authorized first sales overseas not subject to exhaustion.

• Lexmark – reward for U.S. patent based on “American markets”:

“The statute gives patentees the reward available from American markets. A patentee cannot reasonably be treated as receiving that reward from sales in foreign markets, and exhaustion has long been keyed to the idea that the patentee has received its U.S. award.”



Kirtsaeng v. John Wiley & Sons, Inc. (S. Ct. 2013):

•Wiley sued Kirtsaeng (Thai citizen studying at Cornell) who had relatives purchase textbooks in Thailand, ship to U.S., then sold by Kirtsaeng in U.S. on eBay

•Supreme Ct. reversed 2nd Cir. and held that Kirtsaeng’s sale of textbooks purchased overseas was protected by the first-sale doctrine

§109(a) of Copyright Act: “the owner of a particular copy . . . lawfully made under this title . . . is entitled, without authority of the copyright owner, to sell or otherwise dispose of the possession of that copy . . . “

§109(a) is not limited to copies made in the U.S. – applies regardless of place of manufacture

•Lexmark – Kirtsaeng “did not address patent law . . .” The patent act does not include a congressionally prescribed exhaustion rule.



Lexmark en banc decision (Fed. Cir. 2016):

• 10-2 (J. Taranto) - decision stretches to 130 pages (including J. Dyk’sdissent)

• Foreign sales: Should Fed. Cir. overrule Jazz Photo in view of Kirtsaeng? No – sale of a patented item outside the U.S. by (or with approval of) patentee does not give rise to U.S. patent exhaustion –even where no reservation of rights accompanies the sale

• Post-sale restrictions on use or resale: Should the Fed. Cir. overrule Mallinckrodt in view of Quanta? No – sale of a patented item, where the sale is subject to a lawful restriction, does not give rise to patent exhaustion



J. Dyk’s dissent (joined by Circuit Judge Hughes):

• A foreign sale should exhaust U.S. patent rights absent an explicit reservation of those rights. J. Dyk would “retain Jazz Photo insofar as it holds that a foreign sale does not in all circumstances lead to exhaustion of United States patent rights. But, in my view, a foreign sale does result in exhaustion if an authorized seller has not explicitly reserved United States patent rights.”

• The majority’s ruling allowing post-sale restrictions – such as the single-use/no-resale restriction at issue – cannot be squared with the Supreme Court’s Quantadecision. J. Dyk states that “Mallinckrodt was wrong when decided . . .”

S. Ct.’s Motion Picture decision overruled A.B. Dick principle that a patentee could impose a post-sale restriction by giving a buyer notice.

Post-sale restrictions cannot be enforced under federal patent law.



Questions presented for Supreme Court review:

• Whether a “conditional sale” that transfers title to the patented item while specifying post-sale restrictions on the article’s use or resale avoids application of the patent exhaustion doctrine and therefore permits the enforcement of such post-sale restrictions through the patent law’s infringement remedy.

• Whether, in light of this Court’s holding in Kirtsaeng v. John Wiley & Sons, Inc., 133 S. Ct. 1351, 1363 (2013), that the common law doctrine barring restraints on alienation that is the basis of exhaustion doctrine “makes no geographical distinctions,” a sale of a patented article – authorized by the U.S. patentee –that takes place outside of the U.S. exhausts the U.S. patent rights in that article.

• Oral arguments held Tuesday, March 21st



U.S. Gov. position (Solicitor General):

• Foreign sales – while Impression argues exhaustion should apply to foreign sales in the same way it applies to U.S. sales, the U.S. gov. supports a “presumptive exhaustion” of patent rights following a foreign sale. A patent owner may “reserve his U.S. rights as part of a foreign sale if he does so expressly.”

• Post-sale restrictions – Impression argues that any sale by the patent owner – even where it includes express restrictions on the use or resale of the item – is an “authorized sale” that exhausts patent rights on items sold. U.S. gov. agrees – restrictions are enforceable under contract law but not as patent infringement.



LachesEwa Davison

• Developed as an equitable defense to protect defendants from unreasonable, prejudicial delay in filing suit.

• Historically, principal application of laches was to

• claims brought in equity

• to which no statute of limitations otherwise applied

Laches


• Patent infringement:

• 35 U.S.C. § 286 establishes a six-year limitation on damages recovery for patent infringement.

• Federal Circuit nonetheless recognized laches as a defense to a patentee’s claim for damages, concluding that Congress had encompassed laches as a defense in § 282. A.C. Aukerman Co. v. R.L. Chaides Construction Co., 960 F.2d 1020 (Fed. Cir. 1992).

• Following Supreme Court’s elimination of laches as a defense to damages for copyright infringement, Federal Circuit reaffirmed that laches are a defense to damages for patent infringement. SCA Hygiene Prods. v. First Quality Baby Prods., 807 F.3d 1311 (Fed. Cir. 2015) (en banc)

Laches


• Laches cannot be used as a defense against damages for patent infringement, where the infringement occurred in the six-year period prescribed by § 286.

• Decreases, but does not eliminate, risk to patent owner from delay in filing suit:

• Damages limited to six-year period.

• Laches remains relevant in deciding whether injunctive relief should be granted (irreparable injury – unreasonable delay, balance of hardships –defendant’s reliance on delay).

• Laches applicable to amount of ongoing royalty?

• Equitable estoppel

SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC580 U.S. __ (2017)


• Equitable estoppel may entirely bar patentee’s claims, but more difficult to prove than laches:

• Patentee engages in misleading conduct that leads the alleged infringer to reasonably infer that patentee does not intend to enforce its patent.

• The alleged infringer relies on the misleading conduct.

• Due to its reliance, the alleged infringer will be materially prejudiced if the patentee’s claims proceed.

SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC580 U.S. __ (2017)


David TelleksonFenwick & West [email protected]

Ewa Davison, Ph.D. Fenwick & West [email protected]

Michael KrenickyConstitution IP, [email protected]

Bryan ZielinskiPfizer [email protected]

Contact Information

75FEBRUARY 2017FENWICK & WEST | LIFE SCIENCES PATENT LITIGATION

mailto:[email protected]




Thank you

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