By Kevin E. Noonan —

The institutional history of the Court of Appeals for the Federal Circuit (CAFC) in recent years has been one of constant reversal by the U.S. Supreme Court.  In procedural matters (eBay Inc. v. MercExchange, LLC), the Federal Circuit’s prerogatives on the standard of review (Dickinson v. Zurko), and even in the CAFC’s explication of patent law (Warner-Jenkinson Co. v. Hilton Davis Chem. Co., Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Merck KGAA v. Integra Lifesciences I, Ltd.), the Supreme Court has reversed or modified almost every action by the Federal Circuit.  This trend threatens to be extended in KSR Int’l Co. v. Teleflex, Inc. and, should the Supreme Court grant certiorari, in Amgen Inc. v. Hoechst Marion Roussel, Inc. 

This trend has not gone unnoticed by the Federal Circuit.  Ever since the Supreme Court granted certiorari in KSR, the CAFC has gone to great pains in its precedential decisions on obviousness to address some of the criticisms raised by the petitioner in the KSR case.  This trend may have culminated in Pfizer, Inc. v. Apotex, Inc., where the Federal Circuit invalidated as obvious a patent that had been found valid in three separate district court cases (see "The Federal Circuit Backpedals on Obviousness" and "Pfizer, Inc. v. Apotex, Inc. (Fed Cir. 2007)").

The trend can also be seen in the Federal Circuit’s recent decisions on declaratory judgment jurisdiction in the wake of the Supreme Court’s MedImmune, Inc. v. Genentech, Inc. decision.  Although generally critical of the CAFC’s "reasonable apprehension" test for finding an Article III case or controversy when a licensee sought to challenge the validity of a licensed patent, the decision was actually a narrow one of jurisdiction, and the Supreme Court scrupulously avoided reaching the merits.  In response, the Federal Circuit has apparently abandoned a decade of its own jurisprudence, as evidenced by two recent cases:  SanDisk Corp. v. STMicroelectronics, Inc. and Teva Pharmaceuticals USA, Inc. v. Novartis Pharmaceuticals Corp.  In the SanDisk case, STMicroelectronics aggressively approached SanDisk with a cross-licensing proposal wrapped around explicit threats to sue on its patents.  This included writing the initial cross-licensing proposal involving eight of its patents, followed in short order by a further letter adding four more patents that it characterized as possibly being "of interest" to SanDisk.  These letters were followed by a meeting, at STMicroelectronics’ insistence, at which STMicroelectronics made both legal and technical presentations purporting to show how specific products sold by SanDisk infringed specific claims in the twelve STMicroelectronics’ patents.  Moreover, STMicroelectronics’ counsel insisted that these discussions be held under the Federal Rules of Evidence 408 – the provision relating to the admissibility of settlement discussions in litigation. 

The Federal Circuit (Judge Linn writing for the court) opined that the Supreme Court’s opinion in MedImmune represents a rejection of the "reasonable apprehension of suit" test (while acknowledging that this criticism comprised dicta in a footnote).  A close reading of the MedImmune opinion, however, clearly limits the scope of this rejection to the facts in that case – that declaratory judgment jurisdiction lies for a non-repudiating licensee, in view of the repercussions of repudiation.  In SanDisk, the Federal Circuit not only went much further than the Supreme Court, they abrogated their responsibility to define the scope of their actions:

Article III jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do.  We need not define the outer boundaries of declaratory judgment jurisdiction, which will depend on the application of the principles of declaratory judgment jurisdiction to the facts and circumstances of each case.  We hold only that where a patentee asserts rights under a patent based on certain identified ongoing or planned activity of another party, and where that party contends that it has the right to engage in the accused activity without license, an Article III case or controversy will arise and the party need not risk a suit for infringement by engaging in the identified activity before seeking a declaration of its legal rights.

The CAFC in SanDisk thus moved from the Supreme Court’s calculus involving a licensee; here, the Federal Circuit made a declaratory judgment available to even a potential licensee.  This result is not mandated by the Supreme Court’s MedImmune decision, and the Federal Circuit’s reasoning, or lack of it, suggests that the CAFC is tiptoeing around this issue for fear of further criticism from the Supreme Court.  The Federal Circuit’s decision was amply supported by STMicroelectronics’ series of aggressive acts that clearly suggested an imminent apprehension of suit (indeed, it is likely that a declaratory judgment action would lie under the Federal Circuit’s pre-MedImmune jurisprudence on these facts).  The fact that the CAFC bolstered its holding by citing other Circuit Courts of Appeal decisions only reinforces the impression that the Federal Circuit expects further scrutiny of its decisions in this area. 

The Federal Circuit continued this trend in Teva Pharmaceuticals (see Patent Docs coverage of this case).  In this case, the CAFC overturned a district court dismissal of Teva’s declaratory judgment action based on the Federal Circuit’s earlier "reasonable apprehension of imminent suit" test.  Teva sued on four of five patents listed in the Orange Book relating to Novartis’ FAMVIR® genital herpes drug.  The fifth, U.S. Patent No. 5,246,937 (the ‘937 patent) protected the drug product itself, and Novartis sued Teva on the ‘937 patent under 35 U.S.C. § 271(e)(2) in view of Teva’s Paragraph IV certification, but did not assert the other four patents.  Nothing in the statute prevented Novartis from suing Teva on any of these four patents should Teva prevail in the ‘937 lawsuit and launch under its ANDA, bringing Teva squarely within the "bet the farm" risk the Supreme Court had used as the basis for its holding in MedImmune – that a licensee was not required to repudiate its license in order to have standing to prosecute a declaratory judgment action of invalidity.

The Federal Circuit did not make this analogy, however.  Instead, the CAFC opined that its earlier jurisdictional precedent had been "overruled by . . . an intervening . . . Supreme Court decision," on the basis of the dicta found in footnote 11 of the MedImmune decision.  On that basis, the Federal Circuit analyzed the jurisdictional facts before the district court, explicitly applying the "all the circumstances" test of Maryland Casualty Co. v. Pacific Coal & Oil Co., one of the cases cited by the Supreme Court in its precedent-setting footnote.  After a long and painstaking analysis solidly grounded in Supreme Court precedent, the Federal Circuit found that there was an actual controversy between the parties and that Teva had demonstrated an injury-in-fact sufficient to support declaratory judgment jurisdiction.  Senior Judge Friedman arrived at the identical conclusion in a much simpler fashion in a concurring opinion.  According to Judge Friedman, Novartis’ listing of its five patents in the Orange Book and Teva’s Paragraph IV certification of non-infringement or invalidity were enough to raise an actual controversy between the parties.

The Federal Circuit’s current (and perhaps justifiable) obsession with the Supreme Court’s exercise in its supervisory role over CAFC decisions has been applauded by some who have been frustrated by the Federal Circuit’s inconsistent application of "settled" patent law principles.  This inconsistency has been viewed as being contrary to Congressional purposes in instituting the Court:  to promote greater uniformity in certain areas of federal jurisdiction and relieve the pressure on the dockets of the Supreme Court and the Courts of Appeals for the regional circuits.  See "An Act To establish a United States Court of Appeals for the Federal Circuit, to establish a United States Claims Court, and for other purposes, 96 Stat. 25 (April 2, 1982).  The Supreme Court’s relative inactivity in reviewing Federal Circuit decisions over the first decade of its existence was consistent with this purpose, and permitted the Federal Circuit to establish its jurisprudence and institutional integrity.

While not proposing that the Federal Circuit is outside the scope of Supreme Court review, it is possible that the Supreme Court’s prior restraint in reviewing CAFC decisions was the better path, to promote the goals enunciated by Congress and to permit the Federal Circuit to bring the desired harmony to patent law that was so sadly absent prior to its creation.  There can be little doubt that the Federal Circuit has brought some of this increased scrutiny upon itself, particularly in areas where it has become so dominated by doctrinal factionalism as to create disharmony in the law (for example, with regard to the issues of deference under Cybor Corp. v. FAS Technologies, Inc. and written description under Regents of the University of California v. Eli Lilly & Co.).  However, there is as much danger in too much Supreme Court review as there would be in too little.  The Supreme Court has an opportunity to permit the Federal Circuit to clean its own house with regard to at least one issue – deference – by permitting the CAFC the time it needs to decide to reconsider the Cybor doctrine en banc before it decides whether to grant certiorari on the issue in Amgen Inc. v. Hoechst Marion Roussel, Inc.

For additional information, please see:

• "CAFC Expands Scope of Declaratory Judgment Jurisdiction," Patently-O, March 27, 2007

• "Medimmune, Inc. v. Genentech, Inc. (2007)," Patent Docs, January 9, 2007