Bayh-Dole Act is Not a "Patent Law" Sufficient to Create CAFC Jurisdiction

WARF v. Xenon Pharmaceuticals (Fed. Cir. 2007) (nonprecedential opinion).

In 2006, WARF won a $1 million verdict in a breach of contract case against Xenon. Although contracts are normally issues of state law, WARF’s original complaint also raised technology transfer issues under the Bayh-Dole Act. (35 U.S.C. §§ 200, et seq.).

On appeal, the CAFC found that it lacked subject matter jurisdiction over the appeal because it did not arise under the patent laws. In this vein, the court first concludes that Bayh-Dole’s inclusion in Title 35 does not necessarily indicate that it is a “patent law.” Rather, the general rule is that contract or licensing disputes do not implicate patent laws unless they require some determination of patent issues such as validity or infringement.

“[M]ere inclusion in Title 35 of the United States Code does not make a statute a patent law under which a claim may arise. At its heart, the Bayh-Dole Act concerns government funding agreements – contracts in the language of 35 U.S.C. § 201 – an area that is outside our section 1295(a) jurisdiction.”

Of course, if Title 35 contains non-patent laws, it makes sense that there may also be patent laws not found in Title 35.

Even if Bayh-Dole was a “patent law,” the appellate panel found that it would still not have jurisdiction over the case because the provisions of Bayh-Dole (1) did not create WARF’s cause of action and (2) are not necessary to determine any other rights of relief.

Case transferred to the Seventh Circuit Court of Appeals.

Supreme Court: Licensee in Good Standing May File Declaratory Judgment

MedImmune v. Genentech (Supreme Court 2007).

Declaratory judgment (DJ) actions are often used by potential defendants to obtain a declaration that a patent is invalid, unenforceable, or not infringed.  Under Federal Circuit law, a licensee cannot challenge a patent without first breaching the license.  The CAFC's reasoning was that a licensee in good standing feels no apprehension of suit since the license is essentially a settlement between the parties. Without an apprehension of suit, the DJ action would not rise to an actual controversy as required by the Constitution.

In a broadly worded opinion, the Supreme Court has scrapped the Federal Circuit's "reasonable-apprehension" test on declaratory judgment standing in favor of a rule that allows licensee's in good-standing to file DJ actions.

We hold that petitioner was not required, insofar as Article III is concerned, to break or terminate its 1997 license agreement before seeking a declaratory judgment in federal court that the underlying patent is invalid, unenforceable, or not infringed.

There are several things to note immediately:

Not Limited to Patents: This case at least extends to all licensing issues and likely to most contracts -- whether or not they involve patents or intellectual property.

Suggested Contractual Work-Around: Reading between the lines, the opinion may indicate that a contractual "prohibition against challenging the validity of the patents." may serve to block challenges by licensee's in good standing. Without the clause, however, the Court found no such prohibition:

To begin with, it is not clear where the prohibition against challenging the validity of the patents is to be found. It can hardly be implied from the mere promise to pay royalties on patents

Regarding apprehension of suit, the Opinion's footnote 11 is a complete divergence from common practice -- finding that a licensee who pays royalties either in fear of an injunctions or for fear of treble damages is being coerced in a way that creates an Article III case or controversy.

Links:

• Download MedImmune.pdf
• Briefs filed in MedImmune v. Genentech;
• CAFC Decision in MedImmune v. Genentech;
• CAFC Decision in MedImmune v. Centocor;
• MedImmune Petition Granted;
• Lear v. Adkins;
• Professor Miller’s comments;
• Supreme Court on the March;
• Supreme Court docket sheet.

Plumtree: DJ Jurisdiction, On-Sale Bar

Plumtree v. Datamize (Fed. Cir. 2006)

Declaratory Judgment Jurisdiction: The Datamize patents cover software authoring tools for creating software kiosks. Datamize had earlier sued Plumtree for patent infringement and had also told Plumtree that it would be infringing the soon-to-issue continuation application. When the continuation did issue, Plumtree filed a declaratory judgment action — giving the CAFC one last opportunity to opine on its reasonable apprehension test before the Supreme Court issues its MedImmune decision in early 2007.

A declaratory judgment action requires an actual controversy between interested parties. The DJ plaintiff must show (1) some action by the patentee that creates a reasonable apprehension of facing a patent infringement lawsuit and (2) some activity on the part of the DJ plaintiff that could constitute infringement. With a few bright-line exceptions (such as that seen in MedImmune), the court looks to the totality of the circumstances when determining whether a reasonable apprehension of suit exists. 

Here, the court found that the prior suit on similar technology exhibited a “course of conduct” indicating a “willingness to protect [its patented] technology”and thus “created a reasonable apprehension of suit.”

On Sale Bar: Once jurisdiction was established, the CAFC looked to determine whether the Datamize patents were invalid for being on-sale more than one year prior to the filing of the application. Here, the appellate panel found that sale of a kiosk did not violate the on-sale bar because the patents did not cover the kiosks themselves.  The court noted, however, that the on-sale bar would be triggered if either (1) the sales contract required use of the patented method or (2) the patented method was actually used to complete the contract prior to the critical date.  Plumtree, however, could not prove either of those — the agreement “did not unambiguously require use of the patented method” and there was no evidence that the patented method was actually performed prior to the critical date.

Notes: This is the second CAFC opinion involving these two parties. The earlier case involved the same technology but a different patent.  That patent was invalid as indefinite because the claims included the terms “aesthetically pleasing.”

Unjust Enrichment For Stealing Ideas Does Not Create Patent Jurisdiction

Thompson v. Microsoft (Fed. Cir. 2006).

Thompson sued Microsoft for unjust enrichment under Michigan law.  Arguing that Microsoft stole his idea, patented it, and implemented it in various products. In its motion to dismiss, Microsoft argued that the claim was preempted by federal patent law. (citing Ultra-Precision).

Instead of hearing the appeal, however, the CAFC declined jurisdiction because the case did not arise under federal patent laws as required by Christianson & Holmes v. Vornado.

Thompson’s well-pleaded complaint does not establish that the right to relief necessarily depends on resolution of a substantial question of federal patent law. Thus, the district court’s jurisdiction does not "aris[e] under" section 1338.

In particular, the court noted that preemption alone does not create jurisdiction. An inventorship issue might create an issue, but Thompson’s claim could have theoretically succeeded without proving inventorship (in the strict patent sense).

Case transferred to the Sixth Circuit Court of Appeals.