July 14, 2020 - Federal Circuit Insights

Supreme Court Review: Sometimes What Is Not Decided Matters More Than What Is

Last week, the Supreme Court closed the book on its October 2019 Term, issuing its final opinions after the Fourth of July holiday. For all the notable features of this term—including the Court’s first-ever telephonic arguments, numerous questions from Justice Thomas, and many high profile cases (almost all of which had the Chief Justice in the majority)—the Federal Circuit had a relatively quiet term at the Supreme Court. Yes, the Supreme Court reviewed four cases from the Federal Circuit (reversing or vacating in three), but none appears to have had a profound effect on practice before the Federal Circuit, particularly with respect to its bread-and-butter patent docket.

Take, for example, Peter v. NantKwest Inc.: there, the Supreme Court reaffirmed the bedrock “American rule” that litigants must pay their own way with respect to attorney’s fees, unless some statute or contract provides otherwise. The Court rejected the Patent Office’s aggressive statutory interpretation argument that “expenses” included “attorney’s fees.” This never seemed like a close case—more of a layup. And indeed the Supreme Court was unanimous in its decision affirming the Federal Circuit. It was the second opinion from an argued case handed down this term (typically, the first several opinions are from some of the most straightforward cases on the docket).

Not to diminish the other decisions this term, but there was no case that came close to the likes of Alice, KSR, eBay, Teva, Oil States, or Cuozzo. To be sure, Thryv, Inc. v. Click-to-Call Technologies, LP became a Cuozzo-lite follow-on—addressing whether the one-year time bar to file a petition for inter partes review after being served with a complaint was judicially reviewable (35 U.S.C. § 315(b)). The Court reiterated its holding in Cuozzo: that when Section 314(d) bars appeals of a decision whether to institute an inter partes review, that bar includes “matters closely tied to the application and interpretation of statutes related to the institution decision.” Applying that same holding, it held that Section 315(b)’s time bar “is integral to, indeed a condition of, institution” and thus final and not appealable under Section 314(d).

Outside of patents, the Supreme Court addressed willful infringement in the trademark context in Romag Fasteners, Inc. v. Fossil, Inc. The Court concluded that—based on the text of the Lanham Act—a plaintiff need not prove willfulness to recover lost profits for false or misleading uses of a mark. By concluding that willfulness was no prerequisite to lost profits, the Supreme Court side-stepped the more significant issue as to what willfulness meant, which could have had implications far outside the Lanham Act. (As an aside, although Romag is a loss in the Federal Circuit’s win-loss column, that’s hardly fair: the Federal Circuit was applying Second Circuit law on the trademark issue reviewed by the Supreme Court.) And in its fourth and final case from the Federal Circuit, the Supreme Court held that the government had to reimburse health insurers that suffered losses when offering policies on exchanges under the Affordable Care Act in Maine Community Health Options v. United States.

If anything, the cases the Supreme Court chose not to hear were in some ways more profound than the cases it actually heard. We know the Supreme Court took a very hard look at several 101 decisions when it Called for the Views of the Solicitor General (CVSG) in two cases. In Hikma Pharmaceuticals USA Inc. v. Vanda Pharmaceuticals Inc., the Court CVSG’d the question of whether methods of using drugs to treat medical conditions are patent eligible under Section 101. The Solicitor General’s brief agreed that the particular patent claims at issue are patent eligible, but noted that the Federal Circuit’s ruling “implicates important and recurring questions on which the [Supreme] Court’s recent Section 101 decisions have fostered substantial uncertainty.” The Solicitor General stated that the Supreme Court’s Mayo decision has “sent conflicting signals.” And he explained that the “confusion created by [the Supreme] Court’s recent Section 101 precedents warrants review in an appropriate case.” Although the Solicitor General suggested Hikma was not the right vehicle for review, he identified another more appropriate case that was already pending before the Supreme Court: Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC, No. 19-430. Given that the Supreme Court usually grants review when the Solicitor General, after being CVSG’d, recommends it, conventional wisdom suggested that Athena would be the next blockbuster 101 case. But, for reasons we can’t know, the Court ended up denying review in both Hikma and Athena.

That leaves HP Inc. v. Berkheimer, which suffered the same fate on the same day as Hikma and Athena. The question presented in Berkheimer was “[w]hether patent-eligibility is a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of the art at the time of the patent.” When the Federal Circuit issued its Berkheimer decision, many practitioners began to wonder if 101 challenges were going to be more difficult to make on a motion to dismiss. In its CVSG Berkheimer brief, the Solicitor General reiterated the point he made in his Hikma brief: “The Court should grant review in an appropriate case to clarify the substantive Section 101 standards.” Once those standards were resolved, he explained, the Court could “then address any ancillary issues that remain”—which would presumably include whether patent eligibility is a question of law or fact. Most likely, once the Supreme Court decided to deny review in Hikma and Athena, there was no reason to grant review of the “ancillary” issue raised in Berkheimer.

The Solicitor General’s Berkheimer brief offered one interesting tidbit. He cautioned against review in Berkheimer based, at least in part, on its subject matter. He noted that the claims were directed to “the software-system context.” And he suggested that other, “more familiar types of innovations—such as industrial processes or methods of medical treatment”—might be easier for the Supreme Court to distinguish between patent eligible and ineligible subject matter. To hammer the point home, he said: “courts (and this Court in particular) have less experience addressing such questions in the context of software systems.” Interestingly, the Federal Circuit has been considering for some time now a pending rehearing/en banc petition in American Axle & Manufacturing v. Neapco Holdings, a case in which a divided Federal Circuit panel struck down on 101 grounds patent claims to a method of manufacturing driveline propeller shafts. Depending on what happens at the Federal Circuit, perhaps a case like that involving the mechanical arts (a la KSR) could be a better vehicle for the Supreme Court to address these issues. Or perhaps, after having recently addressed 101 several times already, the Supreme Court just wants to take itself out of that business.

So that’s a wrap for the October 2019 Supreme Court Term. We will have to wait and see if next year brings more excitement in reviewing Federal Circuit decisions. Just remember to unmute your telephone line and avoid flushing the toilet.