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Thursday, August 11, 2016

IP, The Constitution, and the Courts - IPSC 2016

IPSC 2016 - Breakout Session III - IP, The Constitution, and the Courts

Lexmark and the Holding Dicta Distinction – Andrew Michaels

A Problem of Subject Matter: Patent Demand Letters and the Federal Circuit’s Jurisdiction – Charles Duan & Kerry Sheehan

Established Rights, the Takings Clause, and Patent Law – Jason Rantanen

A Free Speech Right to Trademark Protection? – Lisa Ramsey 

Lexmark and the Holding Dicta Distinction – Andrew Michaels

How do we distinguish dicta from holding? This project uses the Federal Circuit's dispute in Lexmark (on remand) over the breadth of the holding in Quanta. As Paul Gugliuzza summarized it for me (I was a late arriver), Michael's argument is that, rather than treating holding/dicta as a binary distinction, we should envision a spectrum of the types of things that courts say in their opinions. 

A spectrum approach to holding v. dicta might helpfully restrict courts. If a holding says "No red convertibles in the park", we might worry about a case where a subsequent court says the opinion requires a holding of no vehicles in the park. They are not unrelated, but perhaps still dicta. Broader statements should have less capacity to bind than narrower holdings.

Jason Rantanen: This is interesting. We often see doctrinal pronouncement in Federal Circuit's case, much broader than necessary to decide the case. We also see language from earlier court opinions that are clearly dicta. Panels in the Federal Circuit nevertheless use it later. I wonder, however, whether we should take into account how the court is using the language. For example, do we bind the court to holding language only, or might they be appealing to the persuasiveness of early reasoning. Your spectrum focuses on text as it appears in the early opinion, but is that too narrow? Can dicta apply? 

Andrew - Sometimes dicta is well considered. But if the court pretends it's a holding, and acts as if it is bound, then they are failing to adjudicate the dispute, and that's a problem.

Paul Gugliuzza - I think the Federal Circuit may engage in some over-use of dicta. Is there a prescriptive payoff to this spectrum? How does the court determine whether to follow the statement or not?

Andrew - The payoff is to require courts to deal more directly with the question of dicta.

Pam Samuelson - I think it's interesting when dicta becomes a holding, over time, and solves a problem. For example, the 3rd Circuit (Whelan) case had a lot of broad dicta that led to a lot of litigation. But the 2d Circuit also included a lot of dicta in Computer Assocs. v. Altai, and the dicta from the that case seems to have knocked out Whelan, and been followed, correctly from Pam's view, in many other circuits.

A subsequent observation from Paul: I think the spectrum provides an interesting descriptive contribution, but I wonder whether, instead of arguing whether a statement is holding or dicta, we'd just end up arguing about (1) where on the spectrum a particular statement falls and (2) whether, given its location on the spectrum, it's binding law or not.

 

A Problem of Subject Matter: Patent Demand Letters and the Federal Circuit’s Jurisdiction – Charles Duan & Kerry Sheehan

States are passing laws designed to cabin patent demand letters. We might presume that the Federal Circuit has primacy, but this paper argues the question isn't so cut and dried. The Supreme Court, in a case about attorney malpractice, held that there should be a balance struck between the interests of the federal courts and the state's consumer protection laws.

In a demand letter case, we could ask whether 1) this raises a sufficient issue of federal patent law, and 2) is the law unconstitutional or improper. To understand the second question, look to the Federal Circuit's Globetrotter case. The patent holder threatened to send letters to the defendant's clients. The defendants sued for tortious interference, and Fed. Cir. held that the Patent Act preempted acts that prevent sending demand letters.

We argue there is an odd disconnect in the Federal Circuit's analysis. It's a mistake that makes the Federal Circuit's jurisdiction appear larger than it is.

What is the right policy outcome? Should the Federal Circuit have primacy here? The uniformity issues that inspired the creation of the Federal Circuit doesn't necessarily reach every case that touches on patent law, and perhaps these demand letter cases are outside the needs of the uniformity requirement.

Jake Linford: I'm unclear on where the line is between the stuff the Federal Circuit controls and the stuff it doesn't. It sounds circular to me. Help me understand.

Charles: The Supreme Court doesn't take the view that the Federal Circuit is the final arbiter of all patent issues. The Christensen and Gund cases are examples where the Supreme Court put the responsibility with the Seventh Circuit and Texas courts respectively. Questions of validity of the patent may go to the Federal Circuit, but not claims about a clearly invalid patent.

Lisa Ramsey: One of the reasons this is so important is because people will get different results before a state court than the Federal Circuit. Is that right?

Charles: It's unclear. If we sort some cases for the Federal Circuit and others for the states, we might get divergent outcomes.

Pam Samuelson: How does the issue of validity of the patent get to the Federal Circuit if the case starts in state courts? 

Charles: Removal is the mechanism. 

Pam: If so, then how do we take the ability of the Federal Circuit away? If the Federal Circuit decides whether it has jurisdiction...

Charles: Perhaps the Supreme Court takes cert?

Paul Gugliuzza: What triggers the arising under jurisdiction of the patent clause? Isn't this a matter of patent jurisdiction?

Charles: I'm not sure this meets the Constitutional language...

Paul: The Federal Circuit may rely on Globetrotter, even if I disagree with them. 

 

Paul Gugliuzza sent me the following summary of the Duan - Sheehan paper, which I find much better than my own:

The paper focuses on state law tort/unfair competition claims against patent holders, such those brought under the new anti-troll statutes adopted in over half the states.  As a substantive matter, Duan and Sheehan criticize the Federal Circuit for giving patent holders nearly absolute immunity from civil claims based on their enforcement behavior, an issue I’ve written about here:  http://ssrn.com/abstract=2539280.  As a matter of institutional policy, they argue that the Federal Circuit is poorly suited to assess the constitutionality of laws regulating patent assertions because the court has embodied various problems theorized to be associated with specialized courts, such as rule-orientedness, a detachment from broad policy concerns, and, perhaps most importantly, capture.  The Federal Circuit’s orientation toward patent holders, they seem to be arguing, would make the court too suspicious of government efforts to regulate patent holders.  Accordingly, they make a doctrinal argument that a challenge to the constitutionality of an anti-troll statute does not “arise under” patent law, as is required for the Federal Circuit to have appellate jurisdiction.  
 
I’m not sure about this.  I agree that, after the Supreme Court’s 2013 decision in Gunn v. Minton, a civil case challenging patent enforcement behavior does not “arise under” patent law.  The embedded patent law issues would be about the validity or infringement of a particular patent—the sort of case-specific issues that are not sufficient to create “arising under” jurisdiction.  But, in my mind, there’s a distinction between those case-specific issues and those that would be raised by a counterclaim seeking a declaratory judgment that a state anti-troll law is unconstitutional.  I suspect the Federal Circuit would say that THAT claim DOES “arise under” patent law, as it raises the issue of whether federal patent law “preempts” state law.  After the AIA’s so-called Holmes Group fix, that counterclaim would be sufficient to confer jurisdiction on the Federal Circuit.  Perhaps a better argument against Federal Circuit jurisdiction is that the federal issue is not preemption by the Patent Act, but the constitutionality of the statute under the First Amendment.  In that circumstance, the case would arise under federal law, but perhaps not federal PATENT LAW, meaning that the Federal Circuit would NOT have jurisdiction.  (In the article linked above, I argue that the Federal Circuit has erroneously stated that immunity for patent holders is about “preemption” of state law when, in fact, the court is actually drawing on the First Amendment right to petition to the government.)  In any event, this is an interesting and provocative project.  And if you’re still reading at this point, cheers to you for your commendable enthusiasm about patents and procedure!

 

Established Rights, the Takings Clause, and Patent Law – Jason Rantanen

Recent arguments have suggested that when patent laws change, the takings clause may be implicated. I wanted to understand the analytical reasoning behind the takings claim. Takings case law is a deep, Alice-in-Wonderland rabbit hole.  How does it actually apply to patent law?

1) Jason agrees that patents are property subject to takings clause. (The Federal Circuit said no, in Zoltec, when the government infringes the patent. The Supreme Court, instead, suggested in dicta in the raisin takings case, that patents are the type of property subject to the takings clause)

2) But it's inappropriate to cut and paste takings case law to patent cases. Patents aren't like rights in real property. We know what a takings of a coal mind looks like. Patents aren't the same. In addition, one key right "taken" is the right to use, and the patent holder doesn't lose the right to use, only the right to exclude or alienate. So application of standard takings cases is difficult.

3) The question is instead whether the new law changes or destroys an "established property right" in the patent. That's the taking, if there is one. What's an established property right? The type associated with property, established with a high degree of legal certainty. See, for example, the Penn Central case, where the Supreme Court is looking for certain rights. If we are looking for high degree of legal certainty, many aspects of patent law has changed significantly and frequently over time. Patent has replaced the entire statutory framework at least four times, with only very minor exceptions. For example, when Congress passed the 1836 Patent Act, it replaced the prior act, and also applied the new act to pending litigation. There are many similarities, but this is a new draft. Same with the 1952 Act: "It shall apply to unexpired patents." Damages changed dramatically, as summarized in Halo v. Pulse. Patent owners used to get treble damages automatically, and they don't anymore. Patent holders in 1836 lost that right while claims were pending.

Lisa Ramsey: One argument against cancellation in the Redskins case is takings. 

Jason Rantanen: The Redskins case considers whether the right was valid in the first place, which falls outside of standard takings analysis.

Camilla Hrdy: You may want to consider why the Supreme Court has held a trade secret can be taken. If so, why not a patent?

 

A Free Speech Right to Trademark Protection? – Lisa Ramsey 

The Federal Circuit recently held that the 2(a) bar against registering disparaging trademarks is unconstitutional. Lisa's paper aims to make two unique contributions to literature on disparaging trademarks and the First Amendment:

  1. Is there a right under international treaties to be able to register a disparaging or scandalous trademark? The answer is no.
  2. A framework of six elements that should be applied in deciding whether laws against offensive trademarks run afoul of free speech rights.

The U.S. is not the only country that bans registration of scandalous marks. Canada even bans use. 

We are members of the Paris Convention, which gives signees the discretion to decide whether to deny a registration on the grounds that a mark is contrary to morality or public order.

Lisa's framework (and 2(a) seems to meet most of these conditions):

  1. Is there government action? Who regulates the expression?
  2. Suppression, punishment, or harm: How does the regulation harm expression? Are there unconstitutional conditions imposed on speakers by denying the benefit? Lisa says no, because the benefit being denied is the right to restrict the speech of others.
  3. Expression. What is being regulated?
  4. Is this individual or government speech? Whose expression is regulated?
  5. No categorical exclusion for the expression: Is the regulation justified because of a categorical exclusion, like obscenity or misleading commercial expression?
  6. Does the regulation fail constitutional scrutiny? Is it content-neutral or content-based? That triggers different levels of scrutiny in the U.S.

What could the Court do if it wants to uphold 2(a)? 1) Say it's not suppression or punishment, and the unconditional conditions doctrine does not apply, under factor 2. 2) It satisfies the scrutiny under 6. 3) Make a "traditional contours" argument like in Eldred and Golan. 

Saurabh Vishnubhakat: Pushing on Lisa's state action analysis, if we apply Shelly v. Kramer broadly (where the Supreme Court refused to allow the enforcement of racially restrictive covenants in court, and which may be limited to its fact), that may suggest everything is potentially a state action?

Rebecca Tushnet: If the Court is taking a "hands off" approach to conflicts between trademarks and the First Amendment, then doesn't hands off mean no registration? Isn't that state action?

Lisa: It is state action.

Rebecca: Then isn't everything state action.

Lisa: There are real benefits to registration that impacts the first amendment. Demand letters work better when backed by a registration. And when you have a registration, it's easier to push claims that some see as questionable, like dilution and merchandising cases.

Charles Duan: When it comes to disparaging marks, those have particularly strong expression value - used to express feelings, and therefore even worse to restrict than other registrations.

Lisa: Exactly!

Pam: Is there an international standard?

Lisa: No, as I read the law, each country has discretion to set up the system it prefers.

Posted by Jake Linford on August 11, 2016 at 08:45 PM in Blogging, Civil Procedure, Constitutional thoughts, First Amendment, Information and Technology, Intellectual Property, International Law, Judicial Process, Property, Science | Permalink

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