Patent Baristas

There has been a lot of reporting of allegations of misconduct by U.S. researchers. The Department of Health and Human Services received 274 complaints — 50 percent higher than 2003 and the most since 1989 when the federal government established a program to deal with scientific misconduct. The federal Office of Research Integrity closed only 23 cases last year and, of those, eight individuals were found guilty of research misconduct. In the past 15 years, the office has confirmed about 185 cases of scientific misconduct.

More disturbing, however, a survey published June 9 in the journal Nature shows about 1.5 percent of 3,247 researchers who responded admitted to falsification or plagiarism. (One in three admitted to some type of professional misbehavior.) This doesn’t seem to be new — in 1974, Dr. William Summerlin, a researcher at Sloan-Kettering Cancer Institute, used a marker to make black patches of fur on white mice in an attempt to prove his new skin graft technique was working. It’s just hard to tell, though, how much bad acts are increasing or just increasingly being found/reported.

Not to let anyone off the hook but there is a tremendous amount of professional pressure to publish papers and do more work in the academic setting than ever before. One researcher testified that he was working 80 to 90 hours a week, seeing patients two days a week, doing surgery one day a week, supervising medical residents, serving on as many as 10 different committees at the hospital and the medical school and putting on national medical conferences. He sought help from a psychiatrist who counseled him to cut back and from his boss who demanded he increase his research and refused to reduce his patient load (Gee, I think I know him).

While there are often many reasons cited, e.g., mental disorders and the like, it still all comes down to character. But not just the character of the researchers involved in the studies. What we have is a system that grinds people into the ground and then recoils as (horrors! gasp!) someone cracks under the strain.

Everyone is so quick to damn the individual researcher (and we should) but no one seems to be willing to indict their co-conspirators. The university administration that sets up a publish or perish environment; the requirement for more and more grants to support more and more (slave) students; the demanding federal grant application process. And even the whistleblowers tend to be punished instead of “upper management” — who get to turn a blind eye to the consequences of the system, all the while reaping the benefits of increased output.

Noteworthy is that the National Institutes of Health is currently being asked to explain why one of the agency’s scientists was fired after he complained about poor scientific practices within his division and inappropriate unprofessional conduct from his supervisor.

But, this practice is certainly not constrained to the research filed. With billable hour requirements exceeding 2000 hours (and many associates required to bill as many as 2400 hours annually in order to achieve the highest compensation levels) there can be a culture of “work or die” in a law firm just as intense as anywhere. The problem, of course, is that there are only so many billable hours in a day and increased pressure on associates (or any attorney, doctor, or other professional) to bill hours may, in turn, increase the temptation to engage in unethical billing practices, such as inflating the hours actually spent on tasks, euphemistically referred to as “padding.”

Chief Justice William H. Rehnquist once observed, “if one is expected to bill more than two thousand hours per year, there are bound to be temptations to exaggerate the hours actually put in.” The Legal Profession Today, 62 IND. L.J. 151, 155 (1987). Yet about a quarter of all partners and half of all associates are now billing more than 2000 hours per year.

This is not just a misconduct question here. This relates to quality of life for professionals as well as their communities. Do we want professionals to be well-rounded individuals capable of contributing to society at all levels or do we want billing machines? I guess we could all be like as one partner in one of Chicago’s largest and most prestigious firms who recorded an average of 5941 billable hours per year for four consecutive years. Karen Dillon, 6,022 Hours, Am. Law., July/Aug. 1994, at 57. If we assume that 70% of work time is converted into billable hours, this lawyer needed to work 23.3 hours per day, 365 days a year.

Unfortunately, everyone is being asked to do more and more but no one asks where “more” comes from. When I was growing up, my father worked all the time (including his one week of “vacation”). He was lauded as a hero for working hard. Now, we’re supposed to work even harder at work while also working more at home and elsewhere. More time at ballgames, dance lessons, school programs, and everything else we’re told we need to do to be good citizens. There is such a thing as too much.

Let’s hope that we hold the rule makers as accountable as the rule breakers.

More here.

An FDA advisory panel announced that Novartis AG’s Foradil asthma drug, marketed by Schering-Plough Corp., should have a warning about the risk for worsened breathing similar to that on GlaxoSmithKline Plc’s Advair and Serevent. The drug shares the ingredient salmeterol with London-based Glaxo’s Advair and Serevent. All three medicines work by easing constriction within the lung. The FDA panel also voted to say Serevent, Advair and Foradil are safe enough to remain on the U.S. market.

Advair and Serevent, which is the same drug combined with a corticosteroid, together outsell competing asthma treatments as well as Glaxo’s other products. The drugs’ sales last year totaled 2.5 billion pounds (about $4.4 billion). Foradil’s sales last year lagged at about $320 million. About 15 million Americans have asthma, which causes inflammation in the airways of the lung and constriction of nearby muscle.

The Serevent and Advair labels contain information based on results of a study that Glaxo began in 1996, Glaxo stopped the study early after 50 people taking Serevent died or had severe life-threatening breathing complications, compared with 36 people given a placebo. The FDA advisers also suggested the agency look at ways to more clearly explain those findings to consumers and doctors.

Today’s post comes from Guest Barista C. Lee Thomason, an expert with over twenty years experience in complex patent infringement suits, on the much-anticipated Court of Appeals for the Federal Circuit decision in Phillips v. AWH Corp.:

The en banc decision in the Phillips case urges that claim construction will be done essentially in accord with three CAFC decisions, Markman, Vitronics and Innova. On that basis, the Phillips decision argues that the existing law was restated, not reformulated. The only expressed change was to remove the precedential value of the Texas Digital line of ‘dictionary’ decisions. Still, some reformulation occurred, at least in regard to ‘rating’ the sources of information offered to interpret patent claims.

One noted change is the primacy accorded to the enablement and best mode requirements from §112. The prior CAFC opinions do not start interpreting claims with §112 as the guiding premise. The §112 requirements for the written description start the analysis in Phillips (slip op. pg. 7), then come again in the middle (slip op., pg. 15, the “statutory directive”), and then toward the end of the decision §112 (pg. 27, the “inventor’s goal” and pg. 29. “important to keep in mind that the purposes of the specification are to teach and enable ..and to provide a best mode”).

The stated goal in Phillips, and the most important component of the analysis is to ascertain the meaning to the “person of ordinary skill in the art in question at the time of the invention” (slip op., pg. 9). That phrase comes, however, from the test set out in §103, not §112. Only a patent lawyer can find reason to quare: does “any person skilled in the art” per §112, ascribe the same meaning to a claim as does “a person having ordinary skill in the art” per §103?

From these threshold points, the Phillips opinion identifies, and suggests the relative worth of, several sources of textual reference. These include, the “context” in the claim, and in the “entire patent” and the “prosecution history” (slip op., pg. 10). That “context” may arise from the use of adjectives to add to ordinary meaning, or from use of a term consistently in several claims (slip op., pg. 12). Next considered is whether the disputed word is a specialized or an ordinary term (slip op., pgs. 11 & 16), which is an aspect based on intrinsic as well as “extrinsic evidence concerning relevant scientific principles, …and the state of the art” (slip op., pg. 11), including perhaps, “technical dictionaries” (slip op., pgs. 18 & 19). Not to be overlooked though, are what the inventor “intended to envelop with the claim” (slip op., pg. 15), and what is the “broadest reasonable construction” consistent with §112 (slip op., pg. 16), which does not engender the “risk of systematic overbreadth” (slip op., pg. 26). All of these are important, but the less important sources are in the prosecution history (slip op., pg. 17), the extrinsic evidence, and expert’s opinions (slip op., pg. 19 & 20).

The edicts in Phillips eliminate any “catechism for claim construction” but its hierarchy of “sources,” in practice, may perform more like a convocation among competing voices. As applied, do these “sources” result in a determination based on the weighty-est of them (once “the appropriate weight [is] assigned to these sources,” slip op., pg. 31), or does the claim interpretation result from a compromise evaluation, (not “any particular sources” analyzed not “in any specific sequence,” slip op., pg. 30).

The opinion may have wanted to amplify the rule in Vitronics, 90 F.3d at 1582, against an ambiguity being created from extrinsic evidence, but no consensus may have existed about how to integrate rules arising from ambiguity, with the stated rulings on inventor intent, prosecution history, multiple dictionary definitions and the presumption of validity (slip op., pgs. 14, 17, 26, & 36). After all, when one “person” interprets a claim term to have ambiguous multiple meanings, another person of skill may deem those as “encompass[ed]” by consistent “multiple dictionary meanings” (slip op., pg. 22 & 24), or by the “broadest reasonable construction” (slip op., pg. 16), or that the meaning of the term is “unambiguous in light of the intrinsic evidence” (slip op., pg. 31).

Perhaps the weakest part of the opinion dances the “fine line” between instances where examples in the written description are “merely …exemplary” and those which express an intention for the claims “to be limited” to the examples. (slip op., pgs. 28-30). For an en banc opinion to say that “Most of the time [this] will become clear” simply overlooks how many panel decisions have struggled in their pursuit of interpreting the claims to avoid importing limitations from the specification.

Part IV of the majority opinion was not joined by those concurring in part. That section reaffirms the doctrine of claim differentiation (slip op., pg. 32). Also, Part IV remarks that the “doctrine of construing claims to preserve their validity” is not a “regular component of claim construction” but is confined to instances of “ambiguity” (slip op., pgs. 36-37). Part IV is weakened too because like other CAFC cases, it never makes clear whether claim differentiation is a doctrine or canon of construction, or just a check against a claim being “redundant” (slip op., pg. 32), or does it act as a “presumption” favoring a broader interpretation (slip op., pg. 13).

Part IV is now the law, however, that applies a broad interpretation to a claim element that the specification suggests can serve “multiple objectives” (slip op., pg. 35). That principle is solidified in Part III of the opinion, which rejects “the contention that if a patent describes only a single embodiment, the claims of the patent must be construed as limited to that embodiment” (slip op., pg. 29). Also, these and other aspects of the ruling may cut back on cases after Texas Digital that find, or infer, that the specification disavowed some breadth impliedly, and Phillips may restore the requirement of a “clear disavowal of claim scope” (slip op., pg. 23).

Many commentators will quote this-ship’s-going-down remarks in Judge Mayer’s opinion in dissent. Suffice it to say that the dissent cites 17 Supreme Court decisions, and only 2 of the CAFC. That suggests that His Honor is imploring the High Court to review the issue (Mayer dissent fn. 1) of whether claim construction is decided by the district judge, or the fact finder. Beyond that, it provides good material for discussing the wisdom of the majority’s rules.

Brazil has threatened to break a patent for Kaletra, one of three anti-retrovirals made by Abbott Laboratories Inc. Brazil said the price of Abbott’s combination Lopinavir and Ritonavir pill is so high it created a public health threat. Brazil is encouraging other countries to use the World Trade Organization‘s rules on patents to challenge pharmaceutical giants in their pricing policy on AIDS drugs

The threat is credible and appears to be legal under the World Trade Organization’s Doha Declaration (an amendment to the WTO’s TRIPS agreement on trade-related intellectual property rights).

The Doha Declaration on the TRIPS Agreement and Public Health, adopted by the WTO Ministerial Conference in November 2001, affirms that the TRIPS Agreement should be interpreted and implemented so as to protect public health and promote access to medicines for all. The Declaration gives the right of WTO Members to make full use of the safeguard provisions of the TRIPS Agreement to protect public health and enhance access to medicines.

The WTO Declaration explicitly states that “intellectual property protection is important for the development of new medicines” and member countries made an unequivocal point of “reiterating our commitment to the TRIPS Agreement.” Furthermore, the WTO members agreed to address the HIV/AIDS pandemic while “maintaining our commitments in the TRIPS Agreement.” Article 31 (f) of the TRIPS Agreement stipulates that a compulsory license must be issued predominantly for the supply of the domestic market of the Member granting the license. Anti-retroviral virus treatment for HIV was the main impetus for this initiative.

Health Minister Humberto Costa said his country’s actions were not primarily intended to set an example but to save the government millions on health costs. Oh, is that right? So the drug is available and Brazil could pay for it — they would just like to choose not to do so. This isn’t really a public health threat, only a government that would like to get out of paying for healthcare for its citizens. I wish I could choose my own payments for my bills.

In recent years, Brazil has repeatedly managed to get price reductions on drugs from big pharmaceutical makers by threatening to break patents. Brazil now says it would save US$54 million (euro44.4 million) annually by creating a generic equivalent of the pill.

Brazil is also in negotiations with two other makers of AIDS drugs, Merck & Co. and Gilead Sciences Inc. Brazil is seeking permission from the two companies either to produce generic equivalents or buy the drugs at discounted prices.

Abbott’s combination Lopinavir and Ritonavir pill, Merck’s Efavirenz and Gilead’s Tenofavir are essential to Brazil’s AIDS program, Costa said. The drugs would cost Brazil US$169 million (euro140 million) this year, or 67 percent of its annual budget for imported AIDS drugs. Not taken into account is that Abbott is already supplying drugs to Brazil at a loss.

On its face, this seems like a good outcome for people to access to cheap or free medicines. However, nothing in life is ever free and trying to kill the goose that laid the golden eggs will only bring short-term gain with long-term pain.

Pharmaceutical companies rely on government-granted patents to protect their huge investments in researching and developing new drugs. It takes 10-15 years and costs $800 million on average to bring a new medicine to market. If some countries try to break patents to get out of paying, guess who’s going to foot the bill?

Without patents to protect all the inventions necessary to develop a drug for a limited time, others could simply copy the drugs immediately, offering their versions at a reduced price since they did not incur the high costs to develop the drug. This would seriously impact the pharmaceutical companies’ ability to recoup their costs and reinvest in other research projects.

Brazil already legally makes copycat versions of several AIDS drugs, and has successfully forced international pharmaceutical companies to lower prices in the past by threatening to break patents. And for a country so concerns for it’s citizens health, Brazil doesn’t seem to mind adding a 9.6% import tariff for completed medicines and essential medical products. Apparently, it’s not a public health threat unless the government is footing the bill.

Granted, it’s the right of any nation to raise revenue but don’t try to cloak yourself in some type of do-gooder image when you’re really out to just save a buck. While the leaders of these countries are happy to lobby for more aid and demand that pharmaceutical companies offer their drugs at cost, they routinely tax medicines until they are unaffordable for the poor. These domestic taxes and tariffs directly prevent millions of their own citizens from receiving treatment.

Attacking patents and keeping high import tariffs only serves to hurt the sickest and poorest citizens in already poor nations. Let’s hope that the Brazilian government understands that it must pay it’s fair share.

Did Pfizer get punked by a nonprofit? The U.S. Patent and Trademark Office (USPTO) issued a ruling on one of several patents that Pfizer holds on Lipitor (atorvastatin), its top-selling cholesterol drug. In the reexamination proceeding initiated last year by the Public Patent Foundation (“PUBPAT”), the USPTO rejected all 44 of the claims of U.S. patent 5,969,156 when it ruled that Pfizer’s arguments for securing the patent in 1999 were invalid.

Each of the 44 claims of the ‘156 patent claim crystalline atorvastatin, known by the chemical name [R-(R*,R*)]-2-(4-fluorophenyl)-beta,delta-dihydroxy-5-(l-methylethyl)- 3-phenyl-4-[(phenylamino)carbonyl]-1 H-pyrrole-1-heptanoic acid hemi calcium salt. The claims of the ‘156 patent differ only in having limitations regarding either (a) X-ray powder diffraction values, (b) solid-state 13C nuclear magnetic resonance chemical shift differences, or (c) moles of water. PUBPAT’s Request for Re-examination alleged that the claims of the ‘156 patent are anticipated by U.S. patents 5,273,995 and 5,686,104 as having disclosed crystalline atorvastatin.

The USPTO has now rejected the claims as unpatentable under 35 U.S.C. 103(a) over US 5,273,995 (‘995) and/or US 5,686,104 (‘104). The Examiner contends that the ‘995 patent teaches a specific enantiomer of the racemic atorvastatin although admitting that it is not absolutely clear if the compound disclosed in the ‘995 patent is amorphous or crystalline. However, in col. 15, line 51, the word “recrystallized” is recited, which the USPTO says implies that the compound was initially crystallized. On this basis, the Examiner assumed that the compound in the ‘995 patent existed in a crystalline form unless Pfizer can show otherwise.

Likewise, the ‘104 patent teaches essentially the same compound of ‘995 (col. 2, lines 60-63), however in a more stable oral pharmaceutical composition. The ‘104 patent is silent to the crystallinity of the atorvastatin compound used and hence may be redundant of ‘995. Pfizer may be able to show that the compound in the ‘104 patent is different from that of ‘995 in terms of amorphism or crystallinity.

However the USPTO indicated that the more pertinent question is whether or not the compounds of the ‘104 patent and/or the ‘995 patent are different crystalline forms of atorvastatin compared to those of the current patent. If the former is true then Pfizer needs to make a showing over both the compounds (provided that they are crystalline, if they are amorphous, no showing is needed), alternatively, if the latter is true then only one showing is needed. The USPTO also took note of US patent 6,605,636, where the compound in US patent 5,273,995 is referred to as crystallized.

So, it’s not over yet and generics won’t show up at the local pharmacy tomorrow. This is just an obviousness rejection (sec. 103) and the presumption can be rebutted. Pfizer will now have two months to respond to the Patent Office’s rejection while PUBPAT can no longer participate in the process. It is worth noting, though, that third party requests for reexamination, like the one filed by PUBPAT, result in having the subject patent either modified or completely revoked about 70% of the time.

For instance, the ‘156 patent attempts to distinguish itself over the prior art by stating it discloses “atorvastatin in a pure and crystalline form to enable formulations to meet exacting pharmaceutical requirements and specifications.” even though none of the claims contain any limitation regarding pharmaceutical requirements or specifications. It is possible that the patent will eventually emerge with some additional limitations added to the claim language.

The ruling doesn’t affect the company’s two most important patents on atorvastatin, which give Pfizer the exclusive right to Lipitor through March 2010 and June 2011, respectively. However, these patents are the subjects of litigation with generic pharmaceutical company Ranbaxy Laboratories Ltd. The ‘156 patent at issue with the current re-exam was set to expire in 2017, thus extending the useful patent protection of the drug (keep in mind that Lipitor is set to become the world’s first $10-billion-a-year drug so the stakes are extremely high).

Although the rejected patent is one of five patents listed by Pfizer with the U.S. Food and Drug Administration (FDA) for atorvastatin, it is the only one asserted by Pfizer in roughly two dozen patent infringement lawsuits filed last year against web sites selling generic atorvastatin to Americans. Two are under review by a Delaware court and the remaining two have never been asserted by Pfizer against any competitor to Lipitor.

The Public Patent Foundation (“PUBPAT”) is a not-for-profit legal services organization that claims to represent “the public’s interests against the harms caused by the patent system, particularly the harms caused by wrongly issued patents and unsound patent policy.” It’s not clear who may be really behind this (or providing the funding for it) but it received seed funding from the Echoing Green foundation. You can see the Board of Directors here.

Download the USPTO Office Action in Ex Parte Reexamination here.

More information about the reexamination of Pfizer’s Lipitor patent can be found at PUBPAT.

Download the PUBPAT Re-examination Request here.

The TechnoLawyer Blog’s Eighth Annual TechnoLawyer @ Awards where announced for best products, services, and Web sites in a variety of categories.

While the Patent Baristas didn’t win as Best Coffee-Themed, Bio-Pharma Patent Law Blog, our congrats go out to Dennis Crouch’s Patently-O: Patent Law Blog for Favorite Practice Area Blog (definitely one of our favorites). Finalists included the terrific beSpacific by Sabrina Pacifici and Broc Romanek’s corporate & securities law blog, The CorporateCounsel.net blog (and yes, we always seem to forget the “the” in the URL).

See the whole enchilada here.

A U.S. District Court jury in Delaware yesterday dealt a blow to Boston Scientific Corp. finding that it infringed two cardiac stent patents of its main competitor in the field, Johnson & Johnson. BSX could be forced to pay damages to J&J although the exact amount will not be set until August at a separate trial.

Morgan Stanley expects that it will cost between $1 billion and $1.5 billion but the amount could triple if a court later finds the infringement was willful and awards treble damages. BSX said it will probably appeal the verdict.

Stents are tiny wire-mesh tubes used to prop open arteries after they have been cleared of blockages through a procedure known as angioplasty. The latest versions from both companies are drug-coated stents, which slowly release medication that prevents vessels from reclogging after procedures to open them up.

The benefits apparently last for years, and even very big blockages in very small vessels can be fixed this way. The devices work so well that when an older stent clogs, it’s better to put a new drug-coated one inside it than to treat the problem with radiation as has been done in the past.

Johnson & Johnson argued that Boston Scientific products, including Taxus drug-coated cardiac stents, are based on stent designs it licensed partly from Julio Palmaz, an academic physician in Texas. Apparently, Boston Scientific turned down Palmaz’s $40 million request in the early 1990s so he went to Johnson & Johnson.

The jury found in favor of Johnson & Johnson’s claims that its patent rights to the Palmaz patent were violated. It also sided with Johnson & Johnson’s claim that Boston Scientific’s newest bare-metal stent design, called Liberté, violates another patent related to flexible stents.

The dispute dates back to 1997 when Johnson & Johnson claimed that a stent Boston Scientific previously sold violated the Palmaz patent. In 2000, a jury awarded Johnson & Johnson $324 million in damages but the award was set aside.

Meanwhile, BSX is now pursuing its own patent infringement case against J&J, leading some observers to predict an eventual settlement. However, BSX could face a court injunction to pull its best performing stent off the market, the Liberté. While difficult, it would not be impossible for J&J to prevail.

Boston Scientific last year reported $5.6 billion in revenue, with nearly half of it driven by sales of Taxus drug-coated cardiac stents, the focus of Johnson & Johnson’s patent-litigation claims.

The U.S. Supreme Court agreed to consider limiting antitrust suits against pharmaceutical companies, computer makers and other patent holders. The justices said they will hear an appeal by Illinois Tool Works Inc., which is trying to block a lawsuit over devices it sells for use in industrial printers.

On Jan. 25, 2005, the U.S. Court of Appeals for the Federal Circuit issued a decision in Independent Ink Inc. v. Illinois Tool Works Inc. that held that in certain circumstances, patent and copyright owners will be presumed to possess market power. The concept of market power plays a crucial role in most antitrust cases. Generally, it means the ability to raise prices above competitive levels without sacrificing profits, e.g., by losing significant sales to competitors. Monopoly power represents a heightened form of market power and, as a practical matter, exists only where a single company controls the vast majority, if not all, of the sales in a market.

In most instances, to establish a cause of action under Section 1 of the Sherman Act (which condemns any concerted action between or among economically independent actors with an overall anti-competitive effect), the plaintiff must prove that the parties to the concerted action possess market power. This follows from the notion that parties lacking market power simply cannot force an anti-competitive result on the market. If a company without market power tries to increase its prices substantially above the market price, customers will defect to competitors’ products.

In an action brought under Section 2 of the Sherman Act (which prohibits deliberate attempts to obtain or maintain monopoly power), the plaintiff must prove that the defendant has an even higher degree of market power than what would suffice under Section 1, that is, either monopoly power or something dangerously close to it.

IP protection in patents and copyrights are often described as monopolies but these are not necessarily economic monopolies in the marketplace. After all, just because you have the exclusive right to sell a bad product doesn’t mean the marketplace must buy it instead of better alternatives. The patent grant may or may not contribute to a market monopoly but it’s not a certainty and each instance must be looked at on a case-by-case basis.

In 1962, the Supreme Court in United States v. Loew’s Inc. the “block-booking” of motion pictures, where studios would only license rights to copyrighted films in a package, as illegal tying. The Court held that “[t]he requisite economic power is presumed when the tying product is patented or copyrighted.” The Court relied on its 1947 opinion in International Salt Co. v. United States, a case in which the defendant tied the lease of a patented machine to the lessee’s purchase of an unpatented product. But International Salt doesn’t mention market power as a necessary element of a tying claim nor does it describe a market power presumption due to ownership of a patent.

In 1988, Congress amended the Patent Act to provide that parties asserting the defense of patent misuse must affirmatively prove that the patentee has market power if the misuse claim rests on a tying theory. This seems to have removed any market power presumption that may have existed under the misuse doctrine.

The present case involves claims of “tying,” which is when a company illegally conditions the sale of a sought-after product on the purchase of a second item. Tying is illegal when the seller has market power in selling the desired product and, therefore, can raise prices on that product without losing sales. Here, the patent owner Illinois Tool holds a patent for a device used to print bar codes on cartons. Trident’s standard licensing agreement requires printer manufacturers also to buy their ink from Trident. The contract also prohibits refilling the printheads. Independent Ink Inc., which sells ink that can be used in Trident’s printheads, sued, saying the licensing agreement is an illegal tying arrangement.

The U.S. Court of Appeals for the Federal Circuit said courts should presume that a company with a patent has market power in that field. In its appeal, ITW said the appeals court’s approach “is the very embodiment of formalism over economic substance.” ITW said that in many cases the patented product has competition that keeps down prices.

The District Court in California dismissed both the Section 1 and Section 2 Sherman Act claims on the basis that Independent Ink failed to show that Illinois Tool had the Section 1 statutorily required market power over the tying product or the required monopoly power under Section 2.

Acknowledging its mandate to follow Supreme Court precedent, the Federal Circuit made clear that unless and until changed by the Supreme Court or the legislature, the precedent was binding, stating:

The fundamental error in all of defendants’ arguments is that they ignore the fact that it is the duty of a court of appeals to follow the precedents of the Supreme Court until the Court itself chooses to expressly overrule them. This message has been conveyed repeatedly by the Court. The Court’s “decisions remain binding precedent until [it] see[s] fit to reconsider them, regardless of whether subsequent cases have raised doubts about their continuing vitality.” Hohn v. United States, 524 U.S. 236, 252-53 (1998). “If a precedent of th[e] Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to th[e] Court the prerogative of overruling its own decisions.” Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484 (1989). Even where a Supreme Court precedent contains many “infirmities” and rests upon “wobbly, moth-eaten foundations,” it remains the “Court’s prerogative alone to overrule one of its precedents.” State Oil Co. v. Khan, 522 U.S. 3, 20 (1997). None of the authorities that defendants present, whether it be the language of Walker Process, the concurrence in Jefferson Parish, or the dissent from denial of certiorari in Data General, constituted an express overruling of International Salt or Loew’s. We conclude that the Supreme Court has held that there is a presumption of market power in patent tying cases, and we are obliged to follow the Supreme Court’s direction in this respect. The time may have come to abandon the doctrine, but it is up to the Congress or the Supreme Court to make this judgment.

However, addressing what it characterized as an unresolved issue, the Federal Circuit held that the presumption of market power was rebuttable, permitting the patent owner the opportunity to overcome it. As well, the CAFC held that the presumption of market power does not create a presumption of monopoly power, which is a requirement of Section 2, stating that:

The presumption of illegality in patent tying arises in section 1 cases. Neither International Salt nor Loew’s dealt with section 2 of the Sherman Act. See Int’l Salt, 332 U.S. at 393 & n.1; Loew’s, 371 U.S. at 39 & n.1. To establish a monopolization claim under section 2 of the Sherman Act, there must be monopoly power in the relevant market and the willful acquisition or maintenance of that power. Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 124 S. Ct. 872, 878-79 (2004). To establish an attempted monopolization claim, plaintiff must demonstrate that the defendant had specific intent to monopolize a relevant market and a “dangerous probability of success.” Spectrum Sports Inc. v. McQuillan, 506 U.S. 447, 455 (1993). It follows that in section 2 cases a definition of the relevant market and consideration of the defendant’s power within that market are required. Id. at 455-56; Walker Process, 382 U.S. at 177-78.

In this case, the alleged monopolization is over the tied product, the ink, not the tying product, the printhead technology. The patent tying cases do not create any presumption that market power over the tying product confers the degree of market power over the tied product necessary to establish a monopolization or attempted monopolization claim. See Fortner II, 429 U.S. at 619. In section 2 cases, the plaintiff bears the burden of defining the market and proving defendant’s power in that market. See Spectrum Sports, 506 U.S. at 455-56. As the district court found, plaintiff makes only the conclusory allegation of a geographic market without supporting economic evidence. Indep. Ink, 210 F. Supp. 2d at 1175. Such conclusory statements are not sufficient to define a relevant market. Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1490 (9th Cir. 1991). Therefore, there is no genuine issue of material fact as to the section 2 claim and summary judgment was properly granted.

But this is not the case under Section 1 of the Sherman Act. Thus the Section 1 Sherman Act cause of action was sustained and remanded for further fact finding and the dismissal of the Section 2 Sherman Act claim was affirmed.

The Federal Circuit’s decision in Independent Ink v. Illinois Tool Works, Inc. is available here.

AIPLA amicus brief is here.

ABA amicus brief is here.

IPO amicus brief is here.