Supreme Court Corner - Q2 2013

by DLA Piper
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RECENT DECISIONS

Bowman v. Monsanto Co.
Decided: 5/13/2013

Patent

Holding: (9-0) Patent rights are exhausted for only original seed sold.

Bowman, a farmer, purchased and planted Monsanto’s patented herbicide-resistant soybean seeds for his first crop of the season, subject to an agreement that he would not harvest and replant any progeny seed. For his second crop of the season, instead of purchasing new seeds, Bowman planted progeny seeds created from the original Monsanto seeds. In a unanimous decision penned by Justice Kagan, the Court held that Monsanto retained its patent rights to control the use and sale of progeny seeds despite the first sale of the original seeds: “If the purchaser of [the seed] could make and sell endless copies, the patent would effectively protect the invention for just a single sale.” The Court was careful, though, to limit the decision only to seed technology and went out of its way to note that the decision should not be applied to other self-replicating technologies (such as genetically modified organisms, live vaccines, cell cultures and advanced computer software): “We recognize that [self-replicating] inventions are becoming ever more prevalent, complex and diverse…[we] need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances.”

 

Note: in our next issue, “Supreme Court Corner” will contain a more extensive analysis of Bowman v. Monsanto.

 

Kirtsaeng v. John Wiley & Sons
Decided: 3/19/2013

Copyright

Holding: The “first sale” doctrine applies to copies of a copyrighted work lawfully made abroad.

John Wiley & Sons often assigns to its wholly owned foreign subsidiary (Wiley Asia) rights to publish, print and sell foreign editions of Wiley’s textbooks abroad. Wiley Asia’s books state they are not to be taken into the US without permission. Kirtsaeng, who came to the US as a student, asked friends in Asia to send him less costly foreign-edition English-language textbooks, which he then sold at a profit in the US.

The issue for the Court was whether the words “lawfully made under this title” restrict the scope of section 109(a)’s “first sale” doctrine geographically. The Court held they do not, finding the “geographical” reading of section 109(a) “bristles with linguistic difficulties” because it “gives the word ‘lawfully’ little, if any, linguistic work to do.” The Court confirmed its non-geographical interpretation was correct by discussing the historical and contemporary statutory context, which lacked a geographic bent, and by noting the common-law “first sale” doctrine made no geographical distinctions.

The impact of Kirtsaeng is that “first sale” doctrine now applies worldwide. This may result in copyright owners licensing, as opposed to selling, their works in the future (because Section 109(a) does not apply to licenses). This is already being done with some eBooks.*

Kirtsaeng may also have a broader impact. Quanta v. LG strengthened the “first sale” doctrine in defending against claims of patent infringement, but that product was both sold and used domestically. There is little guidance on how the doctrine might apply to international sales. What happens when a licensed product is first sold outside the US, then brought into the US and used or sold? Courts may look to Kirtsaeng for guidance, especially because the Court recently refused to hear an appeal from the Federal Circuit on this very issue (in Ninestar Technology v. ITC). Unlike the patent and copyright fields, the “first sale” doctrine has almost no teeth in the trademark arena – present law in most Courts of Appeal strongly favors manufacturers in stopping so-called gray market goods (like the textbooks in Kirtsaeng). Kirtsaeng will likely encourage copyright owners to think more about how trademark law can be used to stop parallel imports.

CASES TO WATCH

Assoc. for Molec. Pathology v. Myriad Genetics, Inc.
Argument: 4/15/2013

Patent

Issue: are isolated human genes patentable?

At argument, the Justices focused on how much the DNA sequence needed to be manipulated to be patentable under 35 U.S.C. § 101, a question addressed in turn by the petitioners, the US government (amicus curiae) and the patentee-respondent, which isolated genes that code for early-onset breast cancer. Justice Ginsburg asked whether isolating DNA was any different from developing “aspirin and the whooping cough vaccine.” The petitioners argued manipulation rather than isolation was key: one could not simply pluck a medicinal leaf off a tree in the Amazon and patent it. Myriad argued it had sufficiently manipulated the genes: the scientists needed to determine at which points to “snip” the DNA strand to obtain the relevant portions. Justice Kagan, following the leaf analogy, skeptically questioned whether the ingenuity and cost to find the Amazonian medicinal plant should be grounds for patenting the naturally occurring leaf. Myriad argued that, unlike the leaf, the isolated DNA is not naturally found in isolation. Ultimately, it appears the Court took notice of the difference between the
at-issue isolated DNA and complementary DNA, which the government argued is patentable; the Court may elect to draw the patent-eligibility line between those two.

Many questions focused on policy. Justice Alito asked whether denying patents on isolated genes would inhibit future research. The government argued that such a patent could alternatively inhibit research: “Allowing a patent on [a naturally occurring gene] would effectively preempt anyone else from using the gene itself for any medical or scientific purpose.”

Federal Trade Commission v. Actavis
Argument: 3/25/2013

Patent

Issue: Are reverse payment agreements in patent cases anticompetitive?

The FTC argued that reverse payment agreements in settlement of infringement suits against generic drug manufacturers are presumptively unlawful and anticompetitive; respondents argued such agreements should be subject to a “rule of reason” scrutiny. Reverse payment settlements have arisen in the Hatch-Waxman context, whereby the patentee drug manufacturer settles the first-filed generic drug manufacturer’s suit challenging the patent (termed a “reverse” payment because the patentee offers the alleged infringer a monetary incentive to not enter the market). The FTC proffered a test that “agreements of this sort should be treated as presumptively unlawful with the presumption able to be rebutted in various ways.” Justice Kennedy voiced concern that this test applies the same whether a patent is strong or weak. Justice Scalia questioned whether patent law is an exception to antitrust law. Respondents argued the Court should apply a “rule of reason” finding an agreement unlawful if it goes beyond the patent’s scope or if the settlement arose from a patentee’s “sham” allegations. Terming such scrutiny “the kitchen sink,” Justice Breyer questioned whether there was a test between it and the per se unlawful approach. Interestingly, a 4-4 split (Alito, J., recused) would uphold the Eleventh Circuit’s ruling, that such agreements within the patent’s term are not anticompetitive, but would not solve the current circuit split.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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