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Chief Judge: US Court of Appeals for Federal Circuit Burdened by IP Infringement Cases

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The US Court of Appeals for the Federal Circuit has been bogged down by a rise in the number of filings and complexity of patent infringement cases and would be further encumbered if specific provisions of proposed patent reform legislation are passed, Chief Judge Paul Michel said in a state of the court address last week.
 
According to intellectual property law experts, Michel’s concerns are well-founded, and the increasing technical expertise demanded by patent infringement cases in the biotechnology and other high-tech sectors has added a considerable amount of time per case and requires more highly trained court staff.
 
In addition, some experts agreed with Michel’s claims that several aspects of the Patent Reform Act of 2007 currently being considered by US Congress would increase the federal circuit’s workload, and said that the Supreme Court may seek to influence the way the federal circuit handles patent infringement cases in the future.
 
Michel made his remarks at the annual Federal Circuit Bar Association Bench & Bar Conference last week in Cambridge, Md. According to Michel, the overall state of the court is good, as it has been reducing the backlog of cases awaiting argument over the past year.
 
However, Michel said that the court’s growth in productivity may be outpaced by the growth in filings, particularly in the area of intellectual property.
 
“Several trends, visible over the last 10 years that add to the court’s workload, have continued,” Michel said. “Filings of patent infringement appeals, for example, have steadily increased. Even more significantly, patent cases have become more complex and hence time-consuming.”
 
The federal circuit is unique among the 13 US circuit courts of appeals in that it has nationwide jurisdiction in a variety of subject areas, including patents and trademarks; hears appeals from all federal district courts; and takes appeals of certain administrative agencies’ decisions, including the Board of Patent Appeals and Interferences of the US Patent and Trademark Office.
 
Federal personnel cases, previously the largest portion and typically the simplest of pending cases in the CAFC, no longer are, Michel said. He added that at the end of May, the court’s pendencies included 420 veterans’ cases, 343 patent infringement cases, and 241 personnel cases.
 
“Total filings have been rising steadily, if modestly,” Michel said. “Thus, our docket continues to grow, with an increasing proportion of difficult cases.”
 
In an interview with BTW, Michel added that “the pendency of patent infringement cases has actually gone down significantly compared to a year ago because we’ve been increasing the pace of hearing and deciding the cases.” The number of patent infringement cases filed per year, however, has been going up at a steady pace over the last 10 or 15 years, he said. Michel did not provide exact year-to-year numbers of patent infringement cases.
 
In addition, “the complexity of the average patent infringement case has grown quite noticeably over the past 10 years or so,” Michel told BTW. “As a result, each patent case tends to be more time consuming, and the average patent case now takes a good bit more time and is more difficult than it was 10 years ago.”
 
High-Tech Bottleneck
 
Michel did not provide figures revealing how many patent infringement cases were related to biotechnology, but did say that the number was “significant.” According to several experts, the heavier caseload can be attributed to both biotechnology — in particular, pharmaceuticals — as well as other high technologies such as information technology.
 
“I think that [the CAFC has] a pretty steady diet coming out of the biotech and high-tech areas,” Clair Laporte, a partner in the IP practice of law firm Foley Hoag, told BTW last week. “I would guess that within the life sciences, the biggest group of cases is more related to small-molecule pharmaceuticals.” She also said that many of those cases are related to litigation initiated by paragraph-IV certifications that are filed by generic drug manufacturers.
 
“Don’t get me wrong — there is a lot of biotech, too,” Laporte added.
 
Frederick Whitmer, co-chair of the IP litigation practice at NY-based law firm Thelen Reid Brown Raysman and Steiner, told BTW that statistically speaking, it is difficult to say how much of the CAFC’s case load is attributable to biotech and pharma.
 
“But when you read the cases, it seems that in recent years there is a higher percentage of patent cases being decided in the federal circuit related to software and computer technology; integrated circuit and electronic technology; broadly speaking biotechnology, pharmaceutical, [and] chemical, all of which are of increasingly complicated technical subject matter,” Steiner said.
 
“A lot of patent law, candidly, has been developed and has grown up in a much simpler technological environment,” he added. “But the same concepts are now being superimposed against really mind-numbing complexity in both the high-tech and biotech areas. It puts greater demand on judicial resources, because they have to be smart both legally and technically.”
 
Foley Hoag’s Laporte said that even if the quantity of veterans’ appeals cases eclipses that of patent infringement cases, “a veteran’s claim just doesn’t have the level of complexity of a patent case. The patent cases challenge the judges with all kinds of different technology, so even if they have technology-sophisticated clerks, they aren’t necessarily perfectly covering every area.
 
Laporte also said that even “lawyers who litigate these cases, who have had years to figure out what the technology is about — even those who have technical training — are assisted by experts and a great deal of time in the case. These judges have to pick it up based on a paper record, and with no experts [available] … and then try to figure it out. That’s very difficult.”
 
Michel told BTW that to deal with these complexities, many judges of the court have been hiring law clerks who are “cross-trained” in law and high-level technology. “For example, I have three law clerks now with PhDs,” Michel said. “Ten years ago, that would have been almost unheard of, but now it’s quite common. In addition to having PhDs, they may have extensive experience in the lab. We’re getting much more experienced and better-credentialed law clerks, and that’s helping to cope with this increased number and complexity of patent cases.”
 
Furthermore, Michel said that he has submitted a request to Congress for additional funds in the current pending budget to provide each of the 12 active judges with a fourth law clerk.
 
“The other courts of appeals already have the ability to have four law clerks per judge, but we’ve been limited to three by the budget,” Michel said. “That would be another way to cope with the increasing burden of the patent cases, and be able to handle them expeditiously and carefully.”
 
Patent Reform Concerns
 
In his address, Michel also expressed concern over two provisions in the identical patent reform bills currently in the markup stage in the House and Senate. Michel said that these provisions “could impose enormous burdens on the court: one making all claim construction rulings immediately appealable as of right,” and another “that dictates that courts in every case must apportion reasonable royalty damages, and do so by one particular methodology that requires valuation of all prior art.”
 

“The complexity of the average patent infringement case has grown quite noticeably over the past 10 years or so. As a result, each patent case tends to be more time consuming, and the average patent case now takes a good bit more time and is more difficult than it was 10 years ago.”

Michel said that he has informed Congress of his concerns, and “knows that they are being considered.”
 
Laporte told BTW that the apportionment of reasonable royalty damages component of the patent reform bill is “absolutely nonsensical” — a sentiment that has been echoed by many in the life sciences and technology transfer industries recently.
 
“It essentially comes out of an anti-patent perspective,” Laporte said. “The notion that you’re going to subtract out the prior art, given that virtually every invention, including very brilliant inventions, is a combination of elements from the prior art, is foolish.
 
“The invention lies in the combination,” she added. “But if you’re going to subtract out the value of the component pieces, not only is that extremely complicated and time-consuming, but it’s fundamentally nonsensical from the point of view of patents and what inventions are really all about.”
 
Regarding Michel’s comments on claim construction rulings possibly being made “immediately appealable,” Thelen’s Whitmer said that a patent claim construction ruling, which occurs prior to trial, is currently not considered a final judgment and thus is not appealable.
 
As a result, he said, a judge’s decision on claim construction cannot be questioned until after a final judgment, which can cause as many as 50 percent of patent infringement cases to be reversed. Thus, “people have [suggested] that there ought to be an immediate right of an appeal from a claim construction ruling so you basically only have to have one trial,” which is what the patent reform bill provision recommends, Whitmer said.
 
But Whitmer agreed that such a rule would likely increase the workload of the CAFC because the court would have to sort through multiple claim construction appeals before trials can even begin.
 
Laporte added that immediately appealable claims construction rulings would mean “that if you are automatically going to go up for an appeal of something that is just a claims construction, and not a final judgment, you’re going to have a two-year wait in the middle of your case, and that’s going to make patent litigation unattractive to patent owners because of the expense and delay, and is likely to lead to a diminution of the value of patents and a massive and largely meaningless increase in the case load of the federal circuit.”
 
Finally, in his address Michel outlined the three CAFC patent cases this year: Medimmune v. Genetech and Microsoft v. At&T, both of which were upheld by the Supreme Court; and KSR v. Teleflex, which the Supreme Court rejected. The outcome and future interpretation of each of these cases has been closely followed by technology transfer professionals and members of the biotech industry.
 
Laporte said that it is atypical for the Supreme Court to have decided so many of the federal circuit’s important patent cases.
 
“Everybody knows that there has been an increasing interest by the Supreme Court in patent issues in recent years, and an important message that it seems to be delivering is that the federal circuit cannot continue to … carve out a series of special rules for patent cases in areas where general rules are applicable,” she said.
 
“These messages have been delivered fairly firmly by the Supreme Court, and I suspect that the federal circuit, as a court that cares deeply about its own reputation, is going to be considering the impact of the Supreme Court looking over its shoulder a little more closely,” Laporte added.

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