Intellectual Property Law of the American Bar of California

ftc.gov, Sep 12, 2005

Jurisdiction and choice of law issues Several commentators have questioned efforts by the Federal Circuit to define its own jurisdiction and to bring uniformity to the legal issues that affect patent cases and the commercial exploitation of patents. A related concern is whether the Federal Circuit acts appropriately in creating its own jurisprudence, rather than relying on the jurisprudence of the regional circuits, in deciding legal issues that are peripheral to the interpretation of Title 35. A few commentators have been especially critical of a series of decisions through which the Federal Circuit has begun to formulate its own case law for resolving issues at the interface of patent law and antitrust law instead of following the court’s original approach that sought to discern and apply the law of the regional circuit on such issues.1
1 See e.g., Ronald S. Katz and Adam J. Safer, Should One Patent Court Be Making Antitrust Law for the
Whole Country?, 69 Antitrust L.J. 687 (2002) ; Peter M. Boyle, Penelope M. Lister and J. Clayton Everett, Jr.,
Antitrust Law at the Federal Circuit: Red Light or Green Light at the IP- Antitrust Intersection, 69 Antitrust L.J.
739 (2002).

Properly understood, the Federal Circuit’s efforts on both fronts have been largely consistent with its Congressional mandate to bring uniformity to the process by which patent rights are defined and enforced. Equally important, the thrust of the criticism does not appear to stem from dissatisfaction with the end results in particular cases, which have been largely consistent with the results that would obtain in any of the regional circuits. Rather, the criticism expresses disagreement with dicta in some Federal Circuit cases, and concern that this appellate court, whose primary mission is addressed to patents and the construction of Title 35, has been able – on its own – to expand that role in areas not absolutely essential to its primary mission. These two points, jurisdiction and choice of law, are inextricably intertwined
as a practical matter, but should be examined independently for clarity.

Worth noting at the outset is that the Federal Circuit is unique in federal jurisprudence. There are no other situations in which appeals from a given district court can move in different directions, depending upon the jurisdictional basis for the underlying case in the lower court. Congress created the Federal Circuit in an express effort to eliminate the costly and damaging impact of widely varying results in patent infringement cases, depending upon which circuit court of appeals would ultimately hear an appeal from a judgement in the district court.

It is apparent from the legislative history of the enabling act that Congress intended that to have this single court of appeals deal with all of the issues that are raised by a well-pleaded Complaint in such cases. Indeed, one of the prime reasons for the Federal Circuit was a procedural problem. Prior to the creation of the Federal Circuit, a race to the courthouse and an expensive venue fight in many if not most important cases preceded any effort to get at the
merits.2 This practice was driven directly by widely varying attitudes among the regional circuits as to whether patents were desirable economic institutions, worthy of enforcement because they fostered investment and risk taking, or dreadful monopolies left over from the 1800s before there was a Sherman Act.

Whatever may have been the underlying rationale of the various circuits in their appro ach to patents, patent owners had one set of preferred courts and patent defendants had amutually exclusive set of preferred courts. The result was enormously wasteful and undermined the economic importance of patents in fundamental ways. The most important of
patents, for example, could be placed in jeopardy merely by asserting invalidity in one of the circuits known to be hostile to patent enforcement, thereby intimidating many patent owners into relinquishing patent rights at a mere fraction of their actual market value. Anyone today who advocates diversity among the circuits as desirable in this arena needs to understand the history that led to the Federal Circuit and the problems that Congress was trying to alleviate.
The court was not created in a vacuum.

The Federal Circuit’s basic jurisdiction is defined as exclusive for cases in which jurisdiction in the lower court is based “in whole or in part” on section 1338(a) of Title 28, the federal procedure statute that gives district courts jurisdiction over cases involving patent infringement. For cases brought as ordinary patent infringement cases, there is no jurisdiction
problem or controversy as to the proper jurisdictional path for the appeal. Thus, where there is a non -frivolous patent cause of action stated in the complaint, the statutory mandate seems clear that the Federal Circuit has exclusive jurisdiction over the appeal from any part of the case, even if the particular issue being dealt with on appeal has nothing to do with a patent.3 Less clearly dictated by the enabling statute are the appellate paths for the myriad
variations in which the original complaint in the district court does not assert a patent infringement cause of action, as such, but where the need to interpret a patent is essential for the cause of action that is stated. A plaintiff may assert, for example, that conduct by the defendant to inform customers of a patent that was obtained by fraud or is otherwise known to be invalid constitutes unfair competition or a violation of the Sherman Act. Irrespective of what is ultimately determined to be the proper appellate path in these various situations, there is no reason to have a different rule in each of the eleven regional circuits for the various situations, and in general both the Federal Circuit and the regional circuits have recognized this. In short, while the Supreme Court is the ultimate arbiter, the determination of appellate
jurisdiction is generally ceded to the Federal Circuit in the first instance.