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Washington-When the U.S. Supreme Court heard arguments last week in a Goliath v. David battle over printer ink, the justices sat not only at the intersection of patent and antitrust law but in the middle of their heaviest patent docket in 40 years. The arguments on Nov. 29 in Illinois Tool Works Inc. v. Independent Ink, No. 04-1329, marked the second time last month that the justices heard a patent antitrust challenge. They will hear two more patent cases this spring, including what many patent law experts believe is the most important patent case in years- eBay Inc. v. MercExchange, No. 05-130. Four cases in one area of the law may not seem to be a lot, but out of the term’s potential 75 to 80 decisions, four is a significant number and is approaching the record seven patent cases heard by the high court in 1965. The justices may not be done yet. They have asked the solicitor general of the United States for his views on whether to grant review in two addition�al patent cases, and several more are either in the wings or swiftly moving through the pipeline to the high court. The questions raised by these challenges are generally major and contentious. And the debate over the correct answers appears now to have shifted away from the halls of Congress, at least in the short term, to the high court itself. So what has happened to awaken the sleeping giant of appellate review? A constellation of factors, according to scholars and litigators, not the least of which is unhappiness with the U.S. Court of Appeals for the Federal Circuit. “The tectonic plates have shifted to correct the unbalance of what had been perceived as a lack of interest by the Supreme Court,” said patent litigator Harold C. Wegner, a partner in Foley & Lardner’s Washington office. “It can be anticipated that the Supreme Court’s interest in patents generally and the Federal Circuit, in particular, will continue for the coming near term, for two or three years.” No one but the justices themselves can say for certain why the high court is taking such a strong interest in patent law this term. But scholars, litigators and others are all “reading tea leaves” for reasons. Intellectual property law scholar Michael Madison of the University of Pittsburgh School of Law, who writes a blog on law, society and technology ( www.madisonian.net), summed up four hypotheses for the high court’s elevated interest in patent cases. First, he said, there is the new chief justice-John G. Roberts Jr.-who comes from a corporate law background and who, because of that background, may have an openness to thinking about the implications of intellectual property law, particularly in the corporate environment. “It’s a welcome development from the perspective of the IP law community to have an additional member of the court who is interested in these issues,” said Madison. “Justices [Stephen G.] Breyer, [Ruth Bader] Ginsburg and [John Paul] Stevens clearly have an interest in intellectual property issues. In the case of each of those three, their interest is in copyright and trademark matters more than patent matters.” Second, he and others theorize, is the composition of the high court clerks. “One of the things we’ve seen in legal education over the last 10-15 years is a dramatic upsurge in law students’ interest in IP law,” Madison said. “It wouldn’t be surprising to see that level of interest manifested in Supreme Court clerks who have an important role in initially reviewing the petitions for certiorari.” Third, the Supreme Court is “catching up” to the fact that intellectual property law and intellectual property business is an enormously important engine of the economy. And finally, the Supreme Court has been looking over the shoulder of the Federal Circuit. Pendulum swing By consolidating patent appeals in a single court, the pendulum of patent law has swung too far in the direction of patent holders, in the view of some, said Madison. The swing shows up in a variety of legal doctrines and is a matter of intense debate in the patent community, he said. “I have to imagine, given the number of patent cases the Supreme Court is interested in, that it is thinking of cutting back some of the rules the Federal Circuit has decided,” he suggested. “If the Supreme Court were generally happy with the direction of what the Federal Circuit has been doing, it could take one patent case, affirm it, and signal it agrees with the Federal Circuit’s direction,” said Madison. “That’s not what has happened here,” he said. “There is a range of legal doctrine in these cases, some of which are core patent doctrines, some are blends of patent and other law. So the Supreme Court has not picked a tiny piece of patent law, but has embraced the entirety of the patent system.” Other patent lawyers, who did not want to be identified, said that district court judges also have been unhappy, some openly, with the Federal Circuit, particularly with the number of split opinions issued. Foley’s Wegner keeps a running tally of the 10 most important patent cases at or on their way to the Supreme Court. At No. 1 is the eBay Inc. challenge, which, according to Wegner and others, is a potential landmark case. EBay asks the high court whether the Federal Circuit erred in setting forth a general rule in patent cases that a district court must-absent exceptional circumstances-issue a permanent injunction after a finding of patent infringement. Other patent issues either at the high court or on their way include: whether antitrust laws are violated by so-called reverse payment settlements in which a patent holder makes a substantial payment to a challenger to drop a validity challenge and stay out of the market for a period of time keyed to the payment; and questions involving the standard of patentability for combination claims and the scope of method patents. Illinois Tool Works and Unitherm Food Systems Inc. v. Swift Eckrich Inc., No. 04-597, which was argued on Nov. 2, also make Wegner’s Top 10. In Unitherm, a patent fraud case, the high court is examining the interplay of appellate court review of the sufficiency of evidence supporting a jury verdict and the Federal Rules of Civil Procedure. At stake is an $18 million antitrust verdict in favor of Unitherm. Ink fight In Illinois Tool Works, argued last week, the Federal Circuit applied a nearly 60-year-old Supreme Court doctrine-a presumption of market power in patent “tying” cases-even though it suggested, as have many economists and antitrust experts, that “the time may have come to abandon the doctrine.” In a typical tying situation, a patented product is marketed on condition that an unpatented product be purchased with it. One of the most difficult and costly tasks facing a plaintiff who charges that a defendant has violated antitrust laws by illegally tying together two products is to show that the defendant has market power in the “tying” product. The task usually involves costly discovery and expert testimony. The presumption shifts the burden to the defendant to show there are reasonable alternatives available in the market. The Supreme Court has applied this presumption in patent cases since its 1947 ruling in International Salt Co. v. U.S., 332 U.S. 392, and again in 1962 in U.S. v. Loews, 371 U.S. 38. In Loews, the court explained that patent laws reward uniqueness: “The existence of a valid patent on the tying product, without more, establishes a distinctiveness sufficient to conclude that any tying arrangement involving the patented product would have anticompetitive effects.” Illinois Tool’s Trident division makes printing systems made up of patented ink-jet printheads and non-patented inks for the printheads. In its licensing agreements, Trident conditions-or ties-the sale of its patented printheads on the purchase of its unpatented inks. Independent Ink Inc. makes and sells ink that can be used in Trident printheads and allegedly at a substantially lower cost. It charged that Trident engaged in illegal tying in violation of Section 1 of the Sherman Act. After losing in district court, Independent Ink won in the Federal Circuit, which relied on International Salt and Loews in applying the presumption of market power to Trident’s patented printheads. In the high court, Andrew Pincus, a partner in the Washington office of Chicago-based Mayer, Brown, Rowe & Maw, counsel to Illinois Tool, urged the justices to jettison the presumption. “If the court were confronted with this question [of market power] today, for the first time, it’s inconceivable the court would adopt that rule,” he said. The presumption, he said, is illogical, has been heavily criticized by economists and has been rejected by federal antitrust regulators, such as the Federal Trade Commission. Most patents, even valuable ones, do not have market power, he argued. “Do you think the presumption drives the lawsuit?” asked Justice Anthony M. Kennedy. Pincus responded affirmatively, adding, “It’s a pretty low-cost tactic to shift the burden [of showing lack of market power] to a competitor.” Pincus drew support during arguments from Deputy Solicitor General Thomas Hungar and amicus brief support from the motion picture and telecommunications industries and intellectual property law associations. Independent Ink’s high court counsel, Kathleen Sullivan, a partner in Quinn Emanuel Urquhart Oliver & Hedges’ Redwood Shores, Calif., office, said the presumption was a “sensible rule of thumb” that has guided courts and parties for nearly 60 years. In response to Roberts’ comment that it places a “heavy burden” on defendants, Sullivan said, “When the patent is used to exact, in perpetuity, a supercompetitive profit, it’s quite fair to require defendants to come forward and show there are reasonable alternatives [in the market].” Her opponents, she said, have shown no evidence of a “rush of frivolous litigation” as a result of the presumption, which has a 60-year track record. She has drawn support from consumer groups, retirees’ advocate AARP and small businesses that fear that without the presumption, drug companies, the movie industry, auto part manufacturers and others would be forced to buy tied products. For example, Pfizer Inc. reportedly has proposed marketing a new, highly effective anti-cholesterol drug in combination with its drug Lipitor, on which the patent will soon expire. Breyer said his dilemma was: “If I decide against you, I would be concerned about the large technology companies extending their market power [through tying arrangements]. If I decide for you, I’m afraid, particularly in the patent area, that a lot of new, uncertain technology doesn’t get off the ground because it has used this way to make money.” “You should affirm,” said Sullivan without hesitation. “There’s no reason to think the presumption has had negative effects on innovation. Patents have increased exponentially. Congress has declined five times to remove the presumption from antitrust laws. It makes good economic sense. It makes good litigation sense.”

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