Martin Shkreli might be an asshole, but he's just the symptom of a larger problem

Last month, a company called Turing Pharmaceuticals purchased the marketing rights to a drug named Daraprim from Impax Laboratories. According to Wikipedia, Daraprim (Pyrimethamine) "is a medication used for protozoal infections. It is commonly used as an antimalarial drug (for both treatment and prevention of malaria), and to treat Toxoplasma gondii infections, particularly when combined with the sulfonamide antibiotic sulfadiazine when treating HIV-positive individuals."

Turing promptly raised the price of Daraprim from $13.50 to $750 per tablet, and general outraged ensued.  Twitter-happy CEO Martin Shkreli became the asshole of the week. "Big Pharma CEO as a capitalist asshole" may make for good headlines, but in my view it's a simplistic approach that focuses on the symptom and not the root cause of the problem.

I'm not yet a lawyer, and I'm not an intellectual property expert or economist either. But I think I can explain this situation in a way that most reporting has generally missed the mark. Of course, I'm open to correction or clarification.

First, let's be clear what happened here. Turing bought the exclusive marketing rights to the name Daraprim. Turing does not have an exclusive right to manufacture the drug and the drug's patents has 

long expired. Any other company could manufacture and market a generic version of Pyrimethamine. A generic version is the same drug--identical (bio-equivalent) to the brand name drug.

The catch here is that no other manufacturer has done so. It's impossible to know precisely why someone does not enter a market, but a few ideas seem clear. The market for Pyrimethamine is very small. Other companies probably believe that the barrier to entry (costly research and development and lengthy FDA approval process) into this small market is higher than the expected return they would receive for their efforts. This may have been the case when the tablets were $13.50 each. By raising the cost to $750, Turing has made the market more enticing for a generic manufacturer to step in. Still, they may avoid to do so if the barrier to entry is prohibitive.

It's also simplistic to treat Turing's price hike as  "free market" exploitation. To be sure, the market and its participants can be ruthless. But the pharmaceutical industry is highly regulated with (as previously noted) high barriers to entry. This process makes it more difficult for generic alternative to Daraprim to hit the shelves in a timely manner.

Whether this is a problem that needs to be "solved" is another matter altogether. But even if both sides agree it's a problem, the approaches are likely to be significantly apart. For example, an interventionist approach would seek to set price controls or attempts to limit exclusivity periods. On the other hand, a different approach might be to continue to relax the regulatory burden on manufacturers so that generic alternatives are easier to bring to the market. Both approaches have advantages and disadvantages, but we haven't really had that debate yet in the scope of these types of price hikes. For the most part, we're stuck on the "asshole CEO" and we haven't yet gotten past that.

Martin Shkreli might be an asshole, but he's just the symptom of a larger problem. Understanding the roots of that problem will help us move on to a more important debate about how to approach that problem.

Law in Plain English: B&B Hardware, Inc. v. Hargis Industries, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: B&B Hardware, Inc. v. Hargis Industries, Inc.

Argument: Dec 2 2014 (Aud.)

Background: In 2007, the Trademark Trial and Appeal Board (TTAB) denied Hargis' application for registration of its "Sealtite" mark for a line of self-drilling and self-taping screws that are commonly used in the construction of metal buildings. The TTAB determined that there was a likelihood of confusion with B&B Hardware's "Sealtight" mark for fasteners that is used predominantly in the aerospace industry. B&B later brought trademark infringement and unfair competition claims against Hargis, and argued that the TTAB's decision should be given preclusive effect on the question of likelihood of confusion. Alternatively, B&B attempted to admit the TTAB decision into evidence. Hargis filed counterclaims for false advertising and false designation of origin. The jury rejected B&B's trademark infringement and unfair competition claims. Hargis prevailed on its counterclaims. The district court also awarded Hargis attorney fees, holding that B&B's conduct of willfully and deliberately manufacturing evidence to support its trademark infringement claim made the case an exceptional one appropriate under the Lanham Act. The Eighth Circuit affirmed, finding that the TTAB, in denying registration, did not decide the same likelihood-of-confusion issues presented to the district court. Additionally, the panel ruled that admitting the TTAB' s decision into evidence would be confusing and misleading to the jury because the TTAB applied its factors and analyzed the evidence in a manner significantly different than the jury would be required to do in an infringement action.

Issue: The questions before the Court are (1) whether the Trademark Trial and Appeal Board’s finding of a likelihood of confusion precludes respondent from relitigating that issue in infringement litigation, in which likelihood of confusion is an element; and (2) whether, if issue preclusion does not apply, the district court was obliged to defer to the Board’s finding of a likelihood of confusion absent strong evidence to rebut it.

Holding: In a 7-2 decision, the Supreme Court ruled that so long as the other ordinary elements of issue preclusion are met, when the usages adjudicated by the TTAB are materially thesame as those before a district court, issue preclusion should apply.

Law in Plain English: Hana Financial, Inc. v. Hana Bank

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Hana Financial, Inc. v. Hana Bank

Argument: Dec 3 2014 (Aud.)

Background: Hana Bank began operating in May 1994 as the Hana Overseas Korean Club, but did not attempt to register its trademark until. Hana Financial (HFI) began operating on April 1, 1995, and registered its own trademark in 1996. In 2007, HFI filed a trademark infringement claim against Hana Bank, HFI contended that the Bank's use of its "Hana Bank" mark infringed HFI's "Hana Financial" mark because its use of the word "Hana" in connection with financial services would likely cause confusion. The jury found that Hana Bank had used its mark in commerce prior to April 1, 1995, and therefore had trademark priority over HFI. The jury's finding was based upon the doctrine of tacking, where a party
may claim priority in a mark based on the first date of use of a similar but technically distinct mark where the previously used mark is the legal equivalent of the mark in question or indistinguishable such that consumers consider both as the same mark. The Ninth Circuit affirmed, ruling that tacking is a question of fact that must ultimately be decided by the jury.

Issue: The question before the Court is whether the jury or the court determines whether use of an older trademark may be tacked to a newer one.

Holding: In a unanimous decision, the Supreme Court ruled that whether two trademarks may be tacked for purposes of determining priority is a question for the jury. When the relevant question is how
an ordinary person or community would make an assessment, the jury is generally the decisionmaker that ought to provide the fact-intensive answer.

Law in Plain English: Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc.

Argument: Oct 15 2014 (Aud.)

Background: Teva, which manufactures Copaxone® (a drug used in treating multiple sclerosis), sued Sandoz and Mylan, for patent infringement. Sandoz and Mylan sought approval to market generic versions of Copaxone®. The district court concluded that Teva's patents had been infringed. The Court of Appeals for the Federal Circuit affirmed the district court's judgment with respect to one group of claims, but reversed the district court's judgment with respect to a second group of claims. In doing so, the panel reviewed de novo the district court's factual finding in support of its construction of a patent claim term. On the other hand, Federal Rule of Civil Procedure 52(a) requires that a district court's factual findings should only be reviewed for clear error.

Issue: The question before the Court is whether a district court’s factual finding in support of its construction of a patent claim term may be reviewed de novo, as the Federal Circuit requires (and as the panel explicitly did in this case), or only for clear error, as Federal Rule of Civil Procedure 52(a) requires.

Holding: In a 7-2 decision, the Supreme Court ruled that when reviewing a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim, the Federal Circuit must apply a “clear error,” not a de novo, standard of review.

Law in Plain English: ABC, Inc. v. Aereo, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: ABC, Inc. v. Aereo, Inc.

Argument: Apr 22, 2014 (Aud.)

Aereo's array of dime-sized antennas.

Discussion: Aereo uses thousands of individual antennas to receive broadcast television channels, and Aereo assigns an individual antenna to each of its subscribers. Aereo transmits to its subscribers broadcast television programs over the internet for a monthly subscription fee, but it does not have any license from copyright holders to record or transmit their programs. The 1976 Copyright Act gives copyright owners an exclusive right "in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly." 17 U.S.C. § 106(4). ABC and other holders of copyrights in programs broadcast on network television moved for a preliminary injunction barring Aereo from transmitting programs to its subscribers while the programs are still airing, claiming that those transmissions infringe their exclusive right to publicly perform their works, as defined by 17 U.S.C. § 101.  The District Court denied the motion. It concluded that, although the Plaintiffs had demonstrated a likelihood that they would suffer irreparable harm in the absence of a preliminary injunction,an injunction would severely harm Aereo, likely ending its business. The balance of hardships did not tip "decidedly" in favor of the Plaintiffs and an injunction "would not disserve the public interest." The Second Circuit affirmed, finding that Aereo's transmissions of unique copies of broadcast television programs created at its users' requests and transmitted while the programs are still airing on broadcast television are not "public performances" of the Plaintiffs' copyrighted works.

Issue: The question before the Court is whether a company “publicly performs” a copyrighted television program when it retransmits a broadcast of that program to thousands of paid subscribers over the Internet.

Holding: In a 6-3 decision, the Supreme Court ruled that Aereo performs petitioners’ works publicly within the meaning of the Transmit Clause. The practical impact of this decision is that Aereo's business model is illegal.

Law in Plain English: Alice Corporation Pty. Ltd. v. CLS Bank International

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Alice Corporation Pty. Ltd. v. CLS Bank International

Argument: Mar 30 2014 (Aud.)

Discussion: Alice, an Australian company, owns several patents which relate to a computerized trading platform used for conducting financial transactions in which a third party settles obligations between a first and a second party so as to eliminate "counterparty" or "settlement" risk. Settlement risk refers to the risk to each party in an exchange that only one of the two parties will actually pay its obligation, leaving the paying party without its principal or the benefit of the counterparty's performance. Alice's patents address that risk by relying on a trusted third party to ensure the exchange of either both parties' obligations or neither obligation. CLS Bank filed suit against Alice seeking a declaratory judgment of noninfringement, invalidity, and unenforceability as to the  patents. Alice answered and counterclaimed, alleging infringement. the district court granted summary judgment in favor of CLS, holding each of the asserted claims of Alice's patents invalid under 35 U.S.C. § 101. A panel of the Federal Circuit reversed, holding that the claims at issue, including claims drawn to methods, computer-readable media, and systems, were all patent eligible under § 101. Upon consideration en banc, a majority of the Federal Circuit affirmed the district court's holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under § 101.

Issue: The question before the Court is whether claims to computer-implemented inventions – including claims to systems and machines, processes, and items of manufacture – are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court.

Holding: In a unanimous decision, the Supreme Court ruled that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101.

Law in Plain English: POM Wonderful LLC v. The Coca Cola Company

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: POM Wonderful LLC v. The Coca Cola Company

Argument: Apr 21 2014 (Aud.)

Background: Pom sued Coca-Cola, alleging that Coca-Cola misled consumers to believe that Coca-Cola's Pomegranate Blueberry consisted primarily of pomegranate and blueberry juices when it actually consisted mainly of (the cheaper) apple and grape juices. Pom challenged the name, labeling, marketing, and advertising of Pomegranate Blueberry. It claimed that Coca-Cola violated the false-advertising provision of the Lanham Act, which authorizes suit against those who use a false or misleading description or representation about any goods. The district court ruled that Pom's Lanham Act challenge to Pomegranate Blueberry's name and labeling was barred by the Food, Drug, and Cosmetic Act (FDCA)'s implementing regulations. The Ninth Circuit affirmed, finding that where the FDA has not concluded that particular conduct violates the FDCA, a Lanham Act claim may not be pursued if the claim would require litigating whether that conduct violates the FDCA.

Issue: The question before the Court is whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the Food, Drug, and Cosmetic Act.

Holding: In a unanimous decision (with Justice Breyer recused), the Supreme Court ruled that competitors may bring Lanham Act claims like POM’s challenging food and beverage labels regulated by the FDCA. Neither the Lanham Act nor the FDCA, in express terms, forbids or limits Lanham Act claims challenging labels that are regulated by the FDCA.

Law in Plain English: Nautilus, Inc. v. Biosig Instruments, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Nautilus, Inc. v. Biosig Instruments, Inc.

Argument: Apr 28 2014 (Aud.)

Background: Biosig Instruments, Inc. is the assignee of a patent for a heart rate monitor associated with an exercise apparatus and/or exercise procedures. Biosig brought a patent infringement action against Nautilus, Inc. alleging that Nautilus infringed Biosig's patent. The Patent Act, 35 U.S.C. §112, requires that the specification of a patent "conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention;" The district found that the term "spaced relationship" in the patent was not defined with any parameters, and as a result, granted Nautilus's motion as to invalidity. The Federal Circuit reversed, finding that a claim is indefinite only when it is "not amenable to construction" or "insolubly ambiguous." In this case, the variables affecting the "spaced relationship" could be determined by those skilled in the art. Thus, "spaced relationship" could not be said to be insolubly ambiguous.

Issue: The questions before the Court are (1) whether the Federal Circuit’s acceptance of ambiguous patent claims with multiple reasonable interpretations – so long as the ambiguity is not “insoluble” by a court – defeats the statutory requirement of particular and distinct patent claiming; and (2) whether the presumption of validity dilutes the requirement of particular and distinct patent claiming.

Holding: In a unanimous decision, the Supreme Court ruled that a patent is invalid for indefiniteness if its claims, read in light of the patent specification and prosecution history, failed to inform those skilled in the art about the scope of the invention.

Law in Plain English: Limelight Networks, Inc. v. Akamai Technologies, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Limelight Networks, Inc. v. Akamai Technologies, Inc.

Argument: Apr 30 2014 (Aud.)

Background: Akamai Technologies, Inc., owns a patent that covers a method for efficient delivery of web content. The claimed method consists of placing some of a content provider's content elements on a set of replicated servers and modifying the content provider's web page to instruct web browsers to retrieve that content from those servers. Akamai filed a complaint against Limelight Networks, Inc., alleging infringement of the patent. In its complaint, Akamai alleged both direct and induced infringement. Limelight maintains a network of servers and, as in the patented method, it allows for efficient content delivery by placing some content elements on its servers. Limelight, however, does not modify the content providers' web pages itself. Instead, Limelight instructs its customers on the steps needed to do that modification. The district court held that Limelight did not infringe the patents asserted against them because Limelight's customers (and not Limelight itself) performed one of the steps of the claimed method. The Federal Circuit reversed, finding that Limelight could be liable for induced infringement if Akamai had performed some of the steps of a claimed method and has induced other parties to commit the remaining steps (divided infringement).

Issue: The question before the Court is whether the Federal Circuit erred in holding that a defendant may be held liable for inducing patent infringement under 35 U.S.C. § 271(b) even though no one has committed direct infringement under Section 271(a).

Holding: In a unanimous decision, the Supreme Court ruled that a defendant is not liable for inducing infringement when no one has directly infringed under Section 271(a) or any other statute. Liability for infringement must be predicated on direct infringement. As a result, the decision of the Federal Circuit was reversed.

Law in Plain English: Petrella v. Metro-Goldwyn-Mayer, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Petrella v. Metro-Goldwyn-Mayer, Inc.

Why did the Supreme Court take this case? In this case, the Ninth Circuit held that the defense of laches is available in copyright cases. In the Fourth Circuit, there is no laches at all. If a copyright suit is brought within the statute of limitations, it may go forward. In the Eleventh Circuit, "there is a strong presumption that a plaintiff's suit is timely if it is filed before the statute of limitations has run. Only in the most extraordinary circumstances will laches be recognized as a defense." Even if laches is found, "laches serves as a bar only to the recovery of retrospective damages, not to prospective relief."  In the Second Circuit, laches is available as a bar to injunctive relief but not to money damages. In the Sixth Circuit, laches is available in only "the most compelling of cases." So-called "circuit splits" are perhaps the most common way cases make it to the Supreme Court.

Argument: Jan 21 2014 (Aud.)

Background: In 2009, Paula Petrella filed an action for copyright infringement, unjust enrichment and accounting against Metro-Goldwyn-Mayer, Inc., and others. According to Petrella, the defendants infringed her purported interest in a book and two screenplays that together allegedly formed the basis for the 1980 motion picture Raging Bull. Petrella's father Frank, who wrote the 1963 screenplay, died in 1981. In 1991, Petrella successfully renewed the copyright in the 1963 screenplay. Because her father died within 28 years of the original copyright, the renewal rights vest in the author’s heirs (Paula) regardless of whether the author assigned the renewal term of copyright to a third-party prior to his death. Petrella renewed the copyright and knew of her claims in 1991, but did not file a lawsuit until January 2009. Because of the three-year statute of limitations prescribed by Congress in 17 U.S.C. § 507(b), Ms. Petrella claimed damages only for the copyright infringement occurring between 2006 and 2009.

The District Court granted summary judgment in favor of the defendants, holding that Petrella's claims are barred by the equitable defense of laches. The Ninth Circuit affirm.

Issue: The question before the Court is whether the nonstatutory defense of laches is available without restriction to bar all remedies for civil copyright claims filed within the three-year statute of limitations prescribed by Congress, 17 U.S.C. § 507(b).

Holding: In a 6-3 decision, the Supreme Court ruled that laches cannot be invoked as a bar to Petrella’s pursuit of a claim for damages brought within §507(b)’s three-year window. By permitting a successful plaintiff to gain retrospective relief only three years back from the time of suit, the copyright statute of
limitations itself takes account of delay.

Law in Plain English: Highmark Inc. v. Allcare Management Systems, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Highmark Inc. v. Allcare Management Systems, Inc. (see Octane Fitness v. Icon Health and Fitness for another case that discusses the same issue).

Argument: Feb 26 2014 (Aud.)

Background: Highmark, a Pennsylvania insurance company, filed suit against Allcare seeking a declaratory judgment of noninfringement, invalidity, and unenforceability of all claims of an Allcare patent. Allcare counterclaimed for infringement. The District Court entered final judgment of noninfringement in favor of Highmark. Highmark moved for an exceptional case finding with respect to Allcare and an award of attorneys' fees and expenses under 35 U.S.C. § 285. After reviewing the record, the District Court found the case exceptional. The Federal Circuit affirmed  one § 285 claim and reversed two others, holding that a District Court’s objective baselessness determination is reviewed “without deference.” The Federal Circuit denied rehearing en banc by a vote of six to five.

Issue: The question before the Court is whether a district court’s exceptional-case finding under 35 U.S.C. § 285 (which permits the court to award attorney’s fees in exceptional cases), based on its judgment that a suit is objectively baseless, is entitled to deference.

Holding: In a unanimous decision, the Supreme Court ruled that all aspects of a district court's exceptional-case determination under § 285 should be reviewed for abuse of discretion. Prior to Octane Fitness, LLC v. ICON Health & Fitness, Inc., this determination was governed by the framework established by the Federal Circuit in Brooks Furniture. Octane rejects the Brooks Furniture framework as unduly rigid and holds that district courts may make the exceptional-case determination under § 285 in the exercise of their discretion. The holding in Octane settles this case.

Law in Plain English: Octane Fitness v. Icon Health and Fitness

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Octane Fitness v. Icon Health and Fitness (see Highmark Inc. v. Allcare Management Systems, Inc. for another case that discusses the same issue).

Argument: Feb 26 2014 (Aud.)

Internal emails show ICON's  tactics in using a old patent to go after a smaller start-up.

Background: ICON Health and Fitness filed a complaint against Octane Fitness alleging that Octane's Q45 and Q47 elliptical machines infringed on ICON's patent.  The patent claims at issue focus on the "linkage system" connecting the foot rail to the frame via the "stroke rail." The District Court concluded that the "stroke rail" and "means for connecting" limitations were absent in the Q45 and Q47 machines and granted summary judgment of noninfringement. The District Court ruled, pursuant to 35 U.S.C. § 285, that the case was not "exceptional" (§ 285 provides that "[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party"). The District Court, citing the line of Federal Circuit cases holding that in the absence of litigation misconduct, fees may only be awarded if the allegations are both 1) objectively baseless and 2) there is clear and convincing evidence of subjective bad faith; found that neither prong was met. The Federal Circuit affirmed.

Issue: The question before the Court is whether the Federal Circuit’s promulgation of a rigid and exclusive two-part test for determining whether a case is “exceptional” under 35 U.S.C. § 285 improperly appropriates a district court’s discretionary authority to award attorney fees to prevailing accused infringers in contravention of statutory intent and this Court’s precedent, thereby raising the standard for accused infringers (but not patentees) to recoup fees and encouraging patent plaintiffs to bring spurious patent cases to cause competitive harm or coerce unwarranted settlements from defendants.

Holding: In a 9-0 decision, the Supreme Court ruled that the Brooks Furniture framework that the Federal Circuit relied upon to determine exceptional cases is unduly rigid and impermissibly encumbers the statutory grant of discretion to district courts. District courts may determine whether a case is exceptional in the case-by-case exercise of their discretion, considering the totality of the circumstances.

Law in Plain English: Lexmark International, Inc. v. Static Control Components, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Lexmark International, Inc. v. Static Control Components, Inc.

Argument: Dec 3 2013 (Aud.)

Background: Lexmark, a producer of laser printers and toner cartridges for its laser printers, developed microchips for both the toner cartridges and the printers so that Lexmark printers will reject any toner cartridges not containing a matching microchip. Static Control Components identified how to replicate the cartridge microchips. Lexmark then sued Static Control for copyright violations related to its source code in making the duplicate microchips. Static Control made a counterclaim under federal and state antitrust and false-advertising laws (including the Lanham Act). Lexmark successfully moved to dismiss all of Static Control's counterclaims. The Sixth Circuit affirmed the district court's dismissal of Static Control's federal antitrust claims, but reversed the dismissal of Static Control's claims under the Lanham Act and certain claims under state law.

Issue: The question before the Court is to determine the appropriate analytic framework for determining a party’s standing to maintain an action for false advertising under the Lanham Act. The three competing possibilities are: (1) the factors set forth in Associated General Contractors of California, Inc. v. California State Council of Carpenters as adopted by the Third, Fifth, Eighth, and Eleventh Circuits; (2) the categorical test, permitting suits only by an actual competitor, employed by the Seventh, Ninth, and Tenth Circuits; or (3) a version of the more expansive “reasonable interest” test, either as applied by the Sixth Circuit in this case or as applied by the Second Circuit in prior cases.

Holding: In a unanimous decision, the Supreme Court ruled that Static Control has adequately pleaded the elements of a Lanham Act cause of action for false advertising. The Court dismissed the three possibilities above and adopted a fourth test: the cause of action extends to plaintiffs who 1) fall with in the zone of interests protected by that statute and 2) whose injury was proximately caused by a violation of that statute. To come within the zone of interests in a suit for false advertising, a plaintiff must allege an injury to a commercial interest in reputation or sales. A plaintiff must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.

Law in Plain English: Medtronic, Inc. v. Merowski Family Ventures, LLC

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Medtronic, Inc. v. Merowski Family Ventures, LLC

Argument: Nov 5 2013 (Aud.)

Background: Medtronic, a leading manufacturer of medical devices and equipment, sued for declaratory judgment of noninfringement and invalidity of several patents owned by Mirowski Family Ventures. The District Court entered judgment of noninfringement in favor of Medtronic and judgment of validity and enforceability in favor of MFV. The Federal Circuit vacated and remanded the decision, finding that the court relied on a legally incorrect allocation of the burden of proof to find noninfringement in the limited circumstances of this case and incorrectly construed the claim terms in question.

Issue: The question before the Court is whether, in a declaratory judgment action brought by a licensee under MedImmune, Inc. v. Genentech, Inc., the licensee has the burden to prove that its products do not infringe the patent, or whether (as is the case in all other patent litigation, including other declaratory judgment actions), the patentee must prove infringement.

Holding: In a unanimous decision, the Supreme Court ruled that when a licensee seeks a declaratory judgment against a patentee that its products do not infringe the licensed patent, the patentee bears the burden of persuasion on the issue of infringement. As a result, the Federal Circuit was reversed. The impact of this decision is that the burden of proof does not shift, even when the patentee is a defendant in a declaratory judgment action, and the plaintiff (the potential infringer) seeks a judgment that he does not infringe the patent.

Here are my ShmooCon submissions

I made two submissions to ShmooCon this year. The first is a full-fledged talk and the second is a "One Track Mind" 20-minute talk. Here are the abstracts, and wish me luck!

©opyright Gone Wrong: Our Broken System and How We Can Fix It

The Constitution grants the Congress the power to enact intellectual property laws "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Since the founding of our country, protection of intellectual property has undergone several systematic changes that have extended the time rights are protected. Additionally, protections have gotten increasingly aggressive and oppressive. This presentation will briefly discuss the history and development of IP law, and then focus on the more recent and onerous provisions that have become embroiled in controversy. Along the way, we'll talk about the Digital Millennium Copyright Act,  copyright and patent trolls, and other methods of intellectual property abuse. Lastly, we will take a look at some of the ways we can reform our broken system to free consumers from burdensome restraints, while at the same time protecting the intellectual property of the creators.

Having Your Cake and Eating It Too: FOIA, Surveillance, and Privacy

In Washington, DC, the federal government is arguing against a prolific Freedom of Information Act (FOIA) requester that his multitudinous requests, taken together, constitute a "mosaic" of information whose release could "significantly and irreparably damage national security" and would have "significant deleterious effects" on the bureau's "ongoing efforts to investigate and combat domestic terrorism." In the District of Columbia, the federal government is defending the legality of the intelligence community's surveillance programs under a 1979 Supreme Court case, Smith v. Maryland, that found constitutional use of a “pen register” device to gather information on numbers called by a criminal suspect. So, yes: the government is simultaneously arguing to that too much otherwise-legitimate FOIA data creates a mosaic that threatens national security--but large scale metadata collection, far beyond anything contemplated by a simple pen register device in 1979--is perfectly legitimate. Is this a problematic dichotomy? And if so, what can we do about it?

Biker gangs and trademark infringement

via Walter Olson.

Is this...

..confusingly similar to this?

Hells Angels says so. What do you think?

Law in Plain English: Shelby County v. Holder

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

See here for a previous discussion and more background on the constitutionality of the Voting Rights Act.

Shelby County v. Holder

In 2006, Congress reauthorized Section 5 the Voting Rights Act (VRA), which kept in place a pre-existing coverage formula in Section 4(b) which determined which jurisdictions are required see seek preclearance for changes to voting procedures. Shelby County, Alabama filed a lawsuit in the U.S. District Court for the District of Columbia, seeking a declaratory judgment that the Voting Rights Act (specifically, Sections 4(b) and 5) were unconstitutional. The District Court disagreed and granted summary judgment to the Attorney General. A divided Court of Appeals affirmed. The question before the Court was whether Congress’ decision to reauthorize Section 5 of the VRA under the pre-existing coverage formula of Section 4(b) of the VRA exceeded its authority under the Fourteenth and Fifteenth Amendments and thus violated the Tenth Amendment and Article IV of the United States Constitution. In a 5-4 decision, the Supreme Court ruled that Section 4 of the Voting Rights Act t is unconstitutional; its formula can no longer be used as a basis for subjecting jurisdictions to preclearance. As a result, Congress cannot use the VRA's existing preclearance formula to single out jurisdictions--they must use data about current conditions.

An interesting admission from Justice Scalia in the DNA patent case?

Justice Scalia's concurrence in today's decision in Association for Molecular Pathology v. Myriad Genetics, Inc.:

JUSTICE SCALIA, concurring in part and concurring in the judgment.
I join the judgment of the Court, and all of its opinion except Part I–A and some portions of the rest of the opinion going into fine details of molecular biology. I am unable to affirm those details on my own knowledge or even my own belief. It suffices for me to affirm, having studied the opinions below and the expert briefs presented here, that the portion of DNA isolated from its natural state sought to be patented is identical to that portion of the DNA in its natural state; and that complementary DNA (cDNA) is a synthetic creation not normally present in nature.

A very interesting admission from a Supreme Court Justice, and especially from Justice Scalia? He seems to be saying "I don't quite understand the science enough to join the entire opinion, but I'm sufficiently informed to agree with the overall decision."

Law in Plain English: Association for Molecular Pathology v. Myriad Genetics, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Association for Molecular Pathology v. Myriad Genetics, Inc.

Myriad Genetics obtained several patents on “isolated” forms of several genes. A group of challengers (four national organizations of doctors, researchers, clinicians, and other health professionals, along with six leading geneticists, two genetic counselors, two women’s health and breast cancer organizations, and six patients who had been diagnosed as being at risk for one of the hereditary forms of cancer) opposed Myriad Genetics by claiming that Myriad hadn't created anything, since the genes remained unchanged, and “natural phenomena” or something that is merely the product of “the laws of nature” cannot be patented. The District Court ruled in favor of the challengers, but the Federal Circuit reversed, finding that all of the challengers (but one, a doctor from NYU who had been doing research on the genes in question but stopped because he feared Myriad might take action against him) lacked standing, and that Myriad's patents were valid. The question before the Court was whether human genes are patentable. In a 9-0 decision, the Supreme Court ruled that natural isolated DNA is not patentable, but synthetic DNA is patentable. A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring. As a result, Myriad's patents (which were based on natural isolated DNA) are not valid.

Law in Plain English: Case or Controversy

This is one in a series of posts designed to describe the structure, procedures, and legal issues of the federal courts in plain English. For similar posts, click here.

The Case or Controversy Clause, part of Article III of the United States Constitution, reads as follows:

The judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority;--to all Cases affecting Ambassadors, other public ministers and Consuls;--to all Cases of admiralty and maritime Jurisdiction;--to Controversies to which the United States shall be a Party;--to Controversies between two or more States;--between a State and Citizens of another State;--between Citizens of different States;--between Citizens of the same State claiming Lands under Grants of different States, and between a State, or the Citizens thereof, and foreign States, Citizens or Subjects.

In plain English, this means that the courts only have power to hear cases when an actual controversy exists. Federal courts cannot decide issues based on hypothetical scenarios, cannot give advisory opinions, or decide issues  that aren't yet ripe.

To illustrate this concept, let's take a recent decision of the United States Court of Appeals for the Federal Circuit.

A group of farmers, many of who grew organic crops, did not want to have their crops contaminated by genetically-modified Monsanto seeds. They were concerned that the widespread proliferation of Monsanto's seeds would contaminate their organic crops, and afraid that Monsanto would then sue them for patent infringement (in some cases like this recent Supreme Court case, Monsanto has sued farmers for such infringement). So, the farmers asked the United States District Court for the Southern District of New York to declare (essentially, make a legally-binding judgment) that Monsanto's patents were invalid, unenforceable, and not infringed.

After filing the suit, the farmers asked Monsanto for a covenant not to sue (something we saw in this Supreme Court case earlier this term), which is exactly what it sounds like: a legally binding agreement not to sue. Monsanto declined to issue the covenant, but instead declared (via their website) that "[i]t has never been, nor will it be Monsanto policy to exercise its patent rights where trace amounts of our patented seeds or traits are present in farmer’s fields as a result of inadvertent means." Additionally Monsanto advised the farmers that

Monsanto is unaware of any circumstances that would give rise to any claim for patent infringement or any lawsuit against your clients. Monsanto therefore does not assert and has no intention of asserting patent-infringement claims against your clients. You represent that “none of your clients intend to possess, use or sell any transgenic seed, including any transgenic seed potentially covered by Monsanto’s patents.” Taking your representation as true, any fear of suit or other action is unreasonable, and any decision not to grow certain crops unjustified.

The District Court concluded that, given these facts, there was no controversy. As a result, it is important to note that the court could not hear the substance of the farmers' claims. On appeal, the Federal Circuit agreed.

Given our understanding of the Case or Controversy Clause, it's not difficult to understand why the courts decided as they did. The farmers were asking the court to rule on something that might happen. Given's Monsanto's stated policy and their assurances that they were unaware of any circumstances that would give rise to any claim for patent infringement or any lawsuit, the court concluded that the farmers had not been injured in any way:

In sum, Monsanto’s binding representations remove any risk of suit against the appellants as users or sellers of trace amounts (less than one percent) of modified seed. The appellants have alleged no concrete plans or activities to use or sell greater than trace amounts of modified seed, and accordingly fail to show any risk of suit on that basis. The appellants therefore lack an essential element of standing. The district court correctly concluded that it lacks Declaratory Judgment Act jurisdiction.

And now you know!