Amicus Curiae Brief — eBay Inc. v. MERCEXCHANGE, LLC

_

BESTAVAILABLECOPY (sx) = =

MAR 1 296

No. 05-130

IN THE

Supreme Court of the United States

EBay INc.,

7 Petitioner,

V.

MercEXxcuancg, L.L.C.,

Respondent.

On Writ oF CERTIORARI TO THE UNITED STATES

Court OF APPEALS FOR THE FEDERAL CIRCUIT

BrieF For Amicus CuRIAE STEVEN M. HoFrrserc

SUPPORTING RESPONDENT

RoBert J. RANDO

Counsel of Record

THE RaANbo Law Firm PC

4940 Merrick Road, Suite 350

Massapequa Park, NY 11762

(516) 799-9800

STEVEN M. HorrBerG

MiLpE & HorrserG LLP

10 Bank Street, Suite 460

White Plains, NY 10606

(914) 949-3100

Counsel for Amicus Curiae

A

200057 ce]

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

TABLE OF CONTENTS

Page

TABLE OF CITED AUTHORITIES ............ iv

STATEMENT OF INTEREST OF AMICUS CURIAE

SOE Oe Oe eT PET ee try henry ren l

POSITION OF AMICUS CURIAE REGARDING

QUES TING PRESEN BED 2 nce ccc ecccsces 5

The Contentions Of Petitioners And

IN gc dau adweasccessuwsees 5

DEE cecslewskan backed dua eae eee 8

TI er a een 10

HISTORICALCHRONOLOGY ............... 1!

SUMMARY OF ARGUMENT ................. 16

Fs EAE eee eee Pay are ner ee 16

CE cis a kb G heh eehe ieee eek tiene kes 17

SEE hake bl bu eh kG a OeS Oe eee 18

AR Ty er nn a re me « 19

Tt si ce ncadvbavicecéecibeekeens os 20

Point |

Any Novel Inroads On The Availability Of

Injunctive Relicf To Non-Practicing Patent

Owners Under Section 283 Would Offend The

Rule Of Paper Bag And Special Equipment

TT

Contents

A. Affirmance Is Required Under The Rule

Of Paper Bag And Special Equipment

1. The Stare Decisis Doctrine ......

2. Congressional Re-Enactment Of

I a citeueeaaeun hee de

3. Congressional Disagreement With

Misuse Decisions .............:;

B. Injunction Cases Construing Other

Statutes Are Inapposite .............

Point II

Any Novel Inroads On The Availability Of

Injunctive Relief To Non-Practicing Patent

Owners Under Section 283 Could Thwart “The

Progress Of Science And The Useful Arts”

see eons eeseeeeegeseceneoeeseeseeseeseeoenses es 8 ee 6 8

A. Disclosure By The Patentee Is All That_

SE os seeks ep av hkewekse<h

B. The Economics Of Non-Use .........

C. The Prospect Of Repetitive Damages

EL 4 6544. bkS uv eewhne ca

Page

20

20

21

22

23

il

Contents

Point Ill

Any Novel Inroads On The Availability Of

Injunctive Relief To Non-Practicing Patent

Owners Under Section 283 Might Affect The

Treaty Obligations Of The United States ...

A. The Pertinent Treaty Provisions ......

|. The TRIPS Agreement ..........

2. The Paris Convention ...........

B. The Lemley Brief Arguments ........

C. Recent Trade Dipiomacy Developments

. 86°64 2 ee 2 Bee CS 6.66.8 6: Ce 8 8 2.4 6 88 eo ee

Page -

29

iv

TABLE OF CITED AUTHORITIES

Page

Cases

A.C. Auckerman Co. v. R.L. Chades Const. Co.,

960 F.2d 1020 (Fed. Cir. 1992) .............. 9

Amoco Prod. Co. v. Vill. of Gambell, Alaska, 480 U.S.

Se GO 0 0s kine skeen uesebeness Peer ne 23

Bloomer v. McQuewan, 55 U.S. 539 (1852) ...... 13

Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,

GP Weak Ee CEO ove dveenwesssvesseel 15, 16, 25

Columbia Motor Car Co. v. C.A. Duerr & Co.,

184 Fed. 893 (2nd Cir. I911) .... 0... eee eee 13

Continental Paper Bag Co. v. Eastern Paper Bag Co.,

See Wak Gee CHOee. 6h dceenbicneeseveeseuns passim

Crown Die & Tool Co. v. Nye Tool & Mach. Works,

ee Gs SPUD «6. dues Cbeus ase tneeeee 13, 21

Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S.

FRG 0. vu5 064446446 000500008 10, 11, 15, 17, 22

Evans v. Jordan, 8 F. Cas. 872 (C.C.D. Va. 1813),

FG, 38 ee: COP ENED chiiekansseesenee 12

Ex parte Wood, 22 U.S. 603 (1824) ............. 12

Foster v. American Foundry & Mach. Co., 492 F.2d

spay 5 > Bp AR cies. 8

Grant v. Raymond, 31 U.S. 218°(1832) .......... 13

Cited Authorities

Page

Hartford-Empire Co v. United States, 329 U.S. 386

10, 14, 21,

Bowe Preeayuypeve PBT es Fe SRE Eee GE

Illinois Tool Works Inc v. Independent Ink, Inc.,

547 U.S. ___ No. 04-1329 (Mar. 1, 2006)

Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470

nace ei ee chk aac hed ocbege ne eee |

Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass.

ee ee Oo eee ee see eee eee & ee ee ee 8 eo 8 6 «a

MercExchange, L.L.C. v. eBay, Inc., 275 F.Supp.2d

695, 712 (E.D. Va. 2003)

BPereaevreerRrPeaeaReRP ee ae =

Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S.

661 (1944)

Morton Salt Co. v. GS. Suppiger Co., 314 U.S. 488

Pe eee eee eseeeereastenpeseenweeeee eee 8 ee 6.8 4

Murray v. The Schooner Charming Betsy, 6 U.S. 64

Odiorne v. Winkley, 18 F. Cas. 581 (C.C.D. Mass.

Spe eeeeeeeeeseeeeedeceeedecedeeeee@eeeeeee @

Payne v. Tennessee, 501 U.S. 808 (1991)

Pfaff v. Wells Electronics, Inc., 525 U.S. 55 (1998) .

S.C.M. Corp. v. Xerox Corp., 645 F.2d 1195 (2nd Cir.

Ne

tl

14

vi

Cited Authorities

Page

Shepard v. United States, 544 U.S. 13 (2005) ..... 21

Special Equipment Co. v. Coe, 324 U.S. 370 (1945)

jeshenevorernrébnnses PITT STITT TT TTT tT,

Patterson v. McLean Credit Union, 491 U.S. 164

Dt) chsh need kihd adenuehaweurteah wea ens 20

United Shoe Mach Co. v. United States, 258 U.S. 451

Drs calls . shure aun whe bedlee che dul aie 13

United States v. American Bell Tel. Co., 167 U.S. 224

Dt npkchie sl deni end ube dadkan wa aee wi 7, 13, 24

United States v. Loew's, Inc., 371 U.S. 38 (1962)

RRO Sean then Png ee ag Me ee 14, 16, 22

Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982)

EO Ra me py Pr Pe Pe ee re 23

Zenith Radio Corp. v. Hazeltine Research, Inc.,

ee alee dl 15,18

Constitution

ee ss PL Ok cu ce cecnbeeeeu eee 3

Statutes and Administrative Codes

Ss a a aa el re ae er aes 25

et es ED 004446050 b vebecceesbetnes 14, 15,

to

t'

vil

Cited Authorities

Page

ae ee et ED. oo vccbhacddeducsare 14, 15, 22

nD civcuespiadunetddasseeviedeens passim

el er rae 15,17

Rules of Evidence & Procedure

RB SS A eae ae eee. Ree 4

NS a Care ee ema eer 11, 16, 17

I I i a ee Mak ee i ln l

Treaties

Paris Convention, Art. 5A(2), Stockholm Revision

I et ear) See ee Pen ee eS ee 26

Paris Convention for the Protection of Industrial

Property, Sept. 5, 1970, 21 U.S.T. 1583,

Es Sh RAS Ren eae e 14, 19, 26, 27

Agreement on Trade-Related Aspects of Intellectual

Property Rights, Including Trade in Counterfeit

Goods, Dec. 15, 1993, 33 I.L.M. 81 (1994) .... passim

Law Reviews, Journals & Magazines

3 Wittiam C. Rosinson, THe Law or Parents anp

Useruc Inventions § 1082 (1890) ......... — 12

vill

Cited Authorities

Page

Ps ED a cde cbckdccducendsudevcenteues 26

H.C. Wegner, “Injunctive Relief: A Charming Betsy

Boomerang” at 4 and 33-36, Ist Annual

Northwestern Journal of Technology and

Intellectual Property Symposium: IP Litigation in

the 21st Century, Chicago (February 24, 2006)

(available at www.foley.com) ...............-. 7,13

STATEMENT OF INTEREST OF AMICUS CURIAE

This brief amicus curiae is submitted in support of

respondent by the Steven M. Hoffberg (hereinafter “Amicus”),

partner of Milde & Hoffberg, LLP, who is a practicing

intellectual property attorney and inventor’. Amicus handles

cases in the areas of patent, copyright, trademark, trade secret

and other intellectual property law, especially patent prosecution,

licensing and strategic guidance to clients, but also in litigation.

Amicus, as many intellectual property attorneys, assists

businesses in many industries that own, enforce and challenge

patents as well represents individual patent owners. Amicus

has had the opportunity, on occasion, to enter into licensing

discussions on behalf of his clients, seeking to sell or license patents.

In many such cases, the highest bidder, or even only bidder, is

an entity who itself seeks to out-license the patent rights.

On the other hand, it has been Amicus’ experience that

corporations which produce product rarely tender offers for

patent nghts belonging to third parties, and thus willingly permit

patents which are relevant to their business to fall into the hands

of investors or entities which have a business model of licensing

and enforcing patents.

- Amicus submits this brief to inform the Court, as to realities

of the patent system from the perspective of a patent attorney

who both advises clients and who pursues commercialization

and licensing of inventions himself.

1. Pursuant to Sup. Cr. R. 37.6, the amicus and its counsel represent

that they have authored this brief in whole, and that no person or entity

other than the amicus curiae and its counsel have made a monetary

contribution to the preparation or submission of this brief. Petitioners

and respondent have filed blanket consents with the Clerk of the Court

to permit the filing of this and other briefs amicus curiae.

Amicus is named inventor of U.S. Patent Nos. 7,006,881,

6.865.825, 6,850,252. 6,791,472. 6.640.145, 6.429.812. 6,418,424,

6,400,996, 6.252.544, 6,230,501, 6.081.750, 5.920.477. 5.903.454,

5.901.246. 5.875.108, 5,867,386, and 5,774,357.

2

Nowhere is the rational and considered application of

principles of patent law more important to the economy of the

United States than in determining whether and to what extent

alleged equitable defenses should preclude issuance of the post-

trial permanent injunctions which, as this Court has recognized

for almost 200 years, lie at the very heart of the patent system

contemplated by the framers of the Constitution.

In order to properly advise it’s clients, Amicus must be

continuously apprised of the precedents of this Court which interpret

the equitable defenses available to accused infringers or otherwise

relate to the availability of permanent injunctive relief after a patent

has been held infringed, not invalid and not unenforceable.

Likewise, in representing clients before the United States

Patent and Trademark Office, Amicus must be acutely sensitive

to decisions which affect the availability of injunctive relief to

patent owners. The night to sue for a permanent injunction

against infringement represents an important element of the total

value of a patent to its owner — often 100% of that value where

the development either is covered by a patent obtained purely

for “defensive” purposes or represents a potentially valuable

but “blocked” improvement which the innovator is unable to

practice in the absence of a license.’

Additionally, Amicus counsels clients regarding

transactions under which financing for research and

development (“R&D”) is obtained through the transfer of either

patent rights or security interests in such rights. In the hands of

either the inventor or her direct or indirect assignee, the night to

exclude via a permanent injunction always represents a

substantial portion of the economic justification for the

2. For a potential entrant, the injunction threat often provides the

economic justification for a cross-license which enables both parties to

practice the improvement. For a non-user who seeks to market a

significant improvement, the potential for such an injunction is often

the only leverage to guarantee that an entrenched oligopsony will either

be forced to pay a fair price for use of the improvement or forego such

use for the period established by Congress.

3

licensing, mortgage or assignment transaction necessary to

obtain the financing for such R&D. Absent the continued

availability of the right to exclude others via permanent

injunction, R&D financing for novel but “blocked” technology

often could not be obtained — either from within an innovator’s

own corporate structure or from some third party.

Such R&D financing can originate either from an entity

already participating in the industry to which the improvement

relates, an entity which wishes to enter that industry, or an entity

that is willing to provide development financing but has no

intention of commercializing the improvement itself by either

entering the industry or integrating vertically — firms which

petitioner and respondent characterize with some measure of

decorum as non-practicing entities (“NPEs"’), but which most

amici supporting petitioner characterize as “patent trolls”. The

terminology, however, is important primarily for the polarizing

rhetoric it contributes to the debate. One man’s entrepreneur is

often another man’s patent troll, and NPEs unquestionably come

in a variety of flavors.

Some NPEs (like respondent) internally develop the

inventive concepts they own or control, while others merely

function as financial middlemen that purchase assignments,

licenses or mortgages in the improvement developments of

others and plan to recoup their investment by sharing in licensing

royalties or assigning or licensing to others the nght to use those

improvements.’ Both types of NPEs contribute to the “progress

of science and the useful arts” that the framers of the Constitution

intended the patent law to promote.*

3. Some amici supporting petitioners propose that only non-users

who conduct internal R&D should be accorded the benefits of this

Court's decisions in Continental Paper Bag Co. v. Eastern Paper Bag

Co., 210 U.S. 405 (1908) (“Paper Bag’), and Special Equipment Co. v.

Coe, 324 U.S. 370 (1945) (“Special Equipment’). The others apparently

propose that this Court's rule be jettisoned entirely.

4. U.S. Const., Art. 1, § 8, cl. 8 (the Patent Clause”).

4

It is also possible to define NPEs more broadly as a much

larger genus of all firms which own patents but have elected

not to practice the subject matter of some of those patents

themselves.’ Paper Bag and Special Equipment, the seminal

decisions of this Court discussing the obligation to issue injunctions

despite non-use by the patent owner, involved not NPEs in the

narrower sense but firms which were already indusiry factors

but had elected not to practice their improvement inventions.

Amicus respectfully submits that any change in the long-

established rule that non-use does not give rise to an equitable

defense barring injunctive relief, necessarily would generate

both great confusion in the district courts and substantial

economic dislocation.°

If the rule were changed, Amicus, who neither manufactures

product, nor renders services, covered by his patent, would have

to review its own portfolio to determine whether any of its patent

assets were threatened with unenforceability under the new rule.

Moreover, all contracts and licenses relating both to Amicus’

clients patent portfolios and to those patents which had been

licensed in from others necessarily would have to be reviewed

and reevaluated.

5. Under that usage, many of the amici supporting petitioners could

be characterized as NPEs since many have accumulated large portfolios

of patents, some of which they are not currently practicing. As new

technologies develop, however, such unused patents can become

important either for purely “defensive” purposes or to provide leverage

for use in obtaining operating rights in such new technology areas.

6. Petitioners and their supporting amici apparently believe that

the threat of district court injunctions forces settlements that effectively

preclude ultimate vindication before the Federal Circuit. If that is true,

then the appropriate remedy probably lies in procedural changes which

would be far less disruptive than any drastic substantive change to the

well-settled principle that non-use does not give rise to an equitable

defense barring entry of a patent injunction. For example, more liberal

availability of a stay pending appeal under Fev. R. Civ. P. 62(c) in patent

injunction cases might be explored.

5

in many instances, the security interests which had been

designed to guarantee recoupment of R&D financing costs

would prove worthless. Under such circumstances, venture

capital markets would be severely stressed and might well dry

up entirely.

In the course of evaluating some of the alleged problems

of which petitioners and their amici complain, it is possible

that Congress ultimately may conclude that injunctive relief

should be eliminated for some narrow class of patents or even

for some industry segment.’ Amicus respectfully submits that,

for at least three separate reasons, this Court should reject

petitioners’ broader assault on the injunction statute and leave

resolution of their alleged problems to Congress.

POSITION OF AMICUS CURIAE

REGARDING QUESTIONS PRESENTED

The Contentions Of Petitioners And Supporting Amici

After a trial at which they failed to establish any cognizable

equitable or legal defenses, petitioners were adjudicated willful

infringers of one of two valid “business methods” patents

7. As pointed out in the brief amicus curiae of the Franklin Pierce

Law Center professors in support of respondent (“FPLC Br.”), Congress

already has enacted compulsory licensing in certain narrow areas such

as under the Clean Air Act (FPLC Br. at 3-4).

8. At various points, petitioners’ brief on the merits (“Pet. Br.”)

suggests (a) that the business method claims of respondent were “vaguely

defined” (Pet. Br. at 2) or merely “vague” (Pet. Br. at 38); (b) that the

district court found “compelling evidence” of non-infringement

(Pet Br. at 6); (c) that business method claims are associated with a

“heightened possibility of invalidity” (Pet. Br. at 11); (d) that the timing

of the filing of respondent's amended claims might somehow give rise

to a defense of equitable estoppel or prosecution history estoppel

(Pet. Br. at 4-5); and (e) that respondent's conduct at a June 2000 meeting

also might give rise to a defense of equitable estoppel (Pet. Br. at 5-6).

Those alleged defenses, however, were merged into the district court's

judgment and are not before this Court.

6

relating to fixed-price purchase technology. They now seek to

sustain the district court’s refusal to enter a permanent

injunction, which the court below reversed as an abuse of

discretion, on the principal ground that respondent does not

compete directly with them or practice its patents. This failure

to practice, the district court found, somehow altered the balance

of equities to the point where the public interest in “the progress

of science and the useful arts” no longer compelled issuance of

a permanent injunction.

Petitioners clearly imply that this Court should abandon

the long-settled rule of Paper Bag and Special Equipment in

any Case involving business methods patents. Some supporting

amici explicitly endorse that same suggestion. Others proffer a

disparate and sometimes inconsistent catalogue of complaints,

all of which likewise allegedly should compel rejection of the

Paper Bag rule whenever established by the evidence.’

In addition to the class of business methods patents (and a

subcategory of such patents that allegedly could impede First

Amendment free speech by shutting down “blogs”), such

complaints are said to arise from both overly broad claims of

“dubious technical merit” on the one hand and narrow

improvement claims on-the other (neither of which, it is said,

should be deemed sufficient to support an injunction);

infringement determinations predicated upon the presence of

“trifling”, “de minimis” or “trace” amounts of a claimed

chemical (or crystalline form of that chemical); the alleged

widespread prevalence of “inadvertent infringement”, “patent

thickets” which make it difficult and expensive to secure

freedom to operate opinions tfromcounse!); “submarine” patents

which result from “gaming” the continuation practice specified

9. Apparently, amici do not claim that any of these additional

circumstances were established by the evidence presented to the district

court, but rather suggest only that they present additional theoretical

justification for abandonment of the rule of Paper Bag and Special

Equipment.

7

by the PTO’s regulations; “gaming” of standards issued by

SSOs; “holdups” and “highjackings” which can lead to

“windfalls” and “disproportionate settlements”; and the alleged

insufficiency of the new eighteen-month publication rule.’®

The implication of this catalogue of complaints is that Paper

Bag and Special Equipment should be overruled and Section

283 should be interpreted to vest district courts with

discretionary power to deny permanent injunctive relief to a

patentee who is not practicing his invention commercially

whenever the infringement defendant can establish one of these

alleged inequities. Neither petitioners nor their supporting amici,

however, even attempt to provide any rational justification for

addressing those complaints to this Court. Instead of bringing

their complaints to Congress, where a number of proposals

addressing some of the same putative problems already are

pending, petitioners and their supporting amici ask this Court

to alter its prior definitive interpretation of an injunction statute

which has been re-enacted without any substantive change on a

number of separate occasions — most recently in the 1952

codification of the patent law.

10. It is of at least some historical interest that many of these

complaints echo remarkably similar complaints voiced by the telephone

and automobile industries more than a century ago. However, American

Bell purchased the crucial improvement patents that had threatened its

business shortly after this Court's decision in United States v. American

Bell Tel. Co., 167 U.S. 224 (1897) (“Bell Telephone’), and by the third

anniversary of the Paper Bag decision, Henry Ford had succeeded in

overcoming the infamous Selden “submarine” patent without the need

for any change in the injunction statute or any other provision of the

patent law. See H.C. Wegner, “Injunctive Relief: A Charming Betsy

Boomerang” at 4 and 33-36, Ist Annual Northwestern Journal of

Technology and Intellectual Property Symposium: IP Litigation in the

21st Century, Chicago (February 24, 2006) (available at www-foley.com)

(“Wegner Paper’). The amicus understands that a further edited version

of the Wegner Paper is to be published in the Northwestern Journal of

Technology and Intellectual Property.

8

The amicus respectfully submits that this Court should

refuse the invitation to create novel equitable defenses and leave

to Congress the question of whether and to what extent there

should be any alteration to the long-established rule that non-

use does not represent an equitable defense barring entry of a

permanent injunction.

Question 1

Question | should be answered in the negative. The Court

of Appeals for the Federal Circuit did not err in holding that the

district court’s refusal to enter a permanent injunction

represented an abuse of discretion. The district court predicated

its finding that respondent had suffered no irreparable harm

upon its conclusion that respondent “does not practice its

inventions and exists merely to license its patented technology

to others”.'' That conclusion was flatly inconsistent with the

controlling Paper Bag and Special Equipment decisions of this

Court - which the district court failed even to discuss.'*

The “finding of infringement” to which Question | is

addressed always presupposes either (a) parallel findings that

the infringed patent also is not invalid and not unenforceable

by virtue of any available equitable affirmative defenses, or (b)

a waiver by the accused infringer, either explicitly or under the

doctrine of res judicata, of any invalidity or equitable affirmative

defenses either actually raised or which could have been raised

at the infringement trial.

11. MercExchange, L.L.C. v. eBay, Inc., 275 F.Supp.2d 695, 712

(E.D. Va. 2003).

12. In finding that “money damages are an adequate remedy to

compensate” respondent “for any continuing infringement” (id. at 713),

the district court cited Foster v. American Foundry & Mach. Co., 492

F.2d 1317, 1324 (2d Cir. 1975) (“Foster”) — another decision that had

failed to discuss either Paper Bag or Special Equipment

9

Because of the central importance of the right to exclude

under the Constitutional mandate and the controlling case law,

where none of the traditional equitable defenses have been made

out, the discretion of a district court to refuse a permanent

injunction is indeed limited to “exceptional circumstances” -

even where the patentee does not practice the patent. Because

the right to a permanent injunction is crucial to the patent grant,

after all alleged equitable defenses have been disposed of at

trial, usually only circumstances relating to the public health

and safety will prevent entry. of a permanent injunction.'*

The pertinent provision is Section 283 of the patent statute,

35 U.S.C. § 283, which provides:

The several courts having jurisdiction under this title

may grant injunctions in accordance with the

principles of equity to prevent the violation of any right

secured by patent, on such terms as the court deems

reasonable.'*

(Emphasis supplied). The language of the statute covers both

preliminary and permanent injunctions. The “principles of

equity” which the district courts are required to consider include

not merely the separate balancing tests applicable to preliminary

and permanent injunctions,'* respectively, but also the entire

13. However, the Federal Circuit recognizes that both damages

and permanent injunctions will sometimes be denied based upon

equitable considerations unrelated to the public health and safety.

See, e.g., A.C. Auckerman Co. v. R.L. Chades Const. Co., 960 F.2d

1020 (Fed. Cir. 1992) (en banc) (laches and equitable estoppel).

14. The language of this statute has remained virtually the same

since its initial enactment in 1819. The statute was last re-enacted as

part of the 1952 codification of the patent statute.

15. In their brief on the merits, petitioners are thus incorrect in

purporting to explain the language of the statute as limiting “[t}hose

familiar equitable principles” to “irreparable injury, adequacy of the

remedy at law, balancing of the hardships, and the public interest”

(Pet. Br. 2).

.

10

range of equitable defenses, including most prominently the

unclean hands principle and the doctrine of patent misuse.

Question 2

Question 2 likewise should be answered in the negative.

The Court’s Paper Bag and Special Equipment decisions

concern only one aspect of a lengthy and far broader colloquy

between this Court and Congress as to which alleged equitable

defenses will be deemed sufficient to bar permanent injunctive

relief under Section 283 and its predecessor statutes — which

have remained virtually unchanged since 1819. When Congress

disagrees with a decision of this Court which affects the

entitlement of a patentee to a permanent injunction, it can and

will overrule that decision by changing the patent statute.

In fact, Congress did just that in 1952 and again in 1988 when

it concluded that this Court had unduly expanded the misuse

doctrine in two separate respects — as the Court recognized in

Dawson Chemical and reaffirmed just last week in Independent

Ink."°

In sharp contradistinction, with full knowledge of this

Court’s Paper Bag and Special Equipment rulings, Congress

re-enacted Section 283 in 1952 without any substantive

alteration."”

16. Dawson Chemical Co. v. Rohm & Haas Co., 448 U.S.176

(1980) (“Dawson Chemical”); Illinois Tool Works Inc v. Independent

Ink, Inc., 547 U.S. __, No. 04-1329 (Mar. 1, 2006) (“/llinois Tool Works’).

17. Paper Bag itself noted that, with the exception of a single four-

year experiment with a working requirement for alien patentees,

Congress had never modified the non-user patentee’s right to a

permanent injunction, and previously had rejected a number of specific

proposals to make such a change (210 U.S. at 429). In Hartford-Empire

Co v. United States, 329 U.S. 386, 433 (1945) (“Hartford-Empire’’).

this Court noted that, in the intervening 37 years, Congress had rejected

no less than twelve separate proposals to alter the Paper Bagb rule by

imposing a forfeiture or compulsory license for a patentee’s non-use.

(Cont'd)

11

HISTORICAL CHRONOLOGY

The amicus notes that a number of the amicus filings,

including some in support of petitioner, set forth useful

narratives of the historical background for this Court's Paper

Bag and Special Equipment decisions within the broader

perspective of the development since 1819 of the patentee’s

right to a permanent injunction pursuant to the Constitutional

mandate that the nghts of a patentee should be “exclusive”.

In the spirit of SUP. CT. R. 37.1, the amicus will attempt to

avoid repetition of that lengthy history except to the extent

necessary for the purpose of supporting the new and different

arguments of the amicus.

In the following histoncal chronology, therefore, the amicus

will attempt to minimize duplication by making reference where

appropriate to one or more of the following previously filed

briefs (a) the brief of respondent opposing the grant of certiorari

(“Opp.”), (b) the brief amici curiae in support of neither party

of the American Intellectual Property Law Association and

Federal Bar Council (“AIPLA/FBC Br.’), (c) the FPLC brief,

‘d) the brief amicus curiae in support of neither party of the

Bar Association of the District of Columbia (“BADC Br.”); and

the brief of of Qualcomm Incorporated, ef al. in support of

respondent opposing certiorari (“Qualcomm Br.”).

In 1803 this Court held that domestic law should, to the

extent possible, be construed in a fashion consistent with the

treaty obligations of the United States. Murray v. The Schooner

Charming Betsy, 6 U.S. 64 (1803) (“Charming Betsy’).

In 1813, six years before enactment of the first federal

patent injunction statute, Chief Jusuce Marshal! found that the

(Cont'd)

In Dawson Chemical, 448 U.S. at 215 n.21, moreover, the Court noted

both that compulsory licensing again had been proposed but not enacted

in the 1952 codification of the patent laws, and again proposed but

rejected in 1959.

12

“inchoate property right” of a patent “is exclusive”. Evans v.

Jordan, 8 F. Cas. 872, 873 (C.C.D. Va. 1813), aff'd, 13 US.

199 (1815) (Opp. at 15-16).

In 1814 Justice Story addressed the “olocking” situation

and noted that the “orrginal inventor of a machine is exclusively

entitled to a patent for it. If another person invent an

improvement on such machine, he can entitle himself to a patent

for such improvement only, and does not thereby acquire a right

to patent and use the original machine”. Odiorne v. Winkley,

18 F. Cas. 581, 582 (C.C.D. Mass. 1814).

In 1817 Justice Story articulated an early formulation of

the patentee’s bargain with the public, noting that the “exclusive

patent-night” is conferred “as an encouragement and reward for

his ingenuity”. Lowell v. Lewis, 15 F. Cas. 1018, 1020 (C.C.D.

Mass. 1817).

In 1819 Congress enacted the first injunction statute under

the federal patent law. In the preceding years, beginning with

the federal patent act of 1790, injunctive relief had been available

to a patentee in the state courts and often in the federal courts

as well.'®

In 1824 Justice Story again discussed the “exclusive night”

of the patentee in Ex parte Wood, 22 U.S. 603, 608 (1824)

(Opp. at 16; Qualcomm Br. at 8).

In 1832 Chief Justice Marshall announced that to the

“exclusive enjoyment of” the patentee’s right to exclude during

the period fixed by Congress, “the public faith is forever

18. “The acts of Congress, prior to 1819, made no provision

for any suit in equity by the owner of a patent, nor for

his enjoyment of any form of equitable relief.

Nevertheless, the Federal courts, following the

decisions of the lords chancellors, held that equity had

junsdiction over patents for inventions, and could

exercise its ordinary power in behalf of the patentee,

whenever these were needed to give complete effect

to the statue under which the patent had been granted.”

3 Wituiam C. Rosinson, THe Law or Parents AND Userut INVENTIONS

$ 1082.

13

pledged”. Grant v. Raymond, 31 U.S. 218, 242 (1832) (Opp. at

15; Qualcomm Br. at 8).

In 1852 Chief Justice Taney announced in Bloomer v.

McQuewan, 55 U.S. 539, 549 (1852), that the “franchise which

the patent grants, consists altogether in the nght to exclude

everyone from making, using or vending the thing patented,

without the permission of the patentee. This is all that he obtains

by the patent.” (Opp. at 16)

In 1897 this Court, in a passage later quoted in Paper Bag

(210 U.S. 424), rejected the notion that an inventor of a patented

improvement “occupies, as it were, the position of a quasi trustee

for the public; that he is under a sort of moral obligation to see

that the public acquires the nght to the free use of that invention

as soon as is conveniently possible.” Bell Telephone, 167 U.S.

at 250 (FP Br. at 5; Qualcomm Br. at 9).

In 1902 Congress enacted enabling legislation adopting

the provisions of the 1897 Brussels version of the Paris

Convention.

In 1908 this Court decided Paper Bag (Opp. at 3, 16;

AIPLA/FBC Br. at 3,9, 22; FP Br. at 5-6; BADC Br. at7;

Qualcomm Br. passim).

In 1911 Henry Ford successfully freed the automobile

industry from the threat of the Selden patent. Wegner Paper at

3, 35. See also Columbia Motor Car Co. v. C.A. Duerr & Co..,

184 Fed. 893, 896 (2nd Cir. 1911).

In 1922 this Court reiterated that “the franchise secured by

the patent consists only in the night to exclude others from

making, using, or vending the thing patented without the

permission of the patentee”. United Shoe Mach Co. v. United

States, 258 U.S. 451, 463 (1922) (AIPLA/FBC Br. at 9).

In 1923 the Paper Bag rule was again endorsed in Crown

Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 34-35

(1923) (“Crown Die & Tool”) (Opp. at 18; Qualcomm Br, at 9).

—_

14

In 1942 this Court ruled that patent tying represented an

equitable defense to an infringement suit under the misuse

doctrine. Morton Salt Co. v. GS. Suppiger Co., 314 U.S. 488

(1942) (FP Br. at 4).

In 1944 the Court ruled that a patentee who initiated a suit

for contributory infringement was guilty of a per se misuse.

Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661 (1944)

(“Mercoid I’).

In 1945 this Court again explained that the owner of a patent

“is not in the position of a quasi-trustee for the public” and

“has no obligation either to use it or to grant its use to others”. ~

So long as “he discloses the invention in his application so that

it will come into the public domain at the end of the” fixed

“period of exclusive right he has fulfilled the only obligation

imposed by the statute.” Hartford-Empire, 323 U.S. at 432-33

(AIPLA/FBC Br. at 22; Qualcomm Br. at 9).

In 1945 Chief Justice Stone reiterated the conclusion

reached 37 years earlier in Paper Bag that “failure of the patentee

to make use of the patented invention does not affect the validity

of the patent”. Special Equipment, 324 U.S. at 378-79 (FPLC

Br. at 7-8).

in 1952 Congress codified the patent law in a

comprehensive enactment that included both the present form

of Section 283 and Sections 271 (c) and (d) (1) through (3)

which were designed to overrule the result of Mercoid I.

In 1962 the Court ruled that a presumption of market power

for antitrust tying purposes could be presumed from the

existence of a patent or copyright. United States v. Loew's, Inc.,

371 U.S. 38 (1962) (“Loew's”).

In 1967 the Stockholm Revision of the Paris Convention

was promulgated in its current form.

15

In 1969 in an opinion by Justice White the Court confirmed

that the “heart of” the patentee’s “legal monopoly is the right to

invoke the State’s power to prevent others from utilizing his

discovery without his consent’. Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 135 (1969) (“Zenith v. Hazeltine”’)

(Opp. at 18).

In 1974 Chief Justice Burger characterized the patentee’s

bargain with the public as involving “adequate and full

disclosure so that upon expiration” of the period of exclusivity

“the knowledge of the invention enures to the people, who are

thus enabled without restriction to practice it and profit by its

use”. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480-81

(1974) (“Kewanee Oil”) (citation omitted) (Opp. at 2, 14 n.5).

In 1980 the Court (a) recognized that Congress had

legislatively overruled Mercoid J in the 1952 enactment of

Sections 271(c) and 271(d)(1) through (3) of the patent statute,

and (b) again stated that the “essence of a patent grant is the

right to exclude others from profiting by the patented invention”.

Dawson Chemical, 448 U.S. at 176 (Opp. at 18; AIPLA/FBC

Br. at 9; FPLC Br. at 8-9; Qualcomm Br. at 9)

In 1988 Congress enacted Section 271(d)(5) of the patent

statute to legislatively overrule the presumption of Loew's.

In 1989 the Court articulated still another formulation of

the patentee’s bargain with the public, noting that the patent

system “embodies a carefully crafted bargain for encouraging

the creation and disclosure of new, useful, and nonobvious

advances” so that “upon expiration” of the'period of exclusivity

“the knowledge inures to the people, who are thus enabled

without restriction to practice it and profit from its use”. Bonito

Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150-51

(1989) (citation omitted) (“Bonito Boats”) (Opp. at 3; AIPLA/

FBC Br. at 12; FPLC Br. at 2)

16

In 1994 the Agreement on Trade Related Aspects of

Intellectual Property (“TRIPS”) was negotiated as part of the

creation of the World Trade Organization (“WTO”).

In 1998 Justice Stevens articulated yet another formulation

of the patentee’s nights and obligations drawn largely from

Bonito Boats. Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 63

(1998) (“Pfaff”) (AIPLA/FBC Br. at 12; FPLC Br. at 2).

In 2001 the Administration threatened Bayer’s exclusive

manufacturing position on Cipro when it was feared that

additional capacity might be required in the wake of the anthrax

scare (FPLC Br. At 9).

In 2001 the United States challenged Brazilian compulsory

licensing legislation as inconsistent with the requirements for

valid local working requirements under the TRIPS Agreement

(BADC Br. at 10).

In 2006, despite considerable Congressional discussion of

the potential for an H5/N1 avian flu emergency, the

Administration has not yet openly pressed Roche to license

Tamiflu (FPLC Br. at 10).]

In 2006 the Court recognized that the enactment of Section

271(d)(5) by Congress had legislatively overruled Loew’s.

Illinois Tool Works, 547 U.S. at __, Slip Op. at ___ (Mar. |, 2006).

SUMMARY OF ARGUMENT

Rule 37.1

The amicus is mindful of this Court’s directive that a brief

for amicus curiae should be limited to “relevant matter not

already brought to its attention by the parties”. Sup. Cr. R. 37.1.°°

The amicus therefore will endorse but will not repeat certain

arguments previously set forth in other briefs.

19. The amicus has carefully reviewed the briefs of the parties

and amici already on file, and every effort has been made to comply

(Cont'd)

17

In the first place, the amicus adopts and will not repeat in

its legal argument the cogent analyses set forth in three of the

previously filed briefs as to why the district court's refusal to

issue a permanent injunction under Section 283 represented an

abuse of discretion that the Federal Circuit panel properly

reversed (Opp. at 3-5, 10-14; AIPLA/FCB Br. at 8-19; FPLC

‘Br. at I1-14). Additionally, references to other arguments set

forth in previously filed briefs will be made throughout the

Argument.

Point I

In Point I of the Argument, the amicus sets forth several

non-duplicative reasons why, at this late stage, the Court should

leave to Congress the decision as to whether to change the rule

of Paper Bag and Special Equipment or otherwise expand the

scope of the equitable defenses available to an accused infringer

under Section 283.

In Point IA of the Argument, the amicus explains the

significance of (1) the presence of two factors which provide

“special force” for adhering to the rule of Paper Bag and Special

Equipment under the stare decisis doctrine; (2) the

Congressional re-enactment of an unchanged version of the

statute in the 1952 codification despite full knowledge that this

Court’s Special Equipment decision had reaffirmed the Paper

Bag rule only seven years previously; (3) the contemporaneous

decision of Congress to overrule the 1944 Mercoid I case in the

same 1952 enactment,” and the 1988 enactment of Sections

27 1(d)((5) of the patent statute, 35 U.S.C. §§ 271(d)(5);"! and

(Cont'd)

with the spirit of Rule 37.1 by minimizing to the extent possible any

overlap in factual subject matter and argumentation between this brief

and those prior submissions.

20. Dawson Chemical, 448 US. at 614.

21. Illinois Tool Works, 547 U.S. at __,. No. 04-1329, slip op.

at 12-13.

18

numerous legislative proposals to make forfeiture or compulsory

license the consequence of misuse.

In Point IB of the Argument, the amicus notes that citations

to this Court by petitioners and their supporting amici of

decisions setting forth standards for the issuance of injunctions

under other federal statutes are inapposite. Injunction standards

under statutes which do not arise under the Constitutional

mandate of exclusivity are simply irrelevant to Section 283,

which was designed to implement the “exclusive right” of the

patentee which lies at “the heart of his legal monopoly”.”

Point II

In Point [1A of the Argument, the amicus explains why,

contrary to the assertions of petitioners and their supporting

amici, the decisions of this Court supporting the right of a non-

practicing entity patentee to exclude others from the practice of

his claims “for limited times” is fully consistent with the

objectives of the Constitutional mandate to “promote the

progress of science and the useful arts”.

In Point IIB of the Argument, the amicus explains why

retention of the rule of Paper Bag and Special Equipment is

economically important (1) for legitimate “defensive” patenting

purposes; (2) to assure continued investment in R&D financing;

and (3) to facilitate recovery of fair value for the contribution

made to the “progress of science and the useful arts” by

significant improvement patents, particularly those made and

developed by smaller NPE inventors and investors.

In Point IIC of the Argument, the amicus submits that the

efficient administration of justice also favors retention of the

Paper Bag rule because unavailability of the permanent

injunction would only create confusion in the district courts

and the prospect of multiple damages trials.

22. Zenith v. Hazeltine, 395 U.S. at 135.

19

Point IT]

In Point III of the Argument, the amicus comments upon

the assertions of three amici regarding possible constraints on

the interpretation of Section 283 which may arise from the treaty

obligations of the United States under (a) the Paris Convention,”

and (b) the TRIPS Agreement.* The amicus believes that the

Charming Betsy canon presents an independent ground for

barring re-interpretation of Section 283. Professor Lemley’s

amicus brief on behalf of the 52 professors supporting petitioners

(“the Lernley brief’’) dismisses the notion that any problems

with treaty obligations might arise from reversal in this action.

The amicus respectfully disagrees.

As the BADC and FPLC briefs astutely point out, recent

trade dip omacy and bilateral compromises by the Executive

Branch appear motivated by a belief that, even where a foreign

statute imposes a local working requirement, the TRIPS

Agreement may oblige its members to provide for injunctive

relief against patent infringement. A fortiori, in the absence of

a Congressional_enactment limiting the right to an injunction

for non-use in this country, any judicial alteration of the rule of

Paper Bag and Special Equipment likewise might run afoul of

the TRIPS Agreement. It also seems clear that it would be

difficult to justify any such judicial change as “legislative

measures” under Art. 5A(2) of the Paris Convention.

23. Paris Convention for the Protection of Industrial Property,

Sept. 5. 1970, 21 U.S.T. 1583, 828 U.N-T.S. 305.

24. Agreement on Trade-Related Aspects of Intellectual

Property Rights, Including Trade in Counterfeit Goods, Dec. 15, 1993,

33 1.L.M. 31 (1994).

20

ARGUMENT

Point I

Any Novel Inroads On The Availability Of Injunctive

Relief To Non-Practicing Patent Owners Under

Section 283 Would Offend The Rule Of Paper Bag

And Special Equipment

A. Affirmance Is Required Under The Rule Of Paper Bag

And Special Equipment

Under the Patent Clause, the framers of the Constitution

left to Congress the determination of how hest to guarantee the

“exclusive right” of the patentee “for limited times” in order to

“promote the progress of science and the useful arts”! Since at

least 1819 (when the first statute authorizing permanent

injunctive relief to patentees in the federal courts was enacted),

this Court consistently has recognized that the right to a

permanent injunction represents the central element — and

usually the only element — of the exclusive right that a patentee

receives in return for her contribution to “the progress of science

and the useful arts”.

The availability of injunctive relief when equitable defenses

are asserted always must be determined against the background

of the origin of that patent right in the Constitution. Another

background factor is that this Court’s pnor rulings in Paper

Bag and Special Equipment represent a relatively narrow but

important facet of a far broader dialogue regarding the

availability of injunctive relief generally in patent cases.

1. The Stare Decisis Doctrine

In Patterson v. McLean Credit Union, 491 U.S. 164, 172-

73 (1989), this Court said that only “special justification” will

permit departure from the doctrine of stare decisis because the

principle is of such “fundamental importance to the rule of law”.

Additionally, the Court found that the doctrine applies with

21

“special force in the area of statutory interpretation” for a reason

that should control disposition of this case:

in the area of statutory interpretation, . . . unlike in the

context of constitutional interpretation, the legislative

power is implicated and Congress remains free to

alter what we have done.

(Citations omitted) (emphasis supplied). This Court’s

interpretations of the injunction statute in Paper Bag and Special

Equipment unquestionably qualify as “statutory interpretation”

under this rubric.

An additional ground for refusing to depart from the stare

decisis principle in the case of Paper Bag and Special Equipment

can be found in Payne v. Tennessee, 501 U.S. 808, 828 (1991),

where the Court announced that the factors favoring stare decisis

“are at their acme in cases involving property and contract rights,

where reliance interests are involved”.

The patentee’s right to exclude under Section 283 was both

codified by Congress and involves property and contract rights.

See Hartford-Empire, 323 U.S. at 415 (“That a patent is property,

protected against appropriation both by individuals and by

government, has long been settled.”); Crown Die & Tool, 261

U.S. at 40 (“Patent property is the creature of statute law’’).

2. Congressional Re-Enactment Of Section 283

This Court has held that Congressional inaction and the

passage of time also will enhances the applicability of the stare

decisis doctrine. In Shepard v. United States, 544 U.S. 13,

20-21 (2005), the Court said:

In this instance, time has enhanced even the usual

precedential force, nearly 15 years having passed since

Taylor came down, without any action by Congress to

modify the statute as subject to our understanding.

22

A fortiori, since Congress re-enacted virtually the same

injunction statute in 1952, 44 years after Paper Bag and seven

years after Special Equipment, the stare decisis principle

necessarily must mandate affirmance.

What is more, the repeated rejection by Congress of the

various forfeiture and compulsory licensing proposals discussed

in Paper Bag, Hartford-Empire and Dawson Chemical only

adds weight to the conclusion that alteration of the rule should

be left to Congress. Indeed, yet another proposal to make non-

use a bar to injunctive relief was dropped from H.R. 2795 just

last year (see BADC Br. at 8-9).

3. Congressional Disagreement With Misuse Decisions

Congress took no remedial action when this Court refused

to create a novel equitable defense in Paper Bag; it took no

action when that ruling was followed in Special Equipment;

and it has repeatedly and steadfastly refused to enact any

legislation tantamount to creation of that same putative equitable

defense of non-use.

When this Court did create a novel equitable defense in

Mercoid I, however, Congress vitiated that ruling by enacting

Sections 27 1(c) and (d)(1) through (3) as part of the 1952 patent

act codification. When this Court created an evidentiary

presumption having the effect of making an equitable defense

to a patent injunction more widely available in Loew's, Congress

obviated that result by enacting Section 271(d)(5) in 1988.

Congress has repeatedly demonstrated that it is capable of

dealing with decisions of this Court with which it disagrees. Its

failure to deal with the rule of Paper Bag and Special Equipment

for 98 years speaks volumes.

23

B. Injunction Cases Construing Other Statutes Are

Inapposite

Most of the injunction cases cited by petitioners and their

supporting amici relate to federal statutes other than the patent

law.** None of those cases, therefore, involved the patentee’s

bargain with the public or required consideration of the

Constitutional guarantee of exclusivity which the patentee

receives in return for the disclosure of his invention.

By way of example, the case other than Paper Bag most

cited by petitioners is Weinberger v. Romero-Barcelo, 456 U.S.

305 (1982) (“Romero-Barcelo”). Another case frequently cited

by petitioners and their supporting amici is Amoco Prod. Co. v.

Vill. of Gambell, Alaska, 480 U.S. 531 (1987) (“Amoco”).

Romero-Barcelo involved injunctive relief under the Federal

Water Po lution Control Act (““FWPCA”) and Amoco involved

injunctions to prevent violations of the Alaska National Interests

Lands Conservation Act (“ANILCA”’) (Pet. Br. 19). Manifestly,

those statutes were not mandated by the Constitution and

decisions construing them have nothing whatsoever to do with

the injunctive relief necessary to preserve the “exclusive right”

of the patentee under the Patent Clause to which “the public

faith is forever pledged”.

25. Foster is the only patent injunction case cited prominently by

petitioners and their supporting amici. It was decided eight years before

the Federal Circuit was established and, as already noted. failed to cite

either Paper Bag or Special Equipment.

24

Point II

Any Novel Inroads On The Availability Of Injunctive

Relief To Non-Practicing Patent Owners Under Section

283 Could Thwart “The Progress Of Science

And The Useful Arts”

A. Disclosure By The Patentee Is All That Is Required

Contrary to the assertions of petitioners and some of their

supporting amici,” this Court has repeatedly concluded that the

right of a non-practicing entity patentee to exclude others from

the practice of his claims “for limited times” is fully consistent

with the Constitutional objective of promoting “the progress of

science and the useful arts”.

In Bell Telephone, the Court ruled definitively that the

patentee is not in “the position of a quasi trustee for the public”

and is under no “moral obligation” to make his invention

available “as soon as is conveniently possible”. 167 U.S. at

250. This language was explicitly endorsed in the Paper Bag

ruling itself. 210 U.S. at 424. In Hartford-Empire, the Court

paraphrased the Bell Telephone \language and announced that

the benefit to the public arises principally “at the end of” the

“period of exclusive rights”. 323 U.S. at 432.

The inventor’s contribution to the “progress of science and

the useful arts” is now disclosed to the public either upon

issuance of the patent or eighteen months after filing, whichever

occurs first. Members of the public are thereupon free to engage

in non-commercial experimentation regarding that disclosure

26. Perhaps the most extreme example of this view is the argument

that commercialization by a patentee is required because the word

“progress” in the Patent Clause of the Constitution must be construed

to mean “distribution”. See the amicus brief of Professor Malla Pollack

and other legal scholars in support of petitioners (“Pollack Br.”). Thus,

amici argue that the “Constitution gives Congress the power to enact

only such patent statutes as promote the distributionof useful

technology” (Pollack Br. at 4) (emphasis supplied).

25

and to devise and file patent applications regarding

improvements thereto, but are not free to practice the patent

without the permission of the patentee prior to the expiration of

the term established by Congress.

These basic principles have been reinforced by the Court’s

subsequent decisions in Kewanee Oil (416 U.S. at 480-81),

Bonito Boats (489 U.S. at 150-51) and Pfaff (S25 U.S. at 63).

B. The Economics Of Non-Use

As the foregoing analysis demonstrates, non-use by a

patentee during the term of his exclusivity is presumptively

legitimate under the Patent Clause and the patent statute. There

are, moreover, a number of economic justifications for the

decision by a NPE not to commercialize.

In Paper Bag itself, the Court discussed possible reasons

for why the patentee had “locked up” its invention (210 U.S. at

427), and found that capital requirements for replacement of

older machines could “make more money” (id. at 428). The

patentee’s purpose in Special Equipment was to prevent

appropriation of the value of another invention by securing a

patent on a less economic alternative.

The dual role of “cefensive™ patenting already has been

explained, as has the need to encourage the continued supply

of the capital to finance R&D. Indeed, several federal courts

have recognized the fact that the one purpose of the assignment

statute, 35 U.S.C. § 261, is to ensure that capital is available to

inventors who are unable to finance R&D internally. See, e.g.,

S.C.M. Corp. v. Xerox Corp., 645 F.2d 1195 (2nd Cir. 1981).

As a practical matter, moreover, barriers to entry will often

prevent a relatively small firm that is active in an unintegrated

segment of a market or on the fringes of a large industry from

direct commercialization of an improvement. By the same token,

marketing of that improvement to the existing members of the

industry often can be hampered by the economic disparity

26

between the parties to the negotiation. Oligopsony conditions

in an industry sometimes can exacerbate the problem,

particularly where an SSO or patent pool is operating in an

industry.

In short, economic analysis also militates against any

departure from the rule of PaperBag and Special Eq::inment.

C. The Prospect Of Repetitive Damages Determinations

The efficient administration of justice also favors retention

of the Paper Bag rule, since unavailability of the permanent

injunction would only create confusion in the district courts

and the prospect of multiple damages trials. The amicus endorses

and will not repeat the cogent analysis of the issue by the FPLC

professors (FPLC brief at 10).

Point III

Any Novel Inroads On The Availability Of Injunctive

Relief To Non-Practicing Patent Owners Under Section

283 Might Affect The Treaty Obligations Of

The United States

The amicus respectfully submits that certain constraints on

the reinterpretation of Section 283 by this Court may arise from

the treaty obligations of the United States under (a) the TRIPS

Agreement,” and (b) the Paris Convention.” If this Court should

decide that the rule of Paper Bag should be changed, it would

then have to determine whether such a change would be

consistent with the Charming Betsy canon.

A. The Pertinent Treaty Provisions

1. The TRIPS Agreement

Article 28 of the TRIPS Agreement, of which the United

States is a member, requires that the patent system of each

27. TRIPS, Art. 28.

28. Paris Convention, Art. SA(2), Stockholm Revision (1967).

27

member state provide for “exclusive nghts”. Articles 30 and 31

provide for “limited exceptions” to those exclusive nights.

Article 4! requires the availability of enforcement procedures.

Article 44 mandates the availability of injunctions for all

situations other than (a) where the infringing acquisition was

made prior to actual or imputed knowledge of the rights

infringed (Article 44.1), or (b) where injunctive remedies in

particular cases are “inconsistent with a Member's law” (Article

44.2).

2. The Paris Convention

Article SA(2) of the Paris Convention, to which the United

States is also a party, provides that the grant of compulsory

licenses can only be authorized by “legislative measures”.

B. The Lemley Brief Arguments

The Lemley brief argues that the “Member’s law” exception

of Article 44.2 of the TRIPS Agreement should be read to

authorize a case-by-case consideration of when the right to an

injunction can be denied (Lemley Br. at 10-11). The principal

problem with this approach is that it ignores Article SA(2) of

the Paris Convention. Under that provision, “legislative

measures” would be required to change the rule of Paper Bag

and Special Equipment. In the absence of an act of Congress,

there can be no assurance that the result sought by petitioners

would comply with the treaty obligations of the United States.

The Lemley brief also suggests that it “would be

unreasonable to interpret a 1952 statute in a way contrary to its

terms on the theory that it must be read as consistent with a

treaty not adopted unti! four decades later” (Lemley Br. at 11).

29. Nor, of course, does the amicus agree that Paper Bag and

Special Ecuipment are “contrary to” the “terms” of Section 283.

28

Yet that is exactly what the Charming Betsy canon requires.”

C. Recent Trade Diplomacy Developments

The amicus will not repeat the BADC’s useful discussion

of the significance of the Executive Branch’s challenge to the

2001 Brazilian compulsory licensing legislation as inconsistent

with the requirements of valid local working requirements under

the TRIPS Agreement (BADC Br. at 10).

The amicus also will not repeat the discussion treatment in

the FPLC brief of the Administration’s activities in respect of

Cipro in 2001 and Tamiflu more recently (FPLC Br. at 9-10).

The recent bilateral trade compromises of the Executive

Branch and its apparent reluctance to interfere with patent

exclusivity even in areas that concern the public health and safety

seem motivated by a belief that, in the absence of a local statute

imposing a working requirement, the TRIPS Agreement obliges

its members to provide for injunctive relief against patent

infringement. In the absence of any Congressional enactment

limiting the right to an injunction for non-use, the Court should

decline to alter the rule of Paper Bag and Special Equipment

29

for that reason as well.

CONCLUSION

If the balance between the objectives formulated by the

framers of the Constitution should become skewed either in

particular industries or with respect to particular categories of

patents, any necessary changes in the statutory scheme should

be effectuated only after careful Congressional deliberations.

This Court should not attempt to anticipate any such

Congressional changes and the amicus respectfully submits that

the Court's role should be limited to reviewing any such changes

that Congress may enact for compliance with the Constitutional

mandate. The judgment of the Federal] Circuit should be

affirmed.

Respectfully submitted,

Rosert J. RANDO

Counsel of Record

THe RANbDO Law Firm PC

4940 Merrick Road, Suite 350

Massapequa Park, NY 11762

(516) 799-9800

STEVEN M. HoFFrBeRG

Mi.pe & Horrserc LLP

10 Bank Street, Suite 460

White Plains, NY 10606

(914) 949-3100

Counsel for Amicus Curiae