Amicus Curiae Brief — Ferring B.V. v. Meijer, Inc.

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Suofeme Court, U.S

1) ED

No: 09-1175 APR 29 2010

IN THE OFFICE OF THE CLERK

Supreme Court of the United States

K’ERRING B.V., FERRING PHARMACEUTICALS, INC.

AND AVENTIS PHARMACEUTICALS, INC.,

Petitioners,

Vv.

MEIJER, INC., MEIJER DISTRIBUTION, INC., ROCHESTER

DRUG CO-OPERATIVE, INC. AND LOUISIANA WHOLESALE

DRUG Co., INC.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

BRIEF OF THE BIOTECHNOLOGY INDUSTRY

ORGANIZATION AND

THE PHARMACEUTICAL RESEARCH AND

MANUFACTURERS OF AMERICA

AS AMICI CURIAE IN SUPPORT OF

PETITIONERS

HANS SAUER, PH.D. CARTER G. PHILLIPS*

BIOTECHNOLOGY INDUSTRY JEFFREY P. KUSHAN

ORGANIZATION PETER S. CHOI

1201 Maryland Ave.,S.W. MATTHEW D. KRUEGER

Suite 900 SIDLEY AUSTIN LLP

Washington, D.C. 20024 1501 K Street, N.W.

(202) 962-6695 Washington, D.C. 20005

(202) 736-8000

cphillips@sidley.com

Counsel for Amici Curiae

April 29, 2010 * Counsel of Record

[Additional Counsel Listed on Inside Cover]

WiLSON-EPES PRINTING CO., INC. — (202) 789-0096 — WASHINGTON, D.C. 20002

DAVID FE. KORN

PHARMACEUTICAL

RESEARCH AND

MANUFACTURERS OF

AMERICA

950 F Street, N.W.

Washington, D.C. 20004

(202) 835-3400

TABLE OF CONTENTS

TABLE OF AUTHORITIES

LIVE meek OF ABEICE CCUREAZL...........0100.0.05-000..

REASONS FOR GRANTING THE PETITION...

ARGUMENT

I. THE DECISION BELOW DEFINES

FEDERAL CIRCUIT JURISDICTION IN

CONFLICT WITH THIS COURT'S PRE-

CEDENTS AND THE FEDERAL CIR-

. THE DECISION BELOW UNDERMINES

MUCH-NEEDED STABILITY AND PRE-

DICTABILITY IN PATENT LAW

CONCLUSION

TABLE OF AUTHORITIES

CASES Page

Burlington Indus., Inc. v. Dayco Corp., 849

F.2d 1418 (Fed. Cir. 1988)

Christianson v. Colt Indus. Operating

Corp., 486 U.S. 800 (1988) passim

City of Chi. v. Intl Coll. of Surgeons, 522

U.S. 156 (1997)

Crittkon Inc. v. Becton Dickinson Vascular

Access, Inc., 120 F.3d 1253 (Fed. Cir.

Davis v. Brouse McDowell, L.P.A., 596 F.3d

1355 (Fed. Cir. 2010)

Digital Equip. Corp. v. Diamond, 653 F.2d

701 (ist Cir. 1981)

Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337

(Fed. Cir. 2007)

Exergen Corp. v. Wal-Mart Stores, Inc., 575

F.3d 1312 (Fed. Cir. 2009)

Ferguson Beauregard/Logic Controls, Div.

of Dover Res., Inc. v. Mega Sys., LLC, 350

F.3d 1327 (Fed. Cir. 2003)

Franchise Tax Bd. v. Constr. Laborers

Vacation Trust, 463 U.S. 1 (1983)

Holmes Group, Inc. v. Vornado Air

Circulation Sys., Inc., 535 U.S. 826

(2002)

Intl Tel. & Tel. Corp. v. Raychem Corp..,

538 F.2d 453 (1st Cir. 1976)

Keene Corp. v. United States, 508 U.S. 200

(1993) |

Kingsdown Med. Consultants, Ltd. v.

Hollister, Inc., 863 F.2d 867 (Fed. Cir.

1988)

MedImmune, Inc. v. Genentech, Inc.,

U.S. 118 (2007)

ill

TABLE OF AUTHORITIES—continued

Page

Therasense, Inc. v. Becton, Dickinson &

Co., No. 2008-1511, 2010 WL 1655391

(Fed. Cir. Apr. 26, 2010)

True Temper Corp. v. CF&I Steel Corp.,

601 F.2d 495 (10th Cir. 1979)

Star Scientific Inc. v. R.J. Reynolds

Tobacco Co., 537 F.3d 1357 (Fed. Cir.

2008)

Unitherm Food Sys., Inc. v. Swift-Eckrich,

Inc., 375 F.3d 1341 (Fed. Cir. 2004), rev'd

on other grounds, 546 U.S. 394 (2006)

Walker Process Equip., Inc. v. Food Mach.

& Chem. Corp., 382 U.S. 172 (1965)

STATUTES AND REGULATION

28 U.S.C. § 1295(a)

37 C.F.R. § 1.56

LEGISLATIVE HISTORY

H.R. Rep. No. 97-312 (1981)

SCHOLARLY AUTHORITIES

Chisum, Vhe Allocation of Jurisdiction

Between State and Federal Courts in

Patent Litigation, 46 Wash. L. Rev. 633

(1971)

DiMasi & Grabowski, The Cost of Buto-

pharmaceutical R&D: Is Biotech Differ-

ent?, 28 Managerial &Decision Econ. 469

(2007)

TABLE OF AUTHORITIES—continued

Page

Giaccotto et al., Drug Prices and Research

and Development Investment Behavior in

the Pharmaceutical Industry, 48 J.L. &

Econ. 195 (2005)

Lichtenberg, The Impact of New Drug

Launches on Longevity: Evidence Krom

Longitudinal Deasease-Level Data From

52 Countries, 1982-2001, 5 Intl J. of

Health Care Fin. & Econ. 47 (2005)

Vernon et al., Drug development costs when

financial risk is measured using the

Fama-French three-factor model, Health

Econ. (Aug. 2009), http://dx.doi.org/10.

1002/hec. 1538

15A Wright et al., Federal Practice and

Procedure (2d ed. 1992)

OTHER AUTHORITY

PhRMA, Pharmaceutical Industry Profile

2010 (2010), available at http://www.

phrma.org/files/attachments/Profile_2010

My a

INTEREST OF AMICI CURIAE'

1. The Bnotechnology Industry Organization

(“BIO”) is a trade association representing over 1,100

companies, academic institutions, and biotechnology

centers. BIO members are involved in research and

development in healthcare, agricultural, environ-

mental, and industrial products. The biotechnology

industry currently has more than 370 products in

clinical trials for treating more than 200 diseases.

The vast majority of BIO members are small

companies that have not yet brought a product to

market or attained profitability.

The biotechnology industry is dependent on

predictable and effective patent protection for the

development of new technologies. Patents serve as

the principal asset on which investors (such as

venture capitalists) base decisions to invest in early-

stage companies and fund research and development

activities that will eventually bring new products to

market. Predictability and transparency in the

procurement and enforcement of patent rights

provides the commercial certainty that is essential to

support innovation in the biotechnology industry.

BIO therefore wishes to promote the adoption and

1 Pursuant to Supreme Court Rule 37.6, amici curiae state

that no counsel for any party authored this brief in whole or in

part and that no entity or person, aside from amici curtae, their

members, and their counsel, made any monetary contribution

towards the preparation and submission of this brief. Petitioner

Aventis Pharmaceuticals, Inc. is a member of both amici curiae,

but has not authored the brief in whole or in part, nor

contributed any money toward the briefs preparation and

submission. Pursuant to Supreme Court Rule 37.2(a), amici

curtae certify that counsel of record for both parties received

timely notice of amici curiae’s intent to file this brief and have

consented to its filing in letters on file with the Clerk’s office.

application of standards for patent eligibility and

enforcement that will ensure appropriate and

consistent protection for the full range of inventions

in the biotechnology sector.

2. The Pharmaceutical Research and Manufac-

turers of America (“PhRMA”) is a_ voluntary,

nonprofit association that represents the country’s

leading research-based pharmaceutical and biotech-

nology companies. PhRMA’s members are dedicated

to discovering medicines that enable patients to lead

longer, healthier, and more productive lives. New

medicines account for 40 percent of the lifespan

increase between 1986 and 2000, see Lichtenberg,

The Impact of New Drug Launches on Longevity:

Evidence From Longitudinal, Disease-Level Data

From 52 Countries, 1982-2001, 5 Intl J. of Health

Care Fin. & Econ. 47, 68 (2005), and member

companies are the source of a majority of all new

medicines that have been discovered and marketed.

In the last decade, PhRMA’s members have invested

more than $400 billion to develop new medicines,

including an estimated $45.8 billion last year alone.

See PhRMA, Pharmaceutical Industry Profile 2010,

at 26 (2010) (“Industry Profile’), available at

http://www.phrma.org/files/attachments/Profile 2010

_FINAL. pdf.

The ability of the Federal Circuit to provide

uniformity in the patent laws, an issue raised in this

case, is significant to PhRMA members because of the

critical role intellectual property plays in incentiviz-

ing pharmaceutical research and development. A

2007 study estimated that the average research and

development costs of bringing a new drug to market

was approximately $1.3 billion in 2005, including the

costs for unsuccessful drugs. See DiMasi &

Grabowski, The Cost of Biopharmaceutical R&D: Is

Biotech Different?, 28 Managerial & Decision Econ.

469, 477 (2007). Another study notes that it takes

approximately sixteen years to bring a new chemical

entity to market and that “only a fraction of drugs in

the R&D ‘pipeline’ ever succeed in making it to

market.” See Gnuaccotto et al., Drug Prices and

Research and Development Investment Behavior in

the Pharmaceutical Industry, 48 J.L. & Econ. 195,

196 & n.2 (2005). The patent laws reflect Congress’s

determination that the protections and corresponding

incentives patents provide are essential to encourag-

ing such costly, time-consuming, and _ high-risk

research and development. With the creation of the

Federal Circuit in 1982, Congress further recognized

that uniformity and predictability in the patent laws

is essential to meet these ends.

REASONS FOR GRANTING THE PETITION

The Second Circuit’s decision strikes a serious blow

to the uniformity and predictability of patent law

that Congress sought to establish by giving the

Federal Circuit exclusive jurisdiction over the vast

majority of cases involving patent issues. As

Congress understood well, stability in patent law is

necessary to spur innovation by firms like those

represented by amici curtae.

Consistent with Congress’s intent, this Court made

clear in Christianson v. Colt Industries Operating

Corp., 486 U.S. 800 (1988), that the Federal Circuit

should hear virtually all appeals involving patent

issues. The Court observed that the Federal Circuit

has exclusive jurisdiction not only when “federal

patent law creates the cause of action,” but also

whenever “the plaintiffs right to relief necessarily

depends on resolution of a substantial question of

federal patent law.” Jd. at 809. Exclusive Federal

Circuit jurisdiction over patent issues is defeated only

if the claim raising a patent issue could also be

supported by a non-patent theory sufficient to achieve

the “overall success of [the] claim.” /d. at 810.

Despite that instruction, the Second Circuit took

jurisdiction here over an antitrust claim that raises

substantial patent law issues. The court of appeals

based this jurisdiction on the ground that

respondents’ claim included a non-patent theory,

even though that theory concerned just a portion of

the wrongful conduct for which relief was sought.

The decision below conflicts both with Christianson

and with decisions of the Federal Circuit and Seventh

Circuit. Those conflicts, which are fully explained in

the petition, are reason enough for this Court to

intervene.

This Court’s review is especially needed, however,

because the potential for litigants to manipulate the

Second Circuit’s test is obvious and endless. Claims

that raise substantial questions of patent law can be

crafted to avoid Federal Circuit review through

formalistic choices in pleading. As a result, the

uniformity of patent law that Congress intended is

placed in jeopardy. Since its creation in 1982, the

Federal Circuit has adapted many areas of patent

law, such as inequitable conduct, to changing

practices and technology. In contrast, the patent law

of the regional circuits is largely stuck in the late-

1970s. Yet, those regional decisions remain good law,

and, to the extent they vary from the Federal

Circuit’s decisions (which they not infrequently do),

many litigants will be motivated to craft their

pleadings to obtain review by regional circuits rather

than the Federal Circuit.

This increased uncertainty and opportunity for

forum shopping will undoubtedly dampen innovation.

Especially in industries like biotechnology and

pharmaceuticals, which require enormous invest-

ments in research and development, stability in the

rules of decision is critical. Before such investments

are made, innovators must weigh the potential costs

and benefits. Doubts about the law that will apply to

patent applications and existing patents will create

uncertainty regarding the potential patent benefits of

their efforts. Consequently, firms will invest fewer

resources, and fewer advancements will be made.

This dynamic led Congress to create the Federal

Circuit. Now this Court’s action is required to restore

Congress’s scheme.

ARGUMENT

I. THE DECISION BELOW DEFINES FEDER-

AL CIRCUIT JURISDICTION IN CONFLICT

WITH THIS COURT'S PRECEDENTS AND

THE FEDERAL CIRCUIT.

The Second Circuit asserted jurisdiction over this

case by applying a standard that cannot be squared

with this Court’s case law or the decisions of other

circuits, including the Federal Circuit—Congress’s

preferred arbiter of patent issues. For the sake of

much-needed stability and to vindicate the Federal

Circuit’s special role in shaping patent law, this

Court should clarify the scope of the Federal Circuit’s

exclusive jurisdiction.

1. Although plaintiffs’ cause of action in this case

arises under the antitrust laws, substantial issues of

patent law unquestionably dominate the basis for the

relief set forth in the complaint. Plaintiffs asserted a

single count of monopolization based on the following

alleged misconduct: (1) the fraudulent procurement

of U.S. Patent No. 5,407,398 (“the ’398 patent”); (2)

the improper listing of the 398 patent in the U.S.

Food and Drug Administration (FDA) publication

known as the “Orange Book”; (3) the prosecution of

sham patent infringement litigation against

competitors to forestall FDA approval of generic drug

products claimed to be covered by the ’398 patent;

and (4) the filing of a sham citizen petition to further

delay final FDA approval of the generic drug

products. Pet. App. 59a-60a. Indeed, plaintiffs

characterized their claim as based on an

“anticompetitive scheme in which the ’398 patent is

the linchpin.” Id. at 15a. The district court

dismissed the complaint for failure to plead facts

sufficient to state a claim of fraud, and lack of

standing to challenge the ’398 patent under the

patent laws and antitrust laws.

Plaintiffs appealed to the Second Circuit. Even

though the case implicates substantial and important

patent issues, the Second Circuit held that it, rather

than the Federal Circuit, had jurisdiction over the

appeal. The court of appeals proceeded to hold that

plaintiffs had standing and that the complaint

adequately pled fraud, and therefore remanded the

case. Pet. App. 8a, 16a, 25a-26a, 33a. The Second

Circuit’s jurisdictional holding forms the basis of the

instant petition.

That holding turned on the fact that plaintiffs’

antitrust claim, based primarily on patent issues,

also included a non-patent “theory,” 1.e., the allegedly

sham citizen petition filing, which the court below

found was “an issue independent of patent law.” Pet.

App. l2Za. Thus, even though the court of appeals

recognized that plaintiffs’ three other theories “turn

on substantial questions of patent law,” and that

“appellate jurisdiction would lie exclusively with the

Federal Circuit if the plaintiffs’ success solely

depended on one or more of these theories,” the court

asserted jurisdiction because one of plaintiffs’

theories could “support the claim without raising

substantial questions of patent law.” Jd. at 1la, 15a-

16a. The court reached this decision despite the fact

that the non-patent theory could not provide

plaintiffs with all the relief sought, given that the

citizen-petition allegation would not justify awarding

damages for the time periods covered by the other

allegations. The Second Circuit dismissed this

critical factor—v.e., whether the non-patent theory

could achieve the claim’s' overall success—as

“lack[ing] jurisdictional significance.” Id. at 15a.

2. The decision below conflicts with this Court’s

construction of the Federal Circuit’s jurisdictional

statute. Congress specified that whenever a district

court’s jurisdiction “was based, in whole or in part,”

on 28 U.S.C. § 1338(a), any appeal must be taken in

the Federal Circuit. 28 U.S.C. § 1295(a). Section

1338(a), in turn, gives. district courts broad

jurisdiction over “any civil action arising under any

Act of Congress relating to patents.” Jd. § 1338(a).

Taken together, these statutes reflect Congress’s

desire to empower the Federal Circuit as _ the

authority over patent law, subject only to this Court’s

inherently limited supervision.

In Christianson v. Colt Industries Operating Corp.,

486 U.S. 800 (1988), this Court construed § 1338(a) to

establish the governing test of Federal Circuit

jurisdiction. In pertinent part, the Court explained

that § 1338(a) includes cases in which “a well-pleaded

complaint establishes” that “the plaintiffs right to

relief necessarily depends on _ resolution of a

substantial question of federal patent law, in that

patent law is a necessary element of one of the well-

pleaded claims.” Jd. at 809. Thus, if any one of a

plaintiffs claims pleaded in the complaint includes

even a single clement that involves patent law, the

Federal Circuit has jurisdiction.

The Christianson Court acknowledged that a “well-

pleaded claim” could involve alternative theories,

under any one of which the plaintiff would be

“entitled to the relief [the claim] seeks.” Jd. at 810.

In that situation, Federal Circuit jurisdiction does not

lie if one of the theories does not implicate patent

law. Jd. After all, if a theory allows the plaintiff to

obtain the relief sought by the claim without

resolution of a patent issue, there might be no patent

issue for the Federal Circuit to review and thus no

comparative advantage in having the appeal handled

by that court.

To be sure, the distinction between a “claim” and

“theory” can be difficult to draw. As shown below, the

distinction has engendered conflict among _ the

circuits, and the Second Circuit reached the wrong

decision here by mistaking a theory for a claim. See

infra 9-11.

Several guiding principles arise out of

Christianson. First, the Christianson Court explain-

ed that a non-patent theory defeats Federal Circuit

jurisdiction only if it is a sufficient basis for “the

overall success of [the] claim.” 486 U.S. at 810

(emphasis added). In this sense, if the operative facts

underlying the claim implicate patent law issues, the

non-patent theory does not defeat Federal Circuit

jurisdiction if it arises from only a portion of those

facts, since such a theory could not determine the

claim’s “‘overall success.” Jd. Similarly, Federal

Circuit jurisdiction remains if the non-patent theory

cannot support all the “relief [the claim] seeks.” Id.

Applying that standard, the Christianson Court

held that the Federal Circuit did not have exclusive

jurisdiction in that particular case because the

plaintiffs could have supported the entirety of their

antitrust claim with several theories having nothing

to do with patent issues. /d. at 813. Tellingly, these

were different legal theories pertaining to the same

operative facts, as opposed to different factual

scenarios combined under a single count. E.g., id.

(claim alleged that defendant’s agreement with other

businesses to boycott plaintiffs’ business was

wrongful both under ae patent theory = (that

defendant’s patent was invalid) and under a theory

involving no patent issue (that defendant had

authorized plaintiffs’ use of technology)). This

implies that Federal Circuit jurisdiction would

remain if the non-patent “theory” were, in reality, a

separate claim, based on different operative facts. Cf.

Keene Corp. v. United States, 508 U.S. 200, 212

(1993) (construing the term “claim” in 28 U.S.C.

§ 1500 with relation to “operative facts” and “relief

requested”).

Second, Christianson instructed courts to guard

against a plaintiffs attempt to manipulate jurisdict-

ion through artful pleading. 486 U.S. at 809 n.3 (“a

plaintiff may not defeat § 1338(a) jurisdiction by

omitting to plead necessary federal patent-law

questions’). This is consistent with this Court’s

broader jurisdiction case law, which has favored rules

that apply to a pleading’s substance, rather than its

form. For example, in determining whether a case

filed in state court may be removed, the federal court

must look beyond plaintiffs styling of his claims and

ask whether a “well-pleaded” complaint would

provide a basis for federal jurisdiction. E.g., City of

Chi. v. Intl Coll. of Surgeons, 522 U.S. 156, 164

(1997); Franchise Tax Bd. v. Constr. Laborers

Vacation Trust, 463 U.S. 1, 22 (1983). Thus, while a

plaintiff may be “master of the complaint,” by

choosing which substantive legal claims to assert, a

plaintiff cannot avoid the jurisdiction that governs

those claims by crafty pleading.

The Second Circuit’s decision plainly disregarded

these principles. The “theory” on which the Second

Circuit based its jurisdiction was an independent

factual occurrence joined with other discrete factual

events under a single antitrust count. Pet. App. lla-

16a. As noted, the “theory” alleged that petitioners

unlawfully extended a monopoly by filing a sham

citizen petition to delay FDA approval of a generic

drug in 2004. Td. at 63a, 93a. But, that is not a

theory capable of sustaining the claim’s “overall

success,” as Christianson requires. 486 U.S. at 810.

Respondents’ claim sought aé_eruling declaring

defendants’ enforcement of the patent unlawful and

treble damages for the period beginning in 2001. Pet.

App. 63a, 93a. However, the non-patent “theory”

regarding the citizen petition would not entitle

respondents to relief against enforcement of the

patents or for damages related to the period before

2004. Consequently, that theory could not entitle

plaintiffs to the “relief [the claim] seeks,” and did not

provide a non-patent basis for the claim’s “overall

success.” 486 U.S. at 810.

This mismatch between the “theory” undergirding

the Second Circuit’s putative jurisdiction and the

relief the overall claim seeks reveals that, in fact,

respondents pleaded multiple antitrust claims, and

simply styled them as multiple “theories” in a single

antitrust count. Under Christianson, as well as this

Court’s other jurisdiction cases, the Second Circuit

should have looked beyond the complaint’s labels and

examined its substance. See id. at 809 n.3. Viewed

in the proper light, it is clear that respondents could

only obtain all the “relief [the claim] seeks” if the

district court addressed the patent law issues raised

in their antitrust claims, since those concerned

conduct beginning in 2001 and encompassed far more

than the citizen petition. Those patent-law issues,

which included a Walker Process antitrust claim, are

the type that Congress meant to fall within the

Federal Circuit’s review.

3. Just as problematic, the Second Circuit’s

jurisdictional test is utterly incompatible with the

Federal Circuit’s test for its own jurisdiction. The

conflict flows primarily from the Second Circuit’s

misperception of the distinction between “claims” and

“theories.”

Unlike the Second Circuit, the Federal Circuit has

drawn the distinction correctly. Thus, in Davis v.

Brouse McDowell, L.P.A., 596 F.3d 1355 (Fed. Cir.

2010), the plaintiff pleaded a single count of

malpractice against ner former patent attorney, but

alleged two distinct factual events that provided

bases for recovery. First, the plaintiff alleged that

the attorney neglected to file international patent

applications in a timely fashion. Id. at 1357-58.

Second, the plaintiff alleged that the attorney was

negligent in his’ preparation of U.S. _ patent

applications. Jd. at 1358-59. The plaintiff argued

that the Federal Circuit lacked jurisdiction on the

ground that the two events constituted alternative

“theories,” one of which (i.e., the failure to file the

international application) did not implicate U.S.

patent law. /d. at 1360. The Federal Circuit rejected

the argument, concluding that the complaint

“presents multiple claims.” Id. (emphasis added).

The Federal Circuit explained that a “claim’ is

broadly defined as the ‘aggregate of operative facts

giving rise to a right enforceable by a court.” Id.

(quoting Black’s Law Dictionary 264 (8th ed. 2004)).

Because the complaint presented “at least two

distinct claims,” one of which raised an issue of U.S.

patent law, the Federal Circuit exercised jurisdiction.

Id. at 1360-62.

Had the Second Circuit applied the Federal

Circuit’s straightforward distinction between claims

and theories, it would have properly declined to

assert jurisdiction. Even though respondents

contended that they alleged a single antitrust claim

comprising multiple theories, those theories are

actually distinct sets of “operative facts” that would

give rise to varying rights to relief. Therefore, under

the Federal Circuit’s Davis decision, plaintiffs’

complaint would be read as involving separate

claims. Most of those “claims” require proof of

substantial questions of patent law, such as whether

petitioners committed fraud or inequitable conduct

before the United States Patent and Trademark

Office (“PTO”). See Pet. App. 59a. Under Christian-

son, those patent law issues should have been

reviewed by the Federal Circuit. Instead, the Second

Circuit simply accepted the plaintiffs’ labeling of

these events as different “theories,” and retained

jurisdiction. This divergence in results warrants this

Court’s resolution.

4. This Court's intervention is_ especially

necessary because the disagreement over Federal

Circuit jurisdiction is not limited to the Second and

Federal Circuits. As the petition shows, the Second

Circuit’s decision conflicts also with Seventh Circuit

decisions. Pet. 21-27.

Moreover, practitioners and scholars have long

bemoaned the uncertainty that plagues Federal

Circuit jurisdiction. As one of the leading patent law

scholars noted nearly 40 years ago, whether “a case

arise[s] under the patent laws” is “one of the darkest

corridors of the law of federal courts and federal

jurisdiction.” Chisum, The Allocation of Jurisdiction

Between State and Federal Courts in Patent

Litigation, 46 Wash. L. Rev. 633, 638-39 (1971)

(emphasis omitted). Although this Court more

recently addressed the effect of counter-claims on

Federal Circuit jurisdiction, Holmes Group, Inc. v.

Vornado Air Circulation Sys., Inc., 535 U.S. 826

(2002), Christianson remains the Court’s last word on

what constitutes a non-patent theory sufficient to

avoid Federal Circuit appellate review. See 15A

Wright et al., Federal Practice and Procedure

§ 3903.1, at 169-70 (2d ed. 1992) (noting that,

although Christianson gave some guidance, “ques-

tions of ‘arising under’ jurisprudence ... continue to

befog Federal Circuit jurisdiction”). As the decision

below demonstrates, more illumination is needed

from this Court to cut through that fog.

Il. THE DECISION BELOW UNDERMINES

MUCH-NEEDED STABILITY AND PRE-

DICTABILITY IN PATENT LAW.

The Second Circuit's erroneous test poses a serious

threat to the stability and predictability in patent law

that Congress intended. Its rule will allow plaintiffs

to avoid Federal Circuit jurisdiction through

formalistic choices in their pleading. This will

exacerbate the forum shopping in patent law that

Congress hoped to curtail. And, would-be innovators

will have to account for increased legal uncertainty

when deciding whether to make the enormous

investments that precede so many advancements

today, especially in the biotechnology and pharma-

ceutical fields.

1. The Second Circuit’s test casts a shadow over

Congress's vision for the Federal Circuit. Congress

created the Federal Circuit to “provide nationwide

uniformity in [the] patent law” and to “make the

rules applied in patent litigation more predictable.”

H.R. Rep. No. 97-312, at 20 (1981). By channeling

patent cases into a single appellate forum, Congress

intended that the resulting uniformity of decisions

would foster technological growth and industrial

innovation, as well as eliminate often “unseemly”

forum-shopping that previously characterized patent

litigation. Id.

The Second Circuit’s decision, however, materially

erodes the Federal Circuit’s jurisdiction over cases

that involve substantial questions of patent law. The

court of appeals wrested jurisdiction away from the

Federal Circuit based on a non-patent “theory” that

was clearly ancillary to respondents’ Walker Process

claim and that could not provide respondents with all

the “relief [the claim] seeks.”

Under the Second Circuit's test, plaintiffs in other

cases can similarly engage in artful pleading to avoid

Federal Circuit review of patent issues. Common and

recurring patent issues such as_ inventorship,

validity, infringement, and enforceability are often

pleaded along with non-patent causes of action

sounding in tort, fraud, contract law, antitrust law,

and bankruptcy law. According to the decision below,

a plaintiff can avoid Federal Circuit jurisdiction

simply by joining with each patent claim some

allegation of wrongdoing that does not raise a patent

issue—even if that allegation could not support all

the relief the plaintiff seeks, and even if the

allegation is fairly insubstantial. By this appr ach,

many claims that raise substantial patent questions

can be shielded from Federal Circuit review.

The Second Circuit’s test will undoubtedly lead to

more patent issues being diverted from the Federal

Circuit. This increases the potential for conflicts in

patent law, as well as major patent issues being

decided by generalist courts of appeals. Further, the

variation will invite litigants to file suit in a district

court that offers opportunities to appeal to the forum

they perceive as most favorable. In light of the broad

availability of declaratory relief actions by putative

patent infringers, see MedImmune, Inc. v. Genentech,

Inc., 549 U.S. 118 (2007), the risk of unseemly races

to the courthouse and blatant forum shopping are

particularly aggravated unless the Second Circuit’s

rule is reviewed and reversed. These are problems

Congress meant for Federal Circuit jurisdiction to

solve.

2. While Congress intended uniformity in all

areas of the patent law, uniformity is especially

important in Walker Process antitrust disputes, such

as the instant case. A Walker Process claim alleges

that a defendant obtained an unlawful monopoly by

“knowingly and willfully misrepresenting facts” to the

PTO in prosecuting a patent. Walker Process Equip.,

Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177

(1965). Although it arises under antitrust laws, a

Walker Process claim inherently involves an inquiry

into patent issues, such as the basis for the PTO’s

issuance of the patent and the materiality of the

allegedly misrepresented facts. H.g., Dippin’ Dots,

Jac. v. Mosey, 476 F.3d 1337, 1346-47 (Fed. Cir.

2007). For that reason, Walker Process claims raise

“ssue[s] unique to the patent law.” Unttherm Food

Sys., Inc. v. Swift-Eckrich, Inc., 375 F.3d 1341, 1357

(Fed. Cir. 2004), rev’d on other grounds, 546 U.S. 394

(2006). Indeed, patent issues were the “linchpin” of

-espondents’ claims here. Pet. App. 15a. Nonethe-

less, the Second Circuit asserted jurisdiction based on

a tangential, factually separate non-patent alle-

gation, largely ignoring the patent issues at the heart

of the case.

The importance of the Federal Circuit’s leading role

in shaping Walker Process law is underscored by the

potential for treble damages in Walker Process

claims. The potential for such severe sanctions

means that uncertainty in this area can chill

technological growth and innovation. The Federal

Circuit is best-situated to supervise a claim based on

Walker Process with proper sensitivity to other patent

doctrines that bear on incentives to innovate. But the

decision below deprives the Federal Circuit of that

role and serves as a blueprint for pleading that avoids

Federal Circuit review. This Court’s intervention is

urgently needed to protect against these untoward

consequences.

3. The law of inequitable conduct is another

patent doctrine whose orderly development by the

Federal Circuit would be disrupted by the decision

below. Inequitable conduct is a claim that a patent,

even if it is valid and infringed, is unenforceable

because the patent holder musrepresented or

concealed information from the PTO while obtaining

the patent. See Critikon Inc. v. Becton Dickinson

Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir.

1997); 37 C.F.R. § 1.56. Inequitable conduct requires

proof of materiality, a quintessential patent law issue

concerning how the misrepresented or concealed

information relates to the patent claims that the

inventor was pursuing. See, e.g., 37 C.F.R. § 1.56(b).

The Federal Circuit has recognized that “the habit

of charging inequitable conduct in almost every major

patent case has become an absolute plague.”

Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418,

1422 (Fed. Cir. 1988). To combat this abuse, the

Federal Circuit has rejected a gross negligence

standard for finding inequitable conduct and instead

held that both deceptive intent and materiality must

be shown in order to render a patent unenforceable.

Kingsdown Med. Consultants, Ltd. v. Hollister, Inc.,

863 F.2d 867, 873-74 (Fed. Cir. 1988). And, more

recently, the Federal Circuit clarified that both

deceptive intent and materiality must be proven by

clear and convincing evidence. See, e.g., Star

Scientific Inc. v. R.J. Reynolds Tobacco Co., 537 F.3d

1357, 1365-66 (Fed. Cir. 2008).

As a result, the Federal Circuit’s strict inequitable

conduct standards now differ markedly from those

found in regional circuits. After the Federal Circuit’s

creation in 1982, most regional circuits had no

opportunity to revisit their inequitable conduct

doctrines, and so their less-exacting gross negligence

tests persist. See, e.g., Digital Equip. Corp. v.

Diamond, 653 F.2d 701 (1st Cir. 1981); True Temper

Corp. v. CF&I Steel Corp., 601 F.2d 495 (10th Cir.

1979); Intl Tel. & Tel. Corp. v. Raychem Corp., 538

F.2d 453 (1[st Cir. 1976)). Though decades old, these

cases remain good law unless altered by the en banc

court of appeals or by this Court, either of which is

exceedingly rare, and litigants asserting inequitable

conduct claims would undoubtedly prefer the benefit

of those cases.

To date, the uncertainty created by these decisions

has been kept in check by the regional circuits’

limited opportunities to decide inequitable conduct

issues. Under the Second Circuit’s jurisdictional

standard, however, the floodgates could break open.

Litigants could cast claims of inequitable conduct as

one “theory” in support of any number of non-patent

causes of action sounding in fraud, rather than as a

separate, independent “claim.” Even though most

inequitable conduct disputes mecessarily turn on

substantial patent law issues (materiality requires an

inquiry into claim construction, the scope and content

of.the prior art, and questions of potential invalidity

based on, for example, anticipation and obviousness),

such issues could be shielded from Federal Circuit

review under the Second Circuit’s erroneous rule.

Moreover, uncertainty in inequitable conduct law

creates unpredictability in other aspects of patent

litigation. For example, because the Federal Circuit’s

inequitable conduct standard includes a scienter

element and sounds in fraud, the Federal Circuit

requires plaintiffs to plead inequitable conduct claims

with the particularity required by Federal Rule of

Civil Procedure 9(b). See, e.g., Exergen Corp. v. Wal-

Mart Stores, Inc., 575 F.3d 1312, 1326 (Fed. Cir.

2009); Ferguson Beauregard/Logic Controls, Div. of

Dover Res., Inc. v. Mega Sys., LLC, 350 F.3d 1327,

1344 (Fed. Cir. 2003). It is not clear, however,

whether the regional circuits’ different inequitable

conduct standards require this same level of detailed

factual pleading in a complaint. The possibility that

less-detailed pleading suffices in those circuits

creates additional incentive for litigants to forum

shop. Patent enforceability should not be dependent

on an accident of judicial venue.

Recognizing the need for clarity in these doctrines,

the Federal Circuit recently granted rehearing en

banc to provide guidance on the materiality standard

in inequitable conduct, and its relationship to the

doctrines of unclean hands and_ fraud. See

Therasense, Inc. v. Becton, Dickinson & Co., No. 2008-

1511, 2010 WL 1655391 (Fed. Cir. Apr. 26, 2010)

(per curiam). It is, therefore, particularly important

that the Court reverse the decision below and prevent

regional! circuits from disrupting the Federal Circuit’s

efforts to bring uniformity to these recurring patent

law issues.

4. This Court should not underestimate the

difficulties regional circuits would encounter in trying

to apply their own antiquated patent law to current

cases. By definition, patent cases deal with advance-

ments in science and technology. As the court with

almost exclusive jurisdiction over patent appeals

since the early 1980s, the Federal Circuit has

developed experience and expertise in the underlying

sciences and the unique patent law issues raised by

cutting-edge innovations.

By contrast, patent law in the regional circuits has

largely remained frozen since the creation of the

Federal Circuit. The Second Circuit decision here

opens the door to important patent issues being

decided by regional circuits that lack familiarity with

rapidly advancing technology or the governing patent

law. This will undermine the certainty Congress

sought to establish by centralizing the development of

patent law in the Federal Circuit. And, it will

devrive practitioners and industry of the Federal

Circuit’s unique capability to adapt the law to

technological advances. Perhaps no firms stand to

lose more than biotechnology and pharmaceutical

firms, which have played such an important role in

this country’s economic growth in the past 25 years

and which will continue to play central roles in the

country’s economy for the foreseeable future.

To be sure, the regional circuits occasionally can

decide patent issues. In Holmes Group Inc. v.

Vornado Air Circulation Systems Inc., 535 U.S. 826

(2002), this Court held that regional circuits have

jurisdiction over patent issues raised in counter-

claims, rather than in a well-pleaded complaint. But

there is no dispute that Congress created the Federal

Circuit to bring a large measure of uniformity to

patent law, and that goal has been largely achieved.

Regional circuits have exercised Vornado-based

appellate jurisdiction over patent counterclaims only

infrequently. The decision below, however, threatens

to break off a much larger piece of Federal Circuit

jurisdiction. To prevent this unwarranted erosion of

that court’s exclusive grant of jurisdiction, this Court

should grant review.

5. Because the decision below introduces

substantial uncertainty into patent-law jurisdiction,

it will needlessly increase the costs of patenting new

innovations, and therefore deter the development of

new, often life-saving, products.

In many industries—with biotechnology and

pharmaceutical firms being chief among them—

innovations result only because of enormous invest-

ments into research and development. As noted, on

average, developing and securing regulatory approval

for a new drug or biologic costs approximately $1.3

billion. See DiMasi & Grabowski, supra, at 477. In

addition, the journey from research and development

to regulatory approval averages approximately 16

years. See Giaccotto et al., supra, at 196 & n.2; see

also Industry Profile at 27. During that time, the

firm earns no return on its investment. And, the firm

may never earn any return since just “very few drugs

that enter development ever achieve final marketing

approval.” Industry Profile, at 27. Even with

approval, just two in ten medicines ever produce

revenues that match or exceed average R&D costs.

See Vernon et al., Drug development costs when

financial risk is measured using the Fama-French

three-factor model, Health Econ. (Aug. 2009), http://

dx.doi.org/10.1002/hec.1538; see also Industry Profile

at “Key Facts.”

Given those realities, firms in these industries

must undertake a careful cost-benefit analysis before

embarking on a new line of research, and decisions

are made years before any hope of actually creating a

commercial product. For that reason, stability and

predictability in the rules that govern potential

litigation are absolutely essential. Congress realized

this as it set up the Federal Circuit, intending it to

develop a uniform, expertise-based body of patent law

to guide innovation. By adopting a jurisdictional

standard that makes it far more likely that a plaintiff

could take a case to any circuit, particularly given the

declaratory judgment device, the decision below will

require innovators to keep tabs on differing laws

across the regional circuits. Firms will have to factor

in this uncertainty in their cost-benefit analysis, and

consequently, discount the potential reward for years

of hard work. This is precisely the result Congress

sought.to avoid. Only this Court can remedy the

injury to Congress’s intent created by the Second

Circuit’s wayward jurisdictional ruling in this case.