Patent Law and Innovation: The Creation, Operation and a Twenty-Year Assessment of the U.S. Court of Appeals for the Federal Circuit
Congressional research reportJan 21, 2003
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Patent Law and Innovation:
The Creation, Operation and
a Twenty-Year Assessment of the
U.S. Court of Appeals for the Federal Circuit
January 21, 2003
-name redactedVisiting Scholar in Economic Growth and Entrepreneurship
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Patent Law and Innovation: The Creation, Operation
and a Twenty-Year Assessment of the
U.S. Court of Appeals for the Federal Circuit
Summary
The U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) is a
specialized court with exclusive appellate jurisdiction over patent appeals. Congress
established the Federal Circuit in 1982 in order to promote predictability and
uniformity in the patent law. Now that the Federal Circuit has celebrated its
twentieth anniversary, it is appropriate to consider the influence of the court upon
patent law and, more generally, the climate for innovative industry within the United
States.
A number of commentators believe that the Federal Circuit has strengthened the
economic, legal and commercial significance of patents to U.S. industry. The Federal
Circuit has broadened the subject matter which may be patented to include such
innovations as computer software and business methods. Some observers believe
that in comparison to predecessor courts, the Federal Circuit has also made it more
difficult to show that a patent is invalid because its subject matter would have been
obvious in light of the state of the art. The Federal Circuit is also said to have both
decreased the showing a patent owner must make in order to obtain a preliminary
injunction against accused infringers and increased the monetary damages owed as
a remedy for patent infringement.
The Federal Circuit has also attracted some negative commentary. Some
commentators believe that the concentration of patent cases in one court provides less
chance for sound development of the law through the contributions of many jurists.
Because the Federal Circuit routinely encounters patent law issues, the pace of
“common law” development in the patent field may be accelerated as compared to
other fields, possibly leading to less legal certainty. The Federal Circuit has also
been described as a “booster” of the patent law with a jurisprudence that favors
patent owners and takes a restrictive view of antitrust principles.
Recent developments continue to shape the Federal Circuit. The 1998 report of
the Commission on Structural Alternatives for the Federal Courts of Appeals (known
as the “White Commission”) did not recommend any immediate changes to the
makeup of the Federal Circuit, but it did suggest that the Federal Circuit may be able
to assume jurisdiction over additional classes of cases for which national uniformity
is desired. The 2002 Supreme Court decision in Holmes Group, Inc. v. Vornado Air
Circulation Systems, Inc., appears to have limited the exclusive appellate jurisdiction
of the Federal Circuit in patent cases.
Continued experience with the Federal Circuit may provide insights on the
possible benefits of creating other specialized tribunals. Identification of the factors
that make judicial specialization desirable, as well as the impact of a specialized
court upon the fields of law within its jurisdiction, may guide future reforms to the
federal judicial system.
This report will be updated as future developments require.
Contents
Patent Law and Innovation Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Patent Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Patent Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Patent Litigation Prior to 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reforms to Patent Litigation in 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The History of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Impact of the Federal Circuit Upon Innovation . . . . . . . . . . . . . . . . . . . . . . 12
Perceived Benefits of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Critiques of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Holmes v. Vornado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Patent Law and Innovation Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Patent Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Patent Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Patent Litigation Prior to 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reforms to Patent Litigation in 1982 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The History of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Impact of the Federal Circuit on Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Perceived Benefits of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Critiques of the Federal Circuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The White Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Holmes v. Vornado . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Concluding Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
List of Tables
Appeals to the Federal Circuit Oganized by Tribunal of Origin . . . . . . . . . . . . . 11
Patent Law and Innovation: The Creation,
Operation and a Twenty-Year Assessment
of the U.S. Court of Appeals
for the Federal Circuit
On October 1, 2002, the U.S. Court of Appeals for the Federal Circuit (“Federal
Circuit”) celebrated its twentieth anniversary. Viewed by many commentators as the
most significant reform to the federal judicial system in nearly a century,1 the creation
of the Federal Circuit was motivated by a perceived need for more consistent
interpretation of the patent law.2 In the early 1980's, many experts believed that the
differing circuit courts of appeals varied widely in their handling of patent disputes.3
Congress therefore established the Federal Circuit, a centralized national court with
exclusive appellate jurisdiction to hear cases arising under the patent law.4 Congress
hoped the Federal Circuit would provide more consistent guidance to innovative
industry, the U.S. Patent and Trademark Office (“USPTO”) and others impacted by
the patent system.5
This report considers the impact of the Federal Circuit upon U.S. patent law and
innovation. It begins with a brief overview of the policy foundations and legal
fundamentals of the patent system. This report next reviews the role of the Federal
Circuit within the federal judicial system. It then recounts the history of the
formation of the Federal Circuit. The impact of the Federal Circuit upon innovation
is discussed, including perceived benefits of the court as well as perceived
shortcomings. The report closes with a review of two recent developments affecting
the Federal Circuit, the White Commission Report6 and the Supreme Court decision
1
Dennis DeConcini, “The Federal Courts Improvement Act of 1982: A Legislative
Overview,” 14 George Mason Law Review (1992), 529.
2
Rochelle Cooper Dreyfuss, “The Federal Circuit: A Case Study in Specialized Courts,” 64
New York University Law Review (1989), 1.
3
Howard T. Markey, “The Phoenix Court,” 10 American Patent Law Association Quarterly
Journal (1982), 227.
4
Thomas H. Case & Scott R. Miller, “An Appraisal of the Court of Appeals for the Federal
Circuit,” 57 Southern California Law Review (1984), 301.
5
S. Rep. No. 275, 97th Cong., 1st Sess. 2, reprinted in 1982 U.S. Code Cong. & Admin.
News 11, 12.
6
Commission on Structural Alternatives for the Federal Courts of Appeal, Final Report (Dec.
18, 1998) (available at http://app.comm. uscourts.gov/final/appstruc.pdf).
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in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.7 along with
concluding observations.
Patent Law and Innovation Policy
The patent law provides inventors with exclusive rights to exploit their
inventions.8 In so doing, the patent law offers economic incentives for individuals
and institutions to engage in technological innovation. Absent a patent system, an
entire industry might readily be able to appropriate the benefits of one firm’s
innovative efforts. Cognizant of potential “free riders,” enterprises might devote few,
if any resources towards research and development. The patent law solves this
market failure problem by allowing firms the opportunity to appropriate the
economic benefits of their innovations.9
The regime of patents is also said to serve other goals. Commentators have
observed that patent rights facilitate technology transfer.10 Without patent rights, an
inventor may have no tangible asset to sell or license. In addition, an inventor might
otherwise be unable to police the conduct of a contracting party. Any technology or
know-how that has been disclosed to a prospective buyer might be appropriated
without compensation to the inventor. The availability of patent protection decreases
the ability of contracting parties to engage in opportunistic behavior. By lowering
such transaction costs, the patent system may make technology-based transactions
more feasible.11
Experts also believe that the patent system encourages the disclosure of products
and processes.12 Each issued patent must include a description sufficient to enable
skilled artisans to practice the patented invention.13 Issued patents may also
encourage others to “invent around” the patentee’s proprietary interest. Others can
build upon the patentee’s disclosure to produce their own technologies that fall
outside the exclusive rights associated with the patent.14
7
535 U.S. 826 (2002).
8
35 U.S.C. § 271(a) (2002).
9
Simone Rose, “Patent ‘Monopolyphobia’: A Means of Extinguishing the Fountainhead?,”
49 Case W. Res. L. Rev. 509 (1999).
10
Jonathan Eaton & Samuel J. Kortum, “Trade in Ideas: Patenting and Productivity in the
OECD,” 40 Journal of International Economics (1996), 251.
11
Robert P. Merges, “Intellectual Property and the Costs of Commercial Exchange: A
Review Essay,” 93 Michigan Law Review (1995), 1570.
12
Keith E. Maskus, “The Role of Intellectual Property Rights in Encouraging Foreign Direct
Investment and Technology Transfer,” 9 Duke Journal of Comparative and International
Law (1998), 10.
13
14
35 U.S.C. § 112 (2002).
Rebecca S. Eisenberg, “Patents and the Progress of Science: Exclusive Rights and
Experimental Use,” 56 University of Chicago Law Review (1989), 1017.
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Through these mechanisms, the patent system may provide a more socially
desirable outcome than its chief legal alternative, trade secret protection. Trade
secrecy guards against the improper appropriation of valuable, commercially useful
information that is the subject of reasonable measures to preserve its secrecy.15
Taking the steps necessary to maintain secrecy, such as implementing physical
security measures, imposes costs that may ultimately be unproductive for society.16
Also, while the patent law obliges inventors to disclose their inventions to the
public,17 trade secret protection requires firms to hold their protections in secret. The
disclosure obligations of the patent system may better serve the goals of encouraging
the diffusion of advanced technological knowledge.
The extent to which the patent system practically achieves these goals is difficult
to assess. Economic research suggests that different industries attach varying values
to patents. For example, one study of the aircraft and semiconductor industries
suggested that lead time and the strength of the learning curve were superior to
patents in capturing the value of investments.18 In contrast, members of the drug and
chemical industries attached a higher value to patents. Differences in the perception
of the patent system have been attributed to the extent to which patents introduced
significant duplication costs and times for competitors of the patentee.
Studies have indicated that individual entrepreneurs and small, innovative firms
rely more heavily upon the patent system than larger enterprises. Larger companies
often possess a number of alternative means for achieving a proprietary or propertylike interest in a particular technology. For example, trade secrecy, ready access to
markets, trademark rights, speed of development, and consumer goodwill may to
some degree act as substitutes to the patent system. As Sally Wyatt and Gilles Bertin
reported in their survey of alternatives to patenting, a representative of one European
corporation opined that "multinational corporations could easily cease to use patents
and use other available methods to achieve the same aims."19 However, individual
inventors and small firms often do not have these mechanisms at their disposal. As
a result, the patent system may enjoy heightened importance with respect to these
enterprises.20
Perhaps the best evidence available as to the perceived value of patents is that,
in the United States, the number of filed patent applications and issued patents
15
American Law Institute, Restatement of Unfair Competition Third § 39 (1995).
16
David D. Friedman et al., “Some Economics of Trade Secret Law,” 5 Journal of Economic
Perspectives (1991), 61.
17
35 U.S.C. § 112 (2002).
18
Levin, Richard C. et al., “Appropriating the Returns for Industrial Research and
Development,” Brookings Papers on Economic Activity, 1987, in The Economics of
Technical Change, eds. Edwin Mansfield and Elizabeth Mansfield (Vermont, Edward Elgar
Publishing Co., 1993).
19
Sally Wyatt & Gilles Y. Bertin, Multinationals and Industrial Property 139 (Harvester
1988).
20
J. Douglas Hawkins, “Importance and Access of International Patent Protection for the
Independent Inventor,” 3 University of Baltimore Intellectual Property Journal (1995), 145.
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continues to climb.21 In 1996, inventors filed 211,013 patent applications at the
USPTO. In 2002, that number had increased to 345,732 applications.22 These
statistics suggest that members of the technological community continue to view
patents as valuable.
The patent system has long been subject to criticism, however. Some observers
believe that the patent system encourages industry concentration and presents a
barrier to entry in some markets.23 Others believe that the patent system too
frequently attracts speculators who prefer to acquire and enforce patents rather than
engage in socially productive activity.24 Still other commentators suggest that the
patent system often converts pioneering inventors into technological suppressors,
who use their patents to block subsequent improvements and thereby impede
technical progress.25 The Wright brothers, for example, patented a method for
stabilizing flight by warping the wings of an aircraft.26 Their patent covered any
system that varied the lateral margins of the wings in opposite directions. Soon
thereafter, Glenn Curtiss and Alexander Graham Bell improved upon the Wright
brothers’ wing-warping device by using a set of wing flaps, or ailerons. Although the
Curtiss-Bell invention was separately patented, use of that invention would result in
the infringement of the Wright brothers patent. Some commentators believe that the
Wright brothers employed their patent to block use of the Curtiss-Bell improvement
invention to the detriment of the development of the U.S. aviation industry.27
When analyzing these contending views, it is important to note the lack of
rigorous analytical methods available for analyzing the effect of the patent law upon
the U.S. economy as a whole. The relationship between innovation and patent rights
remains poorly understood. Concerned observers simply do not know what market
impacts would result from changing patent term from its current twenty-year period,
for example.28 As a result, current economic and policy tools do not allow us to
calibrate the patent system precisely in order to produce an optimal level of
investment in innovation.
21
Robert Hunt, “Patent Reform: A Mixed Blessing for the U.S. Economy?,” Federal Reserve
Bank of Philadelphia Business Review, available at http://www.phil.frb.org
/files/br/brnd99rh.pdf.
22
U.S. Patent & Trademark Office, U.S. Patent Statistics, Calendar Years 1963-2001
(available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.pdf).
23
(name redacted), “Collusion and Collective Action in the Patent System: A Proposal for
Patent Bounties,” University of Illinois Law Review (2001), 305.
24
Ibid.
25
See Robert P. Merges & Richard R. Nelson, “On the Complex Economics of Patent
Scope,” 90 Columbia Law Review (1990), 839.
26
See Steven C. Carlson, “Patent Pools and the Antitrust Dilemma,” 16 Yale Journal on
Regulation (1999), 359.
27
See George Bittlingmayer, “Property Rights, Progress, and the Aircraft Patent Agreement,”
31 Journal of Law and Economics 227, 230-31 (1988).
28
See F. Scott Kieff, “Property Rights and Property Rules for Commercializing Inventions,”
85 Minnesota Law Review (2001), 697.
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Patent Acquisition
As mandated by the Patent Act of 1952,29 U.S. patent rights do not arise
automatically. Inventors must prepare and submit applications to the U.S. Patent and
Trademark Office if they wish to obtain patent protection.30 USPTO officials known
as examiners then assess whether the application merits the award of a patent.31
In deciding whether to approve a patent application, a USPTO examiner will
consider whether the submitted application fully discloses and distinctly claims the
invention.32 In addition, the application must disclose the “best mode,” or preferred
way, that the applicant knows to practice the invention.33 The examiner will also
determine whether the invention itself fulfills certain substantive standards set by the
patent statute. To be patentable, an invention must be useful, novel and nonobvious.
The requirement of usefulness, or utility, is satisfied if the invention is operable and
provides a tangible benefit.34 To be judged novel, the invention must not be fully
anticipated by a prior patent, publication or other knowledge within the public
domain.35 A nonobvious invention must not have been readily within the ordinary
skills of a competent artisan at the time the invention was made.36
If the USPTO allows the patent to issue, the patent proprietor obtains the right
to exclude others from making, using, selling, offering to sell or importing into the
United States the patented invention.37 The maximum term of patent protection is
ordinarily set at 20 years from the date the application is filed.38 The patent applicant
gains no enforceable rights until such time as the application is approved for issuance
as a granted patent, however. Once the patent expires, others may employ the
patented invention without compensation to the patentee.
29
P.L. 82-593, 66 Stat. 792 (codified at Title 35 United States Code).
30
35 U.S.C. § 111 (2002).
31
35 U.S.C. § 131 (2002).
32
35 U.S.C. § 112 (2002).
33
Ibid.
34
35 U.S.C. § 101. (2002).
35
35 U.S.C. § 102 (2002).
36
35 U.S.C. § 103 (2002).
37
35 U.S.C. § 271(a) (2002).
38
35 U.S.C. § 154(a)(2) (2002). Although patent term is based upon the filing date, the
patentee gains no enforceable legal rights until the USPTO allows the application to issue
as a granted patent. A number of Patent Act provisions may modify the basic 20-year term,
including examination delays at the USPTO and delays in obtaining marketing approval for
the patented invention from other federal agencies.
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Patent Litigation
Patent Litigation Prior to 1982
Congress has specified that patent litigation generally occurs within the federal
courts, as compared to state or local courts.39 Patent disputes enter the federal court
system through two principal routes. First, a patent applicant may disagree with a
USPTO decision denying the issuance of a patent. In such cases, the patent applicant
is entitled to appeal the administrative agency’s decision. From its founding in 1909
through 1982, a specialized tribunal, the Court of Customs and Patent Appeals
(“CCPA”), was authorized to hear cases arising from the USPTO.40 Appeals from
the CCPA could be heard by the nation’s highest court, the U.S. Supreme Court.
The second possibility is patent enforcement. Issued patents provide their
owners with certain rights, but these rights are not self-enforcing. A patentee bears
responsibility for monitoring its competitors to determine whether they are using the
patented invention or not. Patent proprietors who wish to compel others to observe
their intellectual property rights must ordinarily commence litigation.41
Patent proprietors commence enforcement litigation in the U.S. district courts,
which are the trial courts of the federal court system. Congress has established 94
federal judicial districts, including at least one district in each state, as well as the
District of Columbia, Puerto Rico, the Virgin Islands, Guam, and the Northern
Mariana Islands.42
These judicial districts are organized into 12 regional circuits, each of which has
a U.S. court of appeals. A court of appeals hears appeals from the district courts
located within its circuit.43 For example, the Court of Appeals for the Second Circuit
presides over the federal district courts of Connecticut, New York and Vermont,
while the Court of Appeals for the Seventh Circuit hears cases from the district courts
of Illinois, Indiana and Wisconsin.44 The Supreme Court possesses authority to hear
cases decided from the courts of appeal.45
39
28 U.S.C. § 1338(a) (2002).
40
Act of Aug. 5, 1909, ch. 6, 36 Stat. 11,105 (establishing Court of Customs Appeals). See
Ellen E. Sward & Rodney F. Page, “The Federal Courts Improvement Act: A Practitioner’s
Perspective,” 33 American University Law Review (1984), 385.
41
(name redacted), “Litigation Beyond the Technological Frontier: Comparative Approaches
to Multinational Patent Enforcement,” 27 Law and Policy in International Business (1996),
277.
42
28 U.S.C. §§ 88, 116 (2002).
43
The appellate courts may also accept appeals from certain decisions of federal
administrative agencies.
44
45
28 U.S.C. § 41 (2002).
In addition, the Supreme Court possesses original jurisdiction over some cases. It also may
expedite appeals from the district courts.
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Reforms to Patent Litigation in 1982
With the passage of the Federal Courts Improvement Act of 1982,46 Congress
altered the traditional jurisdictional structure for patent appeals. Congress created a
new court, the Federal Circuit, possessing nationwide jurisdiction to hear appeals in
cases involving the patent laws.47 Congress accomplished this task through two
principal acts. First, Congress abolished the CCPA and invested the Federal Circuit
with jurisdiction over appeals of adverse patentability decisions from the USPTO.
Second, Congress divested the regional circuit courts of appeals of patent
enforcement cases. Under the new law, the Federal Circuit enjoys national
jurisdiction over appeals in patent infringement cases.
As a result, patent applicants may appeal adverse patentability decisions from
the USPTO directly to the Federal Circuit. In addition, in patent infringement
litigation, appeals go not to the regional courts of appeal, but to the Federal Circuit.
For example, suppose that the U.S. District Court for the Eastern District of Virginia
decides a case involving a violation of federal employment laws, and another case
involving complaints of patent infringement. Because the U.S. District Court for the
Eastern District of Virginia sits within the Fourth Circuit, any appeal of the
employment case would be to the U.S. Court of Appeals for the Fourth Circuit. An
appeal of the district court judgment of the patent case would be heard by the Federal
Circuit, however. The Supreme Court may resolve appeals decided by the Federal
Circuit.
The History of the Federal Circuit
A long history concerns the concept of a single, national court of patent appeals.
Legislative proposals to establish such a tribunal date back to at least 1887.48 From
that time through the World War II era, bills proposing similar arrangements were
introduced in numerous sessions of Congress.49 Paul Janicke, a member of the
faculty of the University of Houston Law Center, observes that although debate over
the merits of a national patent appeals court occurred over nearly a century, the points
of contention remained substantially the same over the years.50
Proponents of a unified appeals court for patent matters observed that patent
litigation involved issues of significant technical and legal complexity. Jurists with
a doctrinal command of patent law principles would be better able to achieve fair
46
Federal Courts Improvement Act of 1982, Pub.L. No. 97-164, 96 Stat. 25 (1982).
47
DeConcini, supra note 1.
48
Paul Janicke, “To Be or Not to Be: The Long Gestation of the U.S. Court of Appeals for
the Federal Circuit (1887-1982), 69 Antitrust Law Journal (2002), 645.
49
Ibid.
50
Ibid.
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results in a timely fashion.51 In addition, patent lawyers persistently reported
significant disparities in the results of patent cases from various circuit courts of
appeal. Some courts were believed to be very favorable towards patent proprietors,
while others only rarely upheld a patent or found that there was patent infringement.
These perceived differences in attitudes towards patents lead to large expenditures
of time and money by litigants trying to maneuver their lawsuits into or out of a
particular circuit.52
Opponents of a patent appeals court instead believed that judicial specialization
would lead to negative consequences. Among other commentators, Judge Simon
Rifkind argued that specialized courts, by considering only a narrow class of cases
year after year, would grow distanced from the mainstream of legal and societal
thinking.53 As well, such a court might come to have a stake in the field of law in
which it was meant to serve as an impartial decider of disputes. Much like an
administrative agency subject to “industry capture,” a specialized patents court might
believe that a strong patent system, with frequent findings of patent validity,
infringement and high damages awards, would be within the court’s own interest.54
Such a bias might overly strengthen the patent system, skewing economic incentives
to innovate and discounting the interests of the public.
Although debate over the wisdom of a national patent appeals court continued,
support for a national patent appeals court rose by the early 1970's. The increasing
sophistication of technology was also believed to lead to increasingly complex,
expensive and time-consuming patent litigation.55 Concerns also grew that the
technological competitiveness of the United States had weakened as compared to
major trading partners such as Japan and Germany.56 During this period, many
commentators called for a strengthening of the U.S. patent system in order to increase
incentives to innovate. A national patent appeals court was among the advocated
reforms for invigorating the U.S. patent system.57
These themes were reflected in the work of a congressional commission formed
in 1972 to study the entire federal appellate system. Chaired by Senator Roman
Hruska, by whose name it became generally known, the commission considered
possible changes in geographic boundaries of the judicial circuits, the effectiveness
51
Richard A. Posner, “Will the Federal Courts of Appeal Survive Until 1984? An Essay on
Delegation and Specialization of the Judicial Function,” 56 Southern California Law
Review (1983), 761.
52
Markey, supra note 3.
53
Simon Rifkind, “A Specialized Court for Patent Litigation? The Danger of a Specialized
Judiciary,” 37 American Bar Association Journal (1951), 425.
54
Ibid.
55
John R. Allison & Mark A. Lemley, “The Growing Complexity of the United States Patent
System,” 82 Boston University Law Review (2002), 77.
56
Pauline Newman, “Origins of the Federal Circuit: The Role of Industry,” 11Federal
Circuit Bar Journal (2001-2002), 541.
57
Ibid.
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of internal court procedures, and ways to improve the administration of appellate
justice generally. The Hruska Commission released its final report in 1975. Among
its conclusions was that the patent law could benefit from the unifying influence of
a national court.58
Although Congress did not act upon the Hruska Commission proposal, the
concept of a national court of patent appeals gained increasing acceptance. In 1978,
the Department of Justice established the Office for Improvements in the
Administration of Justice (OIAJ). A former member of the University of Virginia law
faculty, Daniel J. Meador, headed the OIAJ. The OIAJ proposed that Congress
merge two existing courts, the Court of Customs and Patent Appeals (CCPA) with
another specialized tribunal, the Court of Claims. The Court of Claims possessed
jurisdiction over a variety of lawsuits against the United States, including disputes
over federal contracts and unlawful "takings" of private property by the federal
government. This new, consolidated court would be termed the U.S. Court of
Appeals for the Federal Circuit.
The OIAJ offered a number of arguments in favor of this proposal. The OIAJ
believed that the consolidation of patent appeals would bring about a significant
degree of appellate decision uniformity. In addition, rather than creating an
additional court, this proposal actually eliminated one, while avoiding the difficulty
of adding new judges or confining the court to a single area of expertise. The OIAJ
also observed that, as a practical matter, the two courts to be merged already
occupied the same building in downtown Washington, DC.59
The OIAJ proposal was ultimately implemented through the Federal Courts
Improvement Act.60 Congress passed this legislation in early 1982, with President
Reagan signing the bill into law on April 2, 1982. The Federal Circuit heard its first
appeal on October 1, 1982.61
As structured by the Federal Courts Improvement Act, Congress authorized
twelve seats on the Federal Circuit bench, but generally ten or eleven actually sit on
the court.62 A number of senior judges, who have a semi-retired status, also work on
58
Commission on Revision of the Federal Court Appellate System, Structure and Internal
Procedures: Recommendations for Change, 67 F.R.D. 195 (1975).
59
Office for Improvements in the Administration of Justice, A Proposal to Improve the
Federal Appellate System (1978).
60
Federal Courts Improvement Act of 1982, Pub.L. No. 97-164, 96 Stat. 25 (1982).
61
See South Corp. v. United States, 690 F.2d 1368 (Fed. Cir. 1983).
62
Paul R. Michel,“The Court of Appeals for the Federal Circuit Must Evolve to Meet the
Challenges Ahead,” 48 American University Law Review (1999), 1177.
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the court.63 Federal Circuit judges ordinarily hear cases in panels of three. For cases
of particular importance, all active judges sit en banc.64
As originally structured by the Federal Courts Improvement Act, and as
subsequently augmented by Congress, the Federal Circuit possesses appellate
jurisdiction over a number of cases not involving the patent law.65 The Federal
Circuit also hears appeals from two special trial courts with nationwide jurisdiction
over certain types of cases: the Court of International Trade addresses cases involving
international trade and customs issues,66 and the United States Court of Federal
Claims which hears certain cases involving claims against the United States.67 In
addition, the court hears appeals in the following cases:
• Denials of applications for trademark registrations by the USPTO Board
of Trademark Appeals;68
• Decisions of the International Trade Commission;69
• Decisions of the Merit Systems Protection Board;70
• Government contract decisions under the Contract Disputes Act of 1978;71
• Cases transferred from the now abolished Temporary Emergency Court of
Appeals (TECA);72
• Vaccine cases arising under the National Childhood Vaccine Injury Act;73
• Decisions under the Veterans' Judicial Review Act;74 and
• Decisions of the Senate Select Committee on Ethics.75
The following table displays the number of appeals filed at the Federal Circuit for the
past five years, organized by the tribunal of their origin.
63
The Sixteenth Annual Judicial Conference of the United States Court of Appeals for the
Federal Circuit, 193 Fed. R. Dec. 263 (1999).
64
See William C. Rooklidge & Matthew F. Weil, “En Banc Review, Horror Pleni, and the
Resolution of Patent Law Conflicts,” 40 Santa Clara Law Review (2000), 787.
65
28 U.S.C. § 1295 (2002).
66
28 U.S.C. § 1295(a)(5)-(7) (2002).
67
28 U.S.C. § 1295(a)(3) (2002).
68
28 U.S.C. § 1295(a)(4) (2002).
69
28 U.S.C. § 1295(a)(6) (2002).
70
28 U.S.C. § 1295(a)(9) (2002).
71
28 U.S.C. § 1295(a)(10), (b), (c).
72
28 U.S.C. § 1295(a)(11)-(14). which includes actions under the Economic Stabilization
Act of 1970, Emergency Petroleum Allocation Act of 1973, Natural Gas Policy Act of 1978,
and Energy Policy and Conservation Act.
73
28 U.S.C. § 1295(a)(3) (2002).
74
38 U.S.C. § 7292 (2002).
75
2 U.S.C. § 1209 (2002).
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Appeals to the Federal Circuit Oganized by Tribunal of Origin
Source of
Appeals
1997
1998
1999
2000
2001
Board of
Contract
Appeals
71
54
40
38
44
Court of
International
Trade
83
75
43
43
71
Court of
Veterans
Appeals
84
122
194
186
151
Department of
Veterans’
Affairs
3
1
10
9
3
Court of
Federal
Claims
151
193
165
144
163
U.S. District
Courts
395
419
466
455
420
International
Trade
Commission
7
12
5
2
8
Merit Systems
Protection
Board
544
462
523
501
455
Patent and
Trademark
Office
72
68
69
91
83
Senate Select
Committee on
Ethics
3
6
0
3
1
Writs
41
42
28
37
55
Total
1458
1454
1543
1509
1454
Sometimes cases appealed to the Federal Circuit involve legal issues over which
the Federal Circuit has exclusive jurisdiction – such as the patent law – as well as
legal issues in which it does not. For example, a case involving a breach of a patent
license could involve both contract law and patent law issues. In reviewing district
court judgments in patent cases, the Federal Circuit applies its own law with respect
to patent law issues, but with respect to nonpatent issues the Federal Circuit generally
applies the law of the circuit in which the district court sits. The Federal Circuit
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reasons that it should “apply Federal Circuit law to patent issues in order to serve one
of the principal purposes for the creation of this court: to promote uniformity in the
law with regard to subject matter within our exclusive appellate jurisdiction.”76
Impact of the Federal Circuit Upon Innovation
Congress created the Federal Circuit with the specific goals of harmonizing
patent law and improving the environment for technological innovation. Two
decades of experience have resulted in varying viewpoints about the court. This
report surveys differing opinions concerning the impact of the Federal Circuit upon
the patent system and innovation policy.
Perceived Benefits of the Federal Circuit
A number of commentators believe that the Federal Circuit has strengthened the
economic, legal and commercial significance of patents to U.S. industry. As
explained by patent attorney Robert P. Taylor:
By any measure chosen, the economic importance of patent property in 2002 is
greater by an order of magnitude than that of a generation ago. The moment and
volume of patent litigation, the attention that patents receive in financial
transactions and corporate boardrooms, the magnitude of judgments and
settlements -- all attest to the aggregate impact that the Federal Circuit has made
on the patent right and the procedures for asserting it.77
Many commentators believe that Federal Circuit case law concerning the
standard of obviousness has had an important impact by strengthening the patent
right.78 Under the Patent Act, in order to be patentable, an invention would not have
been obvious to a person of ordinary skill in the art at the time the invention was
made.79 Some observers believed that the regional courts of appeals applied a very
stringent standard of obviousness, such that many patents issued by the USPTO were
declared invalid during enforcement proceedings.80 In contrast to some earlier courts,
the Federal Circuit requires patent challengers to show that there was some
motivation in the prior art to make the patented invention, relying upon specific
teachings from the prior art.81 Some experts believe that under the Federal Circuit’s
76
Atari, Inc. v. JS&A Group, Inc., 747 F.2d 1422 (Fed. Cir. 1984).
77
Robert P. Taylor, “Twenty Years of the Federal Circuit: An Overview,” 716 Practising
Law Institute, Patents, Copyrights, Trademarks and Literary Property Course Handbook
Series (2002), 9.
78
Ibid.
79
35 U.S.C. § 103(a) (2002).
80
Martin J. Adelman et al., Patent Law: Cases and Materials (West Publishing Co., St. Paul,
Minnesota 1998), 413.
81
Alan P. Klein, “A Funny Thing Happened to the Non-Obvious Subject Matter Condition
for Patentability on Its Way to the Federal Circuit,” 6 University of Baltimore Intellectual
Property Law Journal (1997), 19.
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obviousness standard, it is more difficult to have an issued patent declared invalid in
court.82
The Federal Circuit is also said to have heightened an issued patent’s
presumption of validity.83 The Patent Act stipulates that each issued patent is
presumed to be valid.84 The burden of proof therefore lies with an individual
attempting to defeat the patent. Prior to the creation of the Federal Circuit, however,
some commentators believe that the regional circuit courts of appeal gave this
presumption little weight.85 The Federal Circuit has held that the statutory
presumption of validity must be overcome by a patent challenger through “clear and
convincing evidence” of a patent’s invalidity.86
The Federal Circuit is also said to have clarified the range of subject matter that
innovators may patent.87 Federal Circuit case law has broadly confirmed the
patentability of inventions in such fields as computer software, business methods and
biotechnology.88 Many commentators believe that a broad approach to patentable
subject matter best responds to the need of contemporary U.S. industry that has
advanced beyond the traditional chemical, electrical and mechanical inventions of
heavy industry.89
The Federal Circuit has also been perceived as increasing the remedies available
to patent owners in cases of infringement. One possible remedy available in patent
litigation is a preliminary injunction.90 A preliminary injunction is a provisional
order, issued by a court and directed towards the defendant in a litigation. The
injunction forbids the party from performing a specified act which, in patent cases,
is ordinarily the practice of the patented invention. Patent owners may seek a
82
Ibid.
83
Gerald Sobel, “The Court of Appeals for the Federal Circuit: A Fifth Anniversary Look
at Its Impact on Patent Law and Litigation,” 37 American University Law Review (1988),
1087.
84
35 U.S.C. § 282 (2002).
85
Sobel, supra note 83.
86
Lindemann Maschinenfabrik GmbH v. American Hoist & Derrick Co., 730 F.2d 1452 (Fed.
Cir. 1984).
87
Gregory J. Maier & Robert C. Mattson, “State Street Bank in the Context of the Software
Patent Saga,” 8 George Mason Law Review (1999), 307.
88
Ibid; see also Lawrence T. Kass & Michael N. Nitabach, “A Roadmap for Biotechnology
Patents? Federal Circuit Precedent and the PTO’s New Examination Guidelines,” 30
American Intellectual Property Law Association Quarterly Journal (2002), 233.
89
Erik S. Maurer, “An Economic Justification for a Broad Interpretation of Patentable
Subject Matter,” 95 Northwestern University Law Review (2001), 1057.
90
35 U.S.C. § 283 (2002).
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preliminary injunction that is effective until the court conducts a full trial on the
merits.91
Prior to the Federal Circuit, patent owners tended to encounter difficulty in
obtaining preliminary injunctions. According to patent attorney Robert Taylor,
regional circuit courts often required the patent owner to show that its patent had
been upheld in a prior case before issuing a preliminary injunction in a subsequent
case.92 The Federal Circuit has instead allowed patent owners to rely more heavily
upon the statutory presumption of validity.93 As a result, the award of a preliminary
injunction focuses more upon a showing that the patentee is likely to prevail in a fullfledged litigation. In turn, preliminary injunctions appear more likely to be awarded
under the case law of the Federal Circuit than under the rulings of predecessor courts.
Because a preliminary injunction has been described as a powerful weapon for patent
owners, allowing a quick and effective remedy against infringers, this shift in the
case law is said to have increased the value of the patent right.94
The Federal Circuit has also been viewed as increasing the amount of monetary
damages owed by infringers to patent owners.95 According to Mr. Taylor, case law
from the regional circuits prior to the Federal Circuit “made a conscious policy to
minimize patent damages.”96 The Federal Circuit’s decisions instead allow patent
owners to recover whatever losses are reasonably foreseeable consequences of
infringement.97
The Federal Circuit has also achieved a number of procedural reforms within
the patent law. For example, the Federal Circuit has determined that in jury trials,
the trial judge should resolve disputes about the scope of patents involved in
enforcement litigation.98 The Federal Circuit has also delineated the types of
91
John Leubsdorf, “The Standard for Preliminary Injunctions,” 91 Harvard Law
Review (1978), 525.
92
Taylor, supra note 77.
93
James J. Foster, “The Preliminary Injunction - A ‘New’ and Potent Weapon in Patent
Litigation,” 68 Journal of the Patent and Trademark Office Society (1986), 281.
94
William A. Morrison, “The Impact of the Creation of the Court of Appeals for the Federal
Circuit on the Availability of Preliminary Injunctive Relief Against Patent Infringement,”
23 Indiana Law Journal (1990), 169.
95
Allan N. Litman, “Monopoly, Competition and Other Factors in Determining Patent
Infringement Damages,” 38 IDEA: Journal of Law and Technology (1997), 1.
96
Taylor, supra note 77.
97
Rite-Hite Corp. v. Kelley Co., 56 F.3d 1368 (Fed. Cir. 1995) (en banc).
98
Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc), aff’d, 517
U.S. 370 (1996).
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evidence on which the trial court might appropriately rely.99 Experts believe that this
change provides more reliable and consistent procedures for interpreting patents.100
Many experts believe that, in total, the Federal Circuit has made the patent law
more coherent and easier to apply. According to Rochelle Dreyfuss, a member of
the faculty of the New York University School of Law, the Federal Circuit has begun
to make patent law more accurate and precise.101 With a single Federal Circuit
considering patent law principles on a more regular basis than did any one of the
regional circuit courts of appeal, Ms. Dreyfuss believes that the Federal Circuit “has
taken the opportunity to rationalize and reconcile the entire body of patent
doctrine.”102 In her view, with a patent law easier for the innovative industry to
discern, a more predictable legal environment for technological advancement has
resulted.
Critiques of the Federal Circuit
The Federal Circuit has also been the subject of critical commentary over its
twenty-year history. Some commentators have expressed concern over the unique
nature of the Federal Circuit, which departs from the traditional structure of appellate
courts. In a published judicial opinion, Chief Judge Young of the U.S. District Court
for the District of Massachusetts stated:
The Federal Circuit is different. Unlike the other regional circuit courts of
appeal, the Federal Circuit came into being, in part, pursuant to an express
Congressional mandate to foster uniformity in the law of patents. . . . Indeed, the
Federal Circuit views itself as a substantive policymaker, a court with a mission
....
Almost since its inception, the Federal Circuit has been dogged with
criticism for straying from the path carefully delineated for appellate tribunals.
Disappointed litigants and commentators have criticized the court for fact-finding
and other forms of hyperactive judging. Increasingly, the bar is expressing
concern over the court’s decision-making procedures and its apparent willingness
to take over the roles of patent examiner, advocate and trier of fact.103
Some commentators believe that the Federal Circuit has overly favored patent
owners. For example, referring to the Federal Circuit, Chief Judge Richard Posner
of the Seventh Circuit has stated that “a specialized court tends to view itself as a
booster of its speciality.”104 Some observers have cited such legal developments as
99
Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576 (Fed. Cir. 1996).
100
Daniel J. Melman, “Post Markman: Claim Construction Trends in the Federal Circuit,”
7 Richmond Journal of Law and Technology (2001), 4.
101
Dreyfuss, supra note 2.
102
Ibid.
103
Control Resources, Inc. v. Delta Electronics, Inc., 131 F.Supp.2d 121, 123-24 (D. Mass.
2001).
104
Declan McCullagh, “Left gets nod from right on copyright law,” CNETNews.com (Nov.
(continued...)
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the expansion of patentable subject matter, an obviousness standard that is believed
to be lenient, and a perceived restricted view of antitrust principles, as evidence that
the Federal Circuit is a favorable forum for patent owners.
The trend towards an expansive sense of the subject matter that can be patented,
including biotechnology, business methods and computer software, as well as the
increased damages awards, have been noted previously.105 Some observers see these
developments not so much as reflecting the needs of modern industry or the actual
economic consequence of patent infringement, but rather a bias towards increasing
the importance of the patent law.106
As noted above, in the view of some commentators, the Federal Circuit has
lowered the standard of nonobviousness.107 For example, the Federal Circuit has
prohibited USPTO examiners from relying upon “common sense” in its patentability
determinations. Instead, examiners must cite specific earlier patents, publications
and other references that prove the invention would have been obvious.108 In
addition, in contrast to predecessor courts, the Federal Circuit also allows patent
owners to rely more heavily upon so-called “secondary considerations,” such as the
commercial success of the patented invention, in order to prove that the invention
would not have been obvious.109 As a result, some observers believe that USPTO
examiners face more difficulty in rejecting patent applications on such inventions as
business methods, and accused infringers have a harder time having issued patents
declared invalid.110
In the view of some observers, the Federal Circuit has not rigorously upheld
antitrust policies. According to attorneys Ronald S. Katz and Adam J. Safer, one
“potential and unintended effect of the creation of the Federal Circuit is that the
delicate balance maintained for many years between intellectual property law and
antitrust law may have been tipped decisively in favor of intellectual property.”111
Katz and Safer contend that in cases covering such practices as refusals to license and
tying – where the patent owner agrees to sell the patented product only where the
104
(...continued)
20, 2002) (reporting remarks of Judge Richard Posner that: “A specialized court tends to see
itself as a booster of its speciality.”) (available at http://news.com.com
/2100-1023-966595.html).
105
See supra notes 87-89 and accompanying text.
106
Malla Pollack, “The Multiple Unconstitutionality of Business Method Patents: Common
Sense, Congressional Consideration, and Constitutional History,” 28 Rutgers Computer and
Technology Law Journal (2002), 61.
107
See supra notes 78-82 and accompanying text.
108
In re Lee, 277 F.3d 1338 (Fed. Cir. 2002).
109
See, e.g., Allen Archery Inc. v. Browning Mfg., 819 F.2d 1087 (Fed. Cir. 1987).
110
Robert P. Merges, “Commercial Success and Patent Standards: Economic Perspectives
on Innovation,” 76 California Law Review (1988), 803.
111
Ronald S. Katz & Adam J. Safer, “Should One Patent Court Be Making Antitrust Law for
the Whole Country?,” 69 Antitrust Law Journal (2002), 687.
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purchaser also buys an unpatented product – the Federal Circuit has tended to decide
in favor of the patent owner.112 James Gambrell, a member of the University of
Texas School of Law, concludes that Federal Circuit jurisprudence “elevates patent
rights at the expense of unfair competition and core antitrust principles that [the
Federal Circuit] was not given the jurisdiction to control.”113
Some analysts also believe that the concentration of patent law appeals within
the Federal Circuit leads to a rapid pace of legal development. In a speech delivered
at the Marquette Law School, Judge Randall R. Rader of the Federal Circuit
explained that the number of copyright lawsuits is comparable to the number of
patent suits each year. Judge Rader further estimated that while the average circuit
court decides an average of 3.5 copyright cases each year, the Federal Circuit has in
recent years averaged 96 precedential patent cases annually.114 Judge Rader
concluded that the rate of common law development at the Federal Circuit proceeds
“at twenty-five times the pace of the average circuit.”115 Such a concentration could
conceivably lead to less, rather than more predictability within the patent law.
Other observers believe the specialized appeals court model provides less
chance for sound development of the law. As explained by Judge Rader: “When the
Federal Circuit speaks, that becomes the nationwide rule and in many cases, once it
has spoken there is less percolation [and] less chance for experimentation . . . .”
Channeling cases to a single forum may deprive the patent law of the collective
wisdom of many jurists, some experts believe, as well as take the patent law outside
the mainstream of legal thinking.116
Some critics have also suggested that difficulties exist in the relationship
between district court judges and the Federal Circuit . Kimberly Moore, a member
of the faculty of the George Mason University School of Law, completed an
empirical study that shows that district court judges improperly interpret patent claim
terms in 33% of the cases appealed to the Federal Circuit.117 Because the proper
interpretation of patent instruments is a central component of any patent litigtation,
this reversal rate leads Ms. Moore to question whether “the patent system [can]
flourish if the scope of the patentee's property right is wrongly assessed one-third of
the time.” Some observers appear to be of the view that some district court judges
are frustrated by the large number of their opinions that are overturned by the Federal
112
Ibid.
113
James B. Gambrell, “The Evolving Interplay of Patent Rights and Antitrust Restraints in
the Federal Circuit,” 9 Texas Intellectual Property Journal (2001), 137.
114
Randall R. Rader, “The United States Court of Appeals for the Federal Circuit: The
Promise and Perils of a Court of Limited Jurisdiction,” 5 Marquette Intellectual Property
Law Review (2001), 1.
115
Ibid.
116
Ibid.
117
Kimberly A. Moore, “Are District Court Judges Equipped to Resolve Patent Cases?,” 12
Federal Circuit Bar Journal (2002), 1.
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Circuit. For example, Judge Samuel B. Kent, for the Southern District of Texas,
once stated in open court:
Frankly, I don't know why I'm so excited about trying to bring this thing [patent
infringement trial] to closure. It goes to the Federal Circuit afterwards. You
know, it's hard to deal with things that are ultimately resolved by people wearing
propeller hats. But we'll just have to see what happens when we give it to them.
I could say that with impunity because they've reversed everything I've ever done,
so I expect fully they'll reverse this, too.118
According to some observers, inconsistencies between trial court and Federal Circuit
opinions hold the potential to lengthen litigation, discourage settlement and increase
uncertainty.119 Ms. Moore questions whether the innovation is hampered by the
seeming inability of trial judges to comply with Federal Circuit law.120
Recent Developments
Two recent events are notable for their analysis of the appropriate role of the
Federal Circuit within the federal judiciary. The 1998 report of the so-called “White
Commission” addressed the possibility of additional courts with specialized subject
matter jurisdiction, as well as the possibility of transferring additional appeals from
the regional circuits to the Federal Circuit. As well, the 2002 decision of the
Supreme Court in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc.,121
appears to have restricted the exclusive appellate jurisdiction of the Federal Circuit.
This report explores these two developments in turn.
The White Commission
Congress created the Commission on Structural Alternatives for the Federal
Courts of Appeals in 1997.122 The commission, headed by retired U.S. Supreme
Court Justice Byron R. White, has been more commonly termed the “White
Commission.” The Commission was charged to “report to the President and the
Congress its recommendations for such changes in circuit boundaries or structure as
may be appropriate for the expeditious and effective disposition of the caseload of
the Federal Courts of Appeals.”123 As part of this task, the Commission considered
several issues pertinent to the current structure of the Federal Circuit.124
118
O.I. Corp. v. Tekmar Co., No. 95-CV-113 (S.D. Tex. June 17, 1996). The Federal Circuit
affirmed Judge Kent’s ruling on appeal. See O.I. Corp. v. Tekmar Co., 115 F.3d 1576 (Fed.
Cir. 1997).
119
Rooklidge & Weil, supra note 64.
120
Moore, supra note 117.
121
535 U.S. 826 (2002).
122
Pub. L. No. 105-119 (Nov. 26, 1997).
123
Ibid.
124
Commission on Structural Alternatives for the Federal Courts of Appeal, Final Report
(continued...)
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The White Commission initially circulated a “tentative draft report” that
discussed the possibility of transferring copyright cases from the regional circuits to
the Federal Circuit.125 The draft report observed that patents and copyrights are linked
in the Constitution, which permits Congress to "promote the Progress of Science and
useful Arts, by securing for limited Times to Authors and Inventors the exclusive
Right to their respective Writings and Discoveries."126 Like patents, copyrights are
governed by a single federal law, the Commission observed, suggesting that uniform
interpretation of those laws is a desirable objective. The Commission further
observed that the availability of both copyright and patent protection for computer
programs has caused a convergence in the two legal disciplines. The Commission
noted that these developments have led some observers to suggest that the same court
be assigned exclusive jurisdiction over patent and copyright claims.127
The White Commission deleted this discussion from the final version of its
report, however. Although the White Commission did not explain this omission,
some commentary over this portion of the draft report was negative. Carl Tobias, a
member of the faculty of the University of Nevada at Las Vegas Law School,
observed that Federal Circuit judges had minimal experience with copyright.128
Michael K. Kirk, Executive Director of the American Intellectual Property Law
Association, stated that the Federal Circuit already possessed a busy caseload that
should not be further weighted down by the imposition of copyright claims.129
Finally, Mr. Kirk also believed that copyright on technologies formed a relatively
small part of the copyright law, so that any perceived efficiency gains were
minimal.130 Mr. Kirk further stated that: “The Federal Circuit should not become a
‘catch-all’ court or ‘dumping ground’ for various types of appeals that can be neatly
carved out of regional circuits’ jurisdiction.”131
The final report of the White Commission did address the possibility of
additional courts that, like the Federal Circuit, would be organized not by geography,
but by the subject matter over which they possessed jurisdiction. Finding no
compelling need, the Commission therefore declined to recommend that Congress
124
(...continued)
(Dec. 18, 1998) (available at http://app.comm. uscourts.gov/final/appstruc.pdf) [hereinafter
“White Commission Report.”].
125
See Commission on Structural Alternatives for the Federal Courts of Appeals, Tentative
Draft Report (Oct. 7, 1998).
126
U.S. Constitution, Article I, Section I, Clause 8.
127
White Commission Report, supra note 124.
128
Carl Tobias, “The White Commission and the Federal Circuit,” 10 Cornell Journal of Law
and Public Policy (2000), 45.
129
Letter from Michael K. Kirk, Executive Director of the American Intellectual Property
Law Association to the Commission on Structural Alternatives for the Federal Courts of
Appeals (Nov. 6, 1998) (available at http://app.comm.uscourts.gov/report/comments/
PropLaw.htm).
130
Ibid.
131
Ibid.
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create new courts with exclusive jurisdiction in cases concerning a particular legal
discipline.132 The Commission further observed that should Congress wish to invest
a single appellate court with exclusive jurisdiction over particular subjects, the
Federal Circuit might serve as the appropriate forum. The Commission took
particular note of tax and social security benefit appeals as possible areas that might
benefit from a consolidated appellate court.133
Holmes v. Vornado
On June 3, 2002, the U.S. Supreme Court issued its decision in Holmes Group,
Inc. v. Vornado Air Circulation Systems, Inc.134 That case interprets the principal
statutes establishing the jurisdiction of the Federal Circuit. The first of these statutes,
28 U.S.C. § 1295, provides in part:
(a) The United States Court of Appeals for the Federal Circuit shall have
exclusive jurisdiction-(1) of an appeal from a final decision of a district court of the United States . . .
if the jurisdiction of that court was based, in whole or in part, on section 1338 of
this title. . . .
In turn, 28 U.S.C. § 1338(a) states in part, with emphasis added:
The district courts shall have original jurisdiction of any civil action arising
under any Act of Congress relating to patents, plant variety protection,
copyrights and trademarks.
Courts traditionally look to see whether a case is “arising under” a particular statute
by looking solely at the documents the plaintiff files with a court to commence a
particular litigation. These documents are termed the “complaint.”135 Thus, if the
plaintiff’s complaint stated a cause of action under the patent law, then the district
court would possess jurisdiction and appeals would go to the Federal Circuit.
Lawyers sometimes term this the doctrine as the “well-pleaded complaint rule.”136
More difficult issues arise when the plaintiff’s complaint does not state a cause
of action in patent law, but the defendant’s court filings do. The defendant’s court
filings, termed as the “answer,” may contain so-called “counterclaims” that include
a cause of action under the patent law.137 For example, suppose that the plaintiff
claims an antitrust violation in his complaint, while the defendant in turn asserts a
claim of patent infringement against the plaintiff in her answer. The issue in Holmes
132
White Commission Report, supra note 124.
133
White Commission Report, supra note 124.
134
535 U.S. 826 (2002).
135
Federal Rules of Civil Procedure Rule 7(a).
136
See, e.g., Richard E. Levy, “Federal Preemption, Removal Jurisdiction, and the WellPleaded Complaint Rule,” 51 University of Chicago Law Review (1984), 634.
137
Federal Rules of Civil Procedure Rule 7(a).
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v. Vornado was whether such a case “arises under” the patent law within the meaning
of the statutes establishing the jurisdiction of the Federal Circuit.
Numerous earlier Federal Circuit cases looked to whether either the plaintiff’s
complaint or the defendant’s answer asserted a cause of action based upon the patent
law.138 If so, then the Federal Circuit believed that it possessed jurisdiction to resolve
that appeal. The Federal Circuit justified its interpretation of the statute based upon
its congressional mandate to prevent forum shopping and provide consistent
interpretation of the patent laws nationwide.139
In Holmes v. Vornado, the Supreme Court overturned the Federal Circuit. The
Supreme Court held that “a counterclaim – which appears as part of the defendant’s
answer, not as part of the plaintiff’s complaint – cannot serve as the basis for ‘arising
under’ jurisdiction.”140 The Supreme Court held that the “well-pleaded complaint
rule” was of long standing and could not be converted into a “well-pleaded
complaint-or-counterclaim rule.”141 The consequence of Holmes v. Vornado is that
appeals of cases based upon a complaint that does not state a cause of action in patent
law, but nonetheless involve considerable patent issues, will be heard by the regional
courts of appeals rather than the Federal Circuit. Although the Supreme Court
recognized that having regional circuits decide patent counterclaims could undermine
consistency in the patent law, the concurring opinion of Justice Stevens observed:
An occasional conflict in decisions may be useful in identifying questions that
merit this Court’s attention. Moreover, occasional decisions by courts with
broader jurisdiction will provide an antidote to the risk that the specialized court
may develop an institutional bias.142
Attorney James W. Dabney has stated that Holmes v. Vornado “strengthens the
traditional right of plaintiffs to choose their own law and forum” and “contracts the
exclusive appellate jurisdiction of the Federal Circuit.”143 Attorneys Bruce M. Wexler
and Joseph M. O’Malley, Jr. are somewhat more concerned over the impact of the
decision, predicting that Holmes v. Vornado “is almost certain to introduce some
strategic forum shopping, pleading strategies and races to the courthouse, since
plaintiffs will now have more ability to direct their non-patent claims to the forum
of their choosing.”144 Given that Holmes v. Vornado was only recently decided, its
full impact upon patent litigation cannot yet be confidently assessed.
138
Aerojet-General Corp. v. Machine Tool Works, 895 F.2d 736 (Fed. Cir. 1990) (en banc).
139
Ibid.
140
122 S.Ct. at 1894.
141
122 S.Ct. at 1893.
142
122 S.Ct. at 1898.
143
James W. Dabney, “Holmes v. Vornado: A Restatement of the ‘Arising Under’
Jurisdiction of the Federal Courts,” 11 New York State Bar Association Bright Ideas no. 2
(Autumn 2002), 3.
144
Bruce M. Wexler and Joseph M. O’Malley, Jr., “Deciding Jurisdiction in Patent Cases,”
New York Law Journal (August 12, 2002).
CRS-22
Concluding Observations
Twenty years of experience has led to varying perceptions of the Federal Circuit.
There can be little question that during the past two decades, the patent system has
become a more prominent intellectual property discipline. Whether this development
has increased the rewards for innovation, or instead creates a legal environment that
makes it more difficult for innovative firms to do business, remains an open question.
With recent developments continuing to shape the jurisdiction of the court, the
Federal Circuit remains a work in progress.
Congress has not created another court modeled after the Court of Appeals for
the Federal Circuit, possessing nationwide appellate jurisdiction over particular
subject matter. However, there has been some congressional interest in creating a
court to hear pharmaceutical patent disputes, investing a single trial court with
exclusive jurisdiction to preside over patent trials, and introducing additional judicial
specialization in such fields as tax and commercial law.145 Continued experience with
the Federal Circuit may provide insights on the possible benefits and detriments of
creating these additional tribunals. Identification of the factors that make judicial
specialization desirable, as well as the impact of specialized courts upon the fields
of law within their jurisdiction, may guide future changes to the federal judicial
system.
145
See Arti K. Rai, “Specialized Trial Courts: Concentrating Expertise on Fact,” 17 Berkeley
Technology Law Journal (2002), 877.
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