Things are not as bad as they seem at the Federal Circuit

The Supreme Court unanimously overturned two Federal Circuit decisions and had some particularly strong words, bordering on contempt, in one of them.

Justice Samuel Alito wrote in the Court’s Limelight v Akamai opinion: “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent. A method patent claims a number of steps; under this Court’s case law, the patent is not infringed unless all the steps are carried out.”

Given that the Federal Circuit’s very function is to understand what it means to infringe a patent and the Supreme Court merely dabbles in patent law – although with increasing interest – this could be seen as deliberate provocation. Many believe the Supreme Court is irritated at what it views as the Federal Circuit ignoring the letter of the law and rewriting patent law to its own taste.

Harvard law professor Noah Feldman succinctly captured the situation in a Bloomberg article: “For the justices to say the circuit judges fundamentally misunderstand patent law is a bit like an intern copywriter saying Don Draper fundamentally misunderstands advertising.”

"The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent" - Justice Samuel Alito

The Federal Circuit has had a tough couple of weeks. Monday’s opinions meant the Supreme Court has overturned all of the Federal Circuit decisions in the five patent cases it has decided this year (there is one more decision to come). Meanwhile, Randall Rader stood down as Chief Judge of the Federal Circuit on May 30, a decision announced on May 23.

Rader’s announcement came amid stories of him sending a laudatory email to patent attorney Edward Reines at Weil Gotshal and Manges and encouraging him to share it with others. Rader later recused himself from certain cases as a result.

“I have come to realise that I have engaged in conduct that crossed lines established for the purpose of maintaining a judicial process whose integrity must remain beyond question,” he said in a letter once the news became public. “It is important to emphasise that I did not and would never compromise my impartiality in judging any case before me. But avoiding even the appearance of partiality is a vital interest of our courts, and I compromised that interest by transgressing limits on judges’ interactions with attorneys who appear before the court. I was inexcusably careless, and I sincerely apologise.”

“I have come to realise that I have engaged in conduct that crossed lines established for the purpose of maintaining a judicial process whose integrity must remain beyond question” – Former Chief Judge Randall Rader

The mainstream press has not hesitated to put the boot in. Jeff Roberts at GigaOm said the Federal Circuit “looks beyond salvaging. It’s time for Congress to disband the court." Timothy B Lee, reporter at media start-up Vox and former technology reporter at the Washington Post, was more measured but said Rader’s indiscretion should prompt a broader conversation about the Federal Circuit and that it was time for reform. “Because although most individual judges have not shown the kind of favouritism toward individual attorneys that Rader did, the court as an institution does seem to have an unduly cosy relationship with the patent bar,” wrote Lee.

The Supreme Court opinions have added further fuel to the fire, with many claiming that the fact that the high court keeps reversing the Federal Circuit’s opinions unanimously shows how out of touch the appeals court is. The Electronic Frontier Foundation declared after the two Supreme Court opinions this week that “it is time for a more balanced system”.

“These rulings mean that the Federal Circuit has been unanimously overruled in every single patent case heard by the Supreme Court this term,” said EFF staff attorney Vera Ranieri in a blog post. “Since there have been five decisions, the Federal Circuit is now an extraordinary 0-45 in supporting votes by Supreme Court justices this year. Even the Chicago Cubs have a better record than that.” (For our non-US readers, the Cubs reference is an insult.)

A reality check is needed. It is healthy to continually question the Federal Circuit’s role and consider any improvements that are needed. But the debate is feeling more like piling on than a sensible discussion.

My feeling is that Rader’s recusals and subsequent apology had nothing to do with the decision to step down this year (though it may have influenced the exact timing). However, it certainly did not help with the barrage of accusations the Federal Circuit has faced over the years of being too pro-patent and too cosy with the patent community. It would be helpful for Rader to add to his apology by expanding on the timing of his standing down as Chief Judge.

More importantly, the Supreme Court verdicts are self-selecting. The high court is not overturning all Federal Circuit decisions; in fact, it is hardly overturning any of them. The justices do not choose cases unless they have a strong feeling they will reverse them. The sample size of five reversals this year is so small that were the Supreme Court to side with the Federal Circuit in Alice v CLS – a big if, admittedly! – the reversal rate would suddenly look a lot more in line.

This point was taken up by Jason Rantanen, law professor at the University of Iowa College of Law, on the Patently O blog. In response to the EFF’s blog post, Rantanen said the reversals so far this year were “bleak numbers indeed” but said some context was needed. He noted that certiorari has been denied in many cases, despite the petitions being vigorously pursued and often with the support of amicus briefings. “So it’s not as if the Federal Circuit is always ‘losing’,” said Rantenen.

Rantanen added that the Supreme Court has reversed in 77% of all merit decisions so far this term, up from last year’s final reversal rate of 72%. “So that the Federal Circuit went 0 for 5 (two of which, Octane Fitness and Highmark, were a linked pair) doesn’t mean that the sky is falling,” said Rantanen. “And since 2010, the Federal Circuit has actually done fairly well: out of the 13 patent cases arising from the Federal Circuit since Bilski v Kappos, the Supreme Court has affirmed the outcome in whole or part seven times.”

“It is impossible to follow Supreme Court precedent on patent law issues because decisions are inconsistent with one another, often internally inconsistent and scientifically inaccurate” – Gene Quinn, founder of the IP Watchdog blog

The Supreme Court itself is hardly blameless when it comes to decisions that create confusion. As a result the Federal Circuit is sometimes put into a tough spot. Gene Quinn, a patent attorney who runs the IP Watchdog blog, said in a blog post after Rader announced he was standing down that making sense of Supreme Court precedent on patent law issues is “virtually impossible”. While noting that he is “certainly not a fan of a lot of recent Federal Circuit cases”, Quinn said more honesty was needed in the debate around the future of the Federal Circuit.

“It is impossible to follow Supreme Court precedent on patent law issues because decisions are inconsistent with one another, often internally inconsistent and scientifically inaccurate,” said Quinn. “To the extent that the Federal Circuit is seen as not following Supreme Court precedent it is because the Supreme Court refuses bright line rules, which in the world of science and technology are absolutely essential. Of course, bright line rules are also exceptionally helpful in the business world for decision making purposes as well. Furthermore, the Supreme Court decides one case here, another case there, and has no appreciation for how patent law concepts and principles are intertwined. Indeed, a careless, overbroad, poorly worded decision on a litigation issue, for example, will also impact patent prosecution, and vice versa.”

One need only look so far as the Supreme Court’s opinion in Myriad, and the USPTO’s subsequent response to it, to see the problems it can cause.

“The [Supreme Court’s Limelight] opinion is harsh toward the Federal Circuit, but somewhat poorly written" – Dennis Crouch, law professor at the University of Missouri School of Law

Not only that, but some believe the Supreme Court does not make total sense even when slamming the Federal Circuit for its own misunderstandings. Dennis Crouch, law professor at the University of Missouri School of Law, pushed back on the Supreme Court’s strong words in its Limelight opinion: “The opinion is harsh toward the Federal Circuit, but somewhat poorly written. In particular, the Supreme Court seems to have misunderstood that the Federal Circuit holding actually does require all steps of the method to be carried out in order for a finding for inducement.” See Crouch’s blog post for a detailed explanation of why he thinks this is so.

There is a new Chief Judge at the Federal Circuit and she deserves a chance to do her job rather than contend with calls for the Federal Circuit to be reformed or disbanded. In addition, under Rader’s watch six new judges were brought on board that are changing the make-up of the court. The Federal Circuit is far from a homogenous voice. There will be disagreements and, sometimes, these will make it up to the Supreme Court. Isn’t this how the system is supposed to work?