10.3 Judicial institutions
For most of U.S. history, federal district courts have been the exclusive tribunal for adjudicating patent cases and challenging the validity of patents. They remain a vital institution for both functions, although they now share the former with the USITC (with respect to imported goods) and the latter with the PTAB. It is not uncommon for patent disputes to play out in two or even all three institutions simultaneously, although there are rules and practices that stay or avoid overlapping proceedings. As noted above, there are also special sets of rules applicable to litigation over generic drugs (so-called ANDA cases) and biosimilars.
10.3.1 Federal judiciary structure
The U.S. federal judiciary has three levels for handling patent cases: (1) the district courts, which adjudicate disputes in the first instance; (2) the Federal Circuit, which has exclusive jurisdiction over patent appeals; and (3) the U.S. Supreme Court, which reviews appeals from the Federal Circuit on a discretionary basis.
Figure 10.5 shows the judicial administration structure in the U.S.
Source: Judicial Administration Structure for IP Disputes provided by the USPTO, available at www.wipo.int/wipolex/en/judgments/j-admin/us.html
10.3.2 Specialized intellectual property judiciary
The U.S. federal judiciary has a mixed approach to patent specialization. Federal district courts have general jurisdiction. Therefore, federal district judges hear a full range of federal cases, ranging from criminal to civil matters. District judges are assisted by federal magistrate judges, law clerks and other court personnel, including general court clerks, administrative assistants and court reporters. Relatively few federal district judges or other district court personnel have scientific or technical backgrounds or patent litigation experience.
The Seventh Amendment to the U.S. Constitution affords either party the right to have patent cases heard by a jury. Since the mid-1990s, approximately 70 percent of patent cases have been tried to juries. Federal civil juries are randomly selected from lists of registered voters and people with a driver’s license who live in the district in which the case is tried. Jurors rarely have specialized scientific, engineering, or patent law training. Federal Rule of Civil Procedure (FRCP) 48 provides that federal juries must contain between 6 and 12 jurors, verdicts must be returned by at least 6 jurors, and that verdicts must be unanimous unless the parties stipulate otherwise.
FRCP 53 and Federal Rule of Evidence (FRE) 706 authorize district judges to appoint special masters to hear evidence and argument from the parties and render an initial decision on substantive matters, such as claim construction or summary judgment. Special masters may also present testimony at trials. Relatively few courts use such advisors.
By contrast, the Federal Circuit has a specialized docket that includes patent appeals. The Federal Circuit was established to eliminate forum shopping among regional circuit courts and to develop a tribunal with particular expertise in patent law. Several of the 19 active and senior judges of the Federal Circuit have scientific or technical backgrounds, as do many of the law clerks.
The U.S. Supreme Court has general jurisdiction. The nine Justices do not have specialized training or experience in science or technology. At least four of the nine Justices must agree to grant review of cases, and all nine members hear cases as a single panel.
10.3.3 Relationship between invalidity and infringement proceedings
U.S. patent litigation often entails parallel proceedings with parties seeking to take advantage of the distinctive characteristics of different dispute resolution fora. The copendency of litigation involving the same patent can result in the duplicative expenditure of judicial resources and impose unnecessary burdens on parties. Various default rules and discretionary authority aim to avoid duplicative and wasteful litigation.
10.3.3.1 District court proceedings
It is not uncommon for patent holders to pursue infringement actions involving the same patent in different jurisdictions at the same time as a result of jurisdiction and venue considerations. Furthermore, copending litigation relating to the same patent can occur when a company under threat of patent enforcement pursues declaratory judgment of invalidity, noninfringement, or unenforceability in a jurisdiction other than where a patent holder is seeking to enforce the patent against that company or other entities. The public policy favoring expeditious resolution of disputes is of particular weight when dealing with wasting assets such as patents.81 Nonetheless, when two actions involving nearly identical parties and closely related patent infringement questions are filed in separate districts, the general rule is that the case first filed takes priority. The first-to-file presumption applies to declaratory judgments as well.
The first-to-file rule, however, “is not rigidly or mechanically applied – an ample degree of discretion, appropriate for disciplined and experienced judges, must be left to the lower courts.”82 Courts occasionally make exceptions based on “considerations of judicial and litigant economy, and the just and effective disposition of disputes.”83 In weighing venue transfer or stay motions, courts have looked to the status of the co-pending case, harm caused by delaying the stayed issues, whether the other forum lacks jurisdiction over all necessary or desirable parties, the possibility of consolidation, the convenience of the parties, and judicial economy.
Stays of co-pending patent litigation involving different parties have been most commonly granted in “customer suit” situations. Such litigation arises when the patent holder is engaged in one litigation against a provider of the accused technology and separate litigation against the purchaser of the accused technology. In some circumstances, courts have stayed patent litigation against such customers pending the outcome of the supplier suit, principally where resolution of liability with respect to the supplier will resolve liability with respect to the customer.
Cases involving the same patent and same parties (e.g., a declaratory judgment action brought by the accused infringer and a patent infringement action brought by the patent holder) are typically resolved by the first-to-file rule: the earlier-filed case takes precedence, and the later-filed case is transferred, stayed, or dismissed.
Even where one case or a group of cases clearly takes precedence based on the first-to-file principle, if the subsequent cases were filed soon after the case deemed to have precedence, the patent holder will likely argue that the stay will be prejudicial and that the possibility of case-narrowing is illusory – indeed, it may require the patent holder’s claims against some defendants to sit for years while other litigation is resolved. In addition, courts will also likely consider the possibility that the case(s) deemed to have precedence will not actually resolve issues that narrow the case sought to be stayed (because of settlement, because the patent holder prevails, or otherwise) and that, even when the same patent claims are asserted, the claim construction and invalidity issues may differ substantially (e.g., because the patent holder’s infringement allegations against the various defendants differ). For these reasons, where the request to stay is filed at the outset of the case, most courts will consider other options, such as multidistrict litigation, an important case management innovation that consolidates multiple complex related cases in a single district court.84 The stage of the case deemed to have precedence can alter this analysis substantially. If, for example, a request seeks to stay a case in its infancy to await the resolution of a case that is on the eve of a trial at which invalidity is at issue, the factors may weigh strongly toward stay; likewise, if the case deemed to have precedence is pending in a venue with a short time to trial, that may also weigh strongly in favor of a stay.
10.3.3.2 United States International Trade Commission proceedings
Following the Supreme Court’s ruling in eBay, Inc. v. MercExchange, L.L.C.85 (see Section 10.7.1) the USITC emerged as an active patent enforcement tribunal because it “is not required to apply the traditional four-factor test for injunctive relief.”86 Where a USITC proceeding finds patent infringement, the USITC generally issues exclusion orders barring importation of the infringing articles into the United States.
Reflecting the USITC’s rapid adjudication timeline, Congress authorized parties to a district court patent case that are also respondents in a parallel USITC proceeding to move for a stay of the district court proceedings as a matter of right.87 The stay remains in effect until the determination of the USITC becomes final. After the dissolution of the stay, 28 U.S.C. § 1659(b) allows the parties to use the USITC investigation record in the district court proceeding.
Although the § 1659(a) stay is mandatory, it only applies to “any claim that involves the same issues involved in the proceeding before the [USITC].” Nonetheless, in cases involving additional patents not at issue in a USITC proceeding, district courts are often asked to stay the entire proceeding. In deciding whether to grant such a stay, the district court will typically balance several factors, including possible damage that may result from the granting of a stay, the hardship or inequity that a party may suffer in being required to go forward and the orderly course of justice measured in terms of the simplifying or complicating of issues, proof and questions of law that could be expected to result from a stay.
Although district courts may consider the record from the USITC proceeding, USITC patent determinations – such as claim construction, validity, infringement, and defenses – do not have a preclusive effect on subsequent district court litigation.88 The general intellectual property jurisdiction statute grants federal courts original and exclusive jurisdiction of civil actions “arising under any Act of Congress relating to patents.”89 Nonetheless, district courts can and do consider USITC rulings in adjudicating cases involving the same patents considered by the USITC.
10.3.3.3 Patent Trial and Appeal Board proceedings
The AIA’s institution of IPR and PGR has invigorated the USPTO’s authority to invalidate patents. The AIA requires that these proceedings, conducted by the PTAB, proceed expeditiously in a streamlined process. In addition, patents reviewed in PTAB proceedings do not carry a presumption of validity. Thus, the challenger need only prove that it is more likely than not that the challenged patent claim is invalid; the challenger does not need to meet the higher “clear and convincing” evidentiary standard applicable in a district court proceeding. As a result, a high percentage of defendants in district court patent litigation seek administrative review of patents asserted against them.
USPTO processes principally affect district court patent case management through stays pending USPTO review. Many district judges have been receptive to staying proceedings involving the same patent claims subject to PTAB review pending resolution of the PTAB proceeding. The rate of stay grants, however, varies across districts and judges. Judges in the Northern District of California and the District of Delaware have granted a high percentage of stay motions, whereas judges in the Eastern and Western Districts of Texas have been reluctant to do so. This factor has a strong influence on where patentees file enforcement actions.
Most courts continue to evaluate stay motions according to the same three-factor test articulated prior to the passage of the AIA:
(1) whether discovery is complete and whether a trial date has been set; (2) whether a stay will simplify the issues in question and trial of the case; and (3) whether a stay would unduly prejudice or present a clear tactical disadvantage to the nonmoving party. 90
The decision remains based on the “totality of the circumstances,” and the inquiry is not limited to the three factors commonly cited.91 Because the PTAB has six months to decide whether to institute an IPR proceeding after a petition is filed,92 and the scope of the proceeding will not be known until it is instituted, many courts delay ruling on the stay motion until institution is granted.
One important issue in assessing a stay motion is whether the PTAB review would potentially resolve the full range of claims before the court. The stay motion presents the court with the opportunity to clarify the potential ramifications of the PTAB review. If a successful challenge would not resolve the outstanding questions, the court can explore the possibility of stipulations to streamline the district court litigation.
PTAB decisions can also affect how a district court construes claim terms. Although the PTAB’s claim construction is not binding on district courts, district judges can consider the PTAB’s claim construction rulings as part of their claim construction process. Since 2018, the PTAB has applied the same standard as used by district courts – that set forth in Phillips v. AWH Corp.93 – in construing patent claims.
10.3.4 Judicial education on intellectual property
The Federal Judicial Center, the education and research agency of the federal courts, provides new federal judges with general judicial training and continuing legal education, including a variety of judicial education programs in the patent area. In conjunction with Professor Peter Menell and the Berkeley Center for Law and Technology, the Center has conducted annual patent training programs since 1998. The Patent Case Management Judicial Guide,94 now in its third edition, provides a comprehensive resource for managing patent cases.