The Highest Court in the Land Shouldn't Always Pull Rank

The justices have a chance to acknowledge that patent courts know a thing or two about patent cases.

Rules, rules, rules.

Photographer: Andrew Harrer/Bloomberg

Who’s in charge of patent law? The answer lies in an ongoing conflict between two courts: the U.S. Court of Appeals for the Federal Circuit, which was created by Congress in 1982 and given control over the entire patent law docket, and the U.S. Supreme Court, which gets to choose which Federal Circuit cases to review and which to leave untouched.

The struggle is before the Supreme Court again Tuesday in a consolidated pair of cases with significant stakes for the patent bar. The court will consider under what circumstances lower courts can award “enhanced damages” of up to three times the amount of actual damages to a patent holder whose patent has been infringed. But the real issue is who gets to make the call about the meaning of the federal law that authorizes the damages. If you’re interested in who’s going to win the struggle, I’ve got a hint for you: It’s the court with “supreme” in its name.

The legal issue is inherently simple, although the policy issues in play are manifold. The statute in question, 35 U.S.C. Section 284, says merely that, after a finding of infringement, a lower court “may increase the damages up to three times the amount found or assessed.” As written, the law gives no further guidance. The question is whether this language means judges should use their discretion and common sense and make case-by-case determinations, or whether they can and should be guided by the higher courts to make their decisions more rule-like and predictable.

There’s a jurisprudential dilemma here. In general, lawyers like rules -- since law itself at bottom is a system of rules. The late Justice Antonin Scalia was an especially strong advocate of this point of view. Rules are meant to ensure that like cases are treated alike, the aspiration that underlies the law’s goal of fairness.

To a fan of rules, it makes sense for a supervising court to take a vague statutory provision and turn it into a rule. The Federal Circuit -- which sees itself as in charge of coordinating rational patent policy -- opted for this approach. It interpreted the statute to say that enhanced damages should only be awarded when it is objectively highly likely that the infringer was infringing, and that the infringer subjectively knew its conduct was infringing.

This is a fairly high standard, so in effect, it’s good for potential patent violators who can make an advance judgment -- and maybe get a legal opinion to back it up -- that their prospective actions aren’t highly likely to count as infringement.

But from the Federal Circuit’s perspective, what’s more important than protecting potential infringers is establishing a uniform rule. The rule is in place; everybody, whether patent holder or potential infringer, will know in advance how such cases will be adjudicated.

The other prong of the dilemma, however, is that judges are supposed to do what Congress says -- and Congress didn’t specify the rule. All Congress did in the statute was mention the possibility of enhanced damages. It could be that, through its silence, Congress was actually opting for case-by-case, discretionary judgment by the district courts. In other words, the statute may actually prohibit the adoption of a rule and require a flexible standard. For someone like Scalia, rules are generally good -- but the highest rule is that a court does what Congress says, including refusing to decide based on a rule.

Fortunately for us, we don’t have to guess at the outcome. The Supreme Court considered an almost identical issue last year, in a case involving another patent statute that occurs just one paragraph away in the U.S. code. In that case, with the terrific name of Octane Fitness LLC v. Icon Health and Fitness, the court considered the Federal Circuit’s interpretation of the provision that enables district courts to award attorneys’ fees under “exceptional circumstances.” The Federal Circuit had adopted a rule almost identical to the one at issue before the court now, restricting attorneys’ fees to cases that were objectively baseless and known to be so by the parties bringing them.

In last year’s Octane case, the Supreme Court, by a 9-0 vote, reversed the Federal Circuit. It held that the law requires that the lower courts exercise discretion on a case-by-case basis. It seems almost inconceivable that the court would vote differently this time.

But as Justice Robert Jackson famously remarked, the Supreme Court is infallible because it’s final, not final because it’s infallible. The fact that the Supreme Court will win its hand-picked conflicts with the Federal Circuit doesn’t mean it’s right.

Patent law is a complex and subtle field, and the patent bar is highly specialized. The Federal Circuit is, as a general matter, a much better place for understanding how patent law works and how to regulate the field. When the Supreme Court applies general principles of law in the patent context, it’s undermining the rational structure that the Federal Circuit is working hard to create.

If and when the justices reverse the Federal Circuit again (this time 8-0), they should ask themselves: Why are we doing this? Is there something the Federal Circuit knows that we don’t? Are we interfering with Congress’s scheme to rationalize patent law under the direction of the special court? Just because we know we can win every conflict, should we?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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