April 2010

Looking Ahead

In the February edition of Last Month at the Federal Circuit, we reported the Federal Circuit’s decision in Therasense, Inc. v. Becton, Dickinson & Co., Nos. 08-1511, -1512, -1513, -1514, -1595 (Fed. Cir. Jan. 25, 2010).  In that opinion, the Federal Circuit affirmed (among other things) the district court’s decision that U.S. Patent No. 5,820,551 was unenforceable due to inequitable conduct.  Following that decision, Plaintiffs-Appellants Abbott Diabetes Care, Inc. et al. filed a petition for rehearing en banc.  On March 26, 2010, the Federal Circuit vacated its January 25, 2010, opinion and reinstated the appeal for a hearing before an en banc panel.  Through these proceedings, the Court wishes to address the following issues relating to the standard for inequitable conduct:

1. Should the materiality-intent-balancing framework for inequitable conduct be modified or replaced?
   
   
2. If so, how?  In particular, should the standard be tied directly to fraud or unclean hands?  If so, what is the appropriate standard for fraud or unclean hands?
   
   
3. What is the proper standard for materiality?  What role should the PTO’s rules play in defining materiality?  Should a finding of materiality require that but for the alleged misconduct, one or more claims would not have issued?
   
   
4. Under what circumstances is it proper to infer intent from materiality?
   
   
5. Should the balancing inquiry (balancing materiality and intent) be abandoned?
   
   
6. Whether the standards for materiality and intent in other federal agency contexts or at common law shed light on the appropriate standards to be applied in the patent context.

Look for a summary of these proceedings in a future edition of Last Month at the Federal Circuit.

On April 19, 2010, the Supreme Court granted certiori in Costco Wholesale Corp. v. Omega S.A., U.S. No. 08-1423, which raises a question regarding the international exhaustion of intellectual property rights in the context of copyright law.  Omega S.A. (“Omega”) sued Costco Wholesale Corp. (“Costco”) for copyright infringement, claiming it did not authorize Costco’s sale of copyrighted products in the United States.  The U.S. District Court for the Central District of California entered SJ in Costco’s favor, agreeing that Omega’s rights were extinguished by the first authorized sale it made to a foreign distributor.  The Ninth Circuit reversed, holding that the first-sale doctrine does not apply in this situation because the watches were manufactured in Switzerland.

The question presented to the Supreme Court is:

Under the Copyright Act’s first-sale doctrine, 17 U.S.C. § 109(a), the owner of any particular copy “lawfully made under this title” may resell that good without the authority of the copyright holder.  In Quality King Distribs., Inc. v. L’Anza Research Int’l, Inc., 523 U.S. 135, 138 (1998), this Court posed the question presented as “whether the ‘first sale’ doctrine endorsed in § 109(a) is applicable to imported copies.”  In the decision below, the Ninth Circuit held that Quality King (which answered that question affirmatively) is limited to its facts, which involved goods manufactured in the United States, sold abroad, and then re-imported.  The question presented here is:
Whether the Ninth Circuit correctly held that the first-sale doctrine does not apply to imported goods manufactured abroad.

Costco Pet. at i.  The case will be argued during the Supreme Court’s October 2010 term.  The Court’s decision may have implications for international patent exhaustion going forward.