Pending U.S. Court Cases on Intellectual Property and Their Relation to the Trans-Pacific Partnership Agreement (TPPA)

**Updated 19 March 2013, after the Supreme Court released its opinion in Kirtsaeng ruling to permit parallel importation of copyrighted works**

The Supreme Court’s docket on intellectual property and related matters has been substantial this term, as well as recent years. Many interesting cases are also making their way through the Federal Courts of Appeals. Between last term and the current term, cases before the Supreme Court related to access to knowledge and access to medicines have included the parallel importation of copyrighted goods, patentability of human genes, patentability of self-replicating technology, the patent eligibility of certain method patents, the interplay of antitrust law and patent law in pay-for-delay cases, among others. The Supreme Court may also elect to grant certiorari in other cases, including the parallel importation of patented goods. Amongst the U.S. Courts of Appeals, a number of patent and copyright cases, including several fair use cases are currently being heard.

How the Trans-Pacific Partnership Agreement (TPPA) will affect these cases remains to be seen. However, the question of why the USTR has put forth proposals in some of these contentious areas while U.S. law remains undecided or unclear remains. Some of the issues in the U.S. proposals for the intellectual property chapter of the TPPA will be directly addressed by U.S. courts in the coming months; those cases pending before the Supreme Court this term will be decided before the Court recesses in June. While not exhaustive, brief coverage of court cases that may be relevant to the TPPA follow:

Pending Cases:
Kirtsaeng v. John Wiley and Sons (Supreme Court of the United States)
Parallel importation of copyrighted goods.

This case involves exhaustion of rights, also known as the first sale doctrine, of copyrighted goods. In this case, Kirtsaeng purchased textbooks from Thailand then resold them in the United States. The publisher filed suit alleging copyright infringement based on a theory that exhaustion of rights do not apply to foreign made works. There is currently a three-way split of authority in the United States on whether national exhaustion or international exhaustion of rights apply to copyrighted goods in the United States. The Third Circuit asserted that international exhaustion applies, the Ninth Circuit found that exhaustion occurs only after the right holder authorizes a first sale within the United States, and the Second Circuit found that exhaustion never applies to foreign made works. The Supreme Court heard oral arguments this fall and is expected to settle this split of authority by the time the Court recesses in June. This case is highly relevant to the TPPA negotiations because the U.S. proposed a ban on parallel importation of copyrighted works. If the Supreme Court rules in favor of Kirtsaeng, finding that exhaustion of rights apply even to sales abroad, the ruling would come in direct conflict with the U.S. proposal for the TPPA.

**Update: On 19 March 2013, the Supreme Court released its opinion in the Kirtsaeng case. In a 6-3 decision, the Court ruled that the first sale doctrine applies not just to domestically manufactured works, but also to those made abroad. The Court thus applies international exhaustion principles rather than national exhaustion, permitting the parallel importation of works. The Court’s ruling is therefore in conflict with the U.S. proposal in the TPPA. Further analysis of the Court’s decision is available here.**

Association for Molecular Pathology v. Myriad Genetics (Supreme Court of the United States)
Patent eligibility of human genes and isolated DNA.

This case surrounds the patent eligibility of human genes and isolated DNA, specifically the BRCA1 and BRCA2 genes associated with an individual’s susceptibility to breast and ovarian cancer. As a result of the upstream patenting on the BRCA genes, the right holder, Myriad Genetics has a monopoly over diagnostic testing for mutations on these genes and patients cannot obtain second opinion testing despite the fact that Myriad’s initial test failed to find known mutations and also had a known error rate, particularly for patients of non-European ancestry. The Supreme Court will hear oral arguments on 15 April 2013, with a decision expected by June. Notably, this case follows after the Supreme Court ordered the case re-heard by the Federal Circuit following its unanimous 2012 ruling in Mayo v. Prometheus, a case where the Supreme Court invalidated certain method claims on a diagnostic test. Although the issue of gene patenting is not expressly addressed n the TPPA, the U.S. has proposed very low patentability standards and also would require patents for diagnostic, therapeutic and surgical methods despite the fact that patenting for these categories are not required by TRIPS and have not been required by any previous U.S. free trade agreement.

Cambridge University Press v. Becker (11th Circuit)
Fair use of e-reserve system in a university.

In the present case, Georgia State University provided students access to copyrighted materials through electronic systems and over the internet, without permission from the rightholders. Publishers sued the university for the e-reserves system, alleging copyright infringement. The district court found fair use to apply in 70 of 75 cases (largely based on the amount of the work used) and that there was no copyright infringement. The district court noted that the four fair use factors (1) purpose and character of the use; 2) nature of the copyrighted work; 3) amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 4) effect of the use upon the potential market for or value of the copyrighted work) must be taken together, rather than viewed in isolation. The case is currently being appealed to the 11th Circuit. With respect to the TPPA, the U.S. has proposed the three-step test and while it references “criticism, comment, news reporting, teaching, scholarship and research,” these elements must be “subject to and consistent with” the three-step test. In other words, the U.S. has proposed the three-step test without providing appropriate protections for those limitations or exceptions that are not subject to the thee-step test, such as the list of Berne exceptions. Some may argue that the U.S. fair use system on its face would not comply with the three-step test as a WTO panel has interpreted the test. However, the exceptions found to be “fair use,” including in this e-reserves case, may be saved despite potential failure to comply with the three-step test because many “fair use” exceptions in the United States could actually fall under a specific Berne exception, such as the exception for teaching and education. However, if the U.S. proposed text on limitations and exceptions for the TPPA is accepted without adequate protection for those exceptions that fall outside the three-step test, much of what is considered to be “fair use” in the United States may come under attack as failing to comply with the three-step test.

Authors Guild v. Hathitrust (2d Circuit)
Orphan works, fair use in digitization, fair use for visually impaired or disabled.

The appeal in this case involves issues of orphan works, fair use of a digitization project, and fair use for persons who are blind or disabled. The court below did not rule on the orphan works project, an initiative to make available to University faculty and students full-text copies of orphan works, due to the suspension of the project pending a change in policy for identifying orphan works (the court judged this issue to be not ripe for review). The district court did rule on the two fair use issues. It first found that making copies of entire works can be transformative fair use when done, for example, to make the work searchable; even wholesale copies of works can be termed fair use when the copy serves a different function as the original. The court thus found that the project of digitizing the work to enhance search capabilities to be fair use. The lower court also found that digitizing works for to provide access for persons who are visually impaired or have other disabilities falls under the Chafee Amendment (permitting accessible format works without permission of the rightholder) and is also transformative fair use. Significantly, the district court noted that “I cannot imagine a definition of fair use that would not encompass the transformative uses made by Defendants’ MDP and would require that I terminate this valuable contribution to the progress of science and cultivation of the arts.” Like the Cambridge v. Becker case, this case turns on the fair use exceptions permitted by U.S. copyright law and the U.S. proposal in the TPPA requiring all exceptions to comply with the three-step test (and restrictive interpretation by the WTO panel) could come into conflict with court findings of fair use.

CLS Bank v. Alice (Federal Circuit)
Presumption of patent validity.

One issue in this case, currently on appeal to an en banc sitting of the Court of Appeals for the Federal Circuit, involves when presumption of patent validity applies. Although 35 U.S.C. 282 provides for a presumption of patent validity, this presumption might only apply to questions of fact and not questions of law. As a result, questions arising under 35 U.S.C. 101, that is questions of subject matter eligibility may fall outside this presumption. The court has an opportunity determine in this case whether presumption of patent validity applies in a case about whether a particular patent-at-issue is patent-eligible under the law; Supreme Court precedent suggests that the presumption of validity does not apply to patent subject matter eligibility questions. The U.S. proposal in the TPPA provides that “each Party shall provide for a rebuttable presumption that a patent is valid, and shall provide that each claim of a patent is presumed valid independently of the validity of the other claims.” However, the weight of precedent suggests that the U.S. exempts the question of subject matter eligibility from the presumption.

Organic Seeds v. Monsanto (Federal Circuit)
Remedies for patent infringement, injunctions.

A group of organic farmers in the present case sought declaratory judgment that they would not be sued for patent infringement should they be contaminated by Monsanto’s patented, genetically modified seeds (Monsanto has reportedly sued a farmer previously for patent infringement when seeds inadvertently ended up on his farm through contamination). Because Monsanto’s genetically modified seeds are so ubiquitous, the chances of unintended contamination is high. In addition to other claims asserted, the farmers in the case stated that Monsanto would not be entitled to any remedy even if the patents were held to be valid, infringed and enforceable because no economic injury would occur to Monsanto and that the public interest does not support the grant of injunction. Depending on how the U.S. proposal is interpreted, it is possible that the outcome of this case could conflict with the U.S. proposal for the TPPA (if the U.S. proposal on injunctive relief is interpreted as requiring an injunction in all cases of infringement).

Additional information on these and other cases, including parallel importation of patented goods, patent exhaustion of self-replicating technology, and the interplay of antitrust law and patent law is available here.