Tuesday, February 18, 2014

Patent Law: First-to-File Rule

By Kathleen M. Wade

What's in a name? Well Juliet, it depends upon whether you are asking a patent prosecutor or litigator. Under the Leahy-Smith America Invents Act (AIA), the rule means as the name suggests: A patent is issued to the first to file an application. 35 U.S.C. § 102. Although the AIA awards patents to the inventor who first files, federal courts do not automatically award the race to the courthouse to the swiftest in patent cases.

The litigation rule was not misnamed when originally established by the United States Supreme Court in 1824. “In all cases of concurrent jurisdiction, the Court which first has possession of the subject must decide it.” Smith v. McIver, 22 U.S. 532, 535 (1824).

Since Smith, the general rule in federal litigation favors the forum of the first-filed action.

The Federal Circuit, whose law controls issues impacting patent law (Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356, 1359 (Fed. Cir. 1999)), advocates following this general rule “unless considerations of judicial and litigant economy, and the just and effective disposition of disputes, requires otherwise.” Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347 (Fed. Cir. 2005) (emphasis added). The court has rejected applying a bright-line rule that would automatically defer to the first-filed court, the fate of the second-filed action. Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 904 (Fed. Cir. 2008). Instead, Federal Circuit precedent instructs that factors such as tenuousness of jurisdiction, broadness of the parallel actions, the degree of judicial investment, the possibility of consolidating related litigation, and the convenience factors under 28 U.S.C. § 1404 (a) may be considered in determining whether parallel actions should proceed separately or together, and, if the latter, in which forum.

Exceptions to the general rule may also be made if bad faith, anticipatory suit, and forum shopping are present.

The Federal Circuit has further carved out a “customer suit exception”: If an infringement action is first brought against the customer, and the manufacturer (from whom the customer purchased the allegedly infringing good) subsequently brings a declaratory judgment action in response, the first-filed action may be stayed in favor of the manufacturer’s declaratory judgment action. See Kahn v. General Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989).

In light of the “ample degree of discretion” the Federal Circuit accords the lower courts, it may be the second-filed court that determines both actions when applying the first-to-file rule. Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012).

So as Juliet doth love the man behind the name, the Federal Circuit too desires that the justice and expediency considerations behind the first-to-file rule, and not the name, have meaning in patent cases.