October 2015

The TPP – Commercial or Foreign Policy Victory?

October 28, 2015
Competition, Economics, International Law

Jing Han, MJLST Staffer

The Trans-Pacific Partnership (TPP) is a proposed trade among twelve Pacific Rim countries, which are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, United States, Singapore and Vietnam, concerning a variety of matters of economic policy, about which agreement was reached on October 5, 2015 after 5 years of negotiations. The 12 countries including the United States of America have agreed to build a new cooperation structure through this agreement. TPP’s 30 chapters have set binding rules on everything from service-sector regulation, investment, patents and copyrights, government procurement, financial regulation, and labor and environmental standards, as well as trade in industrial goods and agriculture. The combined Gross Domestic Product-GDP of the world’s largest pact of these 12 countries is nearly 28 trillion dollars. Those dozen states account for roughly forty percent of global gross domestic product, thirty percent of global exports and twenty-five percent of global imports.

Some people believe that one of the reasons for the recent push for new trade initiatives is a feeling that the WTO system is not working. This view is probably not an uncommon one. But is it correct? It is worth looking at just what the WTO does, and how it compares to the TPP as a possible alternative trade agreement and organization.

First, all 159 WTO members have made promises not to charge tariffs above rates that are set out in legally binding schedules. The TPP does have the potential to go further than the WTO in terms of tariff reductions and services liberalization. Of course, such commitments would be preferential, only given to a handful of trading partners, and thus would not be truly free trade. There are significant economic benefits to having free trade cover as many countries as possible, including the avoidance of complex and trade-restricting rules of origin.

Second, WTO rules also discipline special tariffs imposed against dumping and subsidies. Through the WTO, these tariffs are subject to detailed rules to prevent them from being abused, which they frequently have been over the years. The TPP will not address anti-dumping/countervailing duties or subsidies at all. And the WTO’s rules on regulatory protectionism are already working quite well, so it is difficult to imagine what the TPP would do in this regard.

Third, WTO rules govern customs procedures, including valuation and classification issues, to prevent these procedures from being used as a disguised means of protection. Furthermore, WTO rules include general prohibitions on using domestic regulations and taxes for protectionist purposes. The WTO’s jurisprudence on these issues is widely respected, and WTO rulings have addressed a range of regulatory protectionism. The TPP would also go beyond the WTO in areas such as intellectual property protection, foreign investment protection, and environmental and labor regulation. But further is not necessarily better. These items have been added to the trade agenda to drum up new support. However, they have also stirred up a good deal of new opposition, and made trade negotiations more complex and difficult.

Fourth, Congress recognized “the growing significance of the Internet as a trading platform in international commerce” and instructed President Obama to achieve objectives concerning digital trade in goods and services and cross-border data flows. The Obama administration wants “digital trade rules-of-the-road” in the TPP agreement. These rules could mark a turning point in the global governance of digital commerce. The importance of digital technologies to trade has grown without multilateral rules keeping pace. The WTO is the main source of multilateral trade agreements, but it was established before the Internet transformed how companies produce, sell, and deliver products and services. In a declaration of 1998, WTO members agreed not to impose customs duties on electronic transactions and recognized the need to address e-commerce directly. However, the WTO’s e-commerce work program has not progressed much because WTO members disagree on various issues.

Fifth, beyond the commercial implications, many experts regard the TPP as a key part of American foreign policy. Amid the rise of China and its increasing exercise of political and military power in East Asia, the Obama administration has said it would turn its attention more to the East, the so-called pivot to Asia, in an effort to strengthen U.S influence in that region. The challenge for China, should it wish to join the TPP, is undertaking the reforms that the agreement would require. For instance, joining TPP will require opening markets in areas such as services and investment and agreeing to new rules in sensitive areas such as the role of state-owned enterprises and access to the Internet. That said, many of the reforms that becoming a TPP party would require are consistent with the internal reforms that China has already identified as being necessary, including reform of its financial sector, strengthening the role of services in the Chinese economy, and encouraging innovation.

In sum, The WTO is an excellent system. Its great strength is its multilateral framework, incorporating most of the world’s nations. However, with the advent of the 21st century, the limits of the WTO’s functions have become increasingly apparent. The Doha Round, marked by conflict between the opinions of developed and emerging nations and the subsequent stalling of negotiations, stands as a symbol of these limits. With more nations participating and more comprehensive liberalization being pursued, it is unavoidable that negotiations will face difficulties. In relation to the TPP, a former senior U.S. official is said to have commented that the U.S. sought to demonstrate its level of commitment to the Asia-Pacific region through its active involvement in the agreement negotiations. The Asia-Pacific region is becoming increasingly important to the U.S., and this fact is manifested in the nation’s initiatives in relation to the TPP. In this respect, the TPP has more political implications compared with its commercial considerations.

UN Countries Strive to Develop Legal Framework for Climate Deal

October 28, 2015
Energy Law, Environmental Law, International Law

Vinita Banthia, MJLST Articles Editor

In December 2009, over a 100 world leaders gathered in Copenhagen, Denmark for the United Nations Climate Change Conference, which included the 15th Conference of the Parties (COP 15) to the United Nations Framework Convention on Climate Change (UNFCCC), and the 5th Conference of the Parties for the Meeting of the Parties to the Kyoto Protocol (COP/MOP 5). The international gathering culminated in the “Copenhagen Accord,” which member countries of the UNFCCC agreed generally to “take note of,” but failed to promise more substantial action.

While the Accord endorsed the Kyoto Protocol and included specific omission reduction targets for some countries, it did not set out any legal framework or structure for the enforcement of these guidelines. Developed countries agreed to provide $100 billion per year by 2020 to developing countries for climate improvement. Again, however, no strategy was developed for the implementation of this funding, and countries continue to disagree on the amount and sourcing of the funds.

Fast forward six years later to the meeting in Bonn, Germany last week, where delegations convened once again to negotiate an international climate agreement. In December, the delegations will reconvene in Paris for the 21st Conference of the Parties to the UNFCCC to further discuss the terms of an international climate deal, and ideally, all 195 attending countries will adopt it. However, many of the issues that prevented a deal from being developed in Copenhagen continue to haunt current discussions.

Frist, developing countries are concerned about the amount of funding developed countries are willing to provide for their transition to clean and sustainable energy sources. In addition, most countries are hesitant to agree to a predetermined emissions reduction target and prefer a self-guided, non-legally-binding requirement that is informally tracked. The members in attendance at the climate conference in Bonn took this strategy and allowed countries to determine their own emissions goals. These compromises allowed the nations to conclude the Bonn meeting with a draft agreement that is predicted to be more successful than the Copenhagen Accord, during the final round of negotiations in Paris. However, it will be important for nations to avoid the temptations of diluting the provisions too much to gain approval of a large number of nations. Instead, nations should take a more heavy-handed approach to ensure important actions are taken, while implementing a legal structure to enforce the provisions of any final agreement.

H.R.8 and the Hydropower Improvement Act of 2015—Another Missed Opportunity

October 28, 2015
Energy Law, Environmental Law, Regulatory

Catherine Cumming, MJLST Lead Note & Comment Editor

While many people see the hydropower industry as a clean and sustainable energy source, most hydropower facilities are decades old and have severe environmental, economic, and social externalities. Relicensing provides an opportunity to bring aging dams up to modern environmental standards and compliance requirements. Over the past thirty years, American Rivers and the Hydropower Reform Coalition used the licensing process to improve hydropower dams and restore rivers. With over 6,000 megawatts of hydropower due for relicensing within the next five years, there are hundreds of dams and thousands of miles of river with an opportunity for improvement. Recent legislation, however, has failed to address the amount of hydropower due for relicensing and the opportunities it presents for increased energy production and environmental compliance. When Congress passed the Hydropower Regulatory Efficiency Act of 2013, it failed favored efficiency over oversight and failed to the amount of hydropower due for relicensing and the opportunity it provided for efficiency upgrades.

This fall, Congress missed yet another opportunity to modernize hydropower and decrease its negative externalities. Rather than “modernize” hydropower, the Energy & Commerce Committee’s approval of a hydropower amendment to H.R.8, the “North American Energy Security and Infrastructure Act of 2015” and Senator Lisa Murkowski’s “Hydropower Improvement Act” ignore the opportunity for increased efficiency and sustainability by creating compliance loopholes for the hydropower industry. If enacted, these bills would allow energy companies to opt out of Clean Water Act, Endangered Species Act, and state water quality and wildlife protections; allow dam owners to pass the costs and burdens of obeying water quality standards, wildlife laws, and cleaning up pollution caused by dams to taxpayers; and transfer state and federal agency authority to protect natural resources to the Federal Energy Regulatory Commission. While 2011 was the “Year of the River,” 2015 is becoming the “Year of Hydropower.” Community interest groups and environmental organizations are concerned that H.R.8 and the “Hydropower Improvement Act” will “turn back the clock and take the hydropower industry back to a time when they could destroy rivers with impunity.”

Shape Up or Ship Out: E.P.A. Forced to Reevaluate Their General Ballast Water Regulation Permit

October 20, 2015
Environmental Law, EPA, Invasive Species

John Biglow, MJLST Staffer

In the recently decided Natural Resources Defense Council v. U.S. E.P.A., — F.3d — (2d Cir. Oct. 5, 2015), the Second Circuit granted the petitioners’ motion, in part, for a review of the Environmental Protection Agency’s 2013 Vessel General Permit (VGP) regulating the discharge of ballast water from ships. The petitioners, four environmental conservation organizations, argued successfully that the EPA acted arbitrarily and capriciously in a number of ways when it set the technology based effluent limits (TBELs) and water quality-based effluent limits (WQBELs) which must be complied with under its VGP. In so deciding, the Second Circuit has remanded the matter to the EPA for proceedings consistent with their opinion, and has kept the 2013 VGP in place until the EPA issues a new VGP.

The EPA has the authority to regulate ballast discharge under §402(a) of the Clean Water Act (CWA). When freighter ships take on or unload cargo, they adjust for changes in weight by taking on or discharging ballast water. As the court stated, this amount “can range from hundreds of gallons to as much as 25 million gallons.” The regulation of ballast discharge is an important aspect of environmental conservation due to its role as a conduit for the spread of invasive species and pollutants. When a ship takes on ballast water in a polluted or infested area, it is possible for these organisms and pollutants to get sucked up with the water, surviving in the ballast tanks before being discharged in some distinct body of water. One study referenced by the court estimated the damage from invasive species to be upwards of $137 billion annually, making the prevention of their spread both a top environmental and economic priority.

The first set of arguments made by the petitioners centered on whether the TBELs set by the EPA were arbitrary and capricious. The petitioners first argued that in setting the TBEL standard to mirror the standard adopted by the International Maritime Organization in 2004 (the IMO standard), the EPA acted arbitrarily and capriciously. The Court agreed, primarily because a higher standard was attainable. The CWA requires the EPA to apply the “best available technology economically achievable” (BAT) when setting their TBELs. In its investigation of the available technology, the EPA employed the Science Advisory Board (SAB) to issue a report on the different available systems. According to their report, there were a number of ballast-water treatment systems that would be able to achieve standards 10 to 100 times greater than the IMO in the near future. By ignoring this potential and instead setting the standard at the IMO, the court found that the EPA acted arbitrarily and capriciously.

Next, the petitioners argued that the EPA acted arbitrarily and capriciously when it limited the SAB’s investigation of ballast treatment systems to shipboard treatment; ignoring onshore treatment options. The court agreed, refusing arguments from the EPA that these systems were not considered because the facilities needed to implement them were not yet in existence. The court reasoned that the time and expense of creating onshore treatment infrastructure was similar to that required for shipboard treatment, and that it was arbitrary and capricious to ignore the possibility. In remanding this issue back to the EPA, the agency will need to fully consider onshore treatment options before adopting or dismissing them in their new VGP.

The petitioners further argued that the EPA was arbitrary and capricious in exempting ships built before 2009 that only sail the great lakes water system (pre-2009 Lakers). The court agreed, reasoning that there was no true distinction between pre- and post-2009 Lakers. The court further stated that exempting ships because they did not currently have the technological capacity to adopt the technology necessary to meet the VGP requirements conflicted with the CWA’s BAT requirement, which seeks to force technology to keep up with contemporary environmental demands.

The petitioners next argued that several facets of the WQBELs were arbitrary and capricious. The WQBELs were designed as a safeguard to be utilized when the TBELs alone are insufficient to meet and maintain water quality standards. In its 2013 VGP, the EPA refused to set numerical values for its WQBELs, instead stating simply that “Your discharge must be controlled as necessary to meet applicable water quality standards in the receiving water body or another water body impacted by your discharges.” The court agreed that setting a narrative WQBEL was arbitrary and capricious, noting that it fails to give ship owners clear guidance as to whether or not they are in compliance with the WQBELs.

The petitioners also argued that the monitoring requirements of the WQBELs was arbitrary and capricious. The 2013 VGP required only that ship owners monitor the expected time, place, and volume of their ballast discharges. The court agreed, reasoning that the EPA could consider requiring ship owners to monitor the actual statistics on their ballast discharges, rather than the expected ones.

It is a critical victory for environmentalists that the Second Circuit is requiring the EPA to revisit what was an incomplete and insufficient 2013 VGP; however, it is critical that the EPA get it right the second time around. The economic and environmental impact of ballast discharges is significant and due to the cost and time requirements involved in creating the infrastructure necessary to meet the VGP system requirements, we are likely to be stuck with whatever the EPA sets as the BAT for a very long time.

Apple Loses Multi-Million Dollar Lawsuit

October 20, 2015
Intellectual Property, Patents

Riley Conlin, MJLST Staffer

Earlier this month, the Wisconsin Alumni Research Foundation (WARF) won a large patent lawsuit against Apple Inc. The suit relates to WARF’s 1998 patent of a technology that improves microchip efficiency. WARF initiated the suit in January 2014 contending that Apple’s A7, A8 and A8X processors violate the patent. The processors are found in the iPhone 5s, 6, 6 Plus, and many variations of the iPad.

Apple denied that their microchips infringed WARF’s patent and contended that the patent was invalid. The U.S. Patent and Trademark Office declined to review the patent’s validity. The jury, sitting in the U.S. District Court for the Western District of Wisconsin, concluded that Apple’s processing chips improperly used technology owned by WARF. U.S. District Court Judge William Conley has scheduled to trial in three phases. First, the jury determined whether or not Apple was liable. Second, the jury will determine the appropriate damages. Finally, the jury will consider whether Apple willfully violated the patent, which could lead to additional damages. Based on Conley’s recent ruling, Apple already faces damages reaching potentially $862.4 million.

WARF has initiated lawsuits around this patent before. In 2008, the foundation used that patent to sue Intel Corp. However, that case never made it to trial, because it was settled shortly prior to it beginning.

In September 2015, WARF filed a subsequent lawsuit against Apple. The foundation contends that Apple’s A9 and A9X chips also infringe upon their patent. The A9 and A9X chips can be found in Apple’s more recent technology including the: iPhone 6S and 6S Plus, and the iPad Pro.

E.C.J Leaves U.S. Organizations to Search for Alternative Data Transfer Channels

October 20, 2015
Cyber Security, Data, EU Law

J. Adam Sorenson, MJLST Staffer

The Court of Justice of the European Union (E.C.J.), the European’s top court, immediately invalidated a 15-year-old U.S. EU Safe Harbor Program Oct. 6th (Schrems v. Data Prot. Comm’r, E.C.J., No. C-362/14, 10/6/15). This left the thousands of businesses which use this program without a reliable and lawful way to transfer personal data from the European Economic Area to the United States.

The Safe Harbor Program was developed by the U.S. Department of Commerce in consultation with the European Commission. It was designed to provide a streamlined and cost-effective means for U.S. organizations to comply with the European Commission’s Directive on Data Protection (Data Protection Directive) which went into effect October of 1998. The program allowed U.S. organizations to voluntarily join and freely transfer personal data out of all 28 member states if they self-certify and comply with the programs 7 Safe Harbor Privacy Principles. The program was enforced by the U.S. Federal Trade Commission. Schrems v. Data Prot. Comm’r, however, brought a swift halt to the program.

This case revolves around Mr. Schrems, an Australian Facbook user since 2008 living in Austria. Some or all of the data collected by the social networking site Facebook is transferred to servers in the United States where it undergoes processing. Mr. Schrems brought suit against the Data Protection Commissioner after he did not exercise his statutory authority to prohibit this transfer. The case applied to a 2000 decision by the European Commission which found the program provided adequate privacy protection and was in line with the Data Protection Directive. The directive prohibits “transfers of personal data to a third country not ensuring an adequate level of protection.”(Schrems) The directive goes on to say that adequate levels may be inferred if a third country ensures an adequate level of protection.

The E.C.J. found that the current Safe Harbor Program did not ensure an adequate level of protection, and therefore found the 2000 decision and the program itself as invalid. This means all U.S. organizations currently transferring personal data out of the EEA are doing so in violation of the Data Protection Directive. This case requires U.S. organizations to find alternative methods of approved data transfer, which generally means seeking the approval of data protection authorities in the EU, which can be a long process.

Although the EU national data protection authorities may allow for some time before cracking down on these U.S. organization, this decision signals a massive shift in the way personal data is transferred between the U.S. and Europe, and will most likely have ripple effects throughout the data privacy and data transfer worlds.

Akamai Techs. v. Limelight Networks: An Expansion of the Scope of Patent Direct Infringement

October 13, 2015
Intellectual Property, Litigation, Patents

Tianxiang (“Max”) Zhou, MJLST Staffer

This August the Federal Circuit Court delivered an en banc opinion of Akamai Techs. v. Limelight Networks, affirming the jury decision awarding $40 million in damages. The per curium opinion provided that the Court “unanimously set forth the law of divided infringement under 35 U.S.C. § 271(a)” and there was substantial evidence “support[ing] the jury’s finding that Limelight directly infringed U.S. Patent No. 6,108,703.” Accordingly, the Federal Circuit reversed the District Court’s grant of Limelight’s motion for judgment of non-infringement as a matter of law.

The issue in this case is whether Limelight should be liable for direct infringement of the patent by inducing consumers to infringe the patent and should thus be jointly and directly liable under 35 U.S.C. §271(a). The Supreme Court held that induced infringement under §271(b) requires a single direct infringer. According to the Supreme Court, Limelight should not be liable as the it only performed some but not all of the infringement steps.

The Federal Circuit expanded the scope of direct infringement and held Limelight liable. The Federal Circuit held that Direct infringement under §271(a) occurs where “all steps of a claimed method are performed by or attributable to a single entity.” According to the Federal Circuit, when there are two or more actors from a joint enterprise, all can be charged with the acts of the other, “rendering each liable for the steps performed by the other as if each is a single actor.” The Court further cited the definition of joint enterprise in Restatement (Second) of Torts and provided four factors in determining whether there is joint enterprise.

The case is important because it set forth the rule that the actors in a joint enterprise can be liable for the other actors. The case prevented a possible way to dodge the direct infringement liability by inducing the consumers to perform some of actions of infringement.

Honeybee Protection in the Ninth Circuit

October 13, 2015
Environmental Law, EPA, Food and Agriculture

Ian Blodger, MJLST Note & Comment Editor

In Pollinator Stewardship Council v. U.S. E.P.A., the Ninth Circuit recently took action to protect honeybees from dangerous chemicals approved by the Environmental Protection Agency. The case is a unique situation because the great deference with which the court reviews the EPA’s pesticide approval decisions means these approvals are rarely overturned.

The EPA has the authority to approve pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). FIFRA allows the EPA to deny approval for pesticide licensing if doing so would prevent unreasonable adverse effects, including risks to the environment. 7 U.S.C. § 136a(a). In approving the use of a new pesticide, the EPA may choose to approve the pesticide conditionally or unconditionally. Conditional approval essentially means the EPA has insufficient data to determine the overall effects of the pesticide, and will allow use of the pesticide for a limited time to determine its impacts. Unconditional approval indicates the EPA has sufficient data to know the pesticide’s environmental effects. The court reviews the EPA’s decision to approve a new pesticide “if it is supported by substantial evidence when considered on the record as a whole” 7 U.S.C. § 136n(b).

This specific case centers around three new pesticides for which Dow Agrosciences sought approval. Each of these pesticides contained sulfoxaflor as its main ingredient. Following testing on individual bees, the EPA concluded sulfaxaflor was highly toxic to bees. After completing additional, though limited studies, the EPA concluded that there would be no way to determine the ultimate impact of the pesticide on the honeybee population unless the pesticide underwent testing under real world conditions. As such the EPA initially proposed to conditionally approve the use of sulfaxaflor pesticides while the agency collected additional data.

The EPA then reconsidered its previous conclusion, and decided to grant unconditional approval to the pesticide so long as certain mitigation measures were put in place. The EPA had no evidence as to the effectiveness of these measures.

Looking to this, the court determined that the record as a whole did not support the EPA’s decision to unconditionally approve the three sulfaxaflor based pesticides. The court’s decision rested on the fact that there was no evidence in the record suggesting the mitigation measures were sufficient to protect honeybees. As a result, the court vacated the EPA’s approval of the pesticides, and remanded the case to the EPA for further studies.

While this outcome does not prevent the EPA from conditionally approving sulfaxaflor, the Ninth Circuit’s analysis will hopefully serve as a reminder to agencies tasked with protecting valuable national resources to take their task seriously.

Are Trademark’s a Medium for Free Speech?: Federal Circuit Considers Whether Section 2(a) of the Lanham Act Violates the First Amendment

October 6, 2015
Constitutional Law, Intellectual Property, Trademark Law

Michael Laird, MJLST Staffer

The Federal Circuit recently heard arguments en banc in a case considering the relationship between intellectual property regimes, specifically trademark law, and freedom of speech under the First Amendment of the U.S. Constitution. The long-term rule comes from the U.S. Court of Customs and Patent Appeals—the predecessor to the Federal Circuit—in the case In re McGinley. 660 F.2d 481 (C.C.P.A. 1981). There, the court held: “with respect to appellant’s First Amendment rights, it is clear that PTO’s refusal to register appellant’s mark [as a trademark] does not affect his right to use it. No conduct is proscribed, and no tangible form of expression is suppressed.” Id. at 484. Under that traditional rule, trademark law was held consistent with the first amendment because an applicant is still permitted to use a mark, whether or not it is trademark eligible. However, that precedent may be at risk.

On Friday, October 3, the Federal Circuit heard arguments for In re Tam on the question of whether § 2(a) of the Lanham Act is consistent with the right of free speech. Section 2(a) bars trademark eligibility for a mark that “consists of or comprises of immoral, deceptive, or scandalous matter; or matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.” 28 U.S.C. § 1052(a). In Tam, § 2(a) was the basis for denying trademark registration for “The Slants”, the name of an Asian-American band because of its disparagement of those of Asian descent.

The court appeared to latch on to concerns that the logic of McGinley would be applicable in the copyright regime since rejection of a copyright would also not inhibit the applicant’s right to use that material. The court asked: “would [it] be constitutional and not a first amendment violation if Congress enacted a statute that said, ‘we’re going to regulate Copyrights and not allow copyright registration to issue to scandalous, immoral, or disparaging copyrights?’” Recording of Oral Arguments, In re Tam, No. 2014-1203 at 39:13 (Fed. Cir. October 2, 2015). The Government conceded, and Court appeared to agree that Congress could not bar disparaging art from copyright registration, as it does with trademarks. See id. at 39:33.

If a work cannot be denied copyright registration because the government concludes the work is disparaging, then some distinction between a copyright and trademark must exist for the government to reject a trademark on that basis. The Government was mostly unsuccessful in providing a means to distinguish the two regimes. The court, however, discussed a few possibilities.

First, the nature of speech in copyrighted material differs from the marks which are eligible for trademark protection. Copyrightable material may involve fundamental political speech and other private speech, which is protected under a heightened scrutiny by the first amendment. Id. at 41:30. Conversely, trademarks, as a means to associate the producer of goods and a brand or logo, constitutes commercial speech.

Second, as one judge stated: “the distinction that could be made is that in copyright, if the government has these limitations it’s so coercive that it essentially…prevents you from [certain] speech. Whereas the trademark realm, although it takes away some benefits of federal registration…it’s not so coercive that the restriction is a burden on free speech.” Id. at 44:30. This argument relates to McGinley, since independent of whether a trademark is granted or denied, the mark owner has the right to use his or her mark in public. In the copyright realm however, the logic of McGinley fails because the denial of a copyright might actually chill speech because of the risk that it will be misappropriated by someone else.

Third, the court differentiated the purpose of the copyright and trademark regimes: “isn’t a copyright a forum for the expression of the arts…whereas a trademark goes to the very heart of stability in the marketplace?” Id. at 5:23. Like a distinction between the nature of a trademark and copyright, the purpose of the systems diverge. Copyright is inherently protective of speech generally. Yet, most trademarks do not concern traditional speech, but protecting an association between the producer of a good and a brand or other mark.

Whether any argument will persuade the court that trademark law is distinct from copyright in some way that permits a disparagement bar to trademark registration remains to be seen. Notably, the court need not resolve the issue, if it were to determine that § 2(a) should be upheld or rejected based on the whether a trademark constitutes private, public, or commercial speech. Either way, the implications of the court’s ruling could impact another major ongoing disparagement case concerning the Washington Redskins’ trademark which is being appealed in the Fourth Circuit. If you are interested in listening to the argument in full, you can find a copy here.

Inter Partes Review: A Questionable Item in the Generic’s Tool Kit

October 6, 2015
Patents, Pharmaceuticals

Will Orlady, MJLST Lead Articles Editor

In 1984, Congress enacted the Drug Price Competition and Patent Term Restoration Act (Hatch-Waxman). Since then, pioneer pharmaceutical manufacturers and their generic counterparts have resolved patent disputes in federal district court under the Hatch-Waxman patent dispute framework. This framework is admittedly complex. But it forces interested parties to engage with Hatch-Waxman, mandating compliance with congressionally determined policy decisions regarding pharmaceutical exclusivity. Hatch-Waxman’s patent dispute framework was part of the larger bill, crafted to balance the interests of pioneer and generic drug manufacturers. Congress enacted the law to address two (apparently competing) goals: (1) to encourage innovation in pharmaceutical research and development and (2) to help generic drugs reach the market more quickly. The tension between these goals merits further discussion.

Before Hatch-Waxman, concerns grew that drug prices were too high and that access to certain treatments was too limited. Thus, there was both need and substantial demand for cheaper, generic drugs. On the other hand, pioneer drug manufacturers complained of inadequate market exclusivity following FDA’s New Drug Application (NDA) process. Put simply, pioneer companies spent (and continue to spend to this day) approximately $1 Billion brining a new drug to market. On top of the money, pioneer manufactures potentially spend several years of their drugs’ valuable patent terms going through the NDA process. Thus, pioneer companies noted that recouping R&D and regulatory expenses was not feasible given the “short” market exclusivity period.

Hatch-Waxman was a carefully wrought legislative compromise. It granted pioneers a patent term extension based on the length of FDA’s regulatory review, non-patent market exclusivity provisions, a mechanism for increasing the public notice of patents and patent challenges, and an automatic injunction forbidding FDA approval of a generic drug in certain circumstances. The generic manufacturers got, among other things, the Abbreviated New Drug Application (ANDA), making the regulatory process for generic drugs less onerous. To be sure, Hatch-Waxman is not without its critics, and its nuances are immense. But it is important to remember that the act represents a careful Congressional balancing of industry and public interests. Hatch-Waxman’s patent dispute resolution mechanism squarely fits within this compromise.

Enter the America Invents Act (AIA) of 2011. Of note, the AIA revised certain post-grant opposition procedures. Specifically, the law expanded the importance of inter partes review (IPR). IPR is a process by which a third party may have a patent reexamined by the patent office to verify that the office validly issued the patent. Since the AIA’s enactment, IPR has become immensely popular. Why is this? IPR offers a potential alternative to district court litigation. It provides advantageous invalidation standards—e.g. the “broadest reasonable interpretation” during claim construction. Further, IPR allows patent challenges with relatively limited discovery, cutting both the time and cost of district court patent litigation. Finally, IPR petitioners have been enormously successful in invalidating many of the patents challenged to date.

Needless to say, IPR frightens patentees holding rights to valuable patents. Can you see where I’m going here? Are particular Congressional mandates and policy determinations on a collision course?

The post-AIA surge of IPR proceedings has pioneer pharmaceutical manufacturers worried—rightly so. Generic manufacturers are already petitioning the U.S. Patent and Trademark Office (PTO) for IPR of patents protecting various pharmaceutical and biologic products. Given the aforementioned advantages of IPR, this shouldn’t come as a surprise, but that is not to say that it is not remarkable. Generic manufacturers could be leveraging the advantages of IPR to force pioneer drug manufacturers to settle patent disputes out of district court. Or, of more consequence, they could be using IPR to skirt the patent dispute frameworks required by Hatch-Waxman and the BPCIA (for biologics).

Indeed, if pioneer pharmaceutical manufacturers hold patents allowing for market exclusivity, the patents should be validly issued. It is, however, simultaneously important to remember that Congress has treated drug and biologic patents differently since, at the very least, 1984. Pharmaceutical patents are remarkable in at least three key ways. First, patents on commercially successful drugs are extraordinarily valuable. Congress (at least ostensibly) allows this because of the enormous regulatory barriers to entry. In other words, it’s a trade. FDA imposes supra-burdensome regulatory costs to ensure new drugs are safe and effective. Consequently, Congress allows pioneer drug manufacturers to unilaterally exploit the market to recoup losses, and make money. Second, pharmaceutical patents read on particles of matter that are harnessed to treat disease and save lives. This creates a unique demand. And third, pharmaceutical patents read on products which require sensational development costs, including the time and money required for regulatory approval.

Does this mean pharmaceutical patents should be treated differently, or made exempt from IPR? The answer is not so simple. But legislators, scholars, and practitioners should consider whether IPR is having unintended consequences within the pharmaceutical industry. Just as a quick example: Did Congress truly intend for the AIA’s IPR to be a way around Hatch-Waxman or the BPCIA? And even if it did, does it make sense to put enormously valuable patents at the mercy of an overburdened administrative agency? As I said, the answers don’t come readily. It’s a policy debate that needs to happen. Until it does, I think it unwise to abandon previously established Congressional compromises—i.e. Hatch-Waxman—for a hasty change to our patent system.

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