Monday, September 19, 2011

Homes Group Fix for Patent Jurisdiction Becomes Law

From Prof. Arthur Hellman (Pittsburgh):

Buried in the patent bill that President Obama signed into law Friday (Pub. L. No. 112-29, the “America Invents Act”) is a set of amendments to Title 28 dealing with jurisdiction in intellectual-property cases.  These amendments are known as the “Holmes Group fix” because they address issues raised by the Supreme Court’s decision in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002).

In Holmes Group, the Court held that the appellate jurisdiction of the Court of Appeals for the Federal Circuit does not encompass cases in which claims under the patent laws are raised in a responsive pleading (e.g., as a counterclaim) rather than in the plaintiff’s complaint.  The Court reached this result through interpretation of the two governing sections of the Judicial Code.  Section 1295(a)(1) has provided that the Federal Circuit shall have exclusive jurisdiction over appeals from the district courts “if the jurisdiction of [the district court] was based, in whole or in part, on section 1338 of this title.”  Section 1338(a), in turn, has vested original jurisdiction in the district courts “of any civil action arising under any Act of Congress relating to patents . . .”

The Court held that § 1338(a) must be interpreted in accordance with the “well-pleaded complaint” rule long established for § 1331 general federal-question jurisdiction cases—and of course under that rule, a counterclaim does not support “arising under” jurisdiction.  The Court’s result was criticized for contravening Congress’s intent to create a uniform body of patent law by having all patent appeals heard by the Federal Circuit (however justified the Court’s reasoning, for a seven-Justice majority, may have been as a matter of interpreting the text of the existing jurisdictional statutes).  And because the exclusive jurisdiction of federal courts in patent and copyright cases is tied to original jurisdiction, the decision also had the effect of allowing state courts to hear counterclaims under the patent and copyright laws.

The “Holmes Group fix” (contained in § 19 of Pub. L. No. 112-29), applicable to civil actions commenced on or after the date of enactment, addresses these concerns by amending two existing sections of the Judicial Code and adding one new section.

First, the new law overrules the specific holding of Holmes Group by defining the appellate jurisdiction of the Federal Circuit to include an appeal from a final decision of a district court “in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim under, any Act of Congress relating to patents or plant variety protection.”

Second, the second sentence of § 1338(a) is deleted and replaced with:  “No State court shall have jurisdiction over any claim for relief arising from any Act of Congress relating to patents, plant variety protection, or copyrights,” with “State” defined broadly to include the District of Columbia, Puerto Rico, and territories.

Finally, the act adds a new section (28 U.S.C. § 1454) authorizing removal of “[a] civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.”

The Public Law is not yet on line, but the new statutory language can be found at pp. 48-49 of the enrolled bill:

http://www.gpo.gov/fdsys/pkg/BILLS-112hr1249enr/pdf/BILLS-112hr1249enr.pdf

The authoritative legislative history of the “America Invents Act” is the House Report on H.R. 1249, the bill that became Pub. L. No. 112-29.  That report has little to say about the Holmes Group fix.  It notes:  “The Act clarifies the jurisdiction of the US District Courts and stipulates that the US Court of Appeals for the Federal Circuit has jurisdiction over appeals involving compulsory patent counterclaims.  The legislative history of this provision, which we reaffirm and adopt as our own, appears in the Committee Report accompanying H.R. 2955 from the 109th Congress” in 2006.  That Committee Report, No. 109-407, can be found at this link:

http://www.gpo.gov/fdsys/pkg/CRPT-109hrpt407/pdf/CRPT-109hrpt407.pdf

The version of the “fix” enacted by Congress yesterday differs in a few respects, not worth detailing now, from the version reported by the House Judiciary Committee in 2006.

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