Supremely Important IP Decisions

When SCOTUS speaks, the intellectual property world has no choice but to take notice. And while we wait for the Supreme Court's upcoming decision in the Jack Daniel's parody case whose oral argument was profiled on these pages last month, there is plenty for IP practitioners to digest with the recent decisions in two of this term's IP cases. On the patent side, a unanimous Supreme Court affirmed the Federal Circuit's decision invalidating two Amgen patents for failure to meet the enablement requirement. That same day, Justice Sotomayor wrote for a divided court -- over a strong dissent penned by Justice Kagan, joined by Chief Justice Roberts -- on the always challenging issue of the proper contours of a fair use defense in copyright infringement cases. In the decision, the majority sided with a well-known commercial photographer and agreed with the Second Circuit that the Andy Warhol Foundation's licensing of a Warhol print based on a photograph of Prince taken by that photographer for a magazine cover was not a fair use. Both mainstream and IP media coverage of both decisions abound, for those interested in further analysis of the potential impact of each decision. In this column, however, I would like to do something a bit different.

To start, it is always worth considering what can be learned about the Supreme Court's view of IP cases when two decisions in such cases are issued on the same day. On the patent side, I have already noted that it was a unanimous opinion, which is not uncommon when it comes to SCOTUS treatment of patent issues. Likewise, one could point to Justice Gorsuch's matter-of-fact opinion as emblematic of the lack of a close call that the issue before the court presented, even as the case itself had seen a number of twists and turns getting to that point -- including a jury verdict in Amgen's favor a long time ago. In contrast, even the most jaded SCOTUS observer would be hard pressed to ignore the heated exchanges in the majority opinion and dissent in the Warhol case. More striking is that such prose was composed by Sotomayor and Kagan, two justices who are normally considered as playing for the same team.

The striking dissonance between the dispassionate patent opinion and what we saw in Warhol suggests that copyright issues may embody more provocative material than patent issues for the Court as currently composed, it is also worth noting that the real-world amount in controversy in Warhol, separate from any infringement damages on offer, was a mere $10,000 one-time license. Meanwhile, Amgen reported sales of the patented drug whose monopoly it has been trying to protect as reaching over $300 million -- just for the final quarter of 2022. Safe to say that SCOTUS' passion, or lack thereof, about IP issues is not tied to the value of the disputes before it.

Next, I think it would be interesting to pull out two quotes from each of the decisions, in an effort to get a better sense of how the Supreme Court views both patent and copyright issues in a general sense. We can start with the Amgen case. First, I would point to Gorsuch's statement on page 15 of the opinion: "What is reasonable in any case will depend on the nature of the invention and the underlying art."

While the precise issue being discussed was enablement, that charge for the factfinder and jurist is equally applicable across a spectrum of issues in a patent case, from validity to damages. In fact, one of the most intellectually rewarding aspects of patent litigation practice is the inquiry into the "nature of the invention and the underlying art." That inquiry often requires some level of technical or scientific facility and can be a demanding exercise in its own right. But the real kicker lies in terms of being able to argue what may be "reasonable" in light of the technical background. That is where the real joy lies for patent litigators.

Another quote from Amgen, this one a potent reminder of the ancient nature, at least in terms of our very young country called America, of patent jurisprudence -- "For more than 150 years, this Court has enforced the statutory enablement requirement according to its terms." Again, Gorsuch was discussing enablement. At the same time, however, it is important for us to remember, at least on occasion, that the Supreme Court's window for consideration of precedential case law on patent issues goes back a lot further than the Federal Circuit era. We would do well as patent litigators to mine that old precedent more frequently, especially in cases that hearken back to first principles regarding fundamental patentability requirements.

What about the Warhol opinion, which involved a much narrower issue relating to just one of the affirmative defenses -- albeit a key one -- that can be raised in a copyright case. That panoply of available defenses was invoked by Sotomayor as providing "ample space for artists and other creators to use existing materials to make valuable new works" on page 37 of the Court's opinion. That apologia, of course, was in response to the dissent's argument that limiting the fair use defense based on the "reasons for copying" would have a chilling effect on creativity. To the majority, however, that risk was overblown, precisely because of the numerous "escape valves" -- of which fair use is but one example -- that can shield an alleged infringer from a copyright infringement claim. In Warhol, because there was a commercial benefit to the copying party in a way that effectively competed with the purpose and deployment of the original work, a defense based on fair use was foreclosed.

In dissent, Kagan did not hold back. In her view, the question presented by the case goes directly to the purpose of the fair use defense in the first place. In her words: "The law does not grant artists (and authors and composers and so on) exclusive rights -- that is, monopolies -- for their own sake. It does so to foster creativity -- '[t]o promote the [p]rogress' of both arts and science. U. S. Const., Art. I, ?8, cl. 8. And for that same reason, the law also protects the fair use of copyrighted material."

By focusing less on whether Warhol's image of Prince was a transformative fair use and more on the fact that Warhol made money licensing the derivative work, the dissent argues that the majority went too far in terms of undercutting the fair use defense.

Without a robust fair use defense, by denying artists like Warhol the "credit for transformative copying," Kagan argues that creativity will be stifled across the range of artistic endeavors. In response, the majority denies that it is being that reductive, but rather trying to balance the nature of the transformative work with the commercial purpose for which it is employed. The hard work of carrying out the fair use analysis in light of the principles laid out in Warhol will be borne by district courts for the foreseeable future. The results of their efforts will go a long way toward determining whether Kagan's concerns were warranted or overblown.

Ultimately, this set of decisions has a lot to teach us about how SCOTUS views IP issues. We have just touched on a few points, with full recognition that there are many more insights that can be teased out of each opinion. At bottom, these decisions should remind us that whenever SCOTUS speaks on IP issues, both the tone and content of the decisions must be considered as supremely important.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston's practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.