Court Opinion

ID: 9489124
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:06:16.81366+00
Date Added: 2024-06-11T17:53:20.064535
License: Public Domain

RADER, Circuit Judge,
concurring.
I concur in the result reached by the majority because Lilly did not show irreparable harm. On that basis, the district court did not abuse its discretion. I depart from the court’s reasoning and conclusion about the “material change” standard under 35 U.S.C. § 271(g).
I
The court’s majority places great emphasis on the legislative history to resolve the meaning of “material change” — a curious approach given its recognition that the legislative history contains “something ... for each side.” The enactment history is far from dispositive in this case. The record of the enactment of this provision evinces a bitter battle between the pharmaceutical industry and its generic industry competitors.
In the first place, neither combatant could convince either house of Congress to enact a statutory standard clearly favorable to their segment of the industry. The hearings before the various subcommittees considering intellectual property components of the bill highlight some of the positions taken by industry and trade groups. See A Bill to Protect Patent Owners from Importation into the United States of Goods Made Overseas by use of a United States Patented Process: Hearings on S. 1513 Before the Subcomm. on Patents, Copyrights and Trademarks of the Senate Comm, on the Judiciary, 99th Cong., 1st Sess. 9, 15, 71, 186-87 (1985) (advocating various degrees of limitation on initial broad statute: — PMA favoring “direct products” with legislative history allowing for trivial changes; AIPLA— opposing “direct” alone as creating loophole without detailed explanation); Intellectual Property Rights: Hearings on S. 1860 and S. 1869 Before the Subcomm. on International Trade of the Senate Comm, on Finance, 99th Cong., 2d Sess. 175, 182 (1986) (arguing on behalf of the International Anti-Counterfeiting Coalition against “direct” limitation as too narrow and for liability for “obvious use of the innovator’s patent”); Intellectual Property and Trade: Hearings Before the Subcomm. on Courts, Civil Liberties, and the Admin, of Justice of the House Comm. on the Judiciary, 99th Cong., 2d Sess. 275-76 (1986) (arguing on behalf of NAM against “direct” limitation and for “materially changed chemically by subsequent steps”).
Without a clear resolution in the statutory language, the battleground shifted to the committee reports. On this front, each combatant could find lobbyists to lace the reports with tutorials to the courts about applying the ambiguous provisions of section 271(g) in future litigation.
With a focus on future litigation, these committee reports became particularly unenlightening as an aid to interpret statutory language. These reports surrendered any pretext of informing members of Congress about the meaning of pending bills before a vote on the floor. Instead, these tutorials, by their own admission, addressed judicial officers, not legislative officers. And the legislative officers ignored them. In fact, the floor debates during passage of the Process Patents Act do not refer to any of the relevant portions of the committee reports.
*1580In the House debates preceding passage of H.R. 4848, only two committee reports were even cited. Both were cited in a discussion unrelated to the process patent portion of the omnibus bill. See 134 Cong. Rec. 17880-18063 (1988) (citing H.R.Rep. No. 40, Pt. 1, 100th Cong., 1st Sess. 124 (1987) and S.R. Rep. No. 71, 100th Cong., 1st Sess. 123 (1987)). Moreover, in all of the debate on the floor of the House, no member discussed (or appears to have even mentioned) “material change.” The debate in the Senate preceding passage of H.R. 4848 contains even less. No Senator cites to any committee report or mentions “material change.” See 134 Cong. Rec. 20104 (1988).
Moreover the reports show all the signs of unresolved conflict evident in the statutory language itself. Early versions of the bill were silent on the scope of protection. Senate Bill 1535 refers only to the importation of “a product produced by such process.” S.Rep. No. 663, 98th Cong., 2d Sess. 30 (1984). In the analysis, the report indicates that the goal of the bill is to prevent importation of “products produced by a process covered by the patent.” Id. at 5. The Senate committee notes: “The principle effect of these changes is to prevent competitors of a patent owner from avoiding the patent by practicing the patented process outside the United States and marketing the resulting product in this country.” Id.
By 1986, “material change” had crept into the statute. See H.R. 4899. The committee explains the addition: “Without such limitations, liability could attach, for example, to the seller of a car in which the steel was made from iron ore that was mined by a patented process, or in which the reflective surface used on the rear view mirror was made by a patented process.” H.R.Rep. 807, 99th Cong., 2d Sess. 20 (1986). Clearly, the House was concerned with notions akin to proximate cause — that is, how far down the line should we cut off potential liability.
The 1987 report accompanying H.R.1931, sets forth significantly greater and more confusing detail concerning “material change.” H.R.Rep. 60, 100th Cong., 1st Sess. 13-14 (1987). The Committee states that it “intends to provide protection to process patent owners which is meaningful and not easily evaded.” Id. The report then suggests no liability would attach where the “basic structure” of the product is changed by a subsequent process. Id. at 13. However, the next paragraph notes: “the subsequent processing modifications of chemical X may only be trivial or of a conventional nature even though a material change occurred in chemical X.” Id. Such a non-material change would occur, for example, where “chemical X is an important intermediate product ... which can materially be changed into an end product.” Id. By this test, the House sets forth a commercial viability test that looks to the efficiency of making the end product absent use of the infringing process. Id. at 13-14. This same report goes on to identify at least two more tests for “material change,” an active ingredient test and an integral or important component test. Id. at 14.
Likewise, the related Senate Report accompanying Senate Bill S. 1200, provides immense detail on the definition of “material change.” S.Rep. No. 83, 100th Cong., 1st Sess. (1987). In this report, the committee explains that S. 1200 “introduces” a “new phrase, materially changed” to restrict the scope of the bill “to exclude ultimate products that, because of intervening manufacturing steps, cease to have a reasonable nexus with the patented process.” Id. at 36. The committee also recognized that “the courts will have to assess the permutations of this issue of proximity to or distance from the process on a case-by-case basis.” Id. at 46; see Bio-Technology General Corp. v. Genentech, Inc., 80 F.3d 1553, 1560 (Fed.Cir.1996) (recognizing Congress intended the courts to resolve the question of “proximity to the product of the patented process on a case-by-case basis”). Interestingly, this statement follows the debate over the scope of the Act, suggesting Congress chose an intentionally vague limitation such as “material change” as a compromise between the pharmaceuticals and generics.
The report then sets forth a “two-phased” test that looks to the commercial viability of making the end product absent use of the infringing process coupled with a basic utility test. Id. at 50. This test like others in the *1581enactment history provides little practical utility in assessing material change. As with its House counterpart, the directly conflicting and confusing tests set forth in the section analysis^ leave little doubt that they were inserted by lobbyists for use in future litigation by their clients. In sum, the enactment history maps all the graves on this inconclusive legislative battleground, but shows no route away from the combat zone. If anything, the enactment history “is more conflicting than the text [of the statute] is ambiguous.” Wong Yang Sung v. McGrath, 339 U.S. 33, 49, 70 S.Ct. 445, 453, 94 L.Ed. 616 (1950).
With no real enlightenment about the meaning of “material change” in the enactment history, this court should interpret this language in light of the overriding purpose of the statute. As recognized by this court’s majority, the Process Patents Act sought to afford meaningful protection to owners of United States process patents. Before the Act, foreign entities could import goods made from patented processes used abroad without liability for patent infringement. The Act sought to plug this loophole.
II
Sadly this decision will create another massive loophole in the protection of patented processes. This decision will, in effect, deny protection to holders of process patents on intermediates as opposed to “final” products. This decision denies protection to a patented process anytime it is not the only way to make an intermediate, even if it is the most economically efficient way to produce the intermediate.
In view of the purpose of the statute, compound 6 and cefaclor are essentially the same product. Compound 6. has no commercial use in the U.S. market except to make cefaclor. The patented process is thus in use to make compound 6 — a' product only four simple, well-known steps from cefaclor. The record shows no other current commercial use of compound 6.
Rather than attempting to distill an elixir from this intoxicating witches brew of enactment history, this court should interpret “material change” consistent with the overriding purpose of the Act — to provide protection to process patent holders. With its eye firmly fixed on the purpose of the Act, this court would avoid eliminating processes for intermediates from the protections of the 1988 Act.