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

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

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

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

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

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

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

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

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.

The Mystery of the Preliminary Injunction’s Tiny Role in Patent Litigations in China and Some Newest Developments

Sen “Alex” Wang, MJLST Managing Editor

In an unpublished note completed early February this year, I compared the current standards of granting preliminary injunctions in patent litigations in the Chinese People’s courts and the US federal courts. The preliminary injunction, an equitable remedy that has long been available to patent litigants in the US, was not codified in the Chinese Patent Act until 2000 as part of China’s effort to fulfill its obligations after joining the WTO. Since then, China has been consciously strengthening the protection for intellectual property rights within its jurisdiction and has taken great pride in the progress it has made so far. In particular, the numbers of patent applications as well as litigations in China have skyrocketed in China, and the People’s courts have become more confident in handling high profile patent cases and issuing large damage awards. However, the preliminary injunction, even after its inception in the Chinese Patent Act, has only played a mysteriously tiny role in protecting the patentees’ rights during the years. For example, from 2003 to 2009, the People’s courts in Guangdong province, one of the biggest and most developed provinces in China, ruled respectively on 54, 19, 21, 20, 24, 5, and 11 preliminary injunction applications involving intellectual property rights (not just patents) while granting only 17, 6, 12, 8, 5, 2, and 1 of the applications in each corresponding year. By contrast, the number of intellectual property cases considered by the People’s courts in Guangdong during the same time frame was 1465, 3199, 4257, 3644, 3989, 5312, and 7152, respectively.

As a powerful and drastic remedy, the preliminary injunction exists to provide speedy relief from irreparable injury and is “generally granted under the theory that there is an urgent need for speedy action to protect the plaintiff’s rights.” Apple, Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1334 (Fed. Cir. 2012) (O’Malley, J., concurring-in-part, dissenting-in-part) (internal citation omitted). In the US, the Federal Circuit utilized, for a long time, a balancing—or so called “sliding scale”—test for issuing preliminary injunctions, where the movant must establish a right thereto in light of four factors: (1) a reasonable likelihood of success on the merits; (2) irreparable harm if an injunction is not granted; (3) the balance of hardships tipping in its favor; and (4) the impact of the injunction on the public interest. Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 2001) (citing Hybritech, Inc. v. Abbott Laboratories, 849 F.2d 1446, 1451 (Fed. Cir. 1988)). None of the factors, taken individually, is dispositive; rather, the court must “weigh and measure each factor against the other factors and against the form and magnitude of the relief requested.” Id. However, following the Supreme Court’s rulings in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) and Winter v. NRDC, Inc., 555 U.S. 7 (2008), the Federal Circuit has given up its balancing test to comply with the more rigorous requirements set forth by the Supreme Court. Compare Abbott Labs. v. Sandoz, Inc., 544 F.3d 1341, 1365 (Fed. Cir. 2008), with Titan Tire Corp. v. Case New Holland, Inc., 566 F.3d 1372, 1375–76 (Fed. Cir. 2009). Currently, “a showing on one preliminary injunction factor does not warrant injunctive relief in light of a weak showing on other factors.” Wind Tower Trade Coal. v. United States, 741 F.3d 89, 100 (Fed. Cir. 2014).

Across the Pacific Ocean, the Chinese People’s courts, under a civil law system, rely heavily on statutes, regulations, and other promulgated rules. To comply with the requirements of the TRIPS Agreement, both Article 66 of the Chinese Patent Act and Article 100 of the Chinese Civil Procedure Act now recognize the preliminary injunction as a provisional remedy in patent litigations. While the acts passed by the People’s Congress form the statutory bases for issuing preliminary injunctions, in practice, the more detailed procedural as well as substantive requirements for obtaining such provisional remedy are actually found in in several judicial interpretations and judicial policy documents promulgated by the Supreme People’s Court (SPC). The foundational judicial interpretation in this regard is the Several Provisions of the Supreme People’s Court Concerning the Application of Law to Pre-trial Cessation of Patent Infringement (最高人民法院关于对诉前停止侵犯专利权行为适用法律问题的若干规定) [hereinafter Provisions on Pre-trial Cessation of Patent Infringement] (2001), the Article 11 of which requires the People’s courts to consider four factors when ruling on an application for a preliminary injunction, namely (1) whether the alleged current or imminent conduct infringes the patent; (2) whether the applicant will suffer irreparable harm without an injunction; (3) the guarantee provided by the applicant; and (4) whether the public interest will be disserved. Despite the SPC’s wording of the first factor, it has been treated as inquiring into the applicant’s likelihood of success on the merits. As to the second—irreparable harm—prong of the test, there had been a great amount of confusion among the lower courts until Cao Jianming, vice president of the SPC, pointed out in February 2008 that the core of the irreparable harm analysis is whether the damage can be compensated by monetary award and whether there is a reasonable expectation of collecting such award in light of the alleged infringer’s financial condition.

With the first two factors being the most important in the determination, the standard in China looks very similar to the one currently used in the federal courts in patent cases as the Rule 65 of Federal Rules of Civil Procedure also mandates the applicants to provide security. This similarity between the standards makes one even more curious about why preliminary injunctions have only been utilized at such a low rate in patent cases in China. The answer—also the problem of the current Chinese approach—lies in the restrictions buried in two judicial policy documents from the SPC. Although the four-factor test seems to be applicable to all patent cases, the SPC has confined the issuance of preliminary injunctions to cases where the facts are clear and the infringement is easy to determine. Opinions on Issues Concerning Maximizing the Role of Intellectual Property Trials in Boosting the Great Development and Great Prosperity of Socialist Culture and Promoting the Independent and Coordinated Development of Economy (关于充分发挥知识产权审判职能作用推动社会主义文化大发展大繁荣和促进经济自主协调发展若干问题的意见) [hereinafter Opinions on Maximizing the Role of Intellectual Property Trials], art. 16 (2011). In particular, when there is no literal infringement and the court has to conduct complicated technical comparisons, a preliminary injunction is deemed inappropriate. Opinions on Several Issues Concerning Intellectual Property Trials Serving the Overall Objective Under the Current Economic Situation (关于当前经济形势下知识产权审判服务大局若干问题的意见) [hereinafter Opinions Under the Current Economic Situation], art. 14 (2009). In addition, if the alleged infringer has challenged the validity of the patent(s) in question or has initiated a separate declaratory judgment action, the courts are required to be extremely cautious in granting preliminary injunctions. Id.

This “clear” and “easy” yet rigid approach seems to be contrary to the legislative intent of introducing such a provisional remedy in the first place and only makes sense to some extent when considered in a bigger context. On several different occasions and in various promulgated documents, the SPC has expressed some serious concern that preliminary injunctions or the process by which they are granted may be abused to impede competition, while adding to the concern is the present procedural setup of obtaining a preliminary injunction. In the People’s Courts, there is no similar remedy as a TRO but only a general preliminary injunction. It is general in the sense that the application can be filed before, at the same time with, or after the commencement of an infringement action, and once granted, the injunction will usually remain in force until the final adjudication on the merits take effect. Provisions on Pre-trial Cessation of Patent Infringement art. 14. Furthermore, a preliminary injunction issued before the filing of an infringement action will, so long as the applicant initiates the formal infringement suit within 15 days of getting the injunction, enjoin the alleged infringer all the way until the end of the infringement action. Id. Also, a preliminary injunction can be issued without notice to the enjoined party, although the courts have the obligation to notify the enjoined party no later than 5 days after the issuance of the injunction. Id. art. 9. Moreover, the People’s courts only have 48 hours (96 hours at most) to make a decision in writing after receiving eligible applications. Id. Additionally, though the People’s Courts are authorized to summon one or all parties to clarify factual issues, no hearing of any form is required. Id. One final point, the enjoined party has no right to appeal but may apply, within 10 days of receiving the injunction, for review once, though the injunction will not be suspended during the review period and there will still be no guaranteed hearing opportunity. Id. art. 10. Given the powerful nature of the remedy once granted, the tight time frame for making a decision in writing, and the limited hearing requirement, it is understandable that the fear of mistakes and misuses has prompted the SPC to take a cautious position.

Although the SPC’s current approach is to some extent understandable, it has comprised the preliminary injunctions’ function as an important provisional remedy for patent holders and has likely caused many patent holders to refrain from even considering this option as evidenced by the extremely low application rate in Guangdong. Fortunately, the SPC has finally noticed this alarming trend. On February 26, 2015, the SPC published for public comment a draft SPC Judicial Interpretation on Several Issues in Application of Law in Determination of Action Preservation in Intellectual Property and Competition Controversies ((最高人民法院关于审查知识产权与竞争纠纷行为保全案件适用法律若干问题的解释) (征求意见稿)). This new judicial interpretation purports to supersede prior judicial interpretations involving preliminary injunctions in patent and trademark cases. According to the draft, the time frame for rendering a preliminary injunction decision is a non-emergency matter may be adjusted to 30 days. It also details other procedural as well as substantive aspects of preliminary injunctions such as the jurisdiction of the court, what constitutes “irreparable harm,” hearing and notice requirement, handling of appeals of cases and handling of oppositions to provisional measures, the effect of changed circumstances, civil liability arising from wrongful application, and other matters. Notably, the draft adopts the exact same four-factor test in the US federal courts. However, it only requires the People’s courts to evaluate the four factors as a whole under the circumstances without identifying any single factor as dispositive. This arguably bears a resemblance to the balancing or sliding scale analysis once used in patent cases in the US federal courts, which opens up the possibility of greater use of preliminary injunctions in the People’s courts in the near future.

Cyber Intrusions

Hana Kidaka, MJLST Staffer

On November 24, 2014, hackers stole confidential information from the servers of Sony Pictures Entertainment. The hackers claimed to have stolen 100 terabytes of confidential information, including employee Social Security numbers, e-mail conversations between executives, and unreleased films. This Sony hack and “[t]he dramatic increase in cyber intrusions” led the Obama Administration to issue legislative proposals on January 13, 2015 in hopes of strengthening cybersecurity. The Administration’s proposals attempt to: “(1) enhance cybersecurity threat information sharing within the private sector and with the Federal Government; (2) establish a single standard to protect individuals by requiring businesses to notify them if their personal information is compromised; and (3) strengthen the ability of law enforcement to investigate and prosecute cybercrimes.”

Following the legislative proposals, President Obama signed executive orders that encourage companies to share cybersecurity information with each other and the government and that allow the government to impose penalties on foreign “individuals or entities that engage in significant malicious cyber-enabled activities.” The President has also been in talks with foreign governments to strengthen cybersecurity. For example, on September 25, 2015, President Obama announced that the U.S. and China have agreed to work together to prevent cybercrimes by providing “timely responses . . . to requests for information and assistance concerning malicious cyber activities” and by “identify[ing] and promot[ing] appropriate norms of state behavior in cyberspace within the international community.” While this is a small step in the right direction, it is important that our federal government establish a comprehensive cybersecurity legal framework that will effectively combat against cyber threats, but also take into account the privacy concerns of many individuals and companies. It will be interesting to see if and how Congress will address these conflicting interests in the near future.