Global Heartburn

Dr. Jan Voda is an international success, but his life would be considerably less complicated if his success were limited to just one country.

Voda is an Oklahoma cardiologist who invented a catheter that makes it easier to perform angioplasty in a coronary artery. Voda patented this catheter in the U.S., Canada and Europe.

But while attending a trade show in 1995, Voda made an unsettling discovery: Cordis Corp., a Florida-based medical device manufacturer, was selling a product that looked an awful lot like his. In October 2003, Voda sued Cordis for infringing his three U.S. patents. But during discovery, Voda learned the company also was selling the allegedly infringing catheters overseas.

Voda responded by asking the federal court in Oklahoma City for leave to amend his complaint so he could add claims that Cordis had infringed Voda's patents from Canada, Britain, France, Germany and the European Patent Office. The court accepted the amended complaint, and Cordis appealed.

The Federal Circuit reversed the district court Feb. 1 and threw out Voda's foreign patents claims. The sharply divided panel effectively ruled that U.S. courts can't exercise jurisdiction over suits involving foreign patents.

Many experts see the ruling as a big defeat for patent owners, who would generally prefer to litigate all their patent claims in one lawsuit, rather than expend the time and money to file separate suits around the globe.

"This makes it much harder for ?? 1/2 companies to enforce their rights on a multinational basis," says John Thomas, a law professor at Georgetown University.

Rethinking Jurisdiction

Before the two federal appellate judges ruled against him, Voda had good reason to think he could have his foreign patent claims decided in a U.S. court. American courts routinely hear suits based on foreign law, including foreign copyright, tort and contract claims. U.S. courts are given the authority to hear these cases under 28 U.S.C. ?? 1/2 1367, which permits a federal court that is hearing a claim based on federal law to exercise supplemental jurisdiction over claims based on state or foreign laws. However, there is one caveat--all claims must derive from a "common nucleus of operative facts."

Voda's claims may well have met this test. But Judge Arthur Gajarsa, joined by Judge Sharon Prost, ruled that even if Voda's domestic and international patent claims arose from the same facts--and so supplemental jurisdiction exists--the district court must decline to exercise this jurisdiction because of the special circumstances foreign patent suits present.

Judge Gajarsa offered several reasons why U.S. courts must refuse to hear foreign patent suits, but his main argument was that "assuming jurisdiction over foreign patent infringement claims could prejudice the rights of the foreign governments." Gajarsa claimed that foreign governments must be free to determine the validity and extent of the patents they issue without any interference from U.S. courts.

The ruling does not explicitly bar all foreign patents from being litigated in U.S. courts. However, the majority's reasoning seems to leave little room for those who want to get a foreign patent claim into a U.S. court.

"They didn't say never, but they came real close," says Jeffrey Lindgren, an IP attorney at Morgan Miller Blair.

International Conundrum

The Federal Circuit's decision is widely seen as a setback for patent owners, who are being torn between nation-based patent systems and the increasingly globalized marketplace. These days, a company or individual can easily make and sell an infringing product all around the world, but a patentee can protect its rights only by bringing multiple lawsuits on a nation-by-nation basis.

"From the patentee's point of view, it is very expensive to sue in multiple forums," says Rochelle Dreyfuss, who teaches patent law at New York University Law School.

It would be far faster, cheaper and more efficient if one court could hear infringement suits concerning multiple countries' patents, many experts assert.

"Trying to train a court about the technology is the most difficult part of a patent case," Thomas says. "Once a court is familiar with the patent and the technology and the prior art, there is no reason why the court can't decide all the issues [for multiple countries' patents]."

But if the U.S. courts opened their doors to foreign patent claims, some fear that American courts would soon be overwhelmed with claims. For example, foreign plaintiffs could file in the U.S. rather than overseas to take advantage of America's liberal discovery rules and jury trials.

"Imagine the chaos in the U.S. courts if plaintiffs brought not only U.S. patent cases but also foreign cases," says Diane Ragosa, a New York associate at Willkie Farr & Gallagher who helped represent Cordis before the Federal Circuit.

Others dismiss that concern, arguing Sec. 1367 allows U.S. courts to exercise jurisdiction over relatively few foreign patent claims.

"[T]he foreign patents would have to be very similar to the U.S. patents and must meet other requirements," says Mitchell Stockwell, a patent litigator in the Atlanta office of Kilpatrick Stockton who represents Voda.

Looking Overseas

Despite the Voda ruling, patent owners may still be able to consolidate their various claims into one suit if they are willing to go outside the U.S.

For instance, a few years ago, the Tokyo District Court handed down a ruling in K.K. Coral Corp. v. Marine Bio K.K. concerning both the plaintiff's Japanese and U.S. patents.

However, plaintiffs in Japan get much less discovery than if they had sued in the U.S., and they find it much tougher to win their suits. In fact, patentees win just 20 percent of their suits in Japan, while the U.S. provides patentees with the highest win rate in the world--59 percent for bench trials and 67 percent for jury trials, according to a 2006 paper by Michael Elmer and Alejandro Garcia of Finnegan, Henderson, Farabow, Garrett & Dunner.

Europe once appeared willing to hear multinational patent suits, but the European Court of Justice recently killed that possibility. Roche v. Primus and GAT v. LuK held that a court in Europe can't rule on infringement suits concerning foreign patents.

The typical way of pursuing a global infringer is to sue in only the product's most important market, hoping this will pressure the infringer into a global settlement. This, however, doesn't really uphold foreign patent laws.

"One country's decision effectively resolves the conflict for the whole world, even though the law of those other countries is not considered," Dreyfuss says. "I don't think that's right."

The best hope for patent owners may be a new international treaty that explicitly enables courts to hear multinational IP disputes. Scholars in the U.S., Germany and South Korea are working on such a treaty, but it is a long way from completion.

Meanwhile, patent owners such as Voda may just have to fight their infringement battles one country at a time. "One day we will get to rational patent enforcement," Thomas says, "but after Voda v. Cordis, we're not there yet."

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Steven Seidenberg

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