- Online Edition
- Print Edition
- Donahue Lecture Series
Randall Fincke (Fincke) was an entrepreneur on a mission to expand automated electronic defibrillation (AED) technology. In 2000, Fincke and a business partner formed Access Cardiosystems, Inc. (Access) to market, manufacture, and sell Fincke’s new AED technology. From its inception, Access was not financially stable, and in early 2001, Fincke was forced to invest his personal funds into the company. Subsequently, Fincke began to look for outside investors to help fund Access’s business operations. Eventually, Fincke found three loyal investors (the Investors), who invested 4.6 million dollars in Access between the spring of 2001 and June 2002.
In July 2002, Fincke received a letter from Phillips Electronics (Phillips) indicating that Access’s new AED technology infringed on one of Phillip’s patents. By October 2002, Access’s financially instability continued, and as a result, Fincke presented a business plan to the Investors and one potential new investor (the New Investor) with the hopes that they would make additional financial contributions to Access. The business plan outlined Access’s financial status, risk factors, and litigation issues; however, it did not reveal the patent infringement letter from Philips. Shortly after receiving the business plan, the New Investor, who had no prior dealings with Fincke or Access, invested two million dollars in Access. In April 2003, despite the new capital, Access remained financially unstable, and the Investors converted their debt into equity and purchased additional Access stock thereby forcing Fincke to relinquish his majority ownership of Access to the Investors. Simultaneously with Fincke’s cessation, a board of directors was created with the Investors, the New Investor, and Fincke as directors. In November 2003, however, the board removed Fincke from his position because they began to suspect he mismanaged Access and made misrepresentations to them regarding Access’s financial and operational success.
In 2004, after Fincke was ousted from Access, he attempted to assert control over Access’s intellectual property, and the Investors along with the New Investor filed suit against Fincke in the Massachusetts Superior Court alleging fraud, misrepresentation, and violations of Section 410(a)(2) of the Massachusetts Blue Sky Laws. On February 8, 2005, Access filed for bankruptcy and the case was removed to the bankruptcy court. The bankruptcy court found that Fincke made a material misrepresentation in the 2002 business plan, in violation of Section 410(a)(2) of the Massachusetts Blue Sky Laws, by failing to disclose the Phillips patent infringement issue. Additionally, the court found that the New Investor was entitled to damages as a result of Fincke’s violation of Section 410(a)(2) because his investment was solicited by means of the business plan. On appeal, the Massachusetts District Court affirmed the bankruptcy court’s findings. Subsequently, Fincke appealed to the First Circuit Court of Appeals, arguing that the New Investor was not entitled to damages under the Section 410 (a)(2) of the Massachusetts Blue Sky Laws because his investment was not solicited “by means of” Fincke’s misrepresentations in the business plan as required by the statute.
The Massachusetts Securities Laws (the Blue Sky Laws) are comprised of Mass. Gen. Laws. ch. 110A, § 101 et. seq. In relevant part, Section 410(a)(2) of the Blue Sky Laws prohibits a person from “offer[ing] or sell[ing] a security by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.” In enacting the Blue Sky Laws, the legislature intended the statutes to be interpreted in accordance with Section 12(2) of the Securities Act of 1933. Indeed, the language of the Section 410(a)(2) is virtually identical to the text of Section 12(2) of the Securities Act of 1933. Accordingly, courts interpreting Section 410(a)(2) utilize the plain language of the statue, Massachusetts case law, and federal case law under Section 12(2) of the Securities Act of 1933.
Section 410(a)(2) of the Blue Sky Laws is both redressive and preventative, and as such, it achieves many objectives. In the most literal sense, Section 410(a)(2) grants buyers of securities a special remedy against sellers who secure their investment by means of fraud or misrepresentation. Figuratively, Section 410(a)(2), seeks to level the playing field in the securities market and create a higher level of business ethics by compelling disclosure of unpropitious matters that could substantially influence a buyer’s decision to invest in a seller’s venture. Additionally, “Section 410(a)(2) provide[s] a heightened deterrent against sellers who make misrepresentations by rendering tainted transactions voidable at the option of the defrauded purchaser, regardless of the actual cause of the investor’s loss.”
The “by means of” language in Section 410(a)(2) plays a critical role in assessing liability under the statue because it is one of the only built in mechanisms that limits the defendant’s liability. However, there is scant legal precedent interpreting the “by means of” clause in Section 410(a)(2). Nevertheless, some matters surrounding the clause are clearly settled. Firstly, the clause imposes liability on the seller regardless of whether the buyer relied on the misrepresentation. Secondly, the provision requires privity between the buyer and seller. Thirdly, the clause mandates that there must be a causal connection between the seller’s misrepresentation and the buyer’s investment. Courts interpreting the causal connection requirement have found that the sale does not need to be directly related to the alleged misrepresentation. Therefore, the causal connection requirement will be satisfied simply if the misrepresentation is used to effect the sale.
The First Circuit Court of Appeals affirmed the lower courts’ findings and rulings. The Court held that under Section 410(a)(2) of Massachusetts Blue Sky Laws, investments are solicited “by means of” a material misrepresentation “when the communication containing the material misrepresentation was used to effect the sale—and not whether it was actually successful in securing the sale.” The court reasoned that the central purpose of Section 410(a)(2) was to deter securities fraud, and the “use” approach followed in suit with this purpose and was consistent with Massachusetts precedent. Furthermore, the court found that when analyzing the “use” approach, courts should use utilize objective evidence in determining whether the seller violated Section 410(a)(2). Additionally, the Court noted that reliance on the part of an investor was not integral to analyzing whether their investment was solicited “by means of” a material misrepresentation because action by the seller alone is sufficient to trigger a violation of Section 410(a)(2). Using these directives, the First Circuit Court of Appeals held that Fincke violated Section 410(a)(2) because objective evidence illustrated that the New Investor had no prior dealings with Fincke, and his decision to invest followed on the heels of receiving the misrepresented business plan.
The First Circuit Court of Appeal’s decision provides clarity to Section 410(a)(2) of the Massachusetts Blue Sky Laws. Going forward, courts will utilize a seemingly bright-lined test for determining whether a seller violates Section 410 (a)(2). That test is, when viewed objectively, whether the material misrepresentation was used to effect the sale. Notwithstanding this test, the First Circuit Court of Appeals may have created a slippery slope for future litigation because it did not place temporal limits on its test. In In re Access Cardiosystems, Inc., Fincke distributed the misleading business plan in October 2002, and the New Investor contributed to Access on October 30, 2002. The period between Fincke’s distribution of the business plan and the use of the material misrepresentation is extremely short. The First Circuit Court of Appeals placed no temporal limits on its test to deal with future cases where the misrepresentation and use are not closely connected in time. By placing no qualifying limits on its test, the First Circuit Court of Appeals might have created the presumption that the “use” approach allows for a seller to be liable under Section 410(a)(2) of the Massachusetts Blue Sky Laws for an infinite amount of time after they make a misrepresentation.
Looking ahead, courts will likely be forced to redefine the “use” approach as put forth by the First Circuit Court of Appeals. Future defendants will urge the courts to place temporal limits on this approach, arguing that a material misrepresentation, as objectively viewed, cannot be used for an infinite amount of time so as to fraudulently influence a sale. Conversely, future plaintiffs will contend that once a misrepresentation is made it lasts forever. When presiding over these cases, courts should make their determinations on a case-by-case basis, utilizing objective evidence and their discretion. Additionally, courts should not attempt to undertake fashioning a rigid rule regarding timing because cases involving Section 410(a)(2) of the Massachusetts Blue Sky Laws are very fact intensive and an inflexible rule would not serve the litigants’ justice in these cases.
Nicole A. Maruzzi, Commentary, Bluer Skies in Massachusetts: First Circuit Clarifies Section 410(a)(2) of the Massachusetts Blue Sky Laws, 4 Suffolk U. L. Rev. Online 2 (May 16, 2016), http://suffolklawreview.org/bluer-skies-in-massachusetts
 See Access Cardiosystems, Inc. v. Fincke (In re Access Cardiosystems, Inc.), 404 B.R. 593, 609 (Bankr. D. Mass. 2009) aff’d, 488 B.R. 1 (D. Mass. 2012).
 See id. at 610 (describing formation of Access). Access was originally incorporated as Acelex and the name of the corporation was later changed to Access Cardiosystems, Inc. Id.
 See id. at 610-11 (summarizing Access’s financial turbulence).
 See id. at 611 (outlining Fincke’s search for outside investors).
 See id. at 613.
 See In re Access Cardiosystems, Inc., 404 B.R. 593, 614-15 (Bankr. D. Mass. 2009) aff’d, 488 B.R. 1 (D. Mass. 2012) (outlining contents of business plan).
 See id. at 614 (noting discrepancies in business plan).
 See id. at 615 (describing investments made by New Investor).
 See Access Cardiosystems, Inc. v. Fincke (In re Access Cardiosystems, Inc.), 460 B.R. 67, 71 (Bankr. D. Mass. 2011) aff’d in part, vacated in part, 488 B.R. 1 (D. Mass. 2012) aff’d, 776 F.3d 30 (1st Cir. 2015) (summarizing stock plan leading to Fincke’s cessation of ownership).
 See id. (describing formation of new board of directors).
 See id. (outlining removal of Fincke for misrepresentations and mismanagement).
 See id. at 72-73 (setting forth events leading to litigation).
 See In re Access Cardiosystems, Inc., 460 B.R. 67, 71 (Bankr. D. Mass. 2011) aff’d in part, vacated in part, 488 B.R. 1 (D. Mass. 2012) aff’d, 776 F.3d 30 (1st Cir. 2015) (describing procedural path of litigation).
 See In re Access Cardiosystems, Inc., 776 F.3d 30, 32 (1st Cir. 2015) (discussing lower court’s ruling).
 See id. (discussing procedural history).
 See id. at 34-35 (outlining Fincke’s challenges to damages award).
 Mass. Gen. Laws. ch. 110A, § 410(a)(2) (2015).
 See Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1025 (Mass. 2004) (discussing history of Massachusetts Blue Sky Laws).
 See Mass. Mut. Life Ins. Co. v. DB Structured Products, Inc., 110 F. Supp. 3d 288, 297 n.9 (D. Mass. 2015) (recognizing similarities between state and federal laws).
 See Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1025 (Mass. 2004) (setting forth method of interpretation for applying Blue Sky Laws).
 See Harry Shulman, Civil Liability and the Securities Act, 43 Yale L.J. 227, 227 (1933) (describing dual purpose of Securities Act).
 See Mary Elizabeth Bierman, Mixed Arbitrable and Nonarbitrable Claims in Securities Litigation: Dean Witter Reynolds, Inc. v. Byrd, 34 Cath. U. L. Rev. 525, 532 (1985) (highlighting special remedies in cases of misrepresentation or fraud).
 See Michael J. Kaufman, Legislative History of 1933 Act civil Remedies, 26 Sec. Lit. Damages § 6:6 (2015) (noting additional purposes of Securities Act of 1933).
 See Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1025 (Mass. 2004) (internal quotations omitted).
 See Arnold S. Jacobs, 5 Disclosure & Remedies Under the Sec. Laws § 3:148 (2015).
 See In re Access Cardiosystems, Inc., 776 F.3d at 35 (1st Cir. 2015) (highlighting lack of case law regarding interpretation of language).
 See David O. Blood, Comment, There Should Be No Reliance in the “Blue Sky”, 1998 B.Y.U. L. Rev. 177, 185 (1998).
 See Sanders v. John Nuveen & Co., 619 F.2d 1222, 1225-26 (7th Cir. 1980).
 See Alton Box Bd. Co. v. Goldman, Sachs & Co., 560 F.2d 916, 924 (8th Cir. 1977).
 See J. William Hicks, 17A Civil Liabilities: Enforcement & Litig. § 6:118 (2015).
 See In re Access Cardiosystems, Inc., 776 F.3d at 33, 37 (1st Cir. 2015).
 See id. at 36.
 See id. (discussing persuasiveness of “use” approach).
 See id. at 36-37 (discussing objective standard).
 See In re Access Cardiosystems, Inc., 776 F.3d at 37 (1st Cir. 2015) (noting reliance not needed to advance claim).
 See id. (outlining objective evidence against Fincke).
 See id. at 36.
 See In re Access Cardiosystems, Inc., 404 B.R. 593, 614-15 (Bankr. D. Mass. 2009) aff’d, 488 B.R. 1 (D. Mass. 2012) (summarizing timeline of events).
Uber is an internet-based service provider, found as an application on a mobile phone. The service it provides: connecting ordinary people who need a car ride to a nearby location with ordinary people who are offering to provide a car ride in their own car. Uber is intentional in describing itself as not being a taxi-service. And in Uber’s five short years of existence, it has managed to provide what many deem as a radically better service than the traditional taxicab, leading to a detrimental effect on the business outlook of the taxicab industry. In response, the taxicab industry is pointing out an unfairness: Uber provides a service that resembles a taxicab service, yet avoids having to comply with the very regulations that are meant to protect taxicabs from competition. Instead of changing how they themselves conduct business in order to become competitive with their new competition, taxicab companies are taking Uber to court, going on strike, and petitioning legislatures and regulatory agencies to put an end to Uber, declaring Uber “illegal.” This has lead Uber to fight back strong by reiterating that it is not a taxi-service, but is merely a platform that connects people to people. This disagreement has escalated to the epitome of a modern day “war” between the political entrepreneur (those who use political capital to maintain the status quo) and the market entrepreneur (those threatening the status quo) and threatening the very existence of a sharing economy.1
In Boston Taxi Owners Ass’n v. City of Boston the battle hit close to home when two Massachusetts taxicab owners and a Boston taxicab owner’s association filed suit against the City of Boston, the Boston police commissioner, the Commonwealth of Massachusetts, and the Massachusetts Department of Transportation (“MassDOT”), claiming the defendants were unfairly and illegally allowing Uber to operate.2 Specifically, the taxi drivers argued that the defendants were infringing on their constitutional rights by allowing Uber to operate without the same stringent regulations imposed on taxis.3 Because the uneven regulations make it easier for Uber to take away business from the taxicab business, the plaintiff’s argued, Uber was violating both the Takings Clause and the Fourteenth Amendment’s Equal Protection Clause.4 In a February 2015 decision, the U.S. District Court for the District of Massachusetts denied the plaintiff’s motion for preliminary injunction.5
Regulation of the American Taxicab dates back to the Great Depression. In the 1930s, as more individuals became unemployed, those who owned a car quickly turned to the—then unregulated—taxicab industry to make a living.6 The number of taxicabs roaming the streets drastically increased, while the number of Americans able to afford a taxicab drastically decreased.7 The tension between the contradicting supply and demand led to high levels of competition between the overabundance of taxicabs, leading most drivers to work sixteen hour days just to support their families.8 These drivers were overtired, untrained, and uninsured, which increased the accident rate and caused them to engage in a game of chaos and survival-of-the-fittest just to find a paying customer. When a taxicab would get in an accident–an all too often occurrence–those who were harmed were forced to bear the loss.9 Taxicabs were causing more harm than good, leading many U.S. cities to begin regulating the industry.10 The most common regulation merely limited the number of taxicabs allowed to operate within a given city. Doing so decreased competition, meaning those who were allowed to drive could depend on a more stable and consistent income. Simultaneously, restricting the number of taxicabs on the street gave cities the opportunity to impose and monitor insurance requirements and background checks on drivers. Cities also began controlling the rates taxicabs were allowed to charge, since the industry was quickly becoming an oligopoly. By 1934, forty-three out of ninety-three of the country’s largest cities had begun regulating the industry.11
Today, there are about 6,300 taxi companies operating 171,000 taxicabs and employing 350,000 people.12 These companies transport 1.4 billion passengers each year, more passengers in the United States than all mass transportation systems combined.13 Furthermore, nearly all communities regulate their taxicabs by restricting the number of taxicabs allowed in the community, setting fares, enforcing service standards, and requiring insurance.14 Most significantly, almost every major city across the world has a medallion system in place: a medallion being a license attached to a particular vehicle—symbolizing that the particular vehicle is authorized to act as a taxicab—and serving as the primary method of limiting the number of taxicabs in a given city.15 Cities across America limit the number of medallions permitted at any given time, making a medallion one of the most sought-after commodities in almost any city. For example, in what many consider the largest taxicab city in the world, New York City has a cap of 13,237 medallions, leading the current medallion rate to cost just over $1,000,000.16 Without a medallion, or, in other words, without a $1,000,000 to spare, someone in New York City cannot operate a vehicle as a taxicab. Furthermore, even if someone does have a $1,000,000 to spare and she wishes to use a vehicle as a taxicab, if there are already 13,237 active medallions roaming the street, she must find someone willing to sell their medallion.
Despite these medallions being almost as old as the industry itself, economists and legal theorists insist that the medallion system has little purpose other than to protect political entrepreneurs.17 Many argue that the taxicab industry should be deregulated, just as the railroad and airline system were deregulated.18 Economists project that deregulating the taxi industry would save $800,000,000 and create 38,000 new jobs.19 Furthermore, deregulation would finally provide the taxicab industry with incentive to focus on customer satisfaction, because the current lack of competition (at least prior to the age of Uber) provides no incentive to provide clean cabs, efficient services, or low fares.
The Boston Police Department (“BPD”) regulates the Boston taxi industry and currently enforces a limit of 1,825 medallions, making a single medallion in Boston worth a little over $700,000.20 While the Boston Police Department has a plethora of rules governing taxicabs, it has yet to enforce those same rules on Uber. MassDOT also has its own set of regulations for taxicabs and defines a taxicab as “any vehicle which carries passengers for hire, and which is licensed by a [local] municipality.”21
For as long as Uber has existed, taxicabs have asserted an unfair playing field between Uber and taxicabs. Why should taxicabs have to adhere to the lengthy list of BPD and MassDOT requirements, while Uber does not?
In response, in January of 2015, MassDOT revised its regulations to create a new classification—and an associated set of regulations—directly aimed at Uber. This new classification labels Uber as a “Transportation Network Company” (“TNC”) and defines TNCs as “entit[ies] operating in Massachusetts that, for consideration, will arrange for a passenger to be transported by a driver between points chosen by the passenger.”22 While TNC regulations are silent on whether a TNC driver must purchase a medallion, TNCs are required to adhere to a specific insurance, licensing, and background check policies.23 By creating this new classification, MassDOT chose to officially recognize Uber and its like as legal entities.
The same day the MassDOT amendments went into effect, the Boston Taxi Owners Association filed a motion for preliminary injunction with the U.S. District Court. The motion asserted that the amendments violate the due process and equal protection clauses since they recognize TNCs as “de facto taxis” without requiring TNCs to adhere to the same regulations expected of taxi drivers.24 Furthermore, the plaintiffs sought an affirmative injunction asserting that the BPD violates their equal protection rights and is engaging in an unconstitutional taking of their property.25 Standing up for all the TNCs of the world, however, the court refused to show deference to the constitutional arguments and denied the taxi cab owners requests for injunction, stating that such arguments were unlikely to succeed on the merits.
Arguing for their takings claim, the taxi owners asserted that the City of Boston was reducing the market value of their medallions by allowing TNCs to operate without purchasing medallions. In response, the court explained that the plaintiffs do not have a constitutionally protected property interest in the market value of their medallions since, at its more inherent level, a medallion provides a privilege to voluntarily engage in a governmental regulatory scheme (and that a market value resulting merely from government regulation cannot constitute a protected property interest).26 Furthermore, a medallion does not guarantee its purchaser a monopoly over the taxicab industry, so taxi drivers should expect certain situations to affect the market value of their medallions.
Arguing for their equal protection claim, the taxi owners next asserted that there was an unfair difference between the treatment of taxicabs and TNCs under the new MassDOT amendments, since taxicabs and TNCs are “similarly situated” and, thus any difference in treatment must be subject to a rational governmental interest. The court, however, explained that taxicabs and TNCs are not “similarly situated,” as TNCs are merely companies that connect people needing a ride with people willing to provide a ride. Perhaps most celebratory—in the eyes of Uber—is that the court went on to say that even if the two entities were similarly situated, Boston does have a rational basis for treating TNCs differently: TNCs challenge the status quo and increase the quality and quantity of transportation options available to Bostonians.27 As the court stated, “the public interest is best served by the existence of a diverse and competitive market for transportation services, including both traditional taxicabs and TNCs. Restricting the development of that market at this early stage of the litigation would not be in the public interest.”28
One can imagine the celebrations among Uber executives upon reading this decision. A U.S. District Court had publically stated the unlikeliness that Uber could be considered a constitutional threat.
Nonetheless, the fight does not stop with this one denial of preliminary injunction. First and foremost, the court stated its blunt expectation that the BPD continues to explore the best ways to regulate TNCs.29 The city’s failure to continue the process of designing TNC regulations could potentially lead a future court to determine that there is disparate treatment between the two entities. And secondly, while preliminary injunctions were denied, litigation on this case—and other similar constitutional cases—will likely continue until higher courts provide a final resting place for the argument.
And while the constitutional argument against Uber may be weak, there are still plenty of other legal predicaments facing Uber. There is an intense fight underway in France, with the Constitutional Council in France upholding the country’s ban on Uber.30 Domestically, Uber faces a major class action suit alleging that Uber is misclassifying its employees as independent contractors, creating the potential for an unfavorable ruling to completely disrupt the company’s business model.31 Not to mention the hundreds of other fierce law suits occurring against Uber across the country. At the end of the day, while Uber is clearly making strides against eliminating its legal threats, it still has many battles yet to fight.
B. Tyler Blair, Commentary, U.S. District Court in Boston Taxi Owners Says Uber can Continue to be Treated Independently from Taxicabs . . . At Least for Now, 4 Suffolk U. L. Rev. Online 1 (Mar. 17, 2016), http://suffolklawreview.org/u-s-district-court-in-boston-taxi-owners-says-uber-can-continue-to-be-treated-independently-from-taxicabs-at-least-for-now
On July 1, 2014, in AbbVie Deutschland GmbH & Co. v. Janssen Biotech, Inc.,1 the Court of Appeals for the Federal Circuit affirmed a district court’s decision invalidating the claims of two antibody patents for failing to meet Section 112’s written description requirement.2 Specifically, the court took issue with the patents’ functionally defined antibody-genus claims, concluding that the patentee failed to disclose a representative species of antibodies diverse enough to support the patents’ broad genus claims. Also of note was the court’s consideration of the preclusive effect of decisions by the Patent and Trademark Office’s Board of Patent Appeals and Interferences (Board). Moving forward, the AbbVie decision casts doubt on the validity of functionally defined genus claims, particularly in highly technical fields such as biological sciences, and it closes the door on parties attempting to make collateral-estoppel arguments based on interference decisions that are in the process of being challenged under 35 U.S.C. § 146.
II. Technology At Issue
The patents at issue in AbbVie, U.S. Patent Numbers 6,914,128 (‘128 patent) and 7,504,485 (‘485 patent), were directed to a class of fully humanized antibodies designed to bind to and neutralize Interlukin-12 (IL-12), a signaling protein secreted by the human body that, if overproduced, can lead to psoriasis and rheumatoid arthritis.
The structure of the claimed antibody genus played a major role in the court’s written description analysis. Generally speaking, an antibody consists of four chains of amino acids, two identical heavy chains and two identical light chains, folded into a three-dimensional structure that binds to an antigen and facilitates the removal of the antigen from the body. The heavy and light chains have both a constant and variable region. Among human antibodies, the variable region of the heavy chain is divided into seven families, ranging from VH1 to VH7. Similarly, the variable region of the light chain is divided into two classes, either Kappa or Lambda. The variable regions of the heavy and light chains each have three complimentary determining regions (CDRs). The binding affinity of an antibody—that is, its ability to bind to and later disassociate from the antigen—is measured by what is referred to as the antibody’s koff rate. The lower the koff rate, the tighter the antibody binds with the targeted antigen.
AbbVie’s ‘128 and ‘485 patents claimed the entire genus of fully humanized antibodies that bind IL-12, but it did so only by the antibodies’ functional characteristics. Said differently, AbbVie claimed the binding and neutralizing characteristics of the antibody, not the structural composition of the antibody itself. Claim 29 of the ‘128 patent, which was treated as representative, claimed the following: “A neutralizing isolated human antibody, or antigen-binding portion thereof that binds to human IL-12 and disassociates from human IL-12 with a koff rate constant of 1×10-2 s-1 or less, as determined by surface plasmon resonance.”3
In its disclosure, AbbVie listed more than 300 different variations of antibodies that achieved the desired koff rate. That said, all 300 of the disclosed antibodies variations were derived from the antibody Joe-9 and thus all shared the same structural makeup: VH3 heavy chains and Lambda Light chains. The differences between each of the 300 disclosed antibodies were only minor changes to the CDR sequences of the Joe-9-based antibodies.4 Notably, although AbbVie disclosed these 300 variations, AbbVie chose not to disclose any structural features or characteristics that were common to the members of the claimed antibody genus.
The Defendant-Appellee, Centocor, markets its own antibody that neutralizes human IL-12 under the brand name Stelara®. Although the Stelara® product is comprised of VH5 heavy chains and Kappa light chains—an entirely different structure than the Joe-9-based antibodies disclosed in the ‘128 and ‘485 patents—AbbVie nonetheless alleged that Stelara® fell within the scope of the genus claims because it was a fully humanized antibody that bound to and disassociated from IL-12 at the claimed koff rate.5
After filing its patent application for Stelara®, Centocor provoked an interference with AbbVie’s ‘128 patent to contest both priority and validity of the ‘128 patent on obviousness grounds. The Board found that the ‘128 patent was not invalid for obviousness and awarded priority to AbbVie. Shortly thereafter, AbbVie and Centocor each filed actions—AbbVie an infringement action in the U.S. District Court for the District of Massachusetts and Centocor a declaratory-judgment action for noninfringement and invalidity in the U.S. District Court for the District of Columbia. Separately, Centocor also challenged the Board’s earlier invalidity and priority decisions under 35 U.S.C. § 146, which allows a party to contest a Board ruling by filing a civil action in federal court. Centocor’s actions were transferred to the District of Massachusetts and consolidated with AbbVie’s infringement action.6
At trial, AbbVie moved for summary judgment on the grounds that Centocor should be collaterally estopped from challenging the validity of the ‘128 patent because Centocor had failed to invalidate the patent in the parties’ earlier interference proceeding. The trial court denied AbbVie’s summary-judgment motion but, after construing the claims, found that Centocor nevertheless infringed the asserted claims of the ‘128 and ‘485 patents. With infringement decided, the issue of validity was tried before a jury.
Upon conclusion of the trial on validity, the jury determined that each of the asserted claims were invalid for lack of adequate written description, lack of enablement, and obviousness. AbbVie moved for a judgment as a matter of law (JMOL) on each of the invalidity grounds, but the motion was denied.7 On appeal, AbbVie challenged the district court’s denial of summary judgment and JMOL.8
IV. Collateral Estoppel
The collateral-estoppel argument AbbVie presented to the Federal Circuit focused on the parties’ earlier interference proceeding. AbbVie contended that the Board’s interference decision was final and thus Centocor should have been foreclosed from relitigating the issue of patent validity at trial. AbbVie believed that the Board’s validity ruling in the interference action was binding and Centocor’s Section 146 proceeding was akin to an appeal of an otherwise-final judgment. In response, Centocor argued that, unlike other types of appeals, Section 146 allows the party challenging a Board decision to put forth new evidence and have the entire record reviewed de novo by the district court. And thus, as long as the Section 146 proceeding was pending, Centocor contended, the Board’s decision was not yet a “binding final judgment” for purposes of collateral estoppel. The Federal Circuit agreed with Centocor, holding that because the district court can conduct a de novo review of all of the evidence in a Section 146 proceeding, including new evidence that was inadmissible at the Patent and Trademark Office (PTO), a Board decision cannot be considered a final judgment that would preclude a party from relitigating the same or similar issues in a parallel action.9
Although the Federal Circuit made clear that a Board’s decision is not final when challenged under Section 146 for purposes of collateral estoppel, the court expressly stopped short of applying that same rationale to Board decisions challenged under 35 U.S.C. § 141.10 That section allows a party to appeal a Board’s ruling directly to the Federal Circuit. Moving forward, it will be interesting to see if the Federal Circuit treats Section 141 challenges to interference proceedings like typical appeals, allowing parties to argue that underlying Board decisions have collateral-estoppel effect in subsequent or parallel litigations.
V. Written Description
The primary focus of the Federal Circuit’s decision in AbbVie was its application of the written description requirement in 35 U.S.C. § 112 to AbbVie’s expansive antibody-genus claims. AbbVie contended that the district court should have granted its JMOL motion on the issue of written description. Specifically, AbbVie believed there was adequate support for its broad genus claim because AbbVie had disclosed more than 300 antibodies covering the full range of the claimed koff rates in the patents’ specifications. And Centocor’s attempts to distinguish Stelara® on the basis of structure, AbbVie contended, were legally irrelevant because AbbVie’s claims were defined by koff rate, not structural characteristics. In response, Centocor pointed out that, although AbbVie disclosed over 300 variations of antibodies, all of those variations were Joe-9-based; thus, all of the disclosed antibodies had VH3 heavy chains and Lambda light chains. Only small adjustments to the CDR sequence differentiated each disclosed antibody from the next. In sum, the thrust of Centocor’s argument was that AbbVie did not disclose, and thus could not prove it “possessed” the idea of, a sufficiently representative number of antibody species required to support such a broad genus of antibodies
The Federal Circuit has held that when a patent claims a functionally defined genus, “the specification must demonstrate that the applicant has made a generic invention that achieves the claimed result and do so by showing that the applicant has invented species sufficient to support a claim to the functionally-defined genus.”11 More specifically, to satisfy Section 112’s written description requirement, a party claiming an entire genus must disclose either: a representative number of species falling within the scope of the genus or structural features so common to the members of the genus so that one of skill in the art can visualize or recognize the members of that genus.12 On appeal, AbbVie conceded that it did not disclose structural features common to the members of the genus, arguing instead that its roughly 300 disclosed antibodies constituted a representative number of species to support its genus claims.
Despite AbbVie’s contentions that 300 disclosed antibodies were sufficiently representative, the Federal Circuit affirmed the district court’s denial of AbbVie’s motion for JMOL, holding that substantial evidence supported the jury’s verdict of invalidity for lack of adequate written description. The court explained that “the jury heard ample evidence that AbbVie’s patents only describe one type of structurally similar anti-bodies and that those antibodies are not representative of the full variety or scope of the genus.”13
To illustrate its species-genus rationale, the court analogized a claimed genus with a plot of land, maintaining that “if the disclosed species only abide in a corner of the genus, one has not described the genus sufficiently to show that the inventor invented, or had possession of, the genus. He only described a portion of it. That is the case here.”14 Further, the court used this same analogy to address AbbVie’s argument that the company did not need to disclose structural characteristics of the species because its claim was functionally based.
One describes a plot of land by its furthest coordinates, in effect drawing a perimeter fence around it. That may be akin to the function of patent claims to particularly point out and distinctly circumscribe the outer boundaries of a claimed invention. With the written description of a genus, however, merely drawing a fence around a perceived genus is not a description of the genus.15
In sum, the court held that although AbbVie did not have to disclose every possible species, or even the allegedly infringing compound itself, in exact terms to comply with Section 112’s written description requirement, “the patents [have to] at least describe some species representative of antibodies that are structurally similar to” the allegedly infringing compound.16
VI. Implications of AbbVie
Moving forward, the AbbVie decision provides clarity in two areas of the patent law. First, the decision makes clear that Board decisions that are in the process of being challenged under Section 146 will not be considered final binding judgments for collateral-estoppel purposes. That said, the court expressly side-stepped the issue of whether Board decisions that are challenged by means of Section 141—a direct appeal of the decision to the Federal Circuit—could have preclusive effect. Based on the court’s emphasis on the ongoing, open nature of Section 146 proceedings in reaching its conclusion, however, my expectation is that the Federal Circuit, when presented with the opportunity, will hold that Board decisions challenged under Section 141 do in fact constitute final binding judgments. Thus, such decisions could serve to preclude a party from later challenging those same issues in a subsequent or parallel proceeding.
Second, the decision raises the bar on patentees seeking to claim functionally. In the wake of AbbVie, patentees with functional claims will now need to go out of their way to establish “a reasonable structure-function correlation” in their specification or by reference to the knowledge of one skilled in the relevant art. And perhaps more notably, for existing patents, the decision unambiguously calls into question the validity of functionally defined genus claims. In fact, the court went so far as to say that functional claims are “inherently vulnerable to invalidity challenge[s] for lack of written description support, especially in technology fields that are highly unpredictable,” such as biological sciences.17
In light of the court’s express skepticism regarding functionally defined genus claims, my expectation is that challenges to the validity of these types of patents on written description grounds will continue to grow. And, generally speaking, I think that is a good thing. Allowing patentees to claim a broad genus without appropriately disclosing species sufficient to support those claims almost certainly gives rise to undeserved patent protection on inventions that simply were never invented. Indeed, such a grant is at odds with the very purpose of the patent laws—a patentee should not be granted a monopoly on an invention he or she has yet to invent or fails to appropriately disclose to the public. I also believe the decision could be a boon for pharmaceutical innovation. As these broad patents begin to fall, I expect that pharmaceutical manufacturers will have a greater incentive to innovate in various areas of biological science that until now fell within the scope of broad, functionally defined genus claims of various biological-science patents.
Kevin C. Adam , Commentary, Structure or Function? AbbVie Deutschland GmbH & Co. v. Janssen Biotech, Inc. and the Federal Circuit’s Structure-Function Analysis of Functionally Defined Genus Claims Under Section 112’s Written Description Requirement, 3 Suffolk U. L. Rev. Online 1 (Feb. 21, 2015), http://suffolklawreview.org/structure-or-function-abbvie
Reflections on organizing an academic gathering easily risk becoming a navel-gazing exercise, and not a very interesting one at that. Those risks notwithstanding, I wish to use the occasion of an April 2014 program at Suffolk University Law School to champion the virtues of smaller academic events that promote genuine dialogue and move at a slower, more contemplative pace. Although I do not promise that I will offer anything especially profound here, this may plant a seed in others to develop similar programs and even have some fun in the process.
“With the check written but not yet signed, he swiveled back in his desk chair and seemed to ponder. The agent, a stocky, somewhat bald, rather informal man named Bob Johnson, hoped his client wasn’t having last-minute doubts. Herb was hardheaded, a slow man to make a deal; Johnson had worked over a year to clinch this sale. But, no, his customer was merely experiencing what Johnson called the Solemn Moment—a phenomenon familiar to insurance salesmen. The mood of a man insuring his life is not unlike that of a man signing his will; thoughts of mortality must occur.”
In the above excerpt from his true-life crime thriller, In Cold Blood, Truman Capote touches upon two important insights regarding estate planning. The first is the connection between the traditional estate planning tool of the will and newer modes of posthumous wealth transmission, such as life insurance. Capote’s second important insight is the connection between estate planning and mortality. Putting one’s affairs in order, whether through the execution of a will or the purchase of a life insurance policy, places death at the forefront of one’s mind.
Why shouldn’t law school introduce its students to modern, cutting edge theories, concepts, and practical skills? Teaching therapeutic jurisprudence (TJ) to law students accomplishes this goal by exposing students to innovative perspectives that demand rigorous application of one’s knowledge and values in a creative problem-solving approach. TJ does not promote the practice of psychotherapy by untrained or unqualified personnel; rather it seeks to educate lawyers, judges, legal personnel, and law students to use the law in a manner helpful to individuals and society as a whole.
“Professionalism as a personal characteristic is revealed in an attitude and approach to an occupation that is commonly characterized by intelligence, integrity, maturity, and thoughtfulness.”
“Words are the principal tool of lawyers and judges, whether we like it or not.”
The quotes above refer to two quintessential aspects of lawyers’ work. First, as members of a self-regulated profession, we must aspire to a level of professionalism that is characterized by intelligence, maturity, and thoughtfulness. Second, regardless of the tasks we undertake, words are critically important to lawyers. Not only must we be able to conduct comprehensive and coherent legal analysis; our ability to serve clients properly depends on effectively translating the analysis into words—both spoken and written.
In this short essay, I will discuss my historical involvement with therapeutic jurisprudence (TJ), how I use it in my classes (both in the free-standing TJ class and in all the others that I teach), its role in my written scholarship, and its role in conferences that I regularly attend. Although this will all be positive and will certainly be supportive of all efforts to widen the appeal of TJ as well as its applicability in the classroom, in scholarship, and in “real life,” I will also be sharing some information that is far from optimistic with regard to how law students and teachers react to TJ. I am deeply saddened by this but feel that this must also be “on the table” in any reflective conversation about TJ.
My contribution to the April 11, 2014, Suffolk University symposium on therapeutic jurisprudence (TJ) related mainly to my project—with Judge Michael Jones (ret.) of Arizona (another symposium participant) and Victoria Australia Magistrate Pauline Spencer—to “mainstream” TJ in the criminal and juvenile justice process. The project was part of the Hague Institute for the Internationalisation of Law’s (HiiL) Forum on Innovating Justice, and as it turns out, several entrants had projects and proposals that were TJ-related. In these published remarks, part of Suffolk University Law Review’s effort to expose the readership to a broad range of TJ ideas, it seems appropriate to briefly canvass the TJ-type projects, discuss how they can enrich legal education, and suggest ways in which law faculty and law students can improve on the forum’s innovations and add to their durability and practical application.