[00:00:00] Speaker 04: We will hear argument next in case number 232374, Accord of Therapeutics Against Alkermes. [00:00:08] Speaker 04: That's how to pronounce it, please. [00:00:11] Speaker 04: Good morning, Your Honors. [00:00:16] Speaker 00: Garrett Beeney on behalf of Appellant Accord of Therapeutics. [00:00:20] Speaker 00: With the court's permission, as the court is aware, the parties have briefed a number of issues. [00:00:25] Speaker 00: What I'd like to address in time for oral argument today are really three issues. [00:00:30] Speaker 00: Very briefly, if I may, why this court has jurisdiction to hear this appeal. [00:00:34] Speaker 00: Might not be that brief, but go ahead. [00:00:38] Speaker 00: Second, why manifest disregard was engaged in by the tribunal. [00:00:43] Speaker 00: by allowing alchemies to retain royalties that were illegally paid under federal law. [00:00:50] Speaker 00: And then finally, why the Manifest Disregard standard allows this court to modify the tribunal award. [00:00:57] Speaker 00: But before getting to jurisdiction, if I may, it may be useful just to remind ourselves the tenure in which this case comes to the court. [00:01:06] Speaker 00: Because there are five material issues that were decided. [00:01:09] Speaker 00: that the parties sought confirmation, received confirmation, and are not in dispute at all. [00:01:15] Speaker 00: And those are that the collection of all post-expiration royalties are unlawful per se under federal law, all royalties. [00:01:24] Speaker 00: Second, that the agreements at issue here really constitute a single agreement, and all of the provisions of both agreements were one agreement to the extent they were considered the same. [00:01:34] Speaker 00: or unenforceable. [00:01:36] Speaker 00: Third, that brought up. [00:01:37] Speaker 00: Can we just get to the jurisdictional argument? [00:01:39] Speaker 00: Absolutely. [00:01:41] Speaker 03: I'm a little concerned about the theory here, because I'm a little worried that it opens up to basically, if the underlying case involves an issue of patent law, then it comes to us. [00:01:53] Speaker 03: And that rule can't be that broad, right? [00:01:56] Speaker 00: I think the rule of Berlant and Kimball that we would submit to the court is- No, no, no. [00:02:00] Speaker 03: Answer my question. [00:02:02] Speaker 00: I'm sorry. [00:02:03] Speaker 00: Maybe I misunderstood. [00:02:03] Speaker 03: Well, my question is, I want to know how to cabin us asserting jurisdiction in this case to some manageable rule that doesn't suddenly become, if there's an issue of patent law anywhere in the case below, it comes to us. [00:02:23] Speaker 03: And even if it's not a patent case, it's not a compulsory patent claim, and the like. [00:02:28] Speaker 03: And I think that broad rule at least [00:02:32] Speaker 03: We have found in Walker, I hate to bring Walker Process back, but we have found in Walker Process claims that if it's a pure Walker Process antitrust claim, which necessarily involves patent law to some extent because it's fraud on the patent office, nevertheless goes to the regional circuit. [00:02:50] Speaker 03: So it can't be that broad rule that just having a tangential patent issue [00:02:57] Speaker 03: can bring it here. [00:02:59] Speaker 00: So why isn't that the case here? [00:03:01] Speaker 00: Because I think the issue at this case, Judge Hughes, strikes at the heart of the duration of the patent as enacted by Congress. [00:03:10] Speaker 00: And that is the whole underpinning of Berlotte and Kimball. [00:03:13] Speaker 00: The question raised here is the extent to... Isn't that the same in these Walker process cases, though? [00:03:17] Speaker 03: The whole argument is somebody has committed fraud on the patent office to garner the market, and so they have to show [00:03:27] Speaker 03: Well, maybe they don't have to show. [00:03:28] Speaker 03: I think maybe our case solved, and maybe I'm answering your question for you. [00:03:32] Speaker 03: But in those cases, [00:03:36] Speaker 03: isn't that part of the Walker Process Claim? [00:03:39] Speaker 00: I think the Walker Process Claim, as I understand it, is so intertwined with antitrust law. [00:03:43] Speaker 00: That is not by any means the case here. [00:03:45] Speaker 00: This is a pure question of patent law, an important question of patent law, and that is how do you effectuate the rule of Berlotte and Kimball? [00:03:54] Speaker 03: Okay, but that's not helping me, because I understand, even if I take that it's an important question of patent law, does that necessarily mean it comes here if it's not some kind of compulsory counterclaim? [00:04:06] Speaker 03: were somehow the basis for the case. [00:04:09] Speaker 03: Because I'm also struggling with the sense that if we rule for you on jurisdiction, that any time an arbitration involves patent law, and there is a decision on that either confirming or not confirming whether the district court is going to come to us. [00:04:27] Speaker 03: And that seems to me not, we haven't decided that, but I'm not sure it's right. [00:04:32] Speaker 03: I'm not sure it's wrong. [00:04:33] Speaker 00: I don't think that's the proposition that we would present to your honors, that that would give this court jurisdiction. [00:04:40] Speaker 00: But here, the blockade. [00:04:41] Speaker 04: So I guess I was thinking about an issue that's come up under the Domestic Arbitration Act recently, culminating in a 2022 Supreme Court decision. [00:04:54] Speaker 04: I think that the basic rule is, with the exception of coming to court [00:04:59] Speaker 04: compel an arbitration under Section 4. [00:05:03] Speaker 04: The other issues, the Section 9 through 11, you know, confirmation, termination, modification, or vacator, are judged for jurisdictional purposes. [00:05:15] Speaker 04: And this is, you know, real history court jurisdictional purposes. [00:05:19] Speaker 04: It's not directly applicable on what the federal court case initiating, or the federal, the case initiating pleading is. [00:05:28] Speaker 04: Not [00:05:30] Speaker 04: looking through to what the arbitration is about. [00:05:34] Speaker 04: So I would have thought that in this case, that the case initiating pleading is what you filed in Southern District of New York. [00:05:45] Speaker 04: It was a pure [00:05:48] Speaker 04: federal patent law claim. [00:05:51] Speaker 04: It says federal patent law as understood in Brulat makes what the panel, the arbitration panel did unlawful. [00:06:03] Speaker 00: I think that's the entire basis of this court's jurisdiction, as well as the fact that the decision allows different state laws to have an impact on different [00:06:15] Speaker 00: remedies for a federal law violation, a federal patent law violation. [00:06:20] Speaker 04: We're just talking about jurisdiction, whether that may be an incorrect assertion. [00:06:26] Speaker 04: That's the merits, whether Brulat really reaches that far. [00:06:30] Speaker 04: But just for jurisdictional purposes, is it enough that your case initiating filing, namely a petition with the Southern District of New York to [00:06:39] Speaker 04: to modify and confirm pieces of the arbitration was, at least in part, directly relying on federal law. [00:06:53] Speaker 04: Yes, Judge Crandon, I believe... I'm on patent law, sorry. [00:06:55] Speaker 00: ...Christensen and Gunn established that principle. [00:06:57] Speaker 04: So, almost all the... There are many cases that I think [00:07:05] Speaker 04: that have been discussed in the briefs, where regional circuits do brulat. [00:07:11] Speaker 04: With one exception that, at least in my understanding, they all involve a situation where brulat comes up as a defense or a counterclaim, and not a compulsory counterclaim. [00:07:26] Speaker 04: So 1295 for us just doesn't apply. [00:07:30] Speaker 04: The one exception is one of the cases submitted on supplemental authority, this recent Seventh Circuit Zimmer case, which, as far as I can tell, was a case for these purposes, namely, which Court of Appeals gets jurisdiction of a real, what I think the Supreme Court has called, a drive-by jurisdictional ruling. [00:07:51] Speaker 04: That is, there was no discussion of why the Seventh Circuit had jurisdiction as opposed to us. [00:07:58] Speaker 04: The opening brief said, [00:08:00] Speaker 04: This is a 1332 diversity case, and so let's go ahead without even addressing whether this was a 1291 or 1295 appeal. [00:08:12] Speaker 04: But everything else seems like Broulat is always in a situation, in a circumstance different from this. [00:08:23] Speaker 04: This is one in which the case initiating cause of action raised [00:08:27] Speaker 04: is a federal patent law case. [00:08:30] Speaker 04: But one reason I mention that is this. [00:08:33] Speaker 04: So in our post-gun discussion of when we think applying the gun's analysis for whether the question is important, one thing we've said is, [00:08:50] Speaker 04: Is it important that we establish some uniformity on a Pavlov? [00:08:54] Speaker 04: That's not possible with respect to Brulat, is it? [00:08:57] Speaker 04: Precisely because it practically always comes up in a 1291 situation. [00:09:04] Speaker 00: Well, I would say a couple of things in response to that, Judge Toronto. [00:09:06] Speaker 00: Certainly not all Brulat questions come to this court. [00:09:10] Speaker 00: And in fact, many Brulat questions, and I believe Zimmer is one of these cases, [00:09:15] Speaker 00: revolve around contract law and whether in fact the contract requires post-exploration payments. [00:09:21] Speaker 04: Revolve around is not really the 1295 standard because 1295 applies when the case in the district court even in part relied on [00:09:34] Speaker 04: And Zimmer was one where ultimately the decision was, the contract actually isn't subject to Rulotte, but that's not, you don't decide whether 1295 applies based on how the district court decision came out, just what was pled. [00:09:56] Speaker 00: No, but I think that the Christensen gun and the subsequent cases talk about a substantial question of patent law important to the patent system as a whole. [00:10:04] Speaker 00: And that's this case. [00:10:06] Speaker 04: But how would we establish uniformity on the question whether Brouillat itself requires disgorgement of unprotested payments that were in fact unlawful at the time? [00:10:22] Speaker 00: I think from looking at the language of Bulat and Kimball, and this is our manifest disregard argument in effect, that if you read that language, you cannot come to any other conclusion that Bulat and Kimball established the principle that any illegally paid royalties under federal law must be restored. [00:10:41] Speaker 00: And that is for all royalties, not part of them. [00:10:44] Speaker 00: State law can't interfere. [00:10:45] Speaker 00: Contract law can't interfere. [00:10:47] Speaker 00: And that's the important rule that you take from Bulat and Kimball. [00:10:51] Speaker 00: And it was manifest disregard for the tribunal to ignore that. [00:10:55] Speaker 00: And it was also error for the district court to claim that Bulat and Kimball don't set that test and that Bulat and Kimball don't set guidance. [00:11:03] Speaker 00: And another reason why I think this court has jurisdiction is because the enabling statute for this court was to establish nationwide law on patents and the decisions below [00:11:17] Speaker 00: allow for there to be this patchwork of decisions about what's the remedy in order to effectuate the federal law that was established by Berlant and Kimmel. [00:11:25] Speaker 02: I'm wondering how far that goes. [00:11:27] Speaker 02: If I can come back to a question Judge Hughes asked you in light of a response you gave to Judge Toronto, is the implication that we would have jurisdiction over any appeal from a petition to confirm or modify [00:11:43] Speaker 02: an arbitration decision, if the underlying arbitration decision was a patent case, we composite that the petition in district court would, on its face, talk about patent issues, is the implication that all of those appeals would come exclusively to us. [00:12:03] Speaker 00: I think, you know, Judge Stark, it has to be a substantial question important to the system as a whole. [00:12:08] Speaker 00: And there may be some that are not. [00:12:10] Speaker 00: This question is, and that establishes jurisdiction in this court. [00:12:14] Speaker 02: So again, you would be asking us to say if it's just a, let's call it a run of the mill infringement or invalidity dispute that arbitrators decided, we would deny jurisdiction over the appeal from a [00:12:28] Speaker 02: a district court confirmation of that arbitration because we say this just has no larger implications other than for these parties? [00:12:37] Speaker 00: I'm not sure I'd go that far, Judge Stark. [00:12:39] Speaker 00: I think I would say that it would depend on the resolution of those questions and the extent to which those questions [00:12:46] Speaker 00: raise substantial issues important to the system as a whole. [00:12:49] Speaker 04: So none of this is terribly clear in my mind. [00:12:53] Speaker 04: Are you familiar with the 2022 Supreme Court decision, Badgerow? [00:12:57] Speaker 04: I'm not. [00:12:58] Speaker 04: OK, that's the one that said when we're not going to do the so-called look-through approach in deciding on [00:13:09] Speaker 04: Federal court jurisdiction, this is all at the district court level. [00:13:15] Speaker 04: It's not a 1295 case. [00:13:16] Speaker 04: And here, there's no question about federal court jurisdiction, both because this is under Section 203 and because there's diversity according to the petition. [00:13:25] Speaker 04: But the court says in that that typically, when somebody is coming to court to challenge some aspect [00:13:37] Speaker 04: of an arbitration decision. [00:13:39] Speaker 04: Even if the arbitration was about true federal law claims, like Title VII or something, which I think maybe that case was, by the time it gets to the federal court, the petition to review it is basically a contract matter. [00:13:57] Speaker 04: You don't look through to see what the causes of action were in the underlying arbitration. [00:14:05] Speaker 04: which feels like it has something to do with trying to figure out how much would be opened by saying there is jurisdiction here, where your case initiating pleading says what's wrong with what the arbitrators did is that that award is contrary to Broulat. [00:14:27] Speaker 04: I don't know whether I mean, I think that's the the area of uncertainty. [00:14:32] Speaker 00: Yeah, I think that's exactly the point I've been trying to make. [00:14:35] Speaker 00: This is not by any means a look through case. [00:14:37] Speaker 00: This is a case in which the petition in front of the district court raised starkly. [00:14:43] Speaker 00: the fact that there is federal law and policy that was undermined by the decision of the tribunal. [00:14:48] Speaker 00: And I think this court has jurisdiction to review that, if for no other reason than to establish nationwide uniform law, but also in order to determine the extent of the federal policy. [00:14:59] Speaker 04: Just to go back to a question I was trying to ask before, how would our decision here establish nationwide uniform law, since Broulat comes up in all kinds of regional circuit cases where, properly in regional circuit cases? [00:15:13] Speaker 00: Because I think at the end of the day, Judge Toronto, the question here is, do Berlotte and Kimball clearly establish that full restitution is the remedy for a Berlotte violation? [00:15:23] Speaker 00: That is a question that the district court said was undetermined and allows for all sorts of [00:15:29] Speaker 00: unlawful, quote, means, quote, in order to deplete the Bullot and Kimball rule. [00:15:34] Speaker 00: But I think that's the principle that this court would establish, and I think should be established from exactly what Bullot and Kimball told us, that the remedy for a Bullot violation has to be full restitution of all royalties paid in violation of patent law. [00:15:50] Speaker 02: I think that the regional circuits would then follow us on that point, if we did. [00:15:53] Speaker 00: Exactly, Judge Stark. [00:15:55] Speaker 00: Excuse me. [00:15:57] Speaker 03: Can I give you a hypothetical? [00:16:00] Speaker 03: So let's say you enter into a license agreement that you're going to pay a royalty per unit for things covered by a certain patent. [00:16:10] Speaker 03: And then you make things that you think aren't covered by that patent. [00:16:13] Speaker 03: And the patent holder goes to arbitration over that. [00:16:18] Speaker 03: And there's a decision by the arbitrator that they either are or aren't covered. [00:16:22] Speaker 03: It doesn't matter. [00:16:24] Speaker 03: That's the determination of patent law because of the determination of whether something is going to impringe that patent or not, which is the basis for claiming that you either should or shouldn't get the royalty. [00:16:35] Speaker 03: If you go to the district court to argue against or for that award, does that come to us or to the regional circuit? [00:16:44] Speaker 00: This may be an unsatisfying answer, Judge Shews, but I think it depends. [00:16:48] Speaker 00: If the arbitrator's award, for example, was that you don't have to meet all elements of the claim in order to establish infringement. [00:16:56] Speaker 03: Well, it's not only an unsatisfying answer. [00:16:59] Speaker 03: It sounds like you're creating a huge mess for us where we're going to get a lot of cases where we're going to have initial disputes about jurisdiction about what's a substantial question of patent law or not. [00:17:11] Speaker 03: And I don't think this is set up to be that unclear in case by case. [00:17:15] Speaker 03: I think we need to have a more workable rule. [00:17:18] Speaker 03: So a run-of-the-mill infringement questions, something that are going to be heard from us if they're decided by an arbitrator as supporting the award or not. [00:17:29] Speaker 00: It is certainly not necessary to accept that principle in order for the court to find it has jurisdiction over this case. [00:17:34] Speaker 03: I understand that you refuse to answer our hypotheticals. [00:17:38] Speaker 03: don't care about the specific facts of this case for the purpose of this hypothetical. [00:17:42] Speaker 03: I'm worried about an onslaught of appeals from arbitrations and patent cases. [00:17:47] Speaker 00: I think this court could decline to assert jurisdiction over that kind of run-of-the-mill question that Judge Hughes you hypothesized. [00:17:54] Speaker 00: And I don't think the court needs to take jurisdiction, but I think it's a different question here, certainly. [00:17:59] Speaker 02: preemption just real quick. [00:18:03] Speaker 02: The argument is that you waived it at the arbitration. [00:18:06] Speaker 02: I think I understand your answer to that about the supremacy clause. [00:18:08] Speaker 02: But I'm concerned it looks like at some stage in the arbitration you were actually relying on state law as the basis for your recovery. [00:18:17] Speaker 02: I think it was New York unjust enrichment and only later switched to taking the view that state law is actually preempted. [00:18:27] Speaker 02: So I'm concerned. [00:18:28] Speaker 02: not so much about whether you preserved the argument, but whether you actually maybe took the complete opposite side on whether state law is preempted when you were at the panel. [00:18:38] Speaker 00: No, I think not, Judge Stark. [00:18:39] Speaker 00: And I think the way this all happened and that preemption was preserved in the context in which the tribunal addressed the remedy for a Berlotte violation, [00:18:52] Speaker 00: First, it told the parties that it was relying on contract law to prevent pre-protest restitution. [00:19:01] Speaker 00: Then after Alcremies sought and received an order saying that the court, that the tribunal was not going to further address that issue, the parties didn't brief the New York statute. [00:19:14] Speaker 00: They didn't address it in the arbitration. [00:19:17] Speaker 02: I think I got all that. [00:19:18] Speaker 02: But I'm looking at, for instance, a page, Appendix 250, where it seems like [00:19:24] Speaker 02: arguing to the tribunal, although I see this is maybe a district court document, but it helps straighten me out on this. [00:19:34] Speaker 02: It looks like you were arguing that the breaches you say Alkermes committed give rise to an unjust enrichment remedy under state law. [00:19:47] Speaker 02: Are you not simultaneously relying on state law and telling us that state law is preempted? [00:19:53] Speaker 00: The state law that was preempted was the law that limits the recovery. [00:19:57] Speaker 00: But even in front of the tribunal, Accorda argued, for example, that its claim for refund is, quote, based on Alchemy's Brulat violation. [00:20:08] Speaker 00: And that's at 672. [00:20:10] Speaker 00: There are plenty of references where it was the federal Brulat violation that was the basis for the claim for full restitution. [00:20:18] Speaker 00: And 672 is just one of them. [00:20:24] Speaker 00: May I turn to why Broulat and Kimball established the rule that we were asking the court to? [00:20:30] Speaker 04: We took two minutes, but I thought we've actually talked a fair bit about it, but go on. [00:20:34] Speaker 00: Well, thank you. [00:20:35] Speaker 04: I appreciate that, Judge Toronto. [00:20:36] Speaker 04: I mean, why does Broulat require the remedy as opposed to establish the right? [00:20:40] Speaker 04: And if you don't invoke the right in a timely fashion, Broulat just doesn't say what the remedy is. [00:20:45] Speaker 04: And as long as it doesn't say, then there's no manifest disregard. [00:20:49] Speaker 00: Well, I think... That's what the district court said. [00:20:52] Speaker 00: Exactly. [00:20:52] Speaker 00: Why is that wrong? [00:20:53] Speaker 00: Because if you read from Broulat and Kimball, you can't come to any conclusion other than the fact that the only way to effectuate the federal principle announced in those cases is to... Yeah, but where in either of those decisions does it create a right of discouragement? [00:21:10] Speaker 00: That was not an issue in front of Rulon and Kimball. [00:21:14] Speaker 00: The parties hadn't paid it. [00:21:15] Speaker 03: Isn't that a problem for you? [00:21:16] Speaker 03: I don't think it is, Judge Hughes, because you can't... The claim for disgorgement doesn't come from those cases. [00:21:23] Speaker 03: It's based on those cases, but you have to have some other cause of action that allows you to file a claim for disgorgement. [00:21:32] Speaker 00: But the discouragement came, at least according to the tribunal, directly from the Broulat violation. [00:21:38] Speaker 00: It was one sentence that followed the other at 450, I believe, of the record. [00:21:43] Speaker 00: There's nothing in between. [00:21:44] Speaker 00: And if you read Broulat and Kimball talking about you may not receive post-expiration royalties, all of the prerogatives of a patent expire, and there must be a free from all restrictions use of a patent that's expired. [00:22:00] Speaker 00: But Kimball said that Perot applied the categorical principle that all patent and all benefits from the monopoly must end. [00:22:07] Speaker 00: That charging a world to quote after expiration is unlawful per se. [00:22:12] Speaker 04: uh... blocked quoted scott paper to the effect that any continuation of the patent monopoly post expiration quote runs counter to the policy and purpose of the patent law the lot of thirty one allowing any royalties post expiration all of all of that just doesn't quite get over uh... why there isn't a distinction between right and remedy in much the same way i guess i've been thinking that this came up in uh... ebay [00:22:42] Speaker 04: about injunctions, where the patent owner said in a kind of plausible way, it says right there in section 154, this is a right to exclude. [00:22:53] Speaker 04: So I get to exclude. [00:22:54] Speaker 04: And the Supreme Court said, no, no, no. [00:22:57] Speaker 04: Remedy of whether you get an injunction to exclude is a different question from the nature of the right. [00:23:03] Speaker 04: Why is that distinction not an important one for thinking about what the scope is of Brouillat? [00:23:09] Speaker 00: I think because, for example, Kimball at 450 says that you may not receive post-expiration royalties, how can that possibly be effectuated if you're allowed to keep post-expiration royalties? [00:23:25] Speaker 03: You still have to have a cause of action, right? [00:23:27] Speaker 03: Let's get rid of all this arbitration and stuff because it's complicated. [00:23:31] Speaker 03: Let's just assume you still have the same license agreement, you didn't agree to arbitration, and you keep paying even though the patents have expired so you don't have to. [00:23:41] Speaker 03: And how do you go about getting that back? [00:23:45] Speaker 03: You either have to find a cause of action in federal court that's going to allow you to do it, or you have to find a cause of action in state court that's going to allow you to seek that remedy. [00:23:53] Speaker 03: You're not going to file a complaint that doesn't state something that states a claim within either court's jurisdiction. [00:24:01] Speaker 03: You can't just file copies of Brulock and Kimball with the court and say, these entitle me to money. [00:24:06] Speaker 00: But restitution, whether it's a federal remedy, and Norman was the case that a court decided below that provides at least an argument that restitution is the automatic federal remedy for a statute that's voided by Congress. [00:24:20] Speaker 00: Here, the ability to receive the royalties is something that Brulat and Kimball outlaw. [00:24:27] Speaker 00: And so that is exactly what has to be effectuated by this uniform rule that you may not keep what's been paid. [00:24:33] Speaker 03: But there are other issues around restitution that you would have to prove in addition to Brulat and Kimball. [00:24:39] Speaker 03: There's all kinds of defenses. [00:24:42] Speaker 03: You could say you're too late, that you didn't tell people in time, you didn't protest, all those kind of things. [00:24:48] Speaker 03: So it's not as if Rulotte and Kimball are self-executing. [00:24:51] Speaker 03: That's the problem. [00:24:53] Speaker 00: But in the opinion, in the tribunal, they were in fact self-executing, and I think Norman stands for the proposition that it is the normal remedy. [00:25:01] Speaker 00: for a provision of a contract that is deemed illegal under federal law for there to be restitution. [00:25:09] Speaker 00: And that cites a Supreme Court authority for that proposition. [00:25:12] Speaker 00: So I think at the end of the day, you will have all sorts of state laws interfering with whether a party can receive, which Kimball says is unlawful, post-exploration royalties. [00:25:26] Speaker 00: You also have the situation where parties may not even know about Brulat. [00:25:30] Speaker 00: In Kimball, I think the court said that the parties stumbled upon Brulat. [00:25:35] Speaker 00: You'll have situations where someone may use business pressure to require a licensee to continue to pay royalties. [00:25:42] Speaker 03: There are all sorts of ways of getting... I think this argument goes way too far and really undermines your case. [00:25:49] Speaker 03: I mean, what you sound to me like saying is, [00:25:52] Speaker 03: Any time that royalties are paid in violation of Brulot and Kimball, you can get them back. [00:25:58] Speaker 03: But that would even mean that if you didn't meet the statute of limitations, you would get them back. [00:26:03] Speaker 00: I think you could certainly provide limitations that are consistent with federal law and policy. [00:26:08] Speaker 00: But here, the statute... Well, how is it consistent? [00:26:11] Speaker 03: If your view is you can never, ever [00:26:14] Speaker 03: keep royalty or payments based on that expiration of patent, why is that consistent with applying a statute of limitation? [00:26:23] Speaker 00: Because that would not be our position, Judge Hughes. [00:26:25] Speaker 00: There are certainly federal interests that are consistent with state statute of limitations laws. [00:26:29] Speaker 00: Here, the idea that you must make a formal protest does nothing to support federal law. [00:26:49] Speaker 01: Good morning, Your Honor. [00:26:50] Speaker 01: Brian Verges for Alkermes. [00:26:52] Speaker 01: I expect there will be questions about jurisdiction, and I'm happy to address those. [00:26:55] Speaker 01: I did want to start with a response to Judge Stark's question about what was argued below by Accorda, because I think it's evolved considerably, and it's helpful to be precise about it. [00:27:04] Speaker 01: Accorda, at no point below, argued that it had a federal right to recover for voluntarily paid past royalties. [00:27:10] Speaker 04: And I'm sorry. [00:27:11] Speaker 04: And by below, you mean? [00:27:12] Speaker 01: I'm sorry. [00:27:12] Speaker 01: I should be precise as well. [00:27:14] Speaker 01: Yes, before the arbitrator. [00:27:16] Speaker 01: They never argued before the arbitrator. [00:27:18] Speaker 04: Why do we care? [00:27:19] Speaker 01: Well, because under the manifest disregard standard, that's crucial. [00:27:22] Speaker 04: Oh, just on the merits. [00:27:23] Speaker 01: Relevant to the merits, under which I took that question to go to. [00:27:27] Speaker 02: Your point would be you can't manifest. [00:27:29] Speaker 02: The tribunal couldn't have manifestly disregarded something not argued. [00:27:33] Speaker 01: By definition, it cannot manifestly disregard something that was not presented. [00:27:36] Speaker 04: I guess when I looked at the papers that were given to us, and they're given in only partial form and even as supplemented, the impression I had was that [00:27:48] Speaker 04: There were an assortment of grounds that were presented to the arbitration panel for trying to get the money back. [00:27:58] Speaker 04: Contract grounds, state cause of action grounds, and at least in part, brulette itself, brulotte itself, just requires it. [00:28:08] Speaker 01: I don't agree with the last part of that, because I think the way this was argued, they were arguing that they had a remedy under state law, whether it's breach of contract, quasi-contractual issues. [00:28:18] Speaker 01: And then they argued that Berlotte and Kimball do not bar the ability to seek a refund. [00:28:23] Speaker 01: If you look at the particular places where they argued it, you can find it in the summary judgment briefing. [00:28:28] Speaker 01: This is before the arbitrator. [00:28:31] Speaker 01: 258, 259 of the appendix, also at 635 and 637 of the appendix, because this was briefed both on opening motions for summary judgment and oppositions. [00:28:42] Speaker 01: And I think the reason it came up that way is because, of course, in the context of patent invalidity, when you're dealing with a refund, some courts have indicated that as a matter of federal policy, [00:28:52] Speaker 01: you cannot seek a refund under an invalidated patent for royalties that you paid previously. [00:28:58] Speaker 01: And their argument was that that's different. [00:29:00] Speaker 01: There's no basis under Brouillat and Kimball to prevent us under state law from recovering a refund. [00:29:07] Speaker 01: But they specifically argued, and this is at page 259 of the appendix, that Brouillat and Kimball did not specifically address damages, did not provide for that right. [00:29:14] Speaker 01: So that was the [00:29:15] Speaker 01: the context in which they were making this argument. [00:29:17] Speaker 01: They never argued that there was some federal common law right. [00:29:20] Speaker 04: I thought that that was a response to your summary judgment motion. [00:29:28] Speaker 04: I don't remember. [00:29:29] Speaker 04: That part seems clear in my mind, but I don't remember what the ground was for your summary judgment motion. [00:29:35] Speaker 01: We raised a number of arguments, as you indicated, about the contract itself at a refund clause. [00:29:40] Speaker 04: Very large is only partial pleading. [00:29:43] Speaker 01: Understood. [00:29:45] Speaker 01: They never argued that as a matter of federal law, whether under preemption or federal common law issue, which I don't think they raised until briefing in this court in a footnote, that they have that sort of right to entitlement. [00:29:57] Speaker 01: They were relying on state law. [00:29:59] Speaker 01: They certainly never raised a preemption argument. [00:30:01] Speaker 01: The Supremacy Clause argument [00:30:03] Speaker 01: the citation of the spermacy clause is not even in the section of the brief that's addressing the voluntary payment doctrine. [00:30:09] Speaker 01: So they never argued that that particular doctrine was preempted. [00:30:14] Speaker 01: They certainly had an opportunity to brief it. [00:30:16] Speaker 01: I understand the other side is arguing that there was a change in position how the arbitrators were handling the issue, but the issue was squarely addressed in summary judgment briefing. [00:30:25] Speaker 01: They briefed it in two different [00:30:27] Speaker 01: occasions before the arbitrator. [00:30:29] Speaker 01: They never argued that that doctrine was preempted by federal law. [00:30:33] Speaker 01: And just a vague reference somewhere else in the brief to the Supremacy Clause is not enough to clearly present an issue to the arbitration panel, which is required for manifest disregard. [00:30:43] Speaker 01: You've been very patient. [00:30:43] Speaker 01: I'm happy to address jurisdictional questions. [00:30:47] Speaker 01: So we believe the matter should be transferred to the Second Circuit because it does not arise under federal patent law. [00:30:56] Speaker 04: Am I right that, with the exception of Zimmer, every one of the Broulat cited Court of Appeals cases involves a situation where the invocation of Broulat was not in the case initiating pleading? [00:31:13] Speaker 01: I think that's right if you were, I mean, there were also declaratory judgment actions. [00:31:18] Speaker 01: And I understand you usually do the mirror thing. [00:31:21] Speaker 01: Nonetheless, the Third Circuit decision, the Aries trading decision, it comes up in the context of declaratory judgments. [00:31:27] Speaker 01: But the analysis that the court engages in there is that it is not a substantial question of patent law under gun dealing with the scope and application of the law. [00:31:37] Speaker 01: And I do think the point Your Honor made that in terms of considering uniformity, [00:31:42] Speaker 01: Clearly, these issues are going to arise in the regional circuits. [00:31:46] Speaker 01: The other side argued in the briefing that that was a vestige of the past. [00:31:50] Speaker 01: The decisions that came out since that we briefed in 28-J letters show that that's not true, that these issues often are going to arise in the circuit. [00:31:58] Speaker 01: And I think another reason that a decision by this court on jurisdiction could not establish uniformity goes to the standard of review we're dealing with under the Federal Arbitration Act. [00:32:08] Speaker 01: where you're dealing with manifest disregard, by definition cannot be establishing new law that is going to apply prospectively an established policy going forward, but is necessarily limited to these particular parties, and addressing the question of, did the arbitrators go so off the reservation that they... That's not quite right, is it? [00:32:28] Speaker 04: I mean, the ruling, of course, is limited to the parties, but the reasoning in support of it, it could be that an opinion says, [00:32:37] Speaker 04: It's not manifest disregard of Brulat, because Brulat doesn't require this. [00:32:43] Speaker 04: That's not the ruling they want. [00:32:45] Speaker 01: No, I understood. [00:32:46] Speaker 01: I take that point, but given the very narrow standard of review that all the court is doing is, did the arbitrators engage in a good faith effort to apply the law, or did they go rogue, essentially? [00:32:59] Speaker 01: That's all manifest disregard is about. [00:33:02] Speaker 01: Did they act in a way that arbitrators are not supposed to? [00:33:04] Speaker 01: because there's clearly presented, clearly controlling law that they chose not to look at. [00:33:10] Speaker 01: Your Honor referenced the Badgerow decision from Supreme Court before it. [00:33:15] Speaker 01: This is a case that is a recent decision from the Fourth Circuit that was not in the briefing, but I feel like it would be useful to make the Court aware of it. [00:33:23] Speaker 04: Was that one of the 28 J letters? [00:33:25] Speaker 01: It was not one of the 28 J letters. [00:33:26] Speaker 01: It does not specifically address Brouillot, but it is a circuit decision [00:33:31] Speaker 01: post-Badrow thinking about how a manifest disregard challenges whether they raise federal questions or not. [00:33:39] Speaker 01: This case is Friedler v. Steifel-Nicholas, 108 F-4th, 241. [00:33:46] Speaker 01: And the court there. [00:33:47] Speaker 04: And that's a 9 USC Chapter 1 case, not a Chapter 2 case? [00:33:52] Speaker 01: I believe that's correct, yes. [00:33:55] Speaker 01: But it's dealing with the question of when you have an underlying claim [00:34:00] Speaker 01: in the arbitration that was a federal claim. [00:34:02] Speaker 01: And previously many courts had looked through. [00:34:04] Speaker 01: Now the Supreme Court in Badgerow says you can't do that. [00:34:07] Speaker 01: Now they're confronted with, well, what happens if someone in the petition is arguing there was a manifest disregard of federal law? [00:34:14] Speaker 01: Does that [00:34:16] Speaker 01: is that sufficient to create a federal question? [00:34:18] Speaker 01: The Fourth Circuit held no, that if that were allowed to create a federal question, if that were considered to be a substantial federal issue, you would be, to a significant extent, undoing the result in Badrow, that it would lead to the kind of flood that Judge Hughes [00:34:33] Speaker 01: indicated because I don't see any principle distinction between patent infringement cases versus other patent policy cases. [00:34:40] Speaker 01: The general understanding that the Fourth Circuit had there that we think is correct is that because of the extremely narrow standard of review when you're dealing with manifest disregard, [00:34:49] Speaker 01: Yes, there's a federal question embedded in some of these instances. [00:34:53] Speaker 01: So you could say it's necessarily raised under the formulation under Gunn and other cases on those lines. [00:34:59] Speaker 01: But it can't be considered substantial because, again, all that is being done in that context is asking whether the arbitrators engaged in good faith effort to be arbitrators rather than going rogue and disregarding law that was clearly presented to them. [00:35:15] Speaker 02: Take it from what you just said, that you would argue we should be concerned that if we exercised appellate jurisdiction here, that we may be opening ourselves up to a potential flood of appeals for arbitration. [00:35:32] Speaker 01: Yeah, I mean, I don't see any principled distinction for saying. [00:35:35] Speaker 01: I mean, I think it would be a fairly odd result. [00:35:37] Speaker 01: If I understood the other side's position, GWAT issues, which in district court litigation often don't come to this court, [00:35:44] Speaker 01: It suggests that that's a substantial federal question that in arbitration should come here. [00:35:49] Speaker 01: But the mine run of patent cases that no one questions in a district court litigation would come to this court involving patent and validity issues, infringement questions, of course those would come to this court. [00:36:00] Speaker 01: They're suggesting, well, maybe not. [00:36:02] Speaker 01: That would be different if you're appealing from an arbitration. [00:36:05] Speaker 01: And I don't see what could possibly be the principled [00:36:08] Speaker 01: distinction for drawing that line. [00:36:11] Speaker 01: I do think there's a principal distinction, if the court is concerned about inviting lots of cases, is the line that the Fourth Circuit adopted. [00:36:19] Speaker 01: And I understand the case was not previously briefed, so Your Honors will have to review it. [00:36:22] Speaker 01: But that just arguing manifest disregard is not itself a basis to establish a substantial federal question. [00:36:33] Speaker 02: This may be a very simple question I just may not understand, but in the district court, was there any dispute about [00:36:41] Speaker 02: its jurisdiction, because under the FAA, there needs to be something independent, right? [00:36:47] Speaker 01: That's right. [00:36:48] Speaker 01: And if you look at page 79 of the appendix, you see there are a couple. [00:36:51] Speaker 04: Not under Chapter 2. [00:36:53] Speaker 01: Well, that's exactly what I was going to say, is this is under the New York Convention. [00:36:57] Speaker 04: And you also have diversity. [00:36:58] Speaker 01: There is also diversity jurisdiction. [00:37:00] Speaker 01: And under Section 203 of the New York Convention, there is a federal clause of action. [00:37:05] Speaker 01: So there clearly is jurisdiction. [00:37:07] Speaker 01: There's no dispute about that. [00:37:08] Speaker 01: But if you look at page 79 of their complaint, where they're providing the grounds for jurisdiction, they're not invoking the patent laws as the basis for jurisdiction. [00:37:17] Speaker 01: They're relying on 203 of the New York Convention and diversity as their grounds for jurisdiction. [00:37:24] Speaker 01: So that's why this is a case where there is federal court jurisdiction, but not jurisdiction in this court of appeals. [00:37:32] Speaker 01: If the court has no further questions, we'd be delighted if you affirm, but we do think the right result is to transfer. [00:37:39] Speaker 04: Thank you for transferring. [00:37:54] Speaker 00: Thank you, Your Honor. [00:37:55] Speaker 00: Your Honor, it is entirely inaccurate that federal law was not argued as the basis for restitution in front of the tribunal. [00:38:03] Speaker 00: A court argued that it is, quote, entitled to recover... What are you reading, Frank? [00:38:09] Speaker 00: 671. [00:38:14] Speaker 00: It argued that upon a Broulat violation, it was entitled to recover monies paid to alchemy, as it was not entitled to collect. [00:38:22] Speaker 00: At 635, [00:38:24] Speaker 00: There was clear and unequivocal language from the Supreme Court that the remedy for a broad violation is restitution. [00:38:33] Speaker 00: Again, at 637, the New York State Voluntary Payment Doctrine can't be applied to payments for a lot makes illegal. [00:38:44] Speaker 00: and that allowing alchemies to benefit from any post-expiration royalties would, quote, be clear violation of public policy. [00:38:51] Speaker 00: There were plenty of references before the tribunal to restitution being required as a matter of federal law, and that the whole reason that the parties were seeking a remedy was because of a violation of federal law under Berlotte. [00:39:10] Speaker 04: In the time that you were sitting at the table, have you [00:39:13] Speaker 04: found anything new to say about to give us comfort about opening on the jurisdictional question about opening the door to rather a lot. [00:39:25] Speaker 00: Well, I understand that the [00:39:27] Speaker 00: need for a fine line as to when these for a lot of questions go to the regional circuits and when they're not. [00:39:34] Speaker 00: I would say to supplement your honor's question earlier, Judge Toronto, that eight of the cases, I think it's eight of the nine cases they cite in their brief about there being no jurisdiction were pre-2012 amendments to Section 1295 when the only place for those counterclaims and offenses could go were to the regional circuits. [00:39:54] Speaker 00: So those cases really have limited notality. [00:39:56] Speaker 00: But this court has addressed arbitration awards. [00:39:59] Speaker 00: And under the logical extension of what Alec Kermes is saying is that you would never have a jurisdiction to address an arbitration award. [00:40:09] Speaker 03: And if there ever was an arbitration award, that is... Well, I mean, if we're never truly definitively deciding a question of patent law because we're reviewing manifest disregard, why isn't that the right answer that they don't belong here? [00:40:26] Speaker 03: Because the regional circuits are the ones that review in non-patent cases the confirmation or non-confirmation of arbitral awards all the time. [00:40:37] Speaker 03: because i think you can have to choose a patchwork of regional circuits deciding what is clear patent law and what is not that was here i mean i think it is almost akin to like preliminary injunctions issues where sure you're going to opine on a legal issue in the context of deciding whether you get a preliminary injunction or not but that's not necessary in fact is usually not binding as a matter of law on the merits of the legal issue [00:41:05] Speaker 03: Doesn't the same thing happen in these manifest disregard cases? [00:41:09] Speaker 03: It's not a question of whether the the tribunal got it wrong as a matter of law It's whether it was manifest disregard even if they got it wrong Well, I think two questions here two answers to that judge use the first is is that you know manifest disregard? [00:41:24] Speaker 00: Asks whether the law is clear and I think that is an issue the district court addressed But if the Second Circuit says [00:41:32] Speaker 03: No, Broulat doesn't require disgorgement. [00:41:36] Speaker 03: That's not binding on us as a matter of patent law. [00:41:40] Speaker 03: That's not binding on district courts in true patent cases as a matter of patent law in the Second Circuit, because it's under a different standard. [00:41:47] Speaker 00: But that, Judge Hughes, is guidance at least to people within the Second Circuit deciding to have New York law apply to their licenses, if not guidance to everybody in the nation, that they can disregard what Brulot and Kimball clearly require, which is that the benefits of a patent end when the patent expires. [00:42:05] Speaker 00: And the second point that I was going to make, Judge Hughes, is that certainly manifest disregard is one of the standards in which to modify the arbitration award. [00:42:16] Speaker 00: But there also is the standard in DeRusse in the Second Circuit and Schwartz in the Second Circuit, quoting W.R. [00:42:21] Speaker 00: Grace in the Supreme Court, where the deference given to the tribunals not used when a tribunal award is in disregard of a clear federal public policy. [00:42:34] Speaker 00: And we also would submit that that was argued below, fairly preserved under Medtronics. [00:42:39] Speaker 00: And there's also another basis that this court can modify the arbitration award. [00:42:44] Speaker 00: without even getting into the manifest disregard standard. [00:42:49] Speaker 00: Thank you. [00:42:49] Speaker 00: Thank you. [00:42:50] Speaker 04: Thanks to all council cases submitted.