United States: Supreme Court Docket Report – June 20, 2011

Originally published June 20, 2011

Keywords: appellate, patentability, Real Estate Settlement Procedures Act, kickback,

Today the Supreme Court granted certiorari in two cases of interest to the business community:

Patent Law—Patentability under 35 U.S.C. § 101

Federal law allows inventors to patent "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 35 U.S.C. § 101. There are, however, "three specific exceptions to § 101's broad patent-eligibility principles: laws of nature, physical phenomena, and abstract ideas." Bilski v. Kappos, 130 S. Ct. 3218, 3225 (2010). The Supreme Court granted certiorari today in Mayo Collaborative Services v. Prometheus Laboratories, Inc., No. 10-1150, in order to examine the scope of the "laws of nature" exception, as it applies to observed medical correlations between blood test results and patient health.

Prometheus's patent claims relate to tests for the efficacy and toxicity of thiopurine drugs used to treat autoimmune diseases, such as Crohn's disease. Prometheus's claims involve administering a thiopurine drug, determining the resulting level of certain metabolites of the drug in the blood, and considering what use, if any, to make of that information. In accordance with this patent, Prometheus markets a metabolite-concentration test. When Mayo announced its intent to market its own metabolite-concentration test, Prometheus brought suit alleging patent infringement.

A federal district court invalidated Prometheus's patent under the natural laws/physical phenomena exceptions. The court held that the first two steps of Prometheus's method were merely "data-gathering" steps, and that the final step was merely a "mental step" in the mind of the treating physician. At its core, according to the district court, Prometheus was attempting to patent the correlation between metabolite-concentration levels and dosages of thiopurine, preempting all uses of that biologic correlation. This correlation, as a natural law or physical phenomenon, was unpatentable.

The Federal Circuit reversed, finding that Prometheus's claims satisfied the "machine-or-transformation" test because both the administering of thiopurine and the subsequent testing of a blood sample were physically "transformative" and not merely "data-gathering" steps. Thus, the Federal Circuit reasoned, Prometheus's claims did not inappropriately "preempt all uses of the natural processes; they utilize them in a series of specific steps." 581 F.3d 1336, 1349 (2009). Mayo sought certiorari, and the Supreme Court granted, vacated, and remanded in light of its decision in Bilski. On remand, the Federal Circuit adopted substantially the same analysis as before.

Mayo again petitioned for certiorari, arguing that the case presented an opportunity to address an issue left unresolved in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124 (2006). The LabCorp petition—which was ultimately dismissed as improvidently granted over the dissent of Justices Stevens, Breyer, and Souter—similarly addressed the patentabiliy of a method that focused on a natural medical correlation. In their dissent, the three Justices argued that LabCorp's patent should be invalidated under the "law of nature" exception.

The Mayo Collaborative Services decision will be closely watched by members of the life-sciences and medical industries. At the certiorari stage, the case already attracted significant interest from numerous amici. Absent extensions, amicus briefs on the merits in support of the petitioner will be due on August 11, 2011, and amicus briefs in support of the respondents will be due on September 13, 2011.

Mayer Brown LLP is co-counsel to the petitioner, Mayo Collaborative Services, in this case.

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Real Estate Settlement Procedures Act—Article III Standing

Section 8(a) of the Real Estate Settlement Procedures Act of 1974 ("RESPA" or "the Act") provides that "[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding . . . that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." 12 U.S.C. § 2607(a). Section 8(d)(2) of the Act provides that any person "who violate[s]" § 8(a) shall be liable "to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service." Id. § 2607(d)(2). Today the Supreme Court granted certiorari in First American Financial Corp. v. Edwards, No. 10-708, to address whether a private purchaser of title insurance has standing to sue under Article III of the U.S. Constitution, where she had no claim that the title insurer's alleged RESPA violation affected the price, quality or other characteristics of her purchased services.

The Court's ultimate decision could be of interest not only to the real estate and insurance sectors but to any industry governed by a statute that confers a damages remedy. If the Court were to hold that the plaintiff lacks standing, the decision could limit suits by plaintiffs who are not injured but claim standing under Article III based on an alleged statutory violation alone.

Respondent, the plaintiff below, purchased title insurance for her new home from petitioner First American Title Insurance Co. ("First American Title"), the defendant below. In her complaint on behalf of a putative nationwide class, respondent alleged that First American Title's parent company violated RESPA through improper business referrals. She made no claim that the alleged violation affected the price or quality of the insurance or services she purchased. She sought to recover on behalf of the class three times the title insurance policy premiums that each member of the class paid to the affiliated title insurance agencies. First American Title moved to dismiss on the ground that the plaintiff lacked standing under Article III, but the district court refused to dismiss the suit, holding that the alleged statutory violation alone sufficed to create an injury that could serve as the basis for Article III standing. The Ninth Circuit affirmed that holding (and held, contrary to the district court, that the case could proceed in part as a class action).

Absent extensions, which are likely, amicus briefs in support of the petitioners (or neither party) will be due on August 11, 2011, and amicus briefs in support of the respondent will be due on September 13, 2011.

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In the past week the Supreme Court has also invited the Solicitor General to file briefs expressing the views of the United States in the following cases of interest to the business community:

Bank Melli Iran New York Representative Office v. Weinstein, No. 10-947: The questions presented are (1) whether the Terrorism Risk Insurance Act of 2002 authorizes creditors of a foreign sovereign to execute against assets of the sovereign's juridically distinct instrumentalities and (2) whether Congress violated the Constitution by retroactively revising the parties bound by a judgment that was already final when the statute was enacted.

Countrywide Home Loans, Inc. v. Rodriquez, No. 10-1285: The question presented is whether the Bankruptcy Code's automatic stay takes precedence over a mortgage lender's right under the Real Estate Settlement Procedures Act to require a borrower to deposit additional funds into his escrow account after filing for Chapter 13 bankruptcy protection when those funds are needed to cover the borrower's anticipated post-petition taxes, insurance, and other escrow obligations.

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