The recent ruling in Acorda Therapeutics, Inc. v. Alkermes Pharma Ireland Ltd. underscores a fundamental principle in patent law: how a legal dispute is framed can determine whether it will be heard by federal courts - or resolved under state law. This case serves as a stark reminder for practitioners and stakeholders involved in patent licensing disputes that jurisdictional strategy is not just about understanding the facts, but about crafting a claim that aligns with federal judicial requirements.
The Holding in Acorda
In Acorda, the U.S. Court of Appeals for the Federal Circuit ruled on whether it had jurisdiction to review an arbitration award concerning a patent license agreement. Acorda argued that the arbitrator exceeded authority by awarding damages based on an invalid patent. However, the court held that because the claim did not “necessarily raise” a substantial question of patent law (as required under Gunn v. Minton), it lacked jurisdiction.
The Federal Circuit emphasized that while the dispute touched on patent validity, the challenge was grounded solely in general arbitration law or contract procedure. As a result, the court concluded that the patent issue was not “substantial enough” to trigger federal jurisdiction. This outcome highlights the importance of how claims are framed when patent-related issues are at play.
What if Acorda Had Raised the Issue from the Beginning?
Had Acorda raised its objections to the royalty payments as soon as the patent expired - or efficiently framed the issue before the Federal Circuit - it could have had a much better chance of recovering all the royalty payments post-expiration. The court’s ruling also set a precedent suggesting that even without specific clauses in licensing agreements, a plausible argument regarding the legality and validity of such contracts can be made once a patent’s validity comes into question.
The case underscores that licensees must not only protest royalties when they appear suspect but also act promptly to challenge the underlying validity of the patents. Delay or lack of timely objection can result in state courts rejecting federal jurisdiction, leaving the licensee without a viable federal forum to contest alleged violations.
Fraudulent Concealment and Federal Jurisdiction
The case also raises implications for claims based on fraudulent concealment of invalidity. If a licensee discovers that the patentee actively concealed known prior art or other issues rendering the patent invalid, this could form the basis of a claim in federal court. However, whether such claims remain in state court depends on how they are framed.
If allegations hinge on specific invalidity grounds - such as lack of enablement or improper inventorship - they can pull the claim into federal jurisdiction. For example, in Jang v. Boston Scientific Corp., the Federal Circuit ruled that a claim alleging ineptitude in patent prosecution could invoke federal jurisdiction because it implicated patent law.
On the other hand, if the complaint is framed as a traditional fraud or contract dispute - e.g., “you misled me into signing this license” - the matter may be relegated to state court. But if the complaint explicitly alleges that the patent is invalid and that its invalidity is central to the harm alleged, federal jurisdiction becomes more likely.
The Ongoing Obligation to Assess Validity
Recent trends in patent law, including Supreme Court cases like Finnovationations v. Payoneer and Genentech v. Eli Lilly, have reinforced that the obligation to assess validity is ongoing - not frozen in time at filing or licensing. These cases highlight that licensees must not only be aware of prior art or enablement issues but also stay apprised of shifting legal standards under §§ 101, 102, 103, and 112.
For example, if a patentee’s belief in a patent’s validity is based on outdated or overly optimistic views of its enforceability - especially in light of evolving judicial trends - this can create significant legal exposure. Practitioners must therefore advise clients to continuously monitor and update the validity of their patents throughout the licensing process.
Strategic Framing Is Key
To bring such cases to federal court, plaintiffs must be surgical in how they frame their claims. They must tie patent law issues to the heart of their case - whether it’s challenging the legality of royalties after a patent expires or contesting the validity of a patent due to prior art or ineptitude.
Unless patent law is embedded as an essential element of the claim, the court may decline jurisdiction, even when the facts suggest misconduct. This is why Acorda serves as a cautionary tale: merely gesturing at invalidity, concealment, or licensing deception isn’t enough. The legal strategy must make patent law indispensable to the outcome.
Comparison: ChromaDex v. Elysium
In ChromaDex v. Elysium, the court squarely addressed patent validity because the licensee raised invalidity as a defense, and the outcome of the case depended directly on that determination. The key difference between Acorda and ChromaDex? In ChromaDex, the patent law issue was litigated and unavoidable.
This comparison highlights the importance of transparency in disputes involving patent validity or enforceability. Licensees and patentees must act promptly and clearly when challenges arise, ensuring that federal courts have jurisdiction to address the substance of their claims.
Avoiding Missteps
Acorda also serves as a reminder that missteps in framing a claim can turn a patent from a revenue source into a litigation sinkhole. In today’s licensing climate - characterized by increasing litigation funding and heightened scrutiny of patents - understanding the procedural terrain is as important as knowing the substantive law.
Plaintiffs must not only ask whether their claims involve patents but also determine whether they depend on patent law. This dual focus ensures that disputes are resolved in the appropriate forum, avoiding the uncertainty and expense of state court proceedings.
Conclusion
The Acorda decision is a wake-up call for practitioners handling patent licensing disputes. It reinforces that jurisdictional framing is not just a technicality - it’s a critical component of successful outcomes. As the legal landscape grows increasingly complex, stakeholders must approach these disputes with precision and strategic foresight.
By ensuring that claims are framed to align with federal requirements, practitioners can navigate the intricacies of patent law and advocacy more effectively. In this post-Acorda era, the lessons are clear: jurisdictional strategy matters, and transparency is essential. Get it right from the start, or risk finding yourself in a state court rather than a federal bench.
For licensees and patentees alike, the stakes are high. The ability to influence the forum in which disputes are resolved is not just about the facts - it’s about how you present them.