Festo Presto: The Incredible Disappearing Doctrine of Equivalents

JMLS Center for Intellectual Property Law NewsSource

Professor M. Janice Mueller

DRAFT January 11, 2001

In its extraordinary November 29, 2000 en banc decision in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., Ltd., 2000 U.S. App. LEXIS 2997, 56 USPQ2d 1865 (Fed. Cir. 2000), a majority of the Federal Circuit announced an absolute Abar by amendment rule that fundamentally contracts the availability of the venerable patent law doctrine of equivalents. Under this rule, no scope of equivalents survives for any claim limitation that was narrowed during prosecution for any reason related to patentability; such limitations may only be met literally. Because the narrowing of claims by amendment is commonplace practice in the iterative process of patent prosecution, almost all issued patents are impacted and their value significantly reduced by this decision.

Handing a windfall to imitators, Festo maps a devilishly straightforward template for free-riding: by making any insubstantial change sufficient to avoid the literal boundary of narrowed claims, patented innovation can be imitated and exploited with ease. In the guise of handing marketplace competitors a bright-line framework that purports to minimize uncertainty, the Federal Circuit has facilitated "fraud on a patent" and suborned the very evil that the doctrine of equivalents was designed to prevent: "plac[ing] the inventor at the mercy of verbalism and . . . subordinating substance to form."

The majority's policy argument that contracting the doctrine of equivalents will promote innovation by encouraging design-arounds and improvements is certainly valid with respect to follow-on enterprises, but ignores the dramatic reduction in incentives for "pioneer" innovation and basic research. Festo slashes incentives for the Abreak-through" inventor because the scope of protection that the patent grant provides has in many cases been narrowed to easily-avoided literal infringement.

As dissenting Judge Michel suggests, the contraction in value of biotechnology patents may be particularly severe. The doctrine of equivalents has been a critical tool for protection of this type of subject matter, for which innovation costs are high and imitation costs very low. Festo strips away these protections. A competitor=s single substitution of an equivalent amino acid for another amino acid recited in an amended claim to a polypeptide will now likely enjoy complete freedom from liability for infringement under the doctrine of equivalents. Likewise, one would expect similar effect for a single nucleotide substitution in an amended claim to a DNA.

Especially troubling is the apparently retrospective application of Festo's absolutism on the approximately 1.2 million U.S. patents currently in force. In marked contrast with the Supreme Court in Warner-Jenkinson, the Festo majority showed no sensitivity to reliance interests of patent owners or concern for Achang[ing] so substantially the rules of the game; i.e., protecting the expectations of those who had procured patents before the Warner-Jenkinson Court announced a rebuttable presumption of estoppel in certain instances where claim amendments were unexplained. The Festo majority announces a new estoppel framework much more severe than Warner-Jenkinson, with non-rebuttable, uniform application to all amendments made for patentability reasons, yet provides no "grandfathering" for extant patents.

The Festo majority decision reflects the ascendancy within the Federal Circuit of a judicial philosophy that treats intellectual property rights (IPRs) are something to be reined in. It evidences a growing backlash against the Aover-propertization mania by which many believe that IPRs have expanded too far and too fast. These judges view IPRs not just as a limited, carefully-balanced exception to the general rule of free competition via imitation, but as the genesis of an amorphous, unbounded legal landscape that the court pronounces simply "unworkable." Festo likewise illustrates that the Federal Circuit is no longer a court of and for patent attorneys. The majority decision was authored by Judge Alvin Schall, a former Department of Justice official, and the key dissent crafted by Judge Paul Michel, a former criminal prosecutor.

The Festo majority discards a wealth of Federal Circuit precedent taking a "flexible" approach to scope of estoppel, stemming from Judge Markey's seminal 1983 decision in Hughes Aircraft v. United States. The majority adopts as the new rule of law a "strict" approach based on what it terms a "diverging" line of Federal Circuit authority. In fact, the Aline of authority followed by the Festo majority is a single case, and one that must be broadly interpreted to serve as wellspring of the new "strict estoppel" paradigm. In point of fact, the foundation of the majority's opinion is but a single judicial outlier.

Festo requires that we adopt a new vocabulary. It is no longer accurate to speak of Aprosecution history estoppel, for that phrase connotes a familiar landscape where a party is justly estopped from recapturing subject matter it previously surrendered in order to obtain a patent. Under the Festo majority=s rule of Abar by amendment, the notion of conscious Asurrender no longer applies. The mere fact of amendment, as long as it narrowed the scope of a claim limitation for any statutory reason, works an absolute bar to a finding of equivalency as regards that limitation. Coverage over subsequently-developed but equivalent technology, not even fathomed at the time of the patentee's filing, is consequently extinguished under Festo.

Practitioners predict that Festo will fundamentally change the way patent applications are prosecuted. New filings will surely present greater numbers of narrower claims, and more thorough prior art searches will be required pre-filing in order to better predict what claims will be allowable without amendment. Applicants will be highly motivated to appeal rejections rather than amend their claims, thus compounding an already immense backlog at the PTO Board of Appeals. Although the resulting prosecution costs in the form of extended attorney time and higher PTO fees will impact all applicants, small-entity/start-up technology firms and solo inventors who can least afford them will predictably be the most prejudiced.

The doctrine of equivalents took root in the context of a central claiming regime that interpreted claims as encompassing preferred embodiments disclosed in the applicant's specification and all equivalents thereto. The doctrine continued to have meaning, albeit in increasing tension with the public notice function of claims, as the U.S. migrated to the modern peripheral claiming regime. Throughout this historical progression, courts realized that equity requires a safety valve to "temper unsparing logic and prevent an infringer from stealing the benefit of the invention." The doctrine of equivalents fulfills that role by recognizing the inherent imprecision of words as lingual representations of novel technology and the limitations of human foresight to envision after-arising equivalents thereof. Although critics decried the doctrine's expansion and warned that its application should be the "exception, . . . not the rule," the Supreme Court in Warner-Jenkinson strongly reaffirmed the doctrine's viability. The Court recognized that various legal limitations on the doctrine of equivalents, including the "all-elements rule," were sufficient to maintain an appropriate balance between apprising the public of available room for imitation and safeguarding incentives for new technology. By fundamentally disregarding that guidance, the Federal Circuit in Festo has done material damage to progress in the "useful arts." Whether the rule of Festo works permanent structural harm to the patent system or is corrected on certiorari is now in the hands of the Supreme Court.