2003 International Law Update, Volume 9, Number 2 (February)

2003 International Law Update, Volume 9, Number 2 (February)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

COMPETITION

In patent infringement suit by Intel against Taiwanese maker of computer CPUs and chipsets, English Court of Appeal (Civil Division) holds that lower court had erred in granting summary judgment to Intel on defendant’s claims that Intel’s licensing agreements were violating competition provisions of EC Treaty

Intel Corporation of Delaware turns out central processing units (CPU’s) with familiar brand names such as “Pentium” and “Celeron.” It also makes chipsets. Both are used in personal computers (PCS). Intel and Via (a Taiwanese corporation) are competing in the world-wide market but Intel holds the clearly dominant position.

It designs, produces and sells about 80% of the x86 CPUs on the world market. Until recently, its chipsets accounted for about 100% of the global market. As of 2000, however, the latter figure went down to about 75% and Via took over about 19% of the market share. To function in a PC, the chipsets, the CPUs and the Windows software must be able to respond to what is called “the x86 instruction set.”

In November 1998, Via entered into a Chipset Licensing Agreement with Intel (“the CLA”). It laid out the terms on which Via could use Intel’s patents in the design and manufacture of its own chipsets for use with the Celeron and Pentium II CPUs made by Intel.

Seven months later, Intel said it was ending the CLA, alleging that Via had been violating its terms. Intel sued Via in the U.S., Singapore and England but the parties settled the cases in June 2000 and referred some issues to an arbitrator. The latter decided that Via had not breached the CLA but that Intel had.

Next Via complained to the EC Commission in September 2000 that Intel was refusing to license its patents so that Via could, for instance, make chipsets compatible with Intel’s new Pentium 4 technology.

A few months later, Intel presented Via with a revised “Asymmetric” CLA. Via objected that it only covered chipsets compatible with the Pentium 4 CPUs but not with later series. On the other hand, it required Via to license all of its chipset and CPU technology to Intel.

In September 2001, Intel filed the two present actions against Via in the English Patents Court (“the Chipset Action” and “the CPU Action”). Intel claimed that Via had been infringing five of Intel’s patents. The two patents in suit in the Chipset Action relate to the protocols which enable the CPU to communicate with the chipset in a way each will understand. The three patents at issue in the CPU Action involve the conventions or protocols that enable the CPU to interact with the operating software, in most cases, a version of Windows.

Via denied the validity of each of the patents relied on and denied that it had infringed any valid claim in any of them. By way of affirmative defense, Via invoked Articles 81 and 82 EC (formerly EC Treaty, Articles 85 and 86) along with the conforming provisions of the English Competition Act of 1998.

The defenses averred first, that Intel’s lawsuit itself abused the dominant position it held with respect to its intellectual property (IP) rights. Second, Via complained that Intel’s unwillingness to issue it a broader license also misused its powerful position in the market by forcing consumers and users to resort to Intel’s new and more costly technology rather than to Via and other less pricey competitors.

The trial judge gave summary judgment to Intel on the competition issues. On its appeal to the Court of Appeal (Civil Division), Via made three basic arguments. First, it maintained that the dominant owner of an IP right has a legal duty under Article 82 EC to refrain from exercising that right so as to keep potential competitors out of the market or from a substantial segment thereof.

Secondly, Via urged that no owner of an IP right can lawfully license it in terms (1) that are wider than needed to show the extent it has given up its exclusive right or (2) that tend to distort competition. Finally, Via insisted that it could properly defend an infringement suit by showing that the suit itself would enable the IP owner to act contrary to Articles 81 and/or 82.

The Court of Appeal rules against Intel and allows Via’s appeal. It points out that, to violate Article 82 EC, a dominant party need not go so far as to keep a new product completely out of the market. Otherwise, the dominant manufacturer could sidestep Article 82 simply by licensing to a lackluster rival. In the Court’s view, defendant’s allegations in both actions might be enough to show Intel’s abuse of its commanding position.

“...[I]t is arguable that the range of exceptional circumstances which may give rise to the abuse by the owner of an intellectual property right of his dominant position contrary to Article 82 can extend to the facts pleaded by Via in both the Chipset Action and the CPU Action. Whether or not they do will depend on the findings of fact made at the trial.”

“In a case such as this such findings are an essential preliminary to any reference [to the European Court of Justice] under Article 234 EC Treaty [formerly Article 177]. In those circumstances I consider that the defence Via seeks to advance under this head has a more than fanciful prospect of success. Further it is one which, in my view, should be disposed of at a trial. Accordingly I would ... allow the appeal on this ground in both the Chipset Action and the CPU Action.” [¶ 51]

Breaches of Article 81 EC, on the other hand, can come about if a license was part of an effort to control the commercial market by regulating not only what products the licensed technology could turn out but also the licensee’s use of it after manufacture.

Moreover, an anti-competitive clause is no more defensible simply because it is part of an IP licensing agreement. It has to stand on its own two feet when it comes to an Article 81 analysis. In the Court’s view, Via had a chance to succeed in proving that the licensing deals that Intel had offered it would have been at odds with Article 81.

Finally, defendant arguably had a defense under Article 82 EC if Intel’s willingness to license its patents would be only on terms that violated Article 81 EC. “[Defendant’s defensive pleading lists] in detail the anti‑competitive effects on which Via relies.”

“They include the allegations that the Asymmetric Licence would, if agreed to, ‘reduce or cancel the incentive for Via to continue investing in research and development and that would distort competition by stifling invention’ in relation to both chipsets and CPUs. ... Via asserts that it would be at risk of being driven from both the x86 CPU market and the x86 compatible chipset market, thereby affecting the structure of competition in the market.”

“No doubt, in one sense, these assertions are formulaic but it does not follow that they are on that account defective. Given that they are alleging a future hypothetical state of affairs, they cannot be as specific as a pleading of past or present fact. ... For my part I do not consider that the pleading in relation to the Asymmetric Licence is so defective as to warrant summary judgment on that issue being given against Via.” [¶¶ 59-60]

On the Article 81 issue, the Court explains its ruling. “Ultimately I am unpersuaded that the position is so clear as to justify granting Intel summary judgment on this issue.”

“First, the appeal to common sense can be made in every case of a threat to enter into an illegal agreement. In such a case it can be said that there is no occasion for the intervention of the court because the contract, if made, will be unlawful. In many cases that may be true but it will not be true in all cases. Particular circumstances, such as the potential effect on third parties, may well justify the intervention of the court.”

“Second, in this case, ... there is also the defence under Article 82. If the willingness to grant licences, but only on terms which involve breaches of Article 81, is part of the abusive conduct of which complaint is made then I see no reason why those facts may not be relied on both for the purposes of the defence under Article 82 and as a free‑standing defence under Article 81. Third, ... at least arguably there is a defence under Article 81 even if there is none under Article 82.”

“Fourth, even if the case under Article 81 is insufficient to found a defence to liability, it may yet constitute a defence to the remedies of injunction, delivery up and an account of profits. The conduct of Intel will have demonstrated that it does not seek to prevent the use of its invention; rather it seeks to exploit it by licensing others to make chipsets compatible with its own technology.”

“If some of the terms of that licence are invalid then the proper remedy may be thought to be to make Via pay proper compensation as opposed to preventing it from using the technology on a normal commercial basis. For all these reasons I would also grant permission to appeal and allow it so that the Article 81 defences may be reinstated.” [¶¶ 87-88]

Citation: Intel Corp (a company incorporated in the state of Delaware USA) v Via Technologies Inc and others, Court of Appeal (Civil Division) [2002] EWCA Civ 1905, [2002] All ER (D) 346 (Dec), 20 December 2002.

COMPETITION

In private antitrust dispute over international vitamin sales, District of Columbia Circuit holds that where defendant’s anti-competitive conduct causes requisite harm to United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conduct’s effect on foreign commerce.

The Foreign Trade Antitrust Improvements Act (FTAIA) (see 15 U.S.C. Section 6(a)) provides that the Sherman Act shall not apply to conduct involving trade or commerce with foreign nations unless (1) such conduct has a “direct, substantial, and reasonably foreseeable effect” on trade and commerce in the U.S., and (2) such effect gives rise to a claim under the Sherman Act.

Foreign buyers of vitamins and related products (plaintiffs) who bought those products outside the U.S., brought an action against several U.S. and foreign companies which distribute these vitamin products internationally (defendants). The suit rested on Section 1 of the Sherman Act [15 U.S.C. Section 1], Sections 4 and 16 of the Clayton Act [15 U.S.C. Section 15 and 25], the antitrust laws of foreign nations, and international law. Plaintiffs alleged that the defendants had conspired world-wide to control vitamin prices in the U.S. market and elsewhere between January 1, 1988, and February 1999.

The defendants moved to dismiss for lack of subject matter jurisdiction under the FTAIA, contending that the alleged injuries lacked any connection to U.S. commerce. The district court granted the motion, and this appeal followed. The U.S. Court of Appeals for the District of Columbia Circuit reverses.

The Court first notes that the Fifth Circuit took a “restrictive view” [of the FTAIA] in Den Norske Stats Oljeselskap As v. Heeremac Vof, 241 F.3d 420 (5th Cir. 2001). There it held that the U.S. effects themselves must give rise to the plaintiff’s claim; it is not enough for a plaintiff to show that the U.S. effects injured other persons.

In contrast, the Second Circuit adopted a “less restrictive view” in Kruman v. Christie’s Int’l PLC, 284 F.3d 384 (2d Cir. 2002), ruling that, once there is a jurisdictional nexus, the FTAIA does not limit the types of plaintiffs who may seek antitrust relief.

The instant Court first defines the precise jurisdictional issue: whether the “gives rise to a claim” requirement of Section 6(a)(2) of the FTAIA authorizes subject matter jurisdiction where the defendant’s conduct affects both domestic and foreign commerce, but the plaintiff’s claim arises only from the conduct’s foreign effect.

“We hold that where the anticompetitive conduct has the requisite harm on United States commerce, FTAIA permits suits by foreign plaintiffs who are injured solely by that conduct’s effect on foreign commerce. The anticompetitive conduct itself must violate the Sherman Act and the conduct’s harmful effect on United States commerce must give rise to ‘a claim’ by someone, even if not the foreign plaintiff who is before the court.”

“Although the language of Section 6a(2) does not plainly resolve this case, we believe that our holding regarding the jurisdictional reach of FTAIA is faithful to the language of the statute. We reach this conclusion not only by virtue of our literal reading of the statute, but also in light of the statute’s legislative history and underlying policies of deterrence emanating from the Supreme Court’s decision in Pfizer, Inc. v. Government of India, 434 U.S. 308 (1978).” [Slip op. 6-7]

The Circuit Court concludes that the foreign plaintiffs have adequately alleged that the U.S. effects of defendants’ cartel gave rise to antitrust claims by parties injured in the U.S. from transactions occurring in the U.S. Thus, subject matter jurisdiction is proper.

[Editors’ Note: A news article in “Business Wire” provides an interesting reading of the decision. “The major international vitamin producers (Hoffman-LaRoche (now Aventis), BASF and Rhone-Poulenc) already have settled claims involving U.S. vitamin purchasers several years ago for over $1 billion ... What this means is that companies who engaged in anticompetitive conduct and thought that they would only be exposed in the United States to liability for the effects of their actions in the U.S. must now realize that they are exposed to liability for the effects of their conduct worldwide.’”]

Citation: Empagran S.A. v. F. Hoffman-LaRoche, Ltd., 315 F.3d 338 (D.C. Cir. 2003); Business Wire of January 17, 2003, “Cohen, Milstein, Hausfeld & Toll Announces Federal Court Expansion of Vitamin Price-fixing Case.”

CRIMINAL LAW

As matter of first impression, Eleventh Circuit holds that “final action” under 18 U.S.C. Section 3292 which can toll limitations period for crimes while government is requesting information from abroad under Mutual Legal Assistance Treaty means objectively complete obedience to request

Gabriel Torres, as director of Garces Commercial College, and other college employees, allegedly fleeced the U.S. Department of Education by filing fraudulent student applications under the Pell Grant Program. Lasting until February 1995, the fraud scheme netted millions of dollars which defendants transferred to corporate bank accounts on the Isle of Man [Editors: An autonomous possession of British crown located in Irish Sea].

On July 9, 1999, the U.S. government asked the Isle of Man government to produce various records under a Mutual Legal Assistance Treaty (MLAT). The U.S. Department of Justice’s Office of International Affairs (OIA) handled the matter. After this MLAT request, the Government submitted an ex parte application to the district court for a suspension of the statute of limitations “for the period beginning July 9, 1999, and ending on the date the Isle of Mann [sic] takes final action on the request for evidence.”

The Isle of Man first responded to the MLAT request on November 12, 1999. Detective Constable Annie Kneale of the Isle of Man’s Constabulary Fraud Squad faxed the response to the OIA. She noted on the fax cover sheet “Enclosed is the information you require,” and attached bank statements for six bank accounts. Nevertheless, the OIA did not get several documents it had asked for. These included authenticated copies of checks, deposits and withdrawal slips, and transfer documents for the accounts.

On January 12, 2000, without moving for an extension of its motion to toll the statute of limitations, the Government renewed its request for the above items to the Isle of Man. On March 8, 2000, Constable Kneale faxed the remaining documents, along with the notation “Enclosed are all documents that Barclays Bank PLC Isle of Man hold on the above investigation.”

A grand jury indicted Torres and a co-defendant in June 2000. Torres moved to dismiss the indictments as time-barred under 18 U.S.C. Section 3282 which provides for a five-year statute of limitations. Torres argued that the Isle of Man had taken “final action” in November 1999, the date of its first response. Thus, the alleged criminal activities completed by December 30, 1994 (the day Garces College closed) became time-barred as of May 5, 2000. The remaining allegations relating to February 23, 1995 (the date of alleged fund transfer from Garces College to individual accounts) allegedly became time-barred on June 28, 2000.

The district court disagreed. It found that “final action” took place when the Isle of Man had submitted its complete response on March 8, 2000, thus tolling the statute of limitations for 242 days. Torres appealed his ensuing convictions. The U.S. Court of Appeals for the Eleventh Circuit affirms.

Section 3292 provides that “upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court ... shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.” Under Section 3292(b), such tolling “begins on the date on which the official request is made and ends on the date on which the foreign court or authority takes final action on the request.”

The statute, however, does not define “final action.” The legislative history shows that Section 3292 aimed to make foreign business records more readily obtainable in admissible form in criminal cases. In United States v. Bischel, 61 F.3d 1429 (9th Cir. 1995), for example, the Ninth Circuit held that “final action” requires a dispositive response to all items set forth in the request. In United States v. Meador, 138 F.3d 986 (5th Cir. 1998), the Fifth Circuit generally concurred with the Ninth, but more narrowly held that “final action” comes about when the foreign government believes that it has fully carried out its obligations.

“We ... decline to adopt the Meador test as we find that it creates a result that is inconsistent with the Congressional intent underlying Section 3292. ... Indeed, under the Meador test, Section 3292 turns on the subjective opinion of foreign countries - -whether correct or not --rather than on an objective assessment of whether the responding country’s submissions were, in fact, complete. ...”

“Congress’s intent of ‘facilitating ... the cumbersome process of obtaining evidence from foreign governments is not furthered by a test that disregards the completeness of a foreign government’s response and instead ‘makes American law dependent on the customs and bureaucratic language of foreign cultures rather than [on] a sound application of American policy.’ ...”

“Certainly, there is no need to create a test that requires the government to reapply for a suspension of the limitations where, as here, the foreign government inadvertently omitted documents that fell within the scope of the government’s original request for which it had already obtained a suspension.” [Slip op. 14-15]

“Accordingly, as the Isle of Man’s response on November 12, 1999 was incomplete ... and the statement on the cover sheet did not provide a dispositive response concerning the omitted documents -- it did not take ‘final action’ on that date. Indeed, as the district court found, the Isle of Man did not take ‘final action’ until March 8, 2000 when it provided a clear, dispositive, and unambiguous response to each item in the government’s original request.” [Slip op. 19]

The Circuit Court, however, questions whether the U.S. prosecutor should be the one who decides when “final action” has taken place. Congress obviously thought about this issue, and placed two safeguards in Section 3292. First, it put a three-year limit on the suspension period in subsection (c)(1). Secondly, if the foreign government takes final action “before the statute of limitations would otherwise expire,” subsection (c)(2) limits the suspension period to six months.

Consequently, both indictments of Torres were timely here. In the Court’s view, however, the better practice for the government in a like case would be to ask for an extension of the suspension period when the foreign government is nonresponsive or provides only an incomplete answer.

Citation: United States v. Torres, No. 02-11082 (11th Cir. January 17, 2003).

CRIMINAL LAW

Reviewing conviction of U.S. citizen for murdering his wife in Haiti, Fifth Circuit upholds Foreign Murder Statute provision that grants Attorney General unreviewable power to find that Haiti lacked lawful ability to secure defendant’s return from U.S. despite existence of U.S.-Haiti extradition treaty

In 1998, Curtis Wharton (Wharton) was working for All American Insurance in Shreveport, Louisiana. A 1997 “Dateline NBC” made a lasting impression on Wharton. It discussed how certain perpetrators had defrauded life insurance providers by obtaining false death certificates from Haiti. Sheila Webb married Curtis Wharton in September 1999.

Later on, Wharton discussed with his co-worker Judy Nipper how they could successfully work that fraud scheme because they had someone who could “furnish them with a body,” i.e, that of Wharton’s wife. Four months after the wedding, someone found Sheila in Haiti with four gunshots to her head and neck. The autopsy revealed that someone had drugged her with the “date-rape drug” Rohypnol. Her purse had been emptied, but she was still wearing her jewelry.

Wharton tried to fool the Haitian National Police (HNP) by claiming that they had been carjacked, and that the car-jackers fled after killing Sheila. Before the HNP could detain him, Wharton returned to the U.S. and tried to collect her life insurance proceeds.

Following an FBI investigation, a federal grand jury indicted Wharton and Nipper for the foreign murder of a U.S. national and other offenses. Wharton appealed his subsequent conviction. The U.S. Court of Appeals for the Fifth Circuit affirms.

Among other challenges, Wharton claimed that the Foreign Murder Statute, 18 U.S.C. Section 1119, is unconstitutional as applied to him. Section 1119(b) provides: “A person who, being a national of the United States, kills or attempts to kill a national of the United States while such a national is outside the United States but within the jurisdiction of another country shall be punished ...”

Under Section 1119(c)(2), it was enacted that: “No prosecution shall be approved under this section unless the Attorney General, in consultation with the Secretary of State, determines that the conduct took place in a country in which the person is no longer present, and the country lacks the ability to lawfully secure the person’s return. A determination by the Attorney General under this paragraph is not subject to judicial review.”

Here, Wharton argued that the U.S. and Haiti have a valid extradition treaty and the statute thus does not apply to him. The Court, however, is not convinced. “The statute ... clearly states that the Attorney General’s determination on this issue is not subject to review. ...”

“Defendant contends that the Attorney General should not be permitted to make a determination that a person is beyond the reach of the foreign country when facts establish that the country could secure his return. The Government responds that the Attorney General’s determination is not an element of the crime and, therefore, does not raise Fifth Amendment due process concerns. We agree.” [Slip op. 12-13]

“Subsection (c), titled ‘Limitations on prosecution,’ separately identifies two qualifications on foreign murder prosecutions. The first requires that the Attorney General ... approve the prosecution. Subsection (c)(1) also provides that no prosecution shall be approved if another country is prosecuting the defendant for the same conduct.

“Subsection (c)(2) similarly provides that no prosecution shall be approved unless the Attorney General determines that the country in which the murder took place lacks the ability to secure the defendant’s return. The structure of the statute suggests that Congress intentionally separated these two limitations from the offense identified in subsection (b).”

“When viewed in context, these limitations refer to the Attorney General’s decision to approve the prosecution for foreign murder, a decision equivalent to the general exercise of prosecutorial discretion. In United States v. White, 51 F.Supp. 2d 1008, 1012 (E.D. Cal. 1997), the court faced a similar question. There, the defendant was also charged under the foreign murder statute and argued that, because Japan had the ability to secure the defendant’s return under an extradition treaty, the Attorney General’s determination was unreasonable.”

“The court refused to review that determination, upholding the statute’s prohibition against judicial review: ... While not binding, we find White persuasive. We conclude that the statutory structure suggests that Congress intentionally separated the Attorney General’s prosecutorial decisions from the elements of the crime.” [Slip op. 15-16]

Citation: United States v. Wharton, 2003 WL 231299 (5th Cir. February 4, 2003).

PATENT LAW

In 5 to 4 split, Canadian Supreme Court concludes that “transgenic animals” produced by Harvard researchers for use in cancer investigations are not patentable “compositions of matter” within Canadian Patent Act though U.S., U.K., and fourteen other nations have issued patents on Harvard’s “oncomouse”

On June 21, 1985, the President and Fellows of Harvard College (“Harvard”) applied for a Canadian patent on “transgenic animals.” It describes a procedure that aims to produce animals susceptible to cancer. Researchers can use them to test the carcinogenic properties of various substances and the potentially protective properties of other materials. Since these animals are predisposed to developing malignant tumors, the amount of carcinogenic material used can be smaller and can therefore more closely approximate the amounts that humans encounter. In addition, these animals will likely develop tumors in a shorter time period.

Using splicing technology, Harvard researchers successfully altered the genetic codes of mice to produce “oncomice.” These mice have an oncogene, or cancer-promoting gene, in the DNA of each cell. Harvard obtained the oncogene from a non-mammal source, such as a virus, and used bacterial DNA in the form of a plasmid [a circular, double-stranded unit of DNA that replicates within a cell independently of the chromosomal DNA] to transport the oncogene into the mouse’s chromosomes.

While fertilized mouse eggs are in the one-cell stage, the researcher injects the plasmid into them and then implants the eggs into a female host mouse. Once the host’s offspring are born, the lab tests them for the presence of the oncogene. Researchers call those mice that have the oncogene “founder” mice and mate them with mice which they have not genetically altered. As Mendelian inheritance principles predict, 50 percent of the offspring of this generation will have the oncogene in their cells.

Harvard seeks to invoke Canadian patent law to protect (1) the process of creating founder mice, and (2) the offspring affected by the oncogene, the end product of the process. Harvard also seeks to extend the process and product claims to all non-human mammals. Many jurisdictions, such as Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, The Netherlands, Portugal, Spain, Sweden, the United Kingdom, and the United States, have granted a patent on the oncomouse.

In March 1993, a Patent Examiner rejected the product claims as being outside the definition of “invention” in Section 2 of the Canadian Patent Act but did allow the process claims. The Commissioner of Patents confirmed the refusal to grant a patent for the product claims. Harvard lost in litigation before the federal trial court but won in the Federal Court of Appeal. The Commissioner of Patents secured review in the Supreme Court of Canada. In a 5 to 4 split, that Court allows the appeal.   

The Court first clarifies the main question in the case. “Perhaps more important in this case is the nature of the problem under review, i.e. whether it constitutes a question of law, fact or mixed law and fact. In my view, the question of whether a higher life form can be considered a ‘manufacture’ or ‘composition of matter’ approaches a pure determination of law. There is no disagreement in this case regarding the nature of the specific invention: if it is determined that higher life forms are ‘manufactures’ or ‘compositions of matter’, then the oncomouse is an invention. [¶150]”

After analyzing various definitions of “manufacture” and “composition of matter,” the Court concludes that higher life forms are not patentable. “Having considered the relevant factors, I conclude that Parliament did not intend to include higher life forms within the definition of invention found in the Patent Act.”

“In their grammatical and ordinary sense alone, the words ‘manufacture’ and ‘composition of matter’ are somewhat imprecise and ambiguous. However, it is my view that the best reading of the words of the Act supports the conclusion that higher life forms are not patentable. As I discuss below, I do not believe that a higher life form such as the oncomouse is easily understood as either a ‘manufacture’ or a ‘composition of matter’. For this reason, I am not satisfied that the definition of ‘invention’ in the Patent Act is sufficiently broad to include higher life forms. [¶155]”

The Court then addresses the complexity of life forms. “The patenting of higher life forms raises special concerns that do not arise in respect of non-living inventions. Unlike other inventions, biologically based inventions are living and self-replicating.”

“In addition, the products of biotechnology are incredibly complex, incapable of full description, and can contain important characteristics that have nothing to do with the invention. [Cites] In my view, the fact that the Patent Act in its current state is ill-equipped to deal appropriately with higher life forms as patentable subject matter is an indication that Parliament never intended the definition of invention to extend to this type of subject matter.” [¶167]

The majority urges that the possibility of entering a slippery slope toward patenting human life is a significant danger. “Should this Court determine that higher life forms are within the scope of Section 2, this must necessarily include human beings. There is no defensible basis within the definition of invention itself to conclude that a chimpanzee is a ‘composition of matter’ while a human being is not.” [¶178]

The Court also expresses concern that, because Section 7 of Canada’s Charter of Rights and Freedoms of 1982 deals only with “persons,” it fails to adequately address the status of fetuses. In regard to the status of fetuses, the majority states that, in its June 2002 report to Parliament: “[T]he CBAC [Canadian Biotechnology Advisory Committee] recommends that the Patent Act be amended to say that no patent shall be granted on human bodies ‘at any stage of development’ (p. x.).” [¶179]

“In its view, this wording would demonstrate an intention not only to include human bodies of infants, children and adults, but also all precursors to the human body from zygotes [a fertilized ovum before cleavage] to foetuses. Recognition by the CBAC of the necessity of specifically addressing this issue supports the view that reference to Section 7 of the Charter alone cannot dispose of concerns associated with the patenting of human life. [¶179]”

The majority next suggests that Section 7 may not be capable of addressing new technologies involving human tissues and organs. “The patenting of body parts raises yet another issue: the increasingly blurred line between human beings and other higher life forms. In the new field of xenotransplantation, human genes are introduced into mammals such as pigs to make the animals’ organs more acceptable to the human body for the purposes of organ transplantation. [¶180]...”

“The problem posed by the above technology with respect to locating the defining line which separates humans from animals is not insurmountable. It does, however, call into question [a dissenter’s] assumption that Section 7 of the Charter is capable of addressing the issues associated with the patenting of human life. In my view, it is not an appropriate judicial function for the courts to create an exception from patentability for human life given that such an exception requires one to consider both what is human and which aspects of human life should be excluded.” [¶181]

In response to Harvard’s contention that the Patent Act seeks to encourage the development of innovative technology, the Court writes: “Regardless of the desirability of a certain activity, or the necessity of creating incentives to engage in that activity, a product of human ingenuity must fall within the terms of the Act in order for it to be patentable.”

“The object of the Act must be taken into account, but the issue of whether a proposed invention ought to be patentable does not provide an answer to the question of whether that proposed invention is patentable. [¶185]¼It simply does not follow from the objective of promoting ingenuity that all inventions must be patentable, regardless of the fact that other indicators of legislative intention point to the contrary conclusion.” [¶187]

The majority cites the Plant Breeders’ Rights Act [PBRA] as one of the indicators of Canadian legislative intent and as supporting its belief that Parliament rather than the courts must address the patentability of higher life forms. “It is a well established principle of statutory interpretation that, given ambiguity in the law, the substance and the form of subsequent legislation may be relevant. [Cite]...” [¶188]

“The existence of the [PBRA] is relevant to the issue of whether Parliament intended higher life forms to be patentable under the Patent Act....[This] ... Act was passed in recognition that the Patent Act was not tailored to plants due to their unique characteristics. Since other higher life forms share many of these characteristics, it is reasonable to assume that Parliament would choose to protect these life forms through legislation other than the Patent Act or through an amended Patent Act that is better suited to the subject matter. [¶189]”

The Court concludes with the issue of drawing lines between different classifications of life forms. “The distinction between lower and higher life forms, though not explicit in the [Patent] Act, is nonetheless defensible on the basis of common sense differences between the two.”

“Perhaps more importantly, there appears to be a consensus that human life is not patentable; yet this distinction is also not explicit in the Act. If the line between lower and higher life forms is indefensible and arbitrary, so too is the line between human beings and other higher life forms....” [¶199]

“The majority of the Federal Court of Appeal, which found that the Patent Act did apply to higher life forms, was nonetheless compelled to draw a distinction between higher life forms and human beings. In doing so, it merely substituted one line, that between humans and animals, for the line preferred by the Patent Office, that between higher and lower life forms. In my opinion, the decision to move the line in this manner was ill-advised. [¶206]”

According to the four dissenters, the oncomouse is patentable subject matter. The amazing scientific triumph of altering every single cell in the body of an animal which does not (in this changed form) exist in nature, by human adjustment of the genetic material of which it is made, constituted, in their view, an inventive “composition of matter” within the meaning of Section 2 of the Patent Act.

Citation: Harvard College v. Canada (Com’r of Patents), File No.: 28155; 2002 S.C.C. 76 (Sup. Ct. Can. Dec. 5, 2002).

WAR CRIMES

In twenty-eight actions by former World War II slave laborers for Germany and Japan, Ninth Circuit concludes that 1999 California statute providing for cause of action for such claims unconstitutionally interferes with federal government’s foreign affairs powers

German forces abducted one plaintiff, Josef Tibor Deutsch, a Jew of Hungarian origin, in 1944 to work 14-hour days for private corporations, including the large German construction company Hochtief AG. Deutsch’s brother died of injuries suffered at the hands of a Hochtief supervisor.

A 1999 California statute, Cal.Code Civ. Proc. Section 354.6, creates a cause of action for World War II slave laborers. Such claims are timely if filed on or before December 31, 2010. Deutsch based his claims on this statute. Defendants were the allegedly responsible corporations (or their successors). The district court dismissed the action, however, as presenting a non-justiciable “political question.” Deutsch noted his appeal.

The Court consolidated Deutsch’s action with 27 other similar suits by victims of Japanese slave labor during World War II. The plaintiffs in the majority of the other cases were U.S. nationals or from Allied nations whom the Japanese had taken as prisoners of war. The district court dismissed those cases as barred by the Treaty of Peace with Japan [September 8, 1951, 3 U.S.T. 3169, T.I.A.S. No. 2490]. Article 14(b) of the Treaty states that: “Except as otherwise provided in the present Treaty, the Allied Powers waive all reparations claims of the Allied Powers, other claims of the Allied Powers and their nationals arising out of any actions taken by Japan and its nationals in the course of the prosecution of the war ...”

The district court dismissed the remaining cases brought by Korean and Chinese nationals on the grounds that the California statute is an unconstitutional intrusion into the foreign affairs powers of the federal government. The U.S. Court of Appeals for the Ninth Circuit affirms, agreeing with the plaintiffs that Section 354.6 exceeded California’s power to engage in foreign affairs.

“While neither the Constitution nor the courts have defined the precise scope of the foreign relations power that is denied to the states, it is clear that matters concerning war are part of the inner core of this power. Of the eleven clauses of the Constitution granting foreign affairs powers to the President and Congress, ... seven concern preparing for war, declaring war, waging war, or settling war. Most of the Constitution’s express limitations on states’ foreign affairs powers also concern war.”

“Even those foreign affairs powers in the Constitution that do not expressly concern war and its resolution may be understood, in part, as a design to prevent war. Indeed, ... supporters of the new Constitution believed that disunity in international affairs risked unnecessary war. See, e.g., The Federalist Papers, No. 3 at 13 ... Matters related to war are for the federal government alone to address.”

“Among the six district court decisions we review here, the only one to reach the foreign affairs challenge to section 354.6 held that the provision was unconstitutional under that doctrine for six reasons: ... Although we agree that section 354.6 violates the foreign affairs power, we base our holding on a narrower consideration. We hold that section 354.6 is impermissible because it intrudes on the federal government’s exclusive power to make and resolve war, including the procedure for resolving war claims.” [Slip op. 30-33]

In Germany’s case, Washington has already exercised its own exclusive authority to end the war and to settle claims related to it. Beginning with the 1945 agreements at Yalta and Potsdam, the World War II treaties did not provide for a private right of action for injured individuals. With the Foundation Agreement of July 17, 2000, victims of German slave labor can receive compensation of up to $7,500. Though such an amount is less than adequate, it does constitute the political resolution of such claims.

Finally, the Treaty of Peace of 1951 with Japan has no private right of action provision. Without such authorization, U.S. states are powerless to alter the federal government’s resolution of disputes resulting from the war with Japan. Section 354.6 is, therefore, unconstitutional. All the remaining claims are time-barred.

Citation: Deutsch v. Turner Corp., 317 F.3d 1005 (9th Cir. 2003).

WORLD TRADE ORGANIZATION

WTO Appellate Body upholds Panel findings that U.S.’s Continued Dumping and Subsidy Offset Act of 2000 is inconsistent with WTO trading rules as specific action against dumping or subsidy

On January 16, 2003, the Appellate Body of the World Trade Organization (WTO) issued its report in the matter of the U.S.’s Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) (the so-called Byrd Amendment), enacted in October 2000 as part of a Fiscal Year 2001 Rural Development, Food and Drug Administration and Related Agencies Appropriations Act of 2001 [Pub.L. No. 106-387, 114 Stat. 1549, sections 1001-1003]. The CDSOA essentially requires that the anti-dumping duties collected from foreign competitors of U.S. companies be distributed to the affected U.S. companies.

On September 10, 2001, the WTO established a Dispute Settlement Panel at the request of, among others, Australia, Brazil, Canada, the European Union, and Japan, to examine the CDSOA’s consistency with WTO trading rules.

In a Report circulated on September 16, 2002, the Panel ruled against the U.S. on three out of the five principal claims. See 2002 International Law Update 156. The U.S. appealed on October 18, 2002, and the Appellate Body now largely affirms the Panel Report.

It confirms that the Act is inconsistent with certain WTO trading rules of the Antidumping Agreement and the Subsidies and Countervailing Measures Agreements (SCM) because it is a specific action against dumping or a subsidy. In particular, the Appellate Body upholds the following:

(A) the finding of the Panel in ¶¶ 7.51 and 8.1 that the CDSOA is a non-permissible specific action against dumping or a subsidy, contrary to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement;

(B) the conclusions of the Panel in ¶¶ 7.93 and 8.1 that the CDSOA is inconsistent with certain provisions of the Anti-Dumping Agreement and the SCM Agreement and, therefore, that the U.S. has failed to comply with Article 32.5 of the SCM Agreement and Article XVI:4 o the WTO Agreement.

(C) the Panel’s finding in ¶ 8.4 that, pursuant to Article 3.8 of the DSU, to the extent that the CDSOA is inconsistent with provisions of the Anti-Dumping Agreement and the SCM Agreement, the CDSOA nullifies or impairs benefits accruing to the Complaining Parties under those Agreements. Finally, the Appellate Body repudiates the U.S. claim that the Panel acted inconsistently with Article 9.2 of the DSU by failing to issue a separate panel report in the branch of the dispute brought by Mexico.

On the other hand, the Appellate Body reverses the Panel’s findings in ¶¶ 7.66 and 8.1 that the CDSOA is inconsistent with Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement. It also rejects the Panel’s conclusion in ¶ 7.63 that the U.S. has not acted in good faith with respect to its obligations under Article 5.4 of the Anti-Dumping Agreement and Article 11.4 of the SCM Agreement.

The Appellate Body therefore recommends that the DSU request the U.S. to bring the CDSOA into conformity with its duties under the Anti-Dumping Agreement, the SCM Agreement, and GATT 1994. In the past two years, the U.S., under the Byrd Amendment, has reportedly given out $470 million in anti-dumping duties to U.S. companies.

Citation: United States - Continued Dumping and Subsidy Offset Act of 2000 (WT/DS217/AB/R & WT/DS234/AB/R) (16 January 2003); Washington Post, January 17, 2003, page E2; U.S. Trade Representative press release of January 16, 2003. The Appellate Report is available on the WTO website “www.wto.org.”

ICJ orders U.S. to take “all measures necessary” to prevent state executions of three Mexican citizens. On February 5, 2003, the International Court of Justice (ICJ) unanimously adopted an “Order indicating provisional measures” in the “Case concerning Avena and other Mexican Nationals.” It requires the U.S. to “take all measures necessary” to forestall the executions of three specified Mexican citizens in the U.S. who have exhausted their appeals. Mexico had filed the request in connection with its broader complaint against the U.S. for alleged violations of Articles 5 and 36 of the Vienna Convention on Consular Relations (April 24, 1963, 21 U.S.T. 77, 596 U.N.T.S. 261 (1969)). The ICJ suit deals with the rights of 54 Mexican citizens who have been sentenced to death in various U.S. States. It alleges that the lack of proper notice and opportunity to ask for assistance through the Mexican Embassy and Consulates prejudiced their rights under the Convention. -- Texas has reportedly decided to ignore the ICJ order. It has two Mexican prisoners who are under death sentences but no execution dates have been set. Citation: International Court of Justice, Case concerning Avena and Other Mexican Nationals (Mexico v. United States of America), Press Release 2003/9 (5 February 2003); Reuters (Findlaw online) report of Thursday, February 6, 2003 (byline of C. Bryson Hull).

U.S. provides for threat assessment of foreign FAA certificate holders. The U.S. Department of Transportation, Transportation Security Administration (TSA), has issued a final rule setting up a procedure by which TSA will notify subject individuals and the Federal Aviation Administration (FAA) that a foreign national poses a security risk and holds, or is applying for, an FAA airman certificate, rating, or authorization. The DOT adopts this final rule without the usual prior notice and comment period because of the increased risk of terrorist attacks since September 11, 2001. Citation: 68 Federal Register 3762 (January 24, 2003).

French court dismisses second racism case against Yahoo. In 2000, France’s Union of Jewish Students and an Anti‑Semitism League sued Yahoo!, Inc. in the French courts for allowing the sale of Nazi collectibles, such as flags bearing swastikas, on its auction pages. Invoking a French statute that bans the display or sale of racist material, the court ordered Yahoo! to bar Internet surfers in France from bidding on such items. See 2001 International Law Update 184. While the case was pending, Yahoo began to charge for auction listings. Not wishing to make money from the auction of Nazi material, Yahoo! also decided to bar such items from its auction pages. The company, however, persisted in contesting the French case. It also persuaded a California federal court that foreign nations with laws restricting free speech more than the First Amendment does lack the power to regulate the activities of U.S. companies. French Holocaust survivors and others brought a second action in the French courts against Yahoo, seeking symbolic damages of one euro. On February 12 last, a Paris court dismissed this case. In the court’s view, neither the company nor its CEO tried to justify war crimes or crimes against humanity such as by glorifying, praising or even presenting the crimes in question favorably. It is not known whether plaintiffs will appeal. Citation: The New York Times (online), February 12, 2003, filed by The Associated Press from Paris at 12:51 a.m. ET.

U.S. Treasury issues rules to improve control of money laundering and terrorist funding. The U.S. Treasury Department has taken further steps to control money laundering and the funding of terrorist schemes. On December 20, 2002, the Treasury designated Nauru and the Ukraine as raising primary money laundering concerns under 31 U.S.C. Section 5318A added by Section 311(a) of the USA Patriot Act of 2001 [Pub.L. 107-56]. -- To the same end, the Treasury has also amended its regulations under the Bank Secrecy Act [31 C.F.R. Part 103], effective March 12, 2003. The amendments strengthen and widen the duties on currency dealers and exchangers to report suspicious transactions to the Treasury. Citation: 67 Federal Register (December 26, 2002) [Nauru & Ukraine]; 68 Federal Register 6613 (February 10, 2003) [Bank Secrecy Act regulations].

Two Protocols designed to safeguard children are ratified by U.S. The U.S. has officially become a party to two Protocols to the United Nations Convention on the Rights of the Child. The first is the Optional Protocol on the Sale of Children, Child Prostitution, and Child Pornography. So far, 105 countries have signed and 42 have ratified it. The main purpose of this Protocol is to secure children from sexual exploitation. For example, it requires parties to prosecute sexual exploiters of children as criminals. -- Also, on December 24, 2002, the U.S. officially acceded to the Optional Protocol on the Involvement of Children in Armed Conflict. This Protocol seeks to prevent children from being forced to take part in warfare. For example, it sets a minimum age of 18 for compulsory military service. So far, 110 countries have signed it, and 42 countries have ratified it. Citation: U.S. Department of State, Fact Sheets of December 24, 2003.

EU implements Kimberley Process on international trade in rough diamonds. The EU has issued Regulation No. 2368/2002 to implement the so-called “Kimberley Process” for the certification, import and export of rough diamonds. It seeks to control the flow of these items from Liberia, Angola, and Sierra Leone, where the proceeds of diamond sales help to prolong violent conflicts. From now on, a certificate validated by a member of the Kimberly Process has to accompany all diamonds traded within the EU. In a separate Regulation, the EU published a list of the competent certifying authorities in the various participating countries. -- The EU Council has also banned the import of rough diamonds from Sierra Leone (2002/992/CFSP) but has lifted restrictions against Angola and the National Union for the Total Independence of Angola (UNITA). [Editors: The U.S. joined the Kimberley system in November 2002. See 2002 Int’l Law Update 174.] Citation: 2003 O.J. of European Union (L 36) 7, 11, February 12, 2003 [Kimberley Process, including list of competent authorities]; 2002 O.J. of European Communities (L 358) 28, December 31, 2002 [Kimberly Process] & (L 348) 1, 2, December 21, 2002 [UNITA & Sierra Leone] & (L 24) 1, January 29, 2003 [Angola restrictions].

ICSID tribunal decides ADF Group case that involves important NAFTA issues. On January 9, 2003, an arbitral tribunal issued its decision in the case of ADF Group Inc. v. United States of America. ADF Group Inc. is a Canadian company with a U.S. subsidiary that designs and produces structural steel. It filed a claim under the ICSID arbitral regime against the U.S. claiming damages resulting from the 1982 Surface Transportation Assistance Act and the implementing regulations of the U.S. Department of Labor, which require that federally funded highway projects use only domestically produced steel. Essentially, ADF argued that the “Buy America” law prevented it from producing steel in Canada for the Springfield interchange project in Virginia, and thus violated NAFTA’s investment chapter. The tribunal ruled, among other things, that: (1) the U.S. law at issue is not inconsistent with NAFTA Article 1102 [national treatment requirement]; (2) ADF did make a prima facie case that the U.S. requirements violate NAFTA Article 1106(1)(b) and (c) [prohibition against performance requirements]. However, the project at issue involves procurement by the State of Virginia, and the U.S. is entitled to the benefit of NAFTA Article 1108(8)(b) [procurement by a party] which renders inapplicable the provisions of Article 1106(1)(b) and (c) in case of procurement by a party. Citation: International Centre for the Settlement of Investment Disputes (ICSID), In the Matter of an Arbitration Under Chapter Eleven of the North American Free Trade Agreement Between ADF Group Inc. and United States of America, Case No. ARB(AF)/00/1 (9 January 2003); U.S. Department of State Media Note, January 9, 2003.

U.S. unblocks Yugoslav assets. The U.S. has taken some first steps to partially unblock large portions of the assets of former Yugoslavia (Socialist Federal Republic of Yugoslavia). These assets were blocked during the 1990s in the form of a series of economic sanctions imposed by the U.S. in response to violent acts occurring in former Yugoslavia. Secretary of State Colin L. Powell had announced on May 21, 2002, that the U.S. would take action through the U.S. Department of the Treasury to unblock Yugoslav assets. Citation: U.S. Department of State Press Statement, December 27, 2002.