Protecting Private Intellectual Property from Government Intrusion: Revisiting SmithKline and the Case for Just Compensation

Abstract

On October 2, 2000, the Supreme Court denied certiorari in literally hundreds of cases that accumulated over the preceding summer.' Among those passing quietly into the night was a petition from the Second Circuit in SmithKline Beecham v. Watson Pharmaceuticals, where Chief Judge Winter held that copyright liability did not attach to a generic drug seller's use of a pioneer drug seller's copyrighted label. The law clerk writing the certiorari pool memorandum likely discarded SmithKline as a fact-bound case, in an obscure area of copyright law in which there was no circuit split, authored by a highly respected circuit judge. Thus the Court never saw SmithKline for what it was: the latest monument to a judicially-led curtailing of intellectual property rights. Beginning with the Supreme Court's decision in Florida Prepaid, the protection of intellectual property ("IP") has become all the more precarious - particularly where there is a government entity involved. Judicial hostility toward intellectual property rights is nothing new; however, this latest wave comes after decades of legislative action to shore up protection of IP, and at a time when such property rights are becoming increasingly central to innovation and the economy. What is noteworthy about this newfound judicial skepticism toward claims of intellectual property protection is its direction in support of government actors at both the federal and state level. Although the Federal Circuit has adopted a pro-IP stance, resulting in more favorable rulings for patent owners, and greater damage awards as between private actors,8 recent decisions from the Supreme Court and other circuits show these courts all too willing to sweep entire questions of infringement aside when there is a federal or state agency interest at stake.

This Article addresses this new curtailment of intellectual property rights in the name of government interests that has emerged at the turn of the millennium. Part I examines the SmithKline decision and the role Food and Drug Administration ("FDA") policy played in shaping the outcome. Looking past the specifics of SmithKline, Part II takes a broader view at the interaction between IP rights and the administrative state. In particular, I focus on a small sampling of the ways in which the FDA and other federal agencies encumber or intrude upon, for better or for worse, one's intellectual property. Part III offers a perspective on SmithKline as just the latest star in a constellation of recent decisions subjugating IP rights to federal and state government interests. Having diagnosed the current state of affairs, I then examine a potential remedy. Part IV considers a constitutional "takings" theory of infringement as a means of overcoming some of the recent judicially-created obstacles to protecting intellectual property from government use or interference. Thus, Part IV addresses one of the unanswered questions from Florida Prepaid: what currency does the Just Compensation Clause provide in questions of infringement?