Akamai v. Limelight: Implications for Medical Method Patents (Redux)

Yesterday, the Court of Appeals for the Federal Circuit issued a unanimous en banc ruling in Akamai v. Limelight, altering the reach of patent liability for induced infringement of a method claim under 35 U.S.C. § 271(b).  This is the second time the en banc court has considered Akamai.  Three years ago, in a splintered decision, a majority of the court had ruled that liability for induced infringement was possible where no single entity had performed all the steps of a claim, but where those steps were divided between two or more parties, one of whom had induced the other(s) to infringe.  In 2014, the Supreme Court reversed, essentially reinstating this single entity rule, and after a panel opinion largely adopting the Supreme Court’s reasoning, a unanimous en banc court has now broadened – at least somewhat – the scope of divided infringement liability, relative to the Supreme Court’s decision.

More specifically, the Federal Circuit concluded that an entity may be held liable for others’ performance of steps of a method claim “in two sets of circumstances: (1) where that entity directs or controls others’ performance, and (2) where the actors form a joint enterprise.”  Noting the court’s prior holdings that these circumstances are met where there is an agency relationship between the relevant actors or there are explicit contractual duties to perform the steps of the method claims, the en banc court added another such circumstance in which liability may be found: “when an alleged infringer conditions participation in an activity or receipt of a benefit upon performance of a step or steps of a patented method and establishes the manner or timing of that performance.”  Because this third condition was present in the case under consideration, the Federal Circuit deemed Limelight liable for infringement.

Exactly thirteen months ago, after the Supreme Court’s decision but before the Federal Circuit had considered the case on remand, I had blogged here about the case’s potential implications for diagnostic method patents.  (For those interested in this field, I then wrote a longer article about diagnostic technologies more broadly, which features a more detailed explanation of this issue.) Essentially, my argument was that the increasing restrictions the courts have placed on patentable subject matter under 35 U.S.C. § 101 would interact with these new divided infringement rules.

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Another Opinion Upholding the Contraceptives Coverage Accommodation

Today, the 10th Circuit issued its opinion in the Little Sisters of the Poor case, holding that the accommodation offered to religious nonprofits – and now also to certain closely-held for-profits – is legally acceptable under the standard imposed by the Religious Freedom Restoration Act (RFRA).  The accommodation, just recently finalized in its current form, allows eligible employers to avoid covering contraceptives for their employees so long as they notify their insurer or the government of their religious objection to doing so. Importantly, employees are still legally guaranteed access to free contraceptives through alternate mechanisms, usually the via insurer directly.

The 10th Circuit’s opinion represents the fifth win for the administration on the accommodation issue following Hobby Lobby. (Note that Hobby Lobby was about an employer who was not previously eligible for the accommodation.)  The RFRA standard provides that the government “may substantially burden a person’s exercise of religion only if it demonstrates that application of the burden to the person—(1) is in furtherance of a compelling governmental interest; and (2) is the least restrictive means of furthering that compelling governmental interest.”

In Little Sisters, the 10th Circuit dispensed with the RFRA claim by holding that there was no substantial burden, one of the threshold questions in the RFRA analysis.  It explained that the fact of the employer’s opt-out does not *cause* contraceptives coverage (i.e., by requiring another party to provide coverage in their stead), which instead is mandated by federal law.  It also determined that there is no substantial burden from complicity in the overall scheme to deliver contraceptive coverage, i.e., by delivering notice of objection, because their only involvement in the scheme is the act of opting out.  Thus, RFRA’s protections were not implicated, and the accommodation can stand.

I fully agree with the result in this case, but would have gotten there another way.

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Onward And Upward For The ACA After King v. Burwell

Christie Hager, a speaker at the Petrie-Flom Center’s “King v. Burwell and the Future of the Affordable Care Act” conference on April 1 has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision. From the piece: 

Chief Justice Roberts, in the majority opinion in King v. Burwell, confirmed that the only insurance spiral now is one onward and upward for the millions of Americans who will benefit from the peace of mind and protections of the Affordable Care Act (ACA) as passed by Congress and signed by President Obama.

Among the many benefits of the ACA, Exchanges have been operating in some form to increase coverage in every state since 2013. Millions of lives have been changed or saved as a result. Many legal theorists and Supreme Court observers are rightly praising the sound legal reasoning and Constitutional principles in action that led to upholding key aspects of the Affordable Care Act (again).

It is a stark example of the relationship among the three branches created by the Constitution: Legislative drafting and passage, Executive implementation, and Judicial interpretation of language that in this case may have been less than clear. Additionally, the practical implications of the Court’s decision also are particularly salient. […]

Read the full piece here.

The Argument That Wasn’t

Guest Blogger Abigail R. Moncrieff of the Boston University School of Law and a speaker at the Petrie-Flom Center’s “King v. Burwell and the Future of the Affordable Care Act” conference on April 1 has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision. From the piece: 

Last Christmas, I spent a somewhat panicky inter-semester break writing an amicus brief for King v. Burwell. I was worried that five Supreme Court justices were going to be too tempted by the plaintiffs’ legalistic interpretation of Obamacare’s text, despite ample evidence beyond the text that Congressnever intended to deprive citizens in 34 states of health insurance subsidies.

In a seminar I taught at Boston University, one of my students had proposed a legalistic version of the common sense point that Congress could not possibly have intended the plaintiffs’ result—a legalistic argument that could be fatal to the plaintiffs’ case but that the government could not make—and I decided to spend my break writing and submitting it. […]

Read the full piece here.

Reproductive Malpractice and the U.S. Military

Check out the new op-ed at HuffPo by Bill of Health bloggers Dov Fox and Alex Stein on the unfair treatment of American servicewomen (and their children) under the Feres doctrine should they fall victim to medical malpractice during their pregnancy or delivery. Fox and Stein call for SCOTUS to fix the loophole it left open in the 1950 case, or for Congress to “set up a fund for compensating children whose disabilities were caused by substandard care at military medical facilities.”  Take a look at the full post here.

King v. Burwell And The Importance Of State Politics

David K. Jones of the Boston University School of Public Health and a speaker at the Petrie-Flom Center’s “King v. Burwell and the Future of the Affordable Care Act” conference on April 1, has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision. From the piece: 

The Supreme Court’s decision in King v. Burwell brings an important chapter of the Affordable Care Act’s (ACA) implementation to a close. The fight about health reform is not over, with Republican presidential candidates promising to repeal the law while supporters of the law push for Medicaid expansion and the development of Accountable Care Organizations.

But it is important to pause and reflect on what we have learned the last five years. This is uncharted territory for supporters of comprehensive health reform who for so many decades studied why legislation was so difficult to enact rather than how complicated it is to implement. […]

Read the full piece here.

The ACA Survives — But With A Note Of Caution For The Future?

Academic Fellow Rachel Sachs has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision in King v. Burwell. From the piece: 

Chief Justice Roberts has once again saved a core provision of the Affordable Care Act (ACA). In King v Burwell, a majority of six Justices upheld the validity of an Internal Revenue Service (IRS) rule interpreting the text of the ACA to permit tax credits to be distributed through both state and federal insurance exchanges. As a result, the millions of Americans receiving subsidies through federally established exchanges in the states that have not chosen to establish their own exchanges will continue to receive them.

Much of the briefing and argument in King involved the legal principle known as Chevron deference, in which courts generally defer to agencies’ reasonable interpretations of statutes if the statutory language is ambiguous. In this case, the government first argued that the statutory language clearly permitted tax credits to be made available on federally established exchanges. But even if the statute was ambiguous, it contended, Chevron counseled deference to the IRS’ reasonable interpretation of the statute.

Read the full piece on the Health Affairs Blog!

Happy about the Supreme Court’s ACA decision? Thank a law professor

By Rachel Sachs

[Originally published on The Conversation].

The core of the Affordable Care Act (ACA) has now survived its second trip to the Supreme Court.

Chief Justice John Roberts wrote for the majority in King v Burwell, holding that the federal government may provide subsidies for citizens to purchase health insurance on exchanges that were established by the federal government, rather than by their own state.

A ruling for the challengers (the “King” in King v Burwell) would not only have stopped the flow of subsidies to 6.4 million people currently receiving them, but it would also have disrupted the functioning of the individual insurance markets in the 34 states that have not established their own exchanges. Continue reading

King v. Burwell And A Right To Health Care

Bill of Health contributor Gregory Curfman has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision in King v. Burwell in the broader context of Americans’ right to care. From the piece:

Do Americans have a fundamental right to health care? This oft-debated question is timely given the Supreme Court’s stunning ruling yesterday in King v. Burwell, in which health insurance subsidies on the federal exchange were upheld in a 6-3 decision.

Here I will place the King v. Burwell opinion in the larger context of to what extent Americans are provided a right to care. The Constitution itself does not stipulate a general right to health care, but a patchwork of rights to certain aspects of health care have emerged over time from both constitutional and statutory law.

Read the full piece at the Health Affairs Blog!

Some Thoughts from a Health Lawyer on King v. Burwell

By Joan H. Krause

[Cross-posted from Hamilton and Griffin on Rights]

The long-awaited and much-debated opinion in King v. Burwell is here. In an opinion written by Chief Justice Roberts – who almost single-handedly saved the ACA with his 2012 opinion in N.F.I.B. v. Sebelius – and newly joined by N.F.I.B. dissenter Justice Kennedy as well as the more liberal Justices, the Court agreed with the Fourth Circuit that the ACA’s tax credits (or “subsidies”) are available to individuals who purchase insurance through both State and Federal health insurance Exchanges. The Petitioners, four Virginia residents who did not wish to purchase health insurance, had argued that Virginia’s Federally-run Exchange did not constitute “an Exchange established by the State” under the ACA tax credit provision; because unsubsidized coverage would cost more than 8% of the Petitioners’ incomes, they would be exempt from the Act’s individual mandate and would not be required to purchase health insurance. While acknowledging that the Petitioners’ arguments regarding the “plain meaning” of the phrase were strong, the majority nonetheless sided with the Government, holding that the context and structure of the overall statute led to the conclusion that the statute permitted tax credits for insurance purchased on “any Exchange created under the Act,” whether State or Federal (slip op. at 21). Justice Scalia penned a scathing yet witty dissent (“We should start calling this law SCOTUScare,” slip op., Scalia, J. dissenting, at 21), arguing that the plain meaning of the language made clear that tax credits were available only on State exchanges, and that any flaws in the Act’s design should be left to Congress to fix.

Despite the attention it received, King was something of a stealth ACA case. Lacking the Constitutional controversies of N.F.I.B., it was in many ways a run-of-the mill statutory interpretation case focusing on four words in a massive document containing, in the words of the Chief Justice, “more than a few examples of inartful drafting” (slip op. at 14).   And yet the potential effects of the decision were perhaps even more far-reaching, in large part because of the timing. N.F.I.B.’s Commerce Clause analysis may have more precedential value in the long-run, but far fewer of the Act’s provisions had gone into effect in June of 2012. With approximately 7 million individuals now receiving insurance through the Federal Exchange, and the majority of them (an estimated 87%) receiving subsidies, the decision in King could have led to the devastating loss of insurance for millions of Americans.

While commentators will no doubt parse every sentence of the opinion (including the Court’s refusal to defer to the IRS’s interpretation of the statute under Chevron), as a health lawyer I found two aspects of the opinion notable. First, the Chief Justice drafted a very nuanced (and mercifully succinct) description of the health insurance market flaws the ACA was designed to address. The Chief Justice understood the ACA’s “three key reforms” – guaranteed issue and community rating of insurance policies, the individual mandate, and tax credits – as well as the ways in which the three were “closely intertwined” (slip op. at 3-4). The first few pages cite multiple horror stories from states where some, but not all, of these reforms were enacted; for data, the opinion cites liberally to the Brief for Bipartisan Economic Scholars as Amici.   In its depth (not to mention brevity), the analysis is completely different from the tortured description of health insurance found just a few years ago in N.F.I.B., evincing a far more sophisticated understanding of both the legal issues and the legislation itself.

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King v. Burwell: Is the ACA Here to Stay?

With Chief Justice Roberts’ remarkably strong decision today for the Supreme Court in King v. Burwell millions of Americans can now rest assured:  affordable health insurance is here to stay.  There may not be a constitutional right to health care in the U.S., and thanks to the Court’s 2012 decision regarding the Affordable Care Act’s Medicaid expansion, millions of citizens (not to mention non-citizens) remain uninsured; but the ACA’s promise of providing affordable coverage to millions of low income Americans is now secure.

The question before the Court in Burwell was whether individuals in the 34 states that rely on a federally-operated health insurance exchange, rather than a state-created exchange, are eligible for the federal tax credits. Without those credits, most people could not afford to buy insurance on the exchanges. Nor would they be subject to the ACA’s mandate to have coverage. As the Court recognized, as healthy people fled the exchanges, the insurance markets in states with federally-operated exchanges would experience a death spiral.

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Human Rights Tribunal Upholds France’s Policies on Ending Life Support for Permanently Unaware Patients

By Norman L. Cantor

France recently confronted its version of America’s 2005 Schiavo case (in which the Florida Supreme Court upheld a spouse’s determination to end life support to a permanently unconscious patient despite the patient’s parents’ objections). In 2014, France’s Conseil d’Etat ruled that artificial nutrition and hydration (ANH) could be withdrawn from a permanently vegetative patient based on oral statements that the patient had made, while competent, indicating unwillingness to be medically sustained in such a condition. The patient’s objecting parents then sought a declaration from the European Court of Human Rights (ECHR) that such termination of life support would violate the European Convention on Human Rights. On June 5, 2015, the ECHR rejected the objecting parents’ contention, finding that France’s approach met human rights standards both in the process and the criteria followed by medical personnel in deciding to end life support.   Lambert v. France, #46043/14 (ECHR 2015).

Vincent Lambert, then 32 years old, was grievously injured in a 2008 traffic accident. He suffered massive brain trauma and was hospitalized for the next 7 years at Reims University Hospital. His precise medical status was initially uncertain. In July 2011, a medical evaluation found him to be “minimally conscious plus.” Over the next year and a half, he underwent 87 speech therapy sessions which failed to establish any code of communication between Mr. Lambert and his surroundings. In early 2013, the attending physician, Dr. Kariger, initiated a process to review Mr. Lambert’s condition and to determine whether the ANH sustaining Mr. Lambert should be withdrawn.

The process that followed was extensive. During 2013, Dr. Kariger consulted with 6 physicians concerning the patient’s mental status and held 2 family meetings at which Mr. Lambert’s wife, Rachel, his parents, and 8 siblings were present. In January 2014, Dr. Kariger announced his determination to end artificial nutrition and reduce hydration. Dr. Kariger’s written report explained that Mr. Lambert had become permanently unaware of his environment and, according to accounts of Mr. Lambert’s prior oral expressions, he would not wish to be medically sustained in such a debilitated condition. Five of the six medical consultants agreed, as did the patient’s wife and 6 of his 8 siblings.

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Ariosa v. Sequenom Invalidates the Non-Invasive Prenatal Testing Patent

On Friday, the Court of Appeals for the Federal Circuit affirmed the district court’s judgment of invalidity of several claims in Sequenom’s diagnostic method patent on the grounds that they were not directed to patent-eligible subject matter under the relevant section of the Patent Act, 35 U.S.C. § 101.  The case, Ariosa v. Sequenom, is important not only to those who have been following the recent back-and-forth between the Federal Circuit and Supreme Court on patent-eligible subject matter, but also to those who study medical innovation, as it implicates questions of innovation incentives and of access to an important new technology.

The case involves a technology known as non-invasive prenatal testing, or NIPT.  Previously, pregnant women seeking to determine whether their fetuses possessed particular genetic abnormalities only had the option to undergo procedures, like amniocentesis, which pose a risk to the developing fetus.  The scientists in this case made a startling discovery: there is a small amount of fetal DNA circulating in the pregnant woman’s plasma and serum.  These portions of maternal blood samples had previously been discarded as medical waste, and the idea that genetic abnormalities could be discovered through a non-invasive procedure like a blood draw, which poses no risk to the health of the fetus, was groundbreaking.  A patent on the method of detecting the fetal DNA in the mother’s serum or plasma was obtained, and Sequenom commercialized a test to practice the patent.  Sequenom was soon embroiled in litigation with Ariosa and other companies which it believed were infringing its patent.

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Commil v. Cisco: Exploring the Relationship Between Patent Infringement and Validity

On Tuesday, the Supreme Court issued its opinion in Commil USA, LLC v. Cisco Systems, Inc., in which it held that a defendant’s belief that a patent is invalid is not a defense to induced infringement of that patent under 35 U.S.C. § 271(b).  Four years ago, in a case called Global-Tech, the Court had held that a defendant could not be liable for induced infringement unless it had knowledge not only of the patent’s existence but also that its behavior constituted patent infringement.  In Commil, six Justices clarified that a defendant who has knowledge of a patent’s existence but believes it to be invalid may still be held liable for inducing its infringement.  (Justice Scalia dissented and was joined by Chief Justice Roberts, with Justice Breyer recused.)

Commil raises several issues for discussion, but I want to talk about just one here: the majority’s fixation on the distinction between infringement and validity.  The key passages of Justice Kennedy’s opinion, on pages 9 through 11, seem to rest heavily on preserving the separation between these two issues.  Essentially, as Justice Kennedy puts it, “because infringement and validity are separate issues under the Act, belief regarding validity cannot negate the scienter required under §271(b).”  Justice Kennedy is clearly correct as a formal matter.  We ask different legal questions when adjudicating issues of infringement and validity, we apply different burdens of proof to the two questions, and we involve different parties in their resolution.

But Justice Kennedy’s opinion ignores the close practical relationship between the two issues.  By contrast, scholars and practitioners have long recognized the tension between infringement and validity as instantiated in patent litigation.  A patentee wants its patent to be construed broadly, to ensure that the defendant’s invention falls within its bounds.  Yet at the same time, the patentee must avoid claiming too broadly, or its patent may be invalidated on precisely those grounds.  (Defendants typically advocate the opposite positions.)

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Recent Judicial Rulemaking Leaves Life Science Patents Hanging In The Balance

This new post by Claire Laporte of Foley Hoag LLP appears on the Health Affairs Blog, as part of a series stemming from the Third Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015.

Do patents nurture or stifle innovation?

In a recent series of decisions, the Supreme Court has begun to express concern that some patents suppress innovation. And it has done so in a number of cases that turn on what used to be a sleepy backwater of the patent law: 35 U.S.C. § 101. This statute says, simply, that “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, … may obtain a patent therefor, subject to the conditions and requirements of this title [i.e., the other requirements of the patent law].”

You might think that this language means that all you have to do is figure out whether an invention falls into one of the permitted categories. If it does, it’s something that can be patented (assuming you meet the other requirements — which are numerous). But no! Over the past few decades, the Supreme Court has engrafted a whole new set of judge-made requirements onto this statute: you cannot get a patent on something that is a “law of nature,” a “product of nature,” or an “abstract idea.” And starting in 2010, the Court put real teeth into these doctrines. […]

See the full post here.

Executions, Doctors, The U.S. Supreme Court, And The Breath Of Kings

This new post by I. Glenn Cohen appears on the Health Affairs Blog, as part of a series stemming from the Third Annual Health Law Year in P/Review event held at Harvard Law School on Friday, January 30, 2015.

The relationship between medicine and capital punishment has been a persistent feature of this past year in health law, both at the level of medical ethics and Supreme Court review.

Our story starts in Oklahoma, where the execution of Clayton Lockett was botched on April 28, 2014. National Institutes of Health (NIH) bioethicist Seema Shah described the events in question:

Oklahoma was administering a new execution protocol that used the drug midazolam, a sedative that is often used in combination with other anesthetic agents. Oklahoma had never used this drug in executions before; in fact, only a few states had experience with using the drug in lethal injection. Florida had previously used this drug in lethal injections, but with a dose five times higher than what was indicated in Oklahoma’s protocol. […]

See the full post here.

King v. Burwell: Appreciating the Stakes of the Case

Yesterday, the Supreme Court heard oral arguments in King v. Burwell, and the Justices seemed split on the central issue of whether the Affordable Care Act (ACA) permits health insurance subsidies to flow to citizens of states that have chosen not to establish their own insurance exchanges.  Trying to predict the outcome of a case like this is notoriously difficult, but I do want to highlight briefly an important difference between the Court three years ago, when it decided NFIB v. Sebelius, and the Court yesterday.

In NFIB, seven Justices declared that the ACA’s Medicaid expansion was unconstitutionally coercive, concluding that the Secretary of Health and Human Services could not condition existing Medicaid funds on a state’s failure to expand Medicaid.  However, the Secretary was instead permitted to offer additional funds to states choosing to expand Medicaid, effectively making the expansion optional.  The Court at the time understood that this outcome could result in a national patchwork, in which certain states would adopt the Medicaid expansion and others would not. Continue reading

Are Egg Donors like Miners and Boxers?

By Dov Fox

The U.S. tax court has just issued its long-awaited decision in Perez v. Commissioner, 144 T.C. No. 4 (Jan. 22, 2015). (Hat tip to Richard Carpenter, who represented Perez.) The case decided whether the $20,000 a woman called Nichelle Perez received to provide her eggs is, for IRS purposes, taxable income, or, instead, recovery for physical damages, which would make that payment tax-free. An introduction to this case is available in my earlier Bill of Health post: Can you be taxed for selling your eggs?, and at greater length in last year’s Taxing Eggs: A Mini Symposium, over at the Faculty Lounge. And the opinion cites thoughtful articles by Professors Kim Krawiec, Bridget Crawford, and Lisa Milot.)

The legal question presented was whether the payments Perez received are tax-exempt “damages” under Section 104 of the Internal Revenue Code. The court held they did not, and thus could be taxed. Judge Holmes observed that the contracts had characterized those payments as consideration for pain and suffering rather than the eggs themselves. He explained that “the injury here, as painful as it was to Perez, was exactly within the scope of the medical procedures to which she contractually consented.” Accordingly, “the payments were made not to compensate her for some unwanted invasion against her bodily integrity but to compensate her for services rendered.” Despite the pain and danger Perez incurred through the process of egg retrieval, Judge Holmes affirmed that “the money she received was not ‘damages'” because “she voluntarily signed a contract to be paid to endure” those risks. I’d be interested to learn whether readers find persuasive the Court’s provocative analogies to egg “donation”: Continue reading

Raising the King v. Burwell Stakes

By Nicolas Terry

Today, the Washington Post ran an interview with Laurence Tribe about the King v. Burwell subsidy litigation (recall that oral arguments are scheduled for March 4). Tribe speculated that Chief Justice Roberts will once again be the swing vote, as he was in Nat’l Fed. of Independent Bus. v. Sebelius. Tribe seems to predict another pragmatic Roberts opinion (and one that might bring Justice Kennedy along), finding the subsidy provisions are at worse ambiguous and that the executive is owed deference as argued by the eminently reasonable Nick Bagley.

Even though Tribe wouldn’t label Roberts as a consequentialist, he does believe that the pragmatic Roberts would be influenced by the impact on the States, the disruption of insurance markets, and the consequences for the newly insured. If the Chief wants more data on those issues he could do no better than to consult two excellent reports from the Urban Institute. The first estimates that a declaration that the subsidies are invalid “would increase the number of uninsured in 34 states by 8.2 million people… and eliminate $28.8 billion in tax credits and cost-sharing reductions in 2016 ($340 billion over 10 years) for 9.3 million people.” Perhaps as important, the Urban Institute’s model also predicts general turmoil in private, non-group insurance markets as the young and healthy would disproportionately drop coverage, causing a predicted 35% increases in premiums.

The second and most recent brief from the Urban Institute begins to put faces on those who will suffer: “Over 60 percent of those who would become uninsured are white, non-Hispanic and over 60 percent would reside in the South. More than half of adults have a high school education or less, and 80 percent are working.”

The executive shouldn’t need such help given the ACA’s clear intent as to how the federal and state exchanges were meant to function. But, if a dose of pragmatism is required to secure a majority of the Court, the stakes couldn’t be any clearer.

United States v. Nayak: The Application of Honest Services Mail and Wire Fraud to the Health Care Industry (Part II)

By Joan H. Krause
[Cross-posted at HealthLawProf Blog]

In a prior post, I discussed the Seventh Circuit’s decision in United States v. Nayak, one of the first major “honest services” mail and wire fraud cases to arise since the Supreme Court decidedSkilling v. United States in 2010. In Skilling, the Court found clear Congressional intent to limit honest services prosecutions to “offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes.” (Skilling at 407, emphasis added) As I warned in a 2012 article, the Court’s focus on bribery and kickback activity within the context of a fiduciary duty might have wide-ranging consequences in the health care field given the nature of the physician-patient relationship.

The structure of honest services cases differs from that of more traditional forms of mail and wire fraud, which usually involve perpetrators who defraud victims of money or property. In contrast, these “intangible rights” cases eliminate the requirement that the victim suffer a financial loss to the perpetrator. Nonetheless, such fraud is actionable only when the perpetrator in fact owes a heightened duty to provide “honest services” to the victim. While Skilling grounded that duty in a fiduciary relationship, the majority offered little guidance as to which aspects of the relationship were most important. As Justice Scalia noted in his concurrence: “None of the ‘honest services’ cases . . . defined the nature and content of the fiduciary duty central to the ‘fraud’ offense. There was not even universal agreement concerning the source of the fiduciary obligation – whether it must be positive state or federal law . . . or merely general principles, such as the ‘obligations of loyalty and fidelity’ that inhere in the ‘employment relationship.’” (Skillingat 416-17)

The indeterminacy of the fiduciary requirement has particular relevance in the medical context. While the physician-patient relationship is commonly described as a fiduciary one, the characterization is far more complex than may first appear. The disparities in medical knowledge, as well as the inability of patients to access many services (such as prescription drugs) without physician involvement, give physicians a great deal of power over their patients – a characteristic fiduciary responsibility. Yet the relationship lacks other fiduciary hallmarks; the physician, for example, lacks the fiduciary’s traditional control over the beneficiary-patient’s money. Skilling offered little guidance as to which of these characteristics is most relevant to the honest services duty.  Continue reading