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Promega Corporation v. Applied Biosystems, Llc.

United States District Court, Seventh Circuit

June 12, 2013

PROMEGA CORPORATION, Plaintiff,
v.
APPLIED BIOSYSTEMS, LLC, LIFE TECHOLOGIES CORPORATION, and CALIFORNIA INSTITUTE OF TECHNOLOGY, Defendants.

OPINION

RICHARD A. POSNER, District Judge.

On June 7, 2013, I conducted a hearing to resolve a Daubert challenge to Dr. Jerry Ruth, and to hear argument on the motions by Promega and the defendants (whom I'll refer to collectively as Life Tech) for summary judgment on infringement, damages, and validity. On the basis of that hearing and the motions, I grant summary judgment that claims 62 (and claim 62's dependent claims), 66, and 67 of U.S. Patent No. RE43, 096-the 096 patent that Promega challenges and Life Tech seeks to enforce-are invalid. These rulings require entry of judgment in favor of Promega; the judgment order will be issued as soon as this opinion is docketed. For completeness I also discuss in this opinion the summary judgment motions dealing with infringement and with damages.

Daubert challenge to Jerry Ruth.

Dr. Ruth, a highly-qualified biochemistry research scientist, has opined that the asserted claims of the 096 patent are invalid as anticipated by, or obvious in light of, prior art. Life Tech has moved to exclude his opinions and testimony on the authority of Fed.R.Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 591-92 (1993). Ruth's report emphasized a 1986 article in Nature coauthored by Lloyd Smith, one of the 096 inventors. But he now concedes that the article is not prior art, and therefore irrele vant, because it postdates the patent's priority date of January 16, 1984.

Life Tech challenges Ruth's analysis of other prior art, including U.S. Patent No. 5, 118, 800 (the "Smith 800 patent"), as hastily articulated, vague, and conclusory. That characterization is inaccurate; Ruth's report analyzes at length the prior art that Promega contends invalidates the 096 claims and describes the parts of those references that he believes an ordinarily skilled biochemist would have known to combine in order to be able to practice the disputed claims of the 096 patent. So had this case gone to trial, Ruth would have been allowed to testify as an expert witness except with regard to Smith's article.

Infringement.

I can dispose of the infringement and damages issues very briefly and so will begin with them. Life Tech has moved for summary judgment that Promega's manufacture, testing, and sale of various products directly infringe claims 62, 66, and 67 of the 096 patent and that Promega is additionally liable for having induced its customers to infringe the same claims by using its products. See 35 U.S.C. §§ 271(a), (b), (f). Life Tech's submission at dkt. 397-1 outlines the specific products in question and the manner in which Life Tech contends that they infringe each claim. "To streamline the case so there will not be a dispute on infringement, " Promega now concedes Life Tech's contentions regarding infringement with two reservations with which Life Tech doesn't quarrel. The first is that if only claim 62 is valid, Promega denies liability for inducing infringement by foreign customers, see 35 U.S.C. § 271(f), because that section does not cover method claims. Cardiac Pacemakers, Inc. v. St. Jude Medical, Inc., 576 F.3d 1348, 1359 (Fed. Cir. 2009) (en banc). Second, Promega's products that do not use four sets of fluorescent tags do not infringe claim 67. Those concessions resolve any disputes about infringement.

Damages.

Jed Greene, Life Tech's damages expert, wanted to testify that 10 percent would be the proper royalty rate applicable to sales of products found to infringe 096 if the relevant claims of the patent are valid. On the basis of Greene's testimony at the Daubert hearing, I ruled that he would not be allowed to testify about royalty rate. Carl Degen, Promega's damages expert, had in various places in his expert report, deposition, and Daubert testimony indicated that he thought the reasonable range for the royalty rate would be 2 to 4.4 percent. Life Tech asks me to treat this as a concession by Promega that 4.4 percent is a reasonable rate, and notes that the figure is derived in part from evidence given by Life Tech's chief technical officer, Randall Dimond.

I am sympathetic to the proposition that if a defendant concedes a reasonable range for a royalty rate, the plaintiff (if it proves liability) should be entitled to the top of the range if, as in this case, there is no evidence that would permit a jury to select a point within that range as being the most reasonable damages estimate. This approach would be consistent with case law that, while insisting that injury be proved in the usual way, permits doubts about the amount of damages to be, within reason (obviously an essential, and sometimes overlooked, qualification), resolved in the plaintiff's favor. See, e.g., Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562-63 (1931); Datascope Corp. v. SMEC, Inc., 879 F.2d 820, 826 n. 6 (Fed. Cir. 1989). This approach is appropriate because invariably the violation of the defendant's rights will have made an exact calculation of damages difficult and often impossible.

But I don't think Degen's testimony and proposed testimony considered as a whole constitute a concession that the reasonable royalty should be 4.4 percent; he also offers reasons why a jury could come to 2 percent. For while he indeed derived the 4.4 percent figure from Dimond's evidence of Promega's charging a higher royalty, he also expressed disagreement with Life Tech's interpretation of that evidence. That disagreement itself requires some explaining.

In 2006, Promega and Life Tech settled litigation over genetic-identity products that used technology patented by both companies. Promega agreed to pay Life Tech a 2 percent royalty for use of Life Tech's 096 patent if the patent was reissued (as it was); Life Tech agreed to pay a 5.5 percent royalty for use of Promega's STR ("short tandem repeat") patents; Life Tech promised to maintain the compatibility of its machines with Promega's products (chemicals used with those machines).

Dimond has testified that Promega's STR patents would have commanded a 12 percent royalty in a one-way license deal (he implies others had paid that rate) but had reduced the rate to 5.5 percent in exchange for Life Tech's promise to maintain its machines' compatibility with Promega's products. Degen likes this explanation of the discount because if that promise was responsible for the rate, no other terms of the 2006 agreement, including Life Tech's 2 percent royalty, would be affected. So Degen argues 2 percent would be the right royalty rate to expect the parties to have agreed on in 2012 with respect to Promega products outside the field of use governed by the 2006 cross-license.

Life Tech disagrees. Its position is that Promega accepted a lower rate in exchange for getting its own lower rate, implying that the 2 percent rate was also lower than Life Tech would grant in a single-license deal, that is, a deal in 2012 allowing Promega to use Life Tech's patent in Promega products outside the field of use of the 2006 license.

Degen's 4.4 percent calculation is a back up, lest the trier of fact think 2 percent too low, in which event Degen wants the trier to assume for argument's sake that in the cross-license negotiation in 2006 each party gave the other the same percentage discount. Promega discounted its normal 12 percent rate to 5.5 percent, a 54 percent discount, implying (given the assumption of identical discounts) that Life Tech accepted a 54 percent discount; and if 2 percent is a 54 percent discount from Life Tech's stand-alone royalty rate, that rate was 4.4 percent. But this as I said is Degen's (and Promega's) back-up position. His (and its) preferred interpretation is that the proper royalty damages rate is only 2 percent, and he could so testify were there a trial on damages, subject of course to cross examination of his testimony on his opinion, including the 4.4 percent alternative.

I want to discuss one more issue that in view of my analysis of validity is not dispositive:

"Specifically hybridized."

In order to preserve a record for appeal, Promega continues to press its challenge to the construction of the term "specifically hybridized" (i.e., designed to bind to) in my April 4 and May 27 orders, in which I construed the term to cover all oligonucleotides intended to bind to a specific location on a complementary strand of DNA even if that location is not unique. Promega argues that the term means "binding to one and only one location on a complementary strand of DNA."

Promega complains that it had no opportunity to brief construction of this claim term, but it could and should have made all the arguments it now seeks to make in earlier submissions. When Life Tech moved for summary judgment that Promega's Power Plex 16 HS system infringes the 096 patent, Promega argued that the Power Plex 16 HS system doesn't infringe because its oligonucleotides can bind to multiple sites on the complementary DNA strand and therefore aren't specifically hybridized, which Promega defines as meaning that the oligonucleotide must bind to a unique site. My ruling on that summary judgment motion required me to interpret the term, and I rejected Promega's construction. My prior orders explain why Promega's construction is unreasonably narrow.

Turning now to the dispositive issue, that of validity, I need to address a series of sub-issues, beginning with-

Anticipation, Obviousness, and Obviousness-Type Double Patenting.

Ordinarily the jury resolves all factual disputes relevant to validity, e.g. SynQor, Inc. v. Artesyn Technologies, Inc., 709 F.3d 1365, 1373 (Fed. Cir. 2013), but if the facts are undisputed (in the sense either that the parties agree on the material facts, or that there could be no reasonable disagreement over what they are, given the record in the case), the judge decides the case, ordinarily on the basis of a motion for summary judgment. See, e.g., KSR Int'l Co. v. Teleflex, Inc., 550 U.S. 398, 427 (2007); OSRAM Sylvania, Inc. v. American Induction Technologies, Inc., 701 F.3d 698, 704 (Fed. Cir. 2012); MySpace Inc. v. GraphOn Corp., 672 F.3d 1250, 1257 (Fed. Cir. 2012).

Promega seeks summary judgment on the basis of the doctrines of anticipation and obviousness. In addition, I requested and received briefing on the claims' validity under the doctrine of obviousness-type double patenting.

Promega's arguments for anticipation and obviousness rely in large part on the 800 patent, which claims the chemical structure of a linker arm that can be used to attach a fluorophore to an oligonucleotide. The 800 patent shares a common inventor with the 096 patent, so Life Tech argues that it is not prior art, see 35 U.S.C. § 102(e)(2), and alternatively that if it is prior art it may not be considered for purposes of determining obviousness. See 35 U.S.C. § 103(c)(3).

The Smith 800 Patent is Prior Art. Prior art includes "a patent granted on an application... by another filed... before the invention by the applicant." 35 U.S.C. § 102(e)(2) (2011) (emphasis added). The application leading to the issuance of the 800 patent (No. 06/565, 010) was filed on December 20, 1983, one month before the application for the 096 patent.

If the inventors on two applications are different, then one patent is owned by one inventor and the other patent by the other inventor. In re Kaplan, 789 F.2d 1574, 1575 (Fed. Cir. 1986); Application of Land, 368 F.2d 866, 876-79 (C.C.P.A. 1966); 3 Chisum on Patents § 3.08(a) (2013). And if there are two inventors on one application and two other inventors on the other, each pair is the owner of one of the patents. Although Lloyd Smith is listed as an inventor of both the 096 and 800 patents, the 096 lists four additional inventors (Lee Hood, Michael Hunkapiller, Tim Hunkapiller, and Charles Connell); the 800 therefore belongs to "another" (that is, another inventing entity from the inventing entity of the 096) and thus can be prior art used to challenge the validity of the 096.

When research by a single research team results in multiple patent applications listing different inventors, the inventor of one of the patents can avoid having the patent applications from other inventors on their team treated as prior art by establishing an earlier priority date, and he can do by proving that he reduced his invention to practice before the patent application or applications filed by the other inventors. See, e.g., Applied Materials, Inc. v. Gemini Research Corp., 835 F.2d 279, 281 (Fed. Cir. 1987). Thus, patent applications from related inventors avoid invalidating each other not through the "of another" requirement (for different inventors are always "another, " or more precisely "others"), but through the rule that assigns a priority date based on when the invention was made rather than when the patent application was filed. Since the 800 and 096 patent applications were filed just one month apart, the technology ...


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