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En Banc Court Holds that Intervening Rights Are Invoked for New or Amended Claims Only

10-1548
March 15, 2012

Decision icon Decision, en banc

Last Month at the Federal Circuit - April 2012

Judges: Rader, Newman, Lourie (author), Bryson, Gajarsa, Linn, Dyk (dissenting-in-part), Prost, Reyna, and Wallach

[Appealed from: D.N.H., Judge DiClerico, Jr.]

In Marine Polymer Technologies, Inc. v. HemCon, Inc., No. 10-1548 (Fed. Cir. Mar. 15, 2012) (en banc), the Federal Circuit, sitting en banc, held that intervening rights do not apply to claims that have not been amended and are not new, and affirmed the judgment of the district court that HemCon, Inc. (“HemCon”) infringed U.S. Patent 6,864,245 (“the ’245 patent”) assigned to Marine Polymer Technologies, Inc. (“Marine Polymer”).

Marine Polymer accused HemCon of infringing the ’245 patent, which claims preparations of “biocompatible” poly-β-1→4-N-acetylglucosamine (“p-GlcNAc”) used to treat serious wounds. The district court found the patent valid and infringed, and awarded Marine Polymer $29.4 million in damages. Initially, HemCon appealed to the Federal Circuit (“the panel”) and argued that the verdict should be overturned under the doctrine of intervening rights. While the litigation was in progress, HemCon initiated an ex parte reexamination of the patent, where, according to HemCon, Marine Polymer amended the claims thus giving rise to intervening rights. During the reexamination proceeding, Marine Polymer argued for a narrower construction of the term “biocompatible” and canceled claims that might be inconsistent with this narrower construction. Marine Polymer neither added any new claims nor amended any existing claim. The examiner in the reexamination proceeding subsequently upheld the patentability of the remaining claims.

The panel agreed that HemCon had acquired intervening rights and overturned the district court decision. Marine Polymer filed a petition for rehearing en banc, which was granted, and a majority of the en banc Court held that HemCon had not acquired intervening rights, because Marine Polymer had not amended claims nor added new claims during the reexamination proceeding. While the Court was split as to whether the district court’s claim construction was correct, it nevertheless affirmed the district court’s decision of infringement.

With respect to claim construction, HemCon argued that the district court’s construction of “biocompatible”—to mean no detectable biological reactivity—was erroneous. In supporting this assertion, HemCon relied primarily on the presence of the six dependent claims in the original ’245 patent (eventually cancelled in reexamination) that required elution test scores of one or two, as well as passages in the specification characterizing certain biocompatibility tests as being satisfied despite detectable bioreactivity.

The Court ultimately found HemCon’s focus on the possibility of non-zero “passing” scores unpersuasive. The Court reasoned that the specification discussed non-zero passing scores only in generalized descriptions of test methods used to assess biocompatibility, but “when read as a whole, the specification makes clear that the p-GlcNAc of the invention outperforms baseline standards and shows ‘no detectable biological reactivity as determined by biocompatibility tests.’” Slip op. at 14. An equally divided Court thus affirmed the district court’s construction of “biocompatible” as meaning p-GlcNAc “with low variability, high purity, and no detectable biological reactivity as determined by biocompatibility tests.” Id. (emphasis added).

In addition, HemCon sought to overturn the jury’s award of $29 million in damages as unreasonable and not supported by substantial evidence. Specifically, HemCon argued that Marine Polymer’s expert lacked a sufficient basis for his testimony on what would constitute a reasonable royalty rate and that the jury improperly relied on the entire market value for its damages calculation. The Court affirmed the jury’s damage award, reasoning that both experts used the same method to calculate total sales of the accused products, and Marine Polymer’s use of “the entire market value” as the royalty base was acceptable. The Court further held that the jury was entitled to evaluate the conflicting evidence and credit the testimony of Marine Polymer’s expert over that of HemCon. Thus, the Court affirmed the damages award.

As to intervening rights, HemCon argued that it did not infringe the ’245 patent because it acquired intervening rights during the reexamination proceeding. HemCon asserted that the district court’s interpretation of “biocompatible” incorrectly narrowed the term by requiring “no” detectable biological reactivity, a construction it alleges conflicts not only with statements in the specification, but also with the presence of dependent claims reciting elution test scores of one or two. HemCon contends that prior to reexamination, the term “biocompatible” must have encompassed low, non-zero levels of bioreactivity, so that the proper construction at that time was necessarily broader than the district court’s interpretation.

HemCon also argued that by cancelling certain dependent claims that recited non-zero bioreactivity levels, and persuading the examiner to adopt the district court’s construction of “biocompatible” during reexamination, Marine Polymer affected a substantive change in the scope of each remaining claim—essentially, from allowing some reactivity in the originally issued claims to permitting “no detectable biological reactivity” after reexamination. Citing the Federal Circuit’s decision in Laitram Corp. v. NEC Corp., 163 F.3d 1342, 1346-47 (Fed. Cir. 1998), HemCon argued that the key to intervening rights lies in determining “whether the scope of the reexamined claims differs from the original claims.” Slip op. at 17, citing Corrected Br. for Defendant-Appellant at 37, 2010 WL 5650491. HemCon concluded that this perceived “substantive change” to the surviving claims of the ’245 patent during reexamination triggered intervening rights with respect to those claims. Marine Polymer disagreed and argued that intervening rights cannot apply with respect to claims that have not been amended or newly introduced in the reexamination proceeding.

The Court agreed with Marine Polymer that intervening rights do not apply here, because the claims had not been amended and were not new. The Court opined that with respect to reissued patents, the concept of intervening rights was codified by the Patent Act of 1952, and that intervening rights do not accrue where the accused product or activity infringes a claim that existed in the original patent and remains “without substantive change” after reissue. Slip op. at 18-19 (citing Seattle Box Co. v. Indus. Crating & Packing, Inc., 731 F.2d 818, 827-28 (Fed. Cir. 1984)). The Court noted that although intervening rights originated as a defense against patents modified through reissue procedures, the doctrine has since been extended to the context of patent reexamination. Pursuant to 35 U.S.C. §§ 307(b) and 316(b), respectively, both ex parte and inter partes reexaminations can give rise to intervening rights. Thus, after a patent emerges from reexamination, the statute makes available intervening rights to the same extent provided in the reissue statute, but only with respect to “amended or new” claims in the reexamined patent.

A majority of the Court held that even if the district court’s claim construction was erroneous, HemCon’s intervening rights argument must fail because it disregards the plain and unambiguous language of § 307(b), which governs intervening rights arising from ex parte reexamination and specifies that only “amended or new” claims incorporated into a patent during reexamination “will have the same effect as that specified in section 252,” i.e., will be susceptible to intervening rights. The Court found that HemCon ignored this threshold statutory requirement and asked that the Court proceed directly to the subsidiary “substantive change” analysis, which derives from § 252. Slip op. at 21, (citing Kaufman Co. v. Lantech, Inc., 807 F.2d 970, 975-77 (Fed. Cir. 1986)). The Court concluded that “under § 307(b), the first question when assessing whether intervening rights [arise] from a reexamination is whether the asserted claim is ‘amended or new’; if the answer is no, that ends the inquiry. Only if the claim at issue is new or has been amended may the court proceed to the second step in the analysis and assess the substantive effect of any such change pursuant to § 252.” Slip op. at 21.

The Court reasoned that here, the patent claims asserted against HemCon were neither “new” nor “amended”–claims 6, 7, 10-12, 17, and 20 contained identical language before and after reexamination. Id. Whether or not Marine Polymer’s arguments to the examiner and cancellation of claims during reexamination may have affected the remaining claims’ effective scope, the Court found that Marine Polymer did not “amend” those claims for intervening rights purposes or make them “new,” which is what the statutory language requires. The Court thus concluded that intervening rights were unavailable under § 307(b) as a matter of law.

HemCon argued that Marine Polymer’s actions in reexamination rendered the asserted claims effectively “amended” by disavowal or estoppel, even though the language of the claims was not formally changed. The Court disagreed, reasoning that “amend” means “to alter . . . formally by adding, deleting, or rephrasing.” Slip op. at 22 (citing American Heritage College Dictionary 42-43 (3d ed. 1997)). The Court further held that even if the term were ambiguous standing alone, any doubts are resolved by its context within § 307, which identifies three categories of claims in a reexamined patent, one of them being amended or new claims. Finally, the Court reasoned that it is clear that “amended” is a term of art in patent prosecution, including reexamination proceedings, and in that context connotes formal changes to the actual language of a claim. The Court concluded that a claim can not be “amended” for purposes of § 307(b) without changing the claim language itself. The Court thus determined that intervening rights did not apply here, since the actual words of the claims had not changed, and no new claim had been introduced during the reexamination proceeding.

Judge Dyk dissented with the majority’s claim construction analysis, noting that the majority construed the term based upon only two instances or examples in the specification. Judge Dyk commented that the majority’s approach to claim construction would enable patentees to eliminate questions of validity by narrowing claims in accordance with a preferred embodiment or single example, while also allowing alleged infringers to narrow claims beyond their valid scope to avoid infringement.

With respect to the intervening rights issue, in Judge Dyk’s view, the majority is incorrect in their statutory interpretation of §307(b). In particular, Judge Dyk noted that §307(b) specifically incorporates the intervening rights provisions of reissued patents found in §252, and contended that Congress was explicit that §307(b) should be interpreted to be identical in scope to §252. Thus, the “amended or new” language in §307(b) was clearly intended to have the same meaning as “substantially identical” in §252. According to Judge Dyk, the focus then should be on whether the old and new claims are “substantially identical,” not on whether the actual words of the claim had changed.

Here, Judge Dyk commented that the original and new claims were not “substantially identical.” He reasoned that during reexamination the patentee agreed, by both argument and by amending the claims to cancel six dependent claims, that the term “biocompatible” should be construed to mean “no detectable biological reactivity.” In doing so, Judge Dyk believed that the patentee adopted a construction that was different than the correct construction of the original claims, namely that “biocompatible” meant, inter alia, “little or no detectable reactivity.” The effect was to narrow the claims and protect them from a finding of invalidity.
Finally, in Judge Dyk’s view, not every argument during reexamination should give rise to intervening rights, but intervening rights should be available where an argument during reexamination rises to the level of a clear and unambiguous disclaimer or disavowal of the original, correct claim construction. He would find that Marine Polymer clearly and unambiguously disclaimed the scope of its claim by effectively becoming its own lexicographer and presenting a specific, limiting definition of the term “biocompatible.”

Summary authored by Amelia Feulner Baur, Ph.D., student associate at Finnegan.