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Permanent Injunction Not Appropriate Where Damages Award Included Market Entry Fee and Ongoing Royalty, Since Such an Award Negates Assertion of Irreparable Harm Due to Future Sales

07-1145
January 17, 2008

Decision icon Decision

Last Month at the Federal Circuit - February 2008

Judges: Bryson, Clevenger, Moore (author)

[Appealed from: W.D. Wis., Judge Crabb]

In Innogenetics, N.V. v. Abbott Laboratories, Nos. 07-1145, -1161 (Fed. Cir. Jan. 17, 2008), the Federal Circuit affirmed the district court on several issues, including its claim construction, its grant of SJ of infringement, its evidentiary rulings, its grant of SJ of no inequitable conduct, and its grant of JMOL of no willful infringement. The Federal Circuit, however, reversed the district court’s grant of JMOL with respect to anticipation, vacated its grant of a permanent injunction, and remanded.

Innogenetics, N.V. (“Innogenetics”) owns U.S. Patent No. 5,846,704 (“the ’704 patent”). The ’704 patent pertains to diagnostic tools that not only detect, but also classify, hepatitis C virus (“HCV”) genotypes in a biological sample, which facilitates tailoring the treatment of patients with different genotypes. Claim 1 of the ’704 patent recites, inter alia, “[a] method of genotyping HCV present in a biological sample comprising hybridizing nucleic acids in a biological sample with at least one probe and detecting a complex as formed with said probe and said nucleic acids of HC, . . . .”

Innogenetics sued Abbott Laboratories (“Abbott”), asserting that Abbott’s genotyping assay kits infringed the ’704 patent. The district court construed the relevant claim limitations, including the limitation “detecting a complex as formed,” to mean “detecting a complex that is or has been formed.” Because Abbott conceded that its noninfringement position was based on its construction of the claims that the district court had not adopted, the district court entered SJ of literal infringement against Abbott. In addition, on cross-motions for SJ on inequitable conduct, the district court denied Abbott’s motion and granted Innogenetics’s motion, concluding that Abbott had failed to adduce sufficient evidence to require a trial on the issue of inequitable conduct. Furthermore, the district court deemed Abbott’s inequitable conduct claim “exceptional” and awarded attorneys’ fees to Innogenetics.

Moreover, before trial, the district court excluded testimony on obviousness by Abbott’s expert witness, limited testimony of a prior art author on anticipation, and excluded a prior art reference. At trial, Abbott presented some evidence on anticipation, but the district court granted JMOL before the case went to the jury, finding that Abbott’s expert’s testimony was based on an inaccurate understanding of the court’s claim construction. The jury found that claim 1 of the ’704 patent was not anticipated, awarded $7 million in damages to Innogenetics, and found Abbott’s infringement to be willful. Abbott filed post-trial motions on infringement, invalidity, and damages. The district court granted Abbott’s motion for JMOL of no willful infringement, but otherwise denied its motions. The district court also granted Innogenetics’s motion for a permanent injunction. Abbott appealed and Innogenetics cross-appealed.

On appeal, the Federal Circuit first addressed the district court’s construction of “as” in the claim limitation “detecting a complex as formed with said probe and said nucleic acids of HVC.” Abbott contended that the word “as” limited the claims to detecting hybridized complexes in a contemporaneous manner, and that Abbott’s products did not infringe because they detected the complex after it ceased to exist. In rejecting this argument, the Federal Circuit noted that a plain reading of the claim limitation suggested that it does just what it says—it detects the formation of a complex between a probe and nucleic acids of the HCV—and that nowhere did the claim language suggest that it only detects the complex itself. It noted that Innogenetics’s expert opined that one of ordinary skill in the art would understand claim 1 to include detecting any complexes that have been formed, an opinion Abbott did not rebut.

In addition, the Federal Circuit reasoned that the specification of the ’704 patent supported the district court’s construction and that Abbott was improperly narrowing the claim language. The Court also rejected Abbott’s reliance on a single dictionary definition of the word “as,” stating that it had committed the “very error of construction . . . warned against” in Phillips v. AWH Corp., 415 F.3d 1303, 1325 (Fed. Cir. 2005)—focusing on the abstract meaning of words rather than on the meaning within the context of the ’704 patent. The Court concluded that there was little meaningful distinction between a method of detecting the hybridized complex itself and a method of detecting the hybridized complex after it is destroyed and that what is detected is still a complex “formed with said probe and said nucleic acids of HCV.” Accordingly, it upheld the district court’s construction of “as.”

The Federal Circuit next addressed the district court’s grant of SJ of literal infringement. Abbott argued that its kits could not infringe because its method of detection was not known to the ordinary artisan at the time the ’704 patent was filed. The district court deemed this issue forfeited because Abbott raised it for the first time on the eve of trial. On appeal, Abbott argued that it did not need to raise this argument earlier. The Federal Circuit disagreed. Applying the law of the Seventh Circuit, which requires a showing of extraordinary circumstances before reaching arguments forfeited in civil litigation, the Federal Circuit affirmed, stating that Abbott had not shown such extraordinary circumstances. Additionally, the Court noted that Abbott’s argument lacked merit because its case law does not preclude a finding of a literal infringement by after-arising technology and Abbott itself put forth evidence that its method did in fact exist at the time the ’704 patent was filed.

The Federal Circuit next addressed the district court’s rulings on obviousness. Specifically, at the final pretrial conference, the district court had granted Innogenetics’s motion in limine, excluding Abbott’s expert testimony on obviousness. The written order commemorating the conference rulings, however, inaccurately stated that Abbott was precluded from entering any evidence of obviousness at trial. Although aware of the mistake, Abbott never moved for correction or reconsideration of the written order, instead choosing only to object on the record. Post-trial, the district court denied Abbott’s motion for a new trial on obviousness because Abbott, despite its knowledge from the very beginning that the written order was inaccurate, was only then seeking correction by way of overturning the jury’s unfavorable verdict against it. On appeal, Abbott contended that it was clear error for the district court to preclude Abbott’s obviousness defense. The Federal Circuit disagreed.

In affirming the district court, the Federal Circuit noted that the district court had not abused its discretion in excluding Abbott’s expert testimony on obviousness since it was vague and conclusory. Additionally, noted the Court, the district court did not abuse its discretion in denying Abbott a new trial on the issue of obviousness because Abbott not only failed to demonstrate the specific prejudice suffered by not being able to present evidence on obviousness, it did not provide any satisfactory explanation as to why it waited until the conclusion of trial to alert the district court regarding the inaccurate order.

The Federal Circuit next turned to the district court’s rulings on anticipation. Abbott sought to introduce at trial the testimony of Dr. Tai-An Cha, the inventor and author of three prior art references, sought to use U.S. Patent No. 6,071,693 (“the Cha patent”) as an anticipatory reference, and presented testimony at trial that U.S. Patent No. 5,580,718 (“the Resnick patent”) anticipated the claimed invention. The district court, however, confined Dr. Cha’s testimony to the actual words and content of the references, excluded the Cha patent on the grounds that Abbott did not disclose it until the last day of discovery, and granted JMOL of no anticipation by the Resnick patent based on its determination that Abbott’s expert testimony rested on an inaccurate understanding of the district court’s claim construction. Abbott challenged all of these rulings on appeal.

With respect to the testimony of Dr. Cha and the Cha patent, the Federal Circuit affirmed, noting that the district court had not abused its discretion in limiting Dr. Cha’s testimony or excluding the Cha patent. However, the Federal Circuit reversed the district court’s grant of JMOL with respect to the Resnick patent and remanded. The Court noted that the district court erroneously found that Abbott’s expert’s testimony regarding the Resnick patent was based on an inaccurate understanding of the district court’s claim construction. Although Abbott’s expert did not use the district court’s exact claim construction language, observed the Court, the substance of the testimony was consistent with the district court’s construction. Accordingly, the Federal Circuit reversed the district court’s entry of JMOL and remanded for a new trial on the issue of whether the Resnick patent anticipated the ’704 patent.

The Federal Circuit next addressed the district court’s grant of SJ of no inequitable conduct and its award of attorneys’ fees. Abbott contended that Innogenetics’s representation to the PTO of the relevance of one of Dr. Cha’s applications (“the Cha PCT application”) during prosecution of the ’704 patent amounted to inequitable conduct. Specifically, during prosecution of a corresponding European application, Innogenetics identified the Cha PCT application as the “closest prior art.” However, when Innogenetics submitted the Cha PCT application and an international search report citing the Cha PCT application to the PTO, it stated that “the references [did] not relate to the invention and, therefore, further discussion of the same [was] not necessary.” Slip op. at 23. Abbott contended that the statements to the PTO constituted material omission or misrepresentation. The district court disagreed and granted SJ of no inequitable conduct and awarded attorneys’ fees to Innogenetics.

The Federal Circuit agreed with the district court’s determination on inequitable conduct. It rejected Abbott’s assertion that statements regarding the Cha PCT application constituted a material misrepresentation. The Court found such statements to be “mere attorney argument,” stating that “an applicant is free to advocate its interpretation of its claims and the teachings of prior art.” Id. In addition, the Court reasoned that because the specific reference complained of, the Cha PCT application, was disclosed to the PTO along with the international search report identifying the same reference, the examiner was free to accept or reject the applicant’s arguments. Accordingly, the Court affirmed the district court’s grant of SJ of no inequitable conduct and the district court’s award of attorneys’ fees.

The Federal Circuit next addressed the district court’s grant of Innogenetics’s motion for a permanent injunction. It vacated the injunction, finding that the district court had abused its discretion. The Court noted that the jury’s damage award tracked the testimony of Innogenetics’s expert and was based on a market entry fee and an ongoing royalty payment. Contrary to Innogenetics’s assertions, noted the Court, the jury’s calculated damages were not compensating solely for Abbott’s past infringement. Rather, the record clearly established that the market entry fee was an amount paid in anticipation of Abbott’s long-term license to sell its products. As a result, the Court stated that because the reasonable royalties award to Innogenetics included an upfront entry fee that contemplated or was based upon future sales by Abbott, Innogenetics could not “complain that it will be irreparably harmed by future sales.” Id. at 26. Moreover, the Court noted that while the market entry fee was based upon the projection that Abbott could sell its products through the expiration of the patent, even Abbott acknowledged that such future sales would be subject to a compulsory license. Accordingly, the Court vacated the injunction and remanded to the district court to delineate the terms of the compulsory license to Abbott, such as conditioning the future sales of the infringing products on payment of a running royalty.

Finally, the Federal Circuit turned to the district court’s grant of JMOL, overturning the jury’s verdict of willful infringement. It observed that In re Seagate Technology, LLC, 497 F.3d 1360, 1371 (Fed. Cir. 2007) (en banc), requires that the patentee show that “the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent” and that “this objectively-defined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer.” Slip op. at 27. The Court noted that the record failed to indicate how Abbott’s “development and sale of its genotyping products were at risk of an objectively high likelihood of infringement.” Id. Accordingly, the Court affirmed the district court’s grant of JMOL of no willful infringement.