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“Meaningful Preparation to Conduct Potentially Infringing Activity” Remains an Important Element in the DJ Jurisdiction Inquiry After MedImmune

07-1443
May 28, 2008

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Last Month at the Federal Circuit - June 2008

Judges: Mayer (author), Schall, Young (District Judge sitting by designation)

[Appealed from: S.D. Tex., Judge Ellison]

In Cat Tech LLC v. TubeMaster, Inc., No. 07-1443 (Fed. Cir. May 28, 2008), the Federal Circuit affirmed the district court’s decision that the dispute between Cat Tech LLC (“Cat Tech”) and TubeMaster, Inc. (“TubeMaster”) was sufficiently real and immediate to warrant a DJ of noninfringement. The Court also affirmed the district court’s construction of the “spacing” limitations of Cat Tech’s U.S. Patent No. 6,905,660 (“the ’660 patent”) and its grant of SJ of noninfringement.

Cat Tech’s ’660 patent describes a method for using loading devices to place catalyst particles into multi-tube chemical reactors. The claimed method involves pouring catalyst over a plurality of plates positioned over the tubes of a chemical reactor. The claims recite, inter alia, a spacing limitation: “a spacing between adjacent plates having a width not greater than the smallest dimension of a single particle to be loaded into the multi-tube reactor, the spacing for collecting dust and partial particles.” Slip op. at 3.

TubeMaster also developed a method of putting catalyst into reactor tubes using loading devices. TubeMaster designed four different configurations for its loading devices and generated AutoCAD drawings for each of its configurations (“configurations 1-4”). In each of the four configurations, some of the spaces between adjacent plates are large enough to allow whole pieces of catalyst to fall between the plates. One month prior to the issuance of the ’660 patent, TubeMaster used configuration 3 to load catalyst. This was the only instance in which the accused device was used.

Cat Tech sued TubeMaster, alleging infringement of the ’660 patent. TubeMaster counterclaimed, seeking a declaration that its devices did not infringe the ’660 patent and that the patent was invalid and unenforceable. Both parties filed SJ motions. The district court granted TubeMaster’s motion for a declaration of noninfringement as to configurations 1, 2, and 4. Even though configuration 3 was the only configuration that had been commercially implemented, the district court determined that it had authority to grant declaratory relief for configurations 1, 2, and 4 because TubeMaster had taken sufficient concrete steps to conduct loading activity with configurations 1, 2, and 4. The district court also concluded that TubeMaster’s use of configuration 3 did not infringe the ’660 patent. It determined that the spacing limitation required a “spacing that [was] not large enough to allow whole particles to fall through.” Id. at 8. Because configuration 3 used spacing that allowed whole catalyst particles to fall through, the district court determined that it did not meet the spacing limitation. Cat Tech appealed.

On appeal, the Federal Circuit first considered whether the district court could issue a DJ of noninfringement as to TubeMaster’s configurations 1, 2, and 4. The Court observed that until recently, it applied a two-prong test for determining the existence of DJ authority: the first prong examined whether conduct by the patenteecreateda “reasonable apprehension” of suit on the part of the DJ plaintiff, and the second prong focused on the DJ plaintiff’s conduct and examined whether there had been “meaningful preparation” to conduct potentially infringing activity. Id. at 10. The Court noted that in MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 S. Ct. 764 (2007), the Supreme Court rejected its “reasonable apprehension” prong, instead focusing on the fundamental inquiry of “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a [DJ].” Slip op. at 10 (quoting MedImmune, 127 S. Ct. at 771). The Court noted that several of its post-MedImmune opinions have addressed the Supreme Court’s rejection of the “reasonable apprehension” prong, but that it had yet to fully consider the impact of MedImmune on the “meaningful preparation” prong of its pre-MedImmune test.

The Court began its analysis by observing that the first prong of its pre-MedImmune test was not at issue because Cat Tech had sued TubeMaster for infringement. Regarding the second prong, the Court concluded that, although MedImmune articulated a more lenient legal standard for the availability of DJ relief in patent cases, the issue of whether there has been meaningful preparation to conduct potentially infringing activity remained an important element in the totality of circumstances which must be considered in determining whether DJ relief is appropriate. The Court stated that “[if] a [DJ] plaintiff has not taken significant, concrete steps to conduct infringing activity, the dispute is neither ‘immediate’ nor ‘real’ and the requirements for justiciability have not been met.” Id. at 12 (citing Lang v. Pac. Marine & Supply Co., 895 F.2d 761, 764 (Fed. Cir. 1990)).

With respect to the immediacy requirement, the Court found that TubeMaster had taken significant, concrete steps to conduct loading activity with configurations 1, 2, and 4 because it had developed two basic loading device designs and generated AutoCAD drawings for each of its four configurations. The Court observed that TubeMaster had already successfully manufactured and delivered a loading device using configuration 3. Moreover, the Court noted that although TubeMaster would still need to customize the loading device designs based on customer-specific dimensions, it was prepared to customize and produce the devices “within a normal delivery schedule” upon receiving an order. Id. at 15. Accordingly, the Court held that TubeMaster’s activities satisfied the constitutionally mandated immediacy requirement.

With respect to the reality requirement, the Court focused on the extent to which the technology in question was “substantially fixed” as opposed to “fluid and indeterminate” at the time declaratory relief was sought. Id. (citing Sierra Applied Scis., Inc. v. Advanced Energy Indus., Inc., 363 F.3d 1361, 1379 (Fed. Cir. 2004)). The Court observed that because TubeMaster’s four basic loading device designs were designed to cover virtually all of its customers’ reactor configurations, TubeMaster did not expect to make substantial modifications to its loading device designs once production began. Accordingly, the Court held that TubeMaster’s designs satisfied the constitutionally mandated reality requirement because the accused products could be produced without significant design change. In so holding, the Court rejected Cat Tech’s argument that there was no “live controversy” regarding configurations 1, 2, and 4 because TubeMaster had made no disclosure of those configurations to its customers. The Court acknowledged that evidence that no preparations have been made to advertise or sell a potentially infringing device may, under certain circumstances, indicate that a dispute lacks the requisite immediacy. However, the Court explained that when a DJ plaintiff has made meaningful preparation to conduct potentially infringing activity, a showing that the plaintiff has prepared draft sales literature or otherwise disclosed its products to potential customers is not an indispensable prerequisite.

The Court observed that even assuming that the immediacy and reality prerequisites for DJ relief have been met, the district court’s exercise of its DJ authority is discretionary. It explained that in deciding whether to entertain a DJ request, a court must determine whether resolving the case serves the objectives for which the DJ Act was created. It observed that “[a] plaintiff need not ‘bet the farm, or . . . risk treble damages . . . before seeking a declaration of its actively contested legal rights.’” Id. at 18 (quoting MedImmune, 127 S. Ct. at 775). It reasoned that, “[a]bsent a [DJ] of non-infringement, TubeMaster will be forced to ‘bet the farm’ by making the ‘in terrorem choice’ . . . between a growing potential liability to Cat Tech and abandoning its catalyst loading activities.” Id. (citation omitted). Accordingly, the Court concluded that the district court properly exercised its discretion to issue a DJ of noninfringement here.

The Federal Circuit then turned to the district court’s determination of noninfringement as to TubeMaster’s configuration 3. Cat Tech argued that the district court incorrectly construed the “spacing” limitation to require “spacing that [was] not large enough to allow whole particles to fall through.” Instead, Cat Tech argued that the claims required only that there be one inter-plate “pinch point” that was of the requisite width. The Court rejected Cat Tech’s proposed construction, concluding that the plain language of the claims, the specification, and the prosecution history supported the district court’s construction. The Court found that the common meaning of the word “spacing” was the “fixing or arranging of spaces.” Based on this definition, the Court concluded that the claims called for plates that were fixed or arranged so that the distance between them would not be greater than the width of a whole catalyst particle. The Court noted that Cat Tech’s proposed “pinch point” construction would render the spacing limitation functionally meaningless because whole catalyst particles would simply fall between any plates separated by gaps wider than a whole catalyst particle. Turning to the written description and prosecution history, the Court found that the specification of the ’660 patent never described or suggested an inter-plate spacing that was narrower than the width of a whole particle at one point, but greater than the width of a whole catalyst particle at another. The Court also noted that the file history of the parent of the ’660 patent contained arguments by Cat Tech that its invention was distinguishable over the prior art because each gap between adjacent plates was smaller than a whole catalyst particle. Thus, the Court rejected Cat Tech’s conflicting argument that only one gap must meet the spacing limitation.

The Court also rejected Cat Tech’s argument that the article “a” in the phrase “a spacing” required only one space that was narrower than a whole catalyst particle. The Court reasoned that even if the claims were construed to require “one spacing” between plates, the entire length of that spacing would need to be narrower than a whole catalyst particle in order to be consistent with functions described in the specification and file history. Thus, the Court held that the district court properly construed the spacing limitation of the ’660 patent to require an inter-plate spacing that was smaller than the width of a whole catalyst particle. Because TubeMaster’s configuration 3 allowed whole catalyst particles to fall between adjacent plates, the Court held that it did not meet the spacing limitation of the ’660 patent and that the district court properly granted TubeMaster’s motion for SJ of noninfringement.